Tyler Cowen`s Great Stagnation: Needs Work (Especially On Immigration) But Shows Improvement




Tyler Cowen
[Email him]
is an

economist at George Mason University,
a


New York Times
columnist, the author of countless books,

and, most
influentially, the main man at the popular

Marginal Revolution
blog. He`s a bright, tireless
guy. So for years I`ve been pointing out to him the

lack of realism
in many of his assumptions about how the
world works.

This
hasn`t made him terribly happy. Thus, for example, Cowen`s
2009 post

Why Steve Sailer is wrong
—where he took a terrible
drubbing in his comments from those better informed than
himself. Nevertheless, losing a lot of arguments has slowly
pushed Cowen toward a somewhat more pragmatic, more
Sailerian perspective—exemplified by his newest and
most-talked about book, The Great Stagnation.

(To be precise,
The Great Stagflation an electronic file somewhere in length between
a magazine article and a real
book.
It`s available from Amazon for the Kindle or the PC for
$4.)

Cowen
writes:


“Median wages have risen only slowly since the 1970s, and
this multi-decade stagnation is not yet over. Typical
individuals in earlier generations reaped much greater gains
than ours, as their living standards doubled every few
decades. … A lot of the prosperity of the `noughties` was
built on debt,

inflated home prices
, and
economic
illusions
.”

This slowdown in growth since 1973 for the
typical family has been hugely costly. Median income is
currently around $54,000, but, Cowen says,
“… if median income
had continued to grow at its earlier postwar rate, the
median family income today would be over $90,000.”

The
economist offers three main reasons for this stagnation, all
three of which I`ve been discussing for years. Cowen sums
them up in a single concept:

“All of these
problems have a single, little noticed root cause: We have
been living off low-hanging fruit for at least 300 years.
Yet during the last forty years, that low-hanging fruit
started disappearing, and we started pretending it was still
there.”

According to Cowen, America has benefited historically
from three main kinds of
“low-hanging fruit”:  

Cowen`s first explanation for America`s traditional well-being—“Up
through the end of the nineteenth century, free and fertile
American land was plentiful and there for the taking”
—is
a rewrite of Benjamin Franklin`s 1751 argument for limiting
immigration,

On the Increase of Mankind
.

Moreover, improvements in transportation,
especially the automobile, continued to make a huge amount
of suburban land conveniently accessible in the 20th
Century. The last year of the long postwar boom was 1973 in
large part because the

energy crisis that began then
made the half-century old
American economic model of

spreading out further
across the suburban landscape less
of a sure thing.

Cowen`s second contention is that
technological progress, outside of electronics, has slowed
dramatically from its peak in roughly 1880-1940, which saw
the introduction of electricity and

automobiles
.

This one is harder to measure, but I`ve
been arguing much the same for about 15 years. The founding
fathers of science fiction, Jules Verne, H.G. Wells, and

Robert A. Heinlein
, envisioned human progress as a
continuation of the trend that began with the development of
the steamboat around 1807:
going faster. The faster we go, the more land per person is
conveniently usable. Thus, Heinlein, who

began publishing science fiction in 1939
, extrapolated
to a future of flying cars and outer space settlement.

The future ain`t what it used to be. Dude,
where`s my
flying car
? (By the way, my father`s first job was
designing one piece of a flying car. The concept was that
you drove it out to a straight stretch of highway in the
country, bolted the wings on to the roof and the propeller
onto the crankshaft, and up, up and away you went. Only a
small number of these flying cars were built before the
government declared it unsafe.)

Lately, though, people have actually been
going slower. No human being has gone the 25,000 mph it
takes to get to the moon in almost 40 years. You can`t even
fly to Europe supersonically on the Concorde anymore. As
Cowen notes: “It
would make my life a lot better to have a teleportation
machine. It makes

my life
only

slightly better
to have a larger refrigerator that makes
ice in cubed or crushed form.”

Granted,
developments in electronics have greatly reduced the cost of
amusing ourselves. But, the Internet hasn`t directly created
a lot of good-paying jobs the way the car business once did.

Facebook
and Twitter are world famous, but Ford and

General Motors
they aren`t: they only employ a couple of
thousand people between them. According to Cowen,
“… a lot of the
internet`s biggest benefits are distributed in proportion to
our cognitive abilities to exploit them.”

And that
brings us to his third low-hanging fruit that doesn`t seem
to be around much anymore:


“Smart, Uneducated
Kids”

Cowen
writes:

“In
1900, only 6.4 percent of Americans of the appropriate age
group graduated from high school. … This rate peaked at
about
80
percent
in the late 1960s and since then has fallen by
about six percentage points.

[Link added.]

Sure, we have plenty of
“uneducated kids”. In fact, in recent decades, we`ve been
bringing them in from South of the Border in vast numbers.

Yet, apparently, we don`t have many
“smart, uneducated
kids”
. Cowen writes:

“… there is no
evidence of convergence of minority-majority graduation
rates over the last thirty-five years, once you include
incarcerated populations in the totals.”

