In his short 2011 book “Great Stagnation”, Tyler Cowen questions growth in the past as well as the prospects for future growth. He takes an interesting view of the productivity which economists see as the main driver of long term growth. His focus is the United States growth dynamics, not only after the crisis, but before that too. United States is moving global technology frontier, so what happens there is an indication what can less developed nations expect once, and if they reach the same frontier.
For the US, Cowen claims, the technological progress that accompanies us for the most part of the century is about to slow down, actually it has already slowed down. According to Cowen, US has already picked the low hanging fruit of previous technological discoveries. Cohen tracks growth rates of output and median income in last few decades and spots a slowdown.
Great Stagnation claims this is due to fact that US picked the low hanging fruits that were obvious as a way to improve lives of ordinary people. In short, Cowen asserts that everything crucial for modern life was invented in the 60s and now we are only left with the fruit higher on the tree. These innovations require much more work and offer lower returns.
Low hanging fruits in US history were immigration, cheap land, high productivity farms, chemicals, industrial innovation, innovation in electronics and more. Not much has changed in modern household since. We added smartphones, apps etc, but how much exactly do these mean. In education much has changed. Many go to colleges and returns are shrinking. Cohen believes we should prepare for a less dynamic future.
Great Stagnation is not just a story of slowing growth, it relates to Cowen’s newer book, the “Average is Over”. In the future, these technology returns will be captured by smaller group of super rich.
So, what can binary options trader think of this? Mostly he is on the right path. Only way to capture these returns from smaller technological advances that wont spread as much as before, is to own equities and bet on the future that way. Binary Options trading is accessible to most ordinary people without huge fees, so they can use financial markets to invest in the future. Even if Cowen is wrong, long term, global capital will then accumulate even faster.
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