Wednesday, February 2, 2011

Great Decoupling and Great Stagnation

There are many comments on Tyler Cowen’s new e-book, The Great Stagnation. Here is one , by Lane Kenworthy, that strikes me as reasonable.

The Kenworthy objections:

First, it is not obvious that innovation has in fact slowed significantly (which is the main factor of stagnating median income according to Cowen). Moreover the Cowen measurement of innovation by patents is especially unconvincing.

Second, “the rate of economic growth has been lower in the recent era, but it’s nevertheless been decent. Yet median income growth has been very slow. This contrasts sharply with the prior period.”

Conclusion: “I’m all for helping to accelerate the rate of innovation. But the big change in the recent decades lies in the degree to which economic growth lifts middle-class incomes. If we want to understand slow income growth, that should be our focus.”

I agree and I suggest the following direction for research: couldn’t the slowing down of middle-class incomes growth be linked to the shrinking of the middle managers number in firms’ hierarchies? See my paper (with J. Hanoteau) on “The Shrinking Hand” on my SSRN page, or on my homepage (

No comments: