Limbo starts to feel like home
According to Herbert Stein’s Law, the signature warning of our age, “If something cannot go on forever, it will stop.” The question is: When?
The central concerns of environmentalists and radical market economists are easy to distinguish – when not straightforwardly opposed – yet both groups face a common mental and historical predicament, which might even be considered the outstanding social discovery of recent times: the extraordinary durability of the unsustainable. A pattern of mass behavior is observed that leads transparently to crisis, based on explosive (exponential) trends that are acknowledged without controversy, yet consensus on matters of fact coexists with paralyzing policy disagreements, seemingly interminable procrastination, and irresolution. The looming crisis continues to swell, close, horribly close, but in no way that is persuasively measurable closer, like some grating Godot purgatory: “You must go on; I can’t go on; I’ll go on.”
Urban Future doesn’t do green anguish as well as teeth-grinding Austrolibertarian irritation, so it won’t really try. Suffice to say that being green is about to become almost unimaginably maddening, if it isn’t already. Just as the standard ‘green house’ model insinuates itself, near-universally, into the structure of common sense, the world temperature record has locked into a flatline, with surging CO2 production showing up everywhere except as warming. Worse still, a new wave of energy resources – stubbornly based on satanic hydrocarbons, and of truly stupefying magnitude – is rolling out inertially, with barely a hint of effective obstruction. Tar sands, fracking, and sub-salt deep sea oil deposits are all coming on-stream already, with methane clathrates just up the road. The world’s on a burn, and it can’t go on (but it carries on).
Financial unsustainability is no less blatant, or bizarrely enduring. Since the beginning of the 20th century, once (classically) liberal Western economies have seen government expenditure rise from under 5% to over 40% of total income, with much of Europe crossing the 50% redline (after which nothing remotely familiar as ‘capitalism’ any longer exists). Public debt levels are tracing geometrically elegant exponential curves, chronic dependency is replacing productive social participation, and generalized sovereign insolvency is now a matter of simple and obvious fact. The only thing clearer than the inevitability of systemic bankruptcy is the political impossibility of doing anything about it, so things carry on, even though they really have to stop. Unintelligible multi-trillion magnitudes of impending calamity stack up, and up, and up in a near future which never quite arrives.
The frozen limbo-state of durable unsustainability is the new normal (which will last until it doesn’t). The pop cultural expression is zombie apocalypse, a shambling, undying state of endlessly prolonged decomposition. When translated into economic analysis, the result is epitomized by Tyler Cowen’s influential e-book The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better. (Yes, Urban Future is arriving incredibly late to this party, but in a frozen limbo that doesn’t matter.)
In a nutshell, Cowen argues that the exhaustion of three principal sources of ‘low-hanging fruit’ has brought the secular trend of American growth to a state of stagnation that high-frequency business cycles have partially obscured. With the consumption of America’s frontier surplus (free land), educational surplus (smart but educationally-unserved population), and — most importantly — technological surplus, from major breakthroughs opening broad avenues of commercial exploitation, growth rates have shriveled to a level that the country’s people are psychologically unprepared to accept as normal.
It fell to Cowen’s GMU colleague Peter Boettke to clearly make the pro-market case for stagnationism that Cowen seems to think he had already persuasively articulated. In an overtly supportive post, Boettke transforms Cowens’ rather elusive argument into a far more pointed anti-government polemic — the discovery of a new depressive equilibrium, in which relentless socio-political degeneration absorbs and neutralizes a decaying trend of techno-economic advance.
An accumulated economic surplus was created by the age of innovation, which the age of economic illusion spent down. We are now coming to the end of that accumulated surplus and thus the full weight of government inefficiencies are starting to be felt throughout the economy.
Perhaps surprisingly, the general tenor of response on the libertarian right was quite different. Rather than celebrating Cowen’s exposure of the statist ruin visited upon Western societies, most of this commentary concentrated upon the stagnationist thesis itself, attacking it from a variety of interlocking angles. David R. Henderson’s Cato review makes stinging economic arguments against Cowen’s claims about land and education. Russ Roberts (at Cafe Hayek) shows how Cowen’s dismal story about stagnant median family incomes draws upon data distorted by historical changes in US family structure and residential patterns. The most common line of resistance, however, instantiated by Don Boudreaux, John Hagel, Steven Horwitz, Bryan Caplan, and Ronald Bailey, among others, rallies in defense of actually existing consumer capitalism. Bailey, for example, notes:
In 1970, a 23-inch color television cost $368 ($2,000 in 2009 dollars). Today, a 22-inch Phillips LCD flat panel TV costs $190. In 1978, an 8-track tape player cost $169 ($550). Today, an iPod Touch with 8 gigabytes of memory costs $204. In 1970, an Olympia adding machine cost $80 ($437 in 2009 dollars). Today, a Canon office calculator costs $6.65. In 1978, a Radio Shack TRS80 computer with 16K of RAM cost $399 ($1300 in 2009 dollars). Today, Costco will sell you an ASUS netbook with 1 gigabyte of RAM for $270. The average car cost $3,900 in 1970 ($21,300 in today’s dollars). A mid-sized 2011 vehicle would cost somewhere around $20,000 and last twice as long.
Another very crude way to look at it is that Americans are four times richer in terms of refrigerators, 10 times richer in terms of TVs, 2.5 times richer when it comes to listening to music on the go, 3,000 times richer in calculators, about 400,000 times richer when it comes to price per kilobyte of computer memory, and two times richer in cars. Cowen dismisses this kind of progress as mere “quality improvements,” but in this case quality becomes it own kind of quantity when it comes to improved living standards.
What seems pretty clear from most of this (and already in Cowen’s account) is that nothing much has been moving forward in the world’s ‘developed’ economies for four decades except for the information technology revolution and its Moore’s Law dynamics. Abstract out the microprocessor, and even the most determinedly optimistic vision of recent trends is gutted to the point of expiration. Without computers, there’s nothing happening, or at least nothing good.
[… still crawling …]