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A review by jwsg
Average Is Over: Powering America Beyond the Age of the Great Stagnation by Tyler Cowen
4.0
In Average is Over, Tyler Cowen explains why, in a reversal of developments in the 20th century, the middle class will shrink over time. Economic principles indicate that returns will accrue to the owners of scarce resources such as quality land and natural resources, IP and quality labour with unique skills. The returns to ordinary labour and ordinary savings will decline. The emergence of new technologies, and intelligent machines in particular, will benefit individuals who are adept at working with technology, not necessarily hard core engineers and coders, but those who can "mix technical knowledge with solving real world problems" and who can manage the interface between technology, people, and the issues and problems we face in daily life and society. Cowen cites the top Freestyle chess teams as examples of individuals who have learned how to exploit the potential of technology to up their game. While these Freestyle chess players may not be the best players on their own, they know how to use technology to give them an edge.
Who else might benefit from this brave new world? Cowen argues that "if you have an unusual ability to spot, recruit and direct those who work well with computers, even if you don't work well with computers yourself, the contemporary world will make you rich....'Welcome to the hyper-meritocracy'". Is it fair for there to be such a large (and growing) income gap between C-suite executives at the top and wage earners at the bottom? Cowen suggests that this is inevitable since it is "the manager who is the scarce input...managers play a role of growing importance in coordinating complex, large scale production processes". It's not to say that there is no scope for social mobility in this hyper-meritocracy. Some people at the bottom will have the opportunity to rise up the ranks - but only those who are highly self-motivated, conscientious (i.e. follow instructions and orders with "exactness and without resentment"), and disciplined.
Cowen defends outsourcing, immigration, and foreign competition - all of which have been blamed for causing problems like unemployment and sluggish economic growth. Cowen admits that outsourcing does not raise productivity for American workers (who may lose their jobs), since the outsourcing does not actually provide American workers with better training, machines or higher value added products to manufacture. However, the productivity gains to factory owners and consumers are likely to outweigh the costs to American workers. Moreover, slowdowns in wage growth are more likely to stem from the skills mismatch between American workers and the new demands of the American economy, rather than outsourcing. "Many millions of people can turn a screen on an assembly line, work a lathe, or handle a telephone switchboard. Not so many people can team up fruitfully with Rybka, or, more generally, work with intelligent machines operating, in, say, our finance, service and medical sectors". Meanwhile, immigration probably helps retain jobs locally rather than pose a threat to jobs, since it helps keep the US competitive and keeps other complementary (lower skilled) jobs in place.
Much of Cowen's book is based on standard economic theory and would not be surprising to anyone familiar with economic principles. But there are some thought provoking snippets. He notes that the security of non-tradable sectors like government, healthcare and education don't face so much of a daily market test. Yet, most of the job growth in the US is coming in such "low accountability sectors, [where] people get paid to produce things, or offer services, and we're never quite sure how much value they are putting on the table". This presents several problems. First, upgrading productivity is a challenge if you cannot really measure the value of what you are producing. Second, the job security of such non-tradable sectors, in contrast to the volatility and uncertainty in other parts of the economy would have implications of social cohesion, what with growing inequality. (On a separate note, for much maligned consultants out there, Cowen also offers a defence for the generalist consultant in The Big Earners and The Big Losers).
Overall, a well-written book that has the right blend of stats and data, examples and anecdotes for an engaging and accessible read.
Who else might benefit from this brave new world? Cowen argues that "if you have an unusual ability to spot, recruit and direct those who work well with computers, even if you don't work well with computers yourself, the contemporary world will make you rich....'Welcome to the hyper-meritocracy'". Is it fair for there to be such a large (and growing) income gap between C-suite executives at the top and wage earners at the bottom? Cowen suggests that this is inevitable since it is "the manager who is the scarce input...managers play a role of growing importance in coordinating complex, large scale production processes". It's not to say that there is no scope for social mobility in this hyper-meritocracy. Some people at the bottom will have the opportunity to rise up the ranks - but only those who are highly self-motivated, conscientious (i.e. follow instructions and orders with "exactness and without resentment"), and disciplined.
Cowen defends outsourcing, immigration, and foreign competition - all of which have been blamed for causing problems like unemployment and sluggish economic growth. Cowen admits that outsourcing does not raise productivity for American workers (who may lose their jobs), since the outsourcing does not actually provide American workers with better training, machines or higher value added products to manufacture. However, the productivity gains to factory owners and consumers are likely to outweigh the costs to American workers. Moreover, slowdowns in wage growth are more likely to stem from the skills mismatch between American workers and the new demands of the American economy, rather than outsourcing. "Many millions of people can turn a screen on an assembly line, work a lathe, or handle a telephone switchboard. Not so many people can team up fruitfully with Rybka, or, more generally, work with intelligent machines operating, in, say, our finance, service and medical sectors". Meanwhile, immigration probably helps retain jobs locally rather than pose a threat to jobs, since it helps keep the US competitive and keeps other complementary (lower skilled) jobs in place.
Much of Cowen's book is based on standard economic theory and would not be surprising to anyone familiar with economic principles. But there are some thought provoking snippets. He notes that the security of non-tradable sectors like government, healthcare and education don't face so much of a daily market test. Yet, most of the job growth in the US is coming in such "low accountability sectors, [where] people get paid to produce things, or offer services, and we're never quite sure how much value they are putting on the table". This presents several problems. First, upgrading productivity is a challenge if you cannot really measure the value of what you are producing. Second, the job security of such non-tradable sectors, in contrast to the volatility and uncertainty in other parts of the economy would have implications of social cohesion, what with growing inequality. (On a separate note, for much maligned consultants out there, Cowen also offers a defence for the generalist consultant in The Big Earners and The Big Losers).
Overall, a well-written book that has the right blend of stats and data, examples and anecdotes for an engaging and accessible read.