This
public university professor notes:

“In contrast to
earlier in the twentieth century, who today is the marginal
student thrown into the college environment? It is someone
who cannot write a clear English sentence, perhaps cannot
read well, and cannot perform all the functions of basic
arithmetic.”

Cowen
goes on to point out:


“We`re facing a fundamental skills mismatch, and the U.S. labor market is increasingly
divided into a group that can keep up with technical work
and a group that can`t.”

This is much like that line from the great
management guru Peter Drucker that I

quote
:


"But the immigrants have a mismatch of skills: They are
qualified for yesterday`s jobs, which are the kinds of jobs

that are going away"

Unfortunately, there are a few points
where Tyler`s thinking, while
improving, still needs more sophistication.

Cowen focuses a little too much on wages
adjusted for inflation. He misses the bigger picture: the
relation of income to the true cost of middle class living.
The Consumer Price Index tends to systematically

underestimate
this by not adequately counting the full
impact of homeownership and higher education.

It`s
crucial to remember that the cost of living isn`t just the
cost of entertaining yourself. Much of this debate gets
sidetracked into unproductive comparisons of imponderables:
Is the median person really better off today than in 1965
because now he has YouTube?

There`s
no question that endless electronic entertainment has gotten
cheaper. Unfortunately, the Consumer Price Index
underestimates the rise in key elements of the cost of
living egregiously.

The big issue from the fundamental point
of view: the cost of sustaining your family into future
generations. That`s the cost of middle class respectability.
That word
“respectability”
sounds trivial and old-fashioned. But
it means something very important and enduring: the ability
to marry. In America, the cost of marriage and children is,
typically, the price of a house with a yard in a
satisfactory school district.

You`ll notice that one of the chief
complaints of the young men protesting in the streets of

Egypt
is that they can`t afford to get married. Well,
that`s a big deal here, too.

Allow me to reminisce about how just how
remarkably

affordable family formation
was during this halcyon
postwar period of rapidly improving standard of living. I
was born in the San Fernando Valley in northwestern Los
Angeles in the latter half of the Baby Boom. My
father,
a junior college graduate, was a mid-level engineer at

Lockheed Aircraft Company in Burbank
. My mother, a high
school graduate, had been a secretary at Lockheed during
WWII. After marrying my father, she kept house and engaged
in charitable work.

In 1951, my parents bought a new house on
a culdesac carved out of a beanfield for $17,000. As

freeways
were built, their house became effectively
closer to destinations such as downtown and LAX.

In the latter 1960s, local public schools
were fine, but my

Catholic parochial school
was absurdly cheap at
something like $15 per month.

I don`t recall exactly the tuition at the
Catholic high school I attended from 1972-1976, but $600 per
year sticks in my head. Tuition today is $11,200, but the
school is much harder to get into because of the decline of
the public schools in the Valley. In the mid-1970s, I recall
being shocked to learn that our archrivals in debate,
Harvard-Westlake, the most exclusive prep school in Los
Angeles, charged an exorbitant $1,800 per year. Today,
tuition at Harvard-Westlake is

$29,200
.

Nearby UCLA was fairly easy to get into in
the 1970s, but I went to private
Rice
University in Houston
. I remember that the cost for
1976-77 was $2,300. (I assume that was just for tuition,
but, who knows, it might have included room and board as
well.)

I then earned an
MBA
at UCLA. The tuition was so nugatory that I have no
recollection of the amount, other than that at our
graduation, the class speaker asked for a round of applause
for the taxpayers of California for footing the bill.

As you may have noticed, life is different
today. Americans tend to marry later, have fewer children,
and live more stressed out lives because they
need
both parents to work
to afford a house in a
"good" school district (a good
school district is the kind with
smart
children
).

What
role does mass immigration play in this? A fair amount,
especially in driving up home costs in the remaining good
school districts.

And why shouldn`t all our technical
progress make the cost of generational sustainability
easier?

From an economist`s point of view, the
question ought to be the opportunity costs of mass
immigration. Does mass immigration make the median American
citizen better or worse off, all else being equal? The
economic concept of

ceteris paribus
allows you to leave Facebook out of
the equation. (Like most things, Facebook wasn`t invented by
an

illegal immigrant.)
Framed correctly, the question is
obviously much less of a slam dunk than the typical
economist assumes.

I write a lot about immigration for a
simple reason: it is
the
policy factor
that American politicians have the most
control over
.

We
don`t
know
how to

"fix the schools"

We don`t
know how to pass laws to create more innovative technology.

But we do know

how to curb mass immigration.
It ain`t that complicated.
Elites
just haven`t wanted
to fix this problem—because

it`s not their problem;
it`s the average American`s
problem.

Cowen
shies away from mentioning immigration much in his book.
But, overall, he`s making progress. I give him a C+.

[Steve Sailer (email
him) is


movie critic
for


The American Conservative
.

His website

www.iSteve.blogspot.com

features his daily blog. His new book,

AMERICA`S HALF-BLOOD PRINCE: BARACK OBAMA`S
"STORY OF RACE AND INHERITANCE", is
available


here
.]