Has a rise in material comforts led to decreased ambition and innovation amongst the American people? That is the case that Tyler Cowen makes in his latest treatise. Compared to the 1950s and 60s, he says, America as a whole experiments, invents, and even protests less, and despite widespread claims of “disruption” our society is more stable than ever before.
Cowen argues that there was more to appreciate about that earlier period than is widely recognized:
There was something to be said for less-compatible, more challenge-laden accidental pairings with all their conflicts and messy resolutions. At the end of the day, you weren’t quite satisfied with your pairings, and so you felt you had to go away and do or build something great, because you had no notion of just waiting for the next social network-base encounter to come along.
Is it really fair to characterize a closeted homosexual or an interracial couple kept apart by the force of law as “not quite satisfied” with their lot? Even if social outcasts are more likely to innovate than their mainstream counterparts, rolling back decades of progress on civil rights seems like a high price to pay. Let’s leave this aside for the moment, though, and consider Cowen’s arguments on their own merits.
The two reference groups to which Cowen most frequently compares contemporary America are (1) contemporary Asian societies, especially China, and (2) mid-century America. Are these actually fair comparisons? The unprecendented levels of GDP growth in China and India have tremendous social welfare consequences, but they are merely catching up with existing levels of technology. As they get closer to the technological frontier, these countries will likely encounter the same diminishing returns and barriers to innovation that Western societies have.
A large part of the reason why America was so innovative in the 1960s had to do with broad social changes, such as the broader inclusion of women and minorities in the workforce (especially in professional positions). Bringing online so many previously-ignored great minds was akin to picking low-hanging fruit in our society, a point that Cowen has himself discussed at length. There aren’t as many “dollar bills on the sidewalk” today (to mix the metaphor). Potentially similar opportunities include open borders (which would bring more great minds to work on important problems) and a single-payer healthcare system (which would promote entrepreneurship). (In a recent interview, Cowen discounted the second of these ideas.)
Furthermore, many of the “great projects” Cowen points to had their basis in military conflict (WWII, the Manhattan project, the interstate highway system, and the Apollo moon landings). Now that the Cold War has ended, there is less impetus for this type of research and development. The military procurement process today is more concerned with sustaining rather than disruptive innovations. In face, the high proportion of the federal budget spent on defense is likely hampering rather than helping our economy, since it attracts such a high degree of rent-seeking.
What are the alternate explanations for Cowen’s observations? Four come to mind: demographics, political polarization, economic homogenization, and rising housing costs. Nearly twice as many Americans, as a percentage, are retirement-age now compared to 1940 (6.8 percent vs. 13.0 percent). The proportion in the most innovative age segment of the population, 18-44, has dropped from 42.8 percent to 36.5 percent (source). The drop in the population of potential innovators is even worse than these numbers would indicate, however, because young adults now spend more time in school and professional training (learning about earlier innovations so that they are prepared to exploit and expand upon them). The costs of caring for these aging members of society are also high, both in government spending and individual household budgets (see p. 49).
Political polarization and economic homogenization are two sides of the same coin insofar as they inhibit geographical mobility. If you are in one of the few blue counties in a red state (or vice-versa), you may be less eager to move to another nearby county. If moving from a 60 percent blue county to a 60 percent red county requires you to “spend a great deal of time actively disagreeing with people” (source), that may be a price higher than you are willing to pay. Moreover, the pool of jobs in that other county is likely to be not-that-different from the ones available where you currently reside: they have about the same mix of dentists, dog-walkers, and dry cleaners there, too (see p. 31).
Another explanation, which has received more attention the past few years, is rising housing costs. If a greater proportion of your household wealth is tied up in your home, wouldn’t that make you less likely to move? Often this wealth remains untapped until retirees take part in a cost-of-living arbitrage and move from expensive housing markets, like California and the Northeast corridor, to less costly ones like Florida or the Sun Belt.
To be sure, Cowen explores some of these alternate hypotheses. For example, on p. 31:
The dentist job outside of Cincinnati just isn’t that different from the dentist job outside of Denver…. A dentist doesn’t have that much reason to move from Cincinnati to Denver or vice versa; instead he or she will pick a preferred city and stick with it.
However, that doesn’t explain what makes one city preferable to another (culture? amenities? proximity to family?), nor what has changed in this respect in recent years.
The one notable exception to these trends, you may be thinking, is the technology industry, especially in Silicon Valley. Why is it that this sector is one of the few sources of innovation in our economy? Is it because companies here can outpace regulators, gaining a foothold before legal frameworks catch up? (See, for example, the discussion of AirBnb in The Upstarts.) Cowen downplays the amount of innovation happening in this sector, largely because there are fewer jobs at startup firms today than in past decades (see chapter 4). Certainly these companies are more efficient, on a revenue-per-employee basis, than ever before.
What are the long-term consequences of these trends? One is that lower rates of interstate mobility would seem to inhibit the roles of states as “laboratories of democracy.” Perhaps this is why more and more political causes are pushing for national uniformity (on laws related to marriage and healthcare, for example) rather than state-by-state reform.
One particularly weak area of Cowen’s argument is that the number and intensity of protests are a proxy for innovation and disruption. In discussing the dearth of protests since the 1970s, Cowen overlooks the massive demonstrations that took place in the 1990s: riots in response to the Rodney King verdict (and O.J. Simpson trial), as well as anti-globalization and pro-environmentalism protests. (As a minor nitpick, he also twice mistakenly cites the Ferguson riots as taking place in 2015 rather than 2014).
While there is much to quibble with in this book, it is a very thought-provoking read. On its strongest points, such as the lack of geographical mobility in contemporary America, it is quite strong. If Cowen is right, America’s future looks a lot more like contemporary Europe. Whether that is a satisfactory outcome remains to be seen.