In this debate from Techonomy 2011, in Tuscon, Ariz., Tyler Cowen, a professor of economics at George Mason University, argues that technology is not the main driving force behind the economy. In fact, says Cowen, economic growth has been the slowest during notable technological booms.
Cowen: Let’s start with some simple numbers. Looking at median income in this country, it has not risen since 1997. Since 1973, it’s up only about 25 percent. There has been no new net job growth over the last decade. Most importantly, consider the statistics on productivity. The rate at which we are generating new ideas today is about one sixth the rate that we had in the 1930s and 1920s—probably the most innovative time of our existence. Now, I know Erik—he’s a brilliant economist, but he’s a wrong economist. He’s going to give you productivity statistics, and those numbers are based on how much companies gain by laying people off. They are productivity gains from firing, not productivity gains from hiring.
What I want you to do is look at this figure—this is total factor productivity. It has been down much lower since 1973—this is the bottom line. For all of the great stuff that people in this room have been doing, we have not been innovative. For all the virtues of the tech sector, consider the losses we’re taking. There is no more cheap energy. K–12 education is a mess, and I know all about the great stuff we’re going to hear about, but even if that happened today, it doesn’t pay off for the next 20 years. In the healthcare there are real advances, but what were paying for it is a mess, the way we’re treated is a mess. Productivity in healthcare is in shambles.
So you have three sectors: healthcare, energy, K–12 education—toss in a good bit of government—that are essentially going backwards. In the tech sector it’s wonderful, it’s struggling mightily to make up for those losses, so maybe we’re holding even on that, but again, I mentioned, standards of living have not risen. Consider the first 50 years of my grandmother’s life. She was born in 1905, hardly anyone finished high school. Electricity, flush toilets, automobiles, radios, television were all to come. She saw those all, and many other things, including airplanes, in her first 50 years. In my first 49 years, I’ve seen the computer, the internet. Turn on a TV show from the early 70s, you can walk right into that world and it is normal, and it looks entirely familiar, and that is sad.
What are the problems? There’s overregulation. Managing stuff is easier than managing humans. The frontier areas for gains, like healthcare and education and government, it’s all about managing humans. It’s hard to do. In a lot of areas we have plateaus. Cars are getting slightly better, but the flying car is not coming anytime soon. Let me just say, referring to what Erik’s going to tell you, don’t obsess over stuff in the pipeline. Like electricity, like the car, it takes a lot longer than you think. Yes, someday further gains will come, but those gains have been remarkably slow. You see it whether you visit Occupy Wall Street or the Tea Party. On the ground, everyone knows that stuff is wrong. And the times when the jobs are disappearing—like the last few years—are the times when output has been falling, not rising. So the culprit is not enough growth, not enough progress, not too much. Thank you all.