Eli Dourado

Winning the stagnant future

I’m tempted to do a serious review of Tyler’s book, but I’m happy to outsource most of my comments to Arnold Kling. Instead, I’ll just make one brief point about the validity of the various numbers used to justify claims of stagnation or non-stagnation.

All of the numbers in play are fundamentally non-economic. Whether we’re talking about growth in measured productivity or median family income, all of the numbers used are calculated by taking some P and multiplying it by some Q. These are modes of accounting, not of doing economic analysis.

What we really want is something that captures changes in total surplus (or utility) per capita: indifference analysis. A basic question that can start off the discussion is the one I asked on Twitter yesterday:

What multiple of your lifetime income would someone have to offer to get you to agree to have been born 20 years earlier?

If you take the 20th root of that multiple and subtract one, you have an estimate of the annual growth rate of your personal economy. If you don’t have a fancy calculator handy, Wolfram Alpha is your friend.

My sense is that Tyler’s multiple is embarrassingly high (it is, after all, the Age of the Infovore). Mine is high too.

If Tyler wants to defend the stagnation hypothesis against this line of reasoning, he has two choices. First, he can say that the multiple would be even higher for earlier 20-year periods. I doubt that he would say this for himself.

Second, he can claim (correctly) that he is not the typical person. The masses are not infovores. But granting that this is the case, it’s difficult to imagine what sort of improvements could be made, even in theory, that would elicit for them the kind of welfare explosion experienced by infovores in recent decades. What do non-infovores want?

The fact is that in wealthy Western countries we’ve hit pretty severe margins of diminishing utility in terms of what we can offer non-infovores, at least those who have not recently come upon some hardship. You can say bigger houses and more leisure, but all I hear, with only slight exaggeration, is “more Muzak and potatoes.”

Tyler makes many good points, but once you accept that for many people (infovores) welfare is surging and for most others (non-infovores) it has comparatively nowhere to go, then it’s hard to call that exactly stagnation. Indeed, you could argue that we have already won the future.