David Henderson's Persuasive Case
By Arnold Kling
In his book review, Henderson writes,
whatever explanation Cowen comes up with for the slower growth of median family income since 1973 should be one that is consistent with the relatively healthy growth of per capita GDP since 1973. Do his explanations do that?
It is certainly legitimate to prefer median family income as a measure of well-being. However, Henderson is correct to point out that the better performance of per capita GDP is a fact that cannot be overlooked as you to try to explain median family income.
If we have run out of low-hanging fruit (cheap land, technological innovation, better education), then that should affect both per capita GDP and median family income. If you want to say that those factors caused median family income to fall, then you are left with a task of explaining how per capita GDP growth managed to hold its own.
Taking account of the two measures of economic performance, the Great Stagnation becomes the Great Redistribution. It is far from obvious how the low-hanging-fruit story plays into redistribution.
Instead, the most plausible candidates that spring to my mind are immigration, changes in family structure, and changes in marriage patterns. And, contra Cowen, I believe that faster innovation played a role, also.