I support Pete’s praise of Cowen’s latest. For technological innovations to improve economic welfare the way standard macroeconomists intend, such developments must also carry real consumable returns and real employment effects. Cowen’s argument is straightforward, relative to what has been invested across industries in recent decades (especially by government) such returns are very low and fast running out.
Again I agree with Pete, this theme represents a wonderfully subversive libertarian argument. Tyler used to be more of an optimist, but now he sees the world as “very messed up” and it’s mostly the government’s fault. I also consider The Great Stagnation to present a subversively Austrian argument. Tyler is, after all, focusing upon the heterogeneous nature of the capital structure.
Many have criticized the Austrian perspective because it implies that members of the economy continuously get fooled by low interest rates and government subsidy? Why not ignore the new money? Why not innovate new institutional arrangements to avoid these effects?
Tyler writes about how much fun and enjoyment we get from the internet, but we are not fundamentally restructuring our lives or improving our real living conditions – we are more just goofing off. I perceive this phenomena as the unconscious expression of rational expectations at work. As government continuously messes up the structure of production by failing to pick winners and confusing financial signals, people’s willingness to hold wealth in traditional financial terms and traditional capital investments decreases. The economy is becoming more digital and more knowledge based in part because these forms of wealth are less subject to the unintended consequences of government meddling than the older more tangible sectors of the economy.
The cool thing about our new technological world is that the ability to hold alternative stocks of wealth in the form of social networks and social capital has become easier. The tragedy is that our regulatory, tax and monetary policies have labotomized the entrepreneurial spirit of our younger generations. There is almost no real opportunity to convert the stock of value held within online social networks into real consumable value or financial profit.
The under thirty crowd looks like a bunch of slackers to older generations. They spend so much time surfing the net and playing around on facebook instead of working hard and climbing the corporate ladder. Some think this is a problem with their work ethic or their culture. I say that’s just crotchety old people talk. The younger generation would rather surf the net because this is precisely their best rational strategy given the messed up environment that our public policies have created.
I propose that it is more difficult today than ever before in American history to grow wealth and actualize entrepreneurial endeavors from a starting point of zero. If you have a significant body of savings and investments, you can protect it and you can find investment opportunities to grow it. But if you are young and motivated and want to invest in ideas that you believe will be profitable in the future – high risk and high taxes await with only marginal relative benefits. The super wealthy do not have access to a better internet than the rest of us. They do not listen to better music or get to see better movies. The internet makes for a far more culturally egalitarian society. The only real difference between being super rich and just getting by is access to luxury goods like flashy cars, houses, clothing etc.
The tax system is set up to support the traditional financial sector. If you want to protect your money the only real opportunity is to max out your 401k. Which will probably be subject to inflation and business cycles. There is almost no incentive for young people to save and invest in real entrepreneurial endeavors.
This is why we are and will continue to stagnate. It is a hard pill for older generations to swallow, but it is true. Social networking via the internet is an advancement in human cooperation and coordination, and younger people are better at it because they have grown up in tandem with these technologies. It is their abilities and their ideas which should and must shape the capital structures of our future world.
In contrast, the electoral population who gets pandered to the most, are the middle aged and middle class. The shovel ready jobs our government tries to create are out of date and out of place with what society actually needs or wants. We don’t need traditional forms of infrastructure like bridges or roads to build our economy, we need MacBooks and internet ready Starbucks. We don’t need poorly designed American automobiles, we need more Craigslists and Bitcoins to replace our rusted out and failing social institutions.
The sad reality is that we live in a world where the people who assembled your Chevy Tahoe probably can’t set the timer on a Tivo and for some ungodly reason they also have more influence on public policy. Our younger generations are the very people who have the forms of knowledge most useful for our technological future – an innate ability to use telecommunications devices and navigate cyber networks. Yet they are the most systematically disadvantaged by our public policies.
Our globalized markets have produced a world with unparalleled affordable access to the necessities of life, but our public policies have created an incentive environment that breeds contentment rather than an enterprising spirit. The youth would rather invest in culture and social networks over money and businesses precisely because culture cannot be sucked away by our federal government and its composite elder interest groups. Our economy and the entitled parasites it hosts cannot sustain as our younger generations unconsciously tap out.