The Wisdom of Steve Miller
Pete Boettke on Cowen’s The Great Stagnation:
The Great Stagnation is a condemnation of government growth
over the 20th century. It was made possible only by the amazing
technological progress of the late 19th and early 20th century. But as
the rate of technological innovation slowed, the costs of government
growth became more evident. The problem, however, is that so many have
gotten used to the economics of illusion that they cannot stand the
reality staring them in the face.
My co-author Steve Miller replies:
problem with TGS is that Tyler really is saying that Schumpeterian
growth especially has slowed down. And it hasn’t. I understand the
libertarian interpretation of his argument. It would be ideologically
convenient to say that growth in the size and scope of government has
led to stagnation. The problem is it hasn’t, because there is no
stagnation. There’s a counterfactual argument to be made that
innovation would have been even greater without a government that
consumes roughly a third of GDP. That’s fine, but the word stagnation
is completely misleading. Economic pessimism is wrong even when
libertarian economists are preaching it.
I largely agree with Steve the Wise, of course. My one quibble is that there is reasonable evidence in favor of a Slight Stagnation. Herb Stein supposedly quipped that “There is nothing wrong with supply-side economics that division by ten wouldn’t fix.” I’m tempted to make an analogous concession to The Great Stagnation, but reflections on CPI bias and consumption-biased technological change stay my hand.