Rather than struggling to write one consistent definitive post, I‘ve decided to bite the bullet and offer a series of small takes.

Of course, I loved the shorter ebook format, encourage others to download, and to switch from the overly hyped e-ink format to something that can actually display charts and graphs. Wanting to read mostly PDFs with lots of charts is why I didn’t buy a Kindle.

The Great Stagnation’s core thesis is that all of the woes of our time come down to diminishing returns. We ate the low hanging fruit as Tyler says.

It’s true that we have ridden the industrialization pony about as far as she is going to go, that new meaningful innovations are going to come from somewhere else and that this new innovation will define a different kind of growth and ultimately a different kind of economy.

However, is this the source of what ails us? I tend to think that it isn’t. For one, the Great Recession has causes that are largely, though not completely, orthogonal to this issue. I also think the actual stagnation in living standards has somewhat different roots.

A key step in evaluating Tyler’s argument is getting a good measure of how the US economy is growing and seeing whether or not it shows evidence of diminishing returns.

Tyler is attracted to median family income as measured by the Census Bureau. Its not hard to see why. Median family income is more or less a measure of how much stuff the typical family can afford to buy. That has indeed been stagnating.

Now if you believe the standard story, then median income has been stagnating both because society is investing in things the family doesn’t buy directly and because more national income is captured by the wealthy (which is another word for Wall Street.)

Tyler’s case ads the following twist: we only think that our overall economy is growing because we are throwing more and more money at medicine, education, and Wall Street. However, these things don’t represent actual economic growth. Our GDP stats are thus inflated, our productivity stats are wrong, and the stagnation of family income reflects the true nature of our economy.

I have some sympathies with this line of reasoning. I have lots of data quibbles and ultimately I think it can’t be quite right, but those can come later.

My primary question, however, is this: to the extent we are throwing money at unproductive uses, is this a supply problem as Tyler posits or a demand problem, as I tend to think?

In other words is it that innovation has just become so darn hard or is it that higher salaries are luring all of our bright kids into becoming doctors and hedge fund managers, while relatively fewer are becoming engineers and teachers. [1]

The net effect of my story is that there less human intellect devoted to productive innovation and that the typical American – by dearth of K12 education – is further from the technological frontier.

Tyler hints at a demand side solution when he says we need to raise the status of scientists, but my question is whether we have actually run out low hanging fruit or have simply stopped picking it?


1) Its important to note that Peter Thiel one of Tyler’s inspirations is a brilliant guy, very interested in science, and founded an innovative company. Nonetheless, he has made most of his money in a hedge funds and much of that in shorting commodities and in currency trades. Not innovative stuff, but lucrative.