What's the Big Story?
By Arnold Kling
the Japanese economy was more dependent on productivity gains in the first place. As those gains start to slow down or dry up, it bites harder and more quickly.
I want to talk about three big stories for what is going on in the world today. Cowen’s big story is The Great Stagnation. Productivity growth has slowed, in part because of a slowdown in technological change.
The Krulong big story is that the market animals escaped from the zoo. We need to put the technocrat/zookeepers back in charge.
My big story is the opposite of both. It is that (1) we have had a speed-up in technological change, and (2) the technocrats have too much power and too little knowledge. The technocratic approaches to bank capital regulation, U.S. housing policy, and European integration have failed spectacularly, illustrating the knowledge-power discrepancy.
I think my story has the easiest time explaining the strong relative performance of emerging-market countries. The Internet has made it easier to establish and manage patterns of trade that incorporate emerging-market economies. This has produced the Great Factor-Price Equalization between workers of average IQ’s in different countries. A large number of average-IQ workers in the United States have yet to find their place with new patterns of sustainable specialization and trade (PSST).