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Fully Grown: Why a Stagnant Economy Is a Sign of Success
Vollrath challenges our long-held assumption that growth is the best indicator of an economy’s health.
Most economists would agree that a thriving economy is synonymous with GDP growth. The more we produce and consume, the higher our living standard and the more resources available to the public. This means that our current era, in which growth has slowed substantially from its postwar highs, has raised alarm bells. But should it? Is growth actually the best way to measure economic success—and does our slowdown indicate economic problems?
The counterintuitive answer Dietrich Vollrath offers No. Looking at the same facts as other economists, he offers a radically different interpretation. Rather than a sign of economic failure, he argues, our current slowdown is, in fact, a sign of our widespread economic success. Our powerful economy has already supplied so much of the necessary stuff of modern life, brought us so much comfort, security, and luxury, that we have turned to new forms of production and consumption that increase our well-being but do not contribute to growth in GDP.
In Fully Grown , Vollrath offers a powerful case to support that argument. He explores a number of important trends in the US including a decrease in the number of workers relative to the population, a shift from a goods-driven economy to a services-driven one, and a decline in geographic mobility. In each case, he shows how their economic effects could be read as a sign of success, even though they each act as a brake of GDP growth. He also reveals what growth measurement can and cannot tell us—which factors are rightly correlated with economic success, which tell us nothing about significant changes in the economy, and which fall into a conspicuously gray area.
Sure to be controversial, Fully Grown will reset the terms of economic debate and help us think anew about what a successful economy looks like.
Most economists would agree that a thriving economy is synonymous with GDP growth. The more we produce and consume, the higher our living standard and the more resources available to the public. This means that our current era, in which growth has slowed substantially from its postwar highs, has raised alarm bells. But should it? Is growth actually the best way to measure economic success—and does our slowdown indicate economic problems?
The counterintuitive answer Dietrich Vollrath offers No. Looking at the same facts as other economists, he offers a radically different interpretation. Rather than a sign of economic failure, he argues, our current slowdown is, in fact, a sign of our widespread economic success. Our powerful economy has already supplied so much of the necessary stuff of modern life, brought us so much comfort, security, and luxury, that we have turned to new forms of production and consumption that increase our well-being but do not contribute to growth in GDP.
In Fully Grown , Vollrath offers a powerful case to support that argument. He explores a number of important trends in the US including a decrease in the number of workers relative to the population, a shift from a goods-driven economy to a services-driven one, and a decline in geographic mobility. In each case, he shows how their economic effects could be read as a sign of success, even though they each act as a brake of GDP growth. He also reveals what growth measurement can and cannot tell us—which factors are rightly correlated with economic success, which tell us nothing about significant changes in the economy, and which fall into a conspicuously gray area.
Sure to be controversial, Fully Grown will reset the terms of economic debate and help us think anew about what a successful economy looks like.
296 pages, Hardcover
First published January 1, 2020
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Displaying 1 - 26 of 26 reviews
October 10, 2020
This is a very remarkable book for several reasons.
First, there is its central thesis. Dietrich Vollrath, who is the co-author a textbook on economic growth, claims that the slowdown in US productivity growth is largely the result of choices you would expect from an affluent society: first, higher living standards and higher educational achievements for women led to declines in fertility, that in turn changed the age structure of the labour force, where the increased education of the new cohorts do not loner compensate for the decreasing returns to experience from the old cohorts; two, as societies grow richer they spend increasing shares of their incomes to services rather than goods, and it is notoriously difficult to improve productivity in services (hairdressing is still basically the same as one hundred years ago).
Second, Vollrath's approach to the structure of the book sets an example for how to introduce serious economic to a general public. The main text is kept non-technical, with just one equation (the macro economic identity) in 220 pages. In the text, Vollrath consistently refers to the authors he cites, but always translates the insights for the target audience. However, the annex to the book does contain all the equations Vollrath refers to implicitly, all the data sets he used for his calculations, and the links to the computer code he wrote for the data manipulations. Each reader who wishes do to so can thus verify himself the claims made by the author.
Third, Vollrath beautifully illustrates how to conduct serious economic analysis. Too many popular books on economics are written by media savvy authors, who have seen the light on how the world functions, and then gather all the evidence in favour of their thesis, while disregarding any inconvenient counterpoints.
Vollrath does nothing of the sort. He carefully goes through all the possible alternative explanations for the phenomenon that is the topic of his book (increased abuse of market power, government regulation and taxation, increasing inequality, competition from China) and looks at the evidence to evaluate them. It doesn't always make exciting reading, but it teaches the reader how not to jump to conclusions whenever he finds facts that are compatible with his view of the world.
The world would be a better place if more policy oriented books took this approach.
One of the must reads of this years for anyone with an interest in the factors determining our standard of living. Now someone needs to repeat the analysis for Europe.
First, there is its central thesis. Dietrich Vollrath, who is the co-author a textbook on economic growth, claims that the slowdown in US productivity growth is largely the result of choices you would expect from an affluent society: first, higher living standards and higher educational achievements for women led to declines in fertility, that in turn changed the age structure of the labour force, where the increased education of the new cohorts do not loner compensate for the decreasing returns to experience from the old cohorts; two, as societies grow richer they spend increasing shares of their incomes to services rather than goods, and it is notoriously difficult to improve productivity in services (hairdressing is still basically the same as one hundred years ago).
Second, Vollrath's approach to the structure of the book sets an example for how to introduce serious economic to a general public. The main text is kept non-technical, with just one equation (the macro economic identity) in 220 pages. In the text, Vollrath consistently refers to the authors he cites, but always translates the insights for the target audience. However, the annex to the book does contain all the equations Vollrath refers to implicitly, all the data sets he used for his calculations, and the links to the computer code he wrote for the data manipulations. Each reader who wishes do to so can thus verify himself the claims made by the author.
Third, Vollrath beautifully illustrates how to conduct serious economic analysis. Too many popular books on economics are written by media savvy authors, who have seen the light on how the world functions, and then gather all the evidence in favour of their thesis, while disregarding any inconvenient counterpoints.
Vollrath does nothing of the sort. He carefully goes through all the possible alternative explanations for the phenomenon that is the topic of his book (increased abuse of market power, government regulation and taxation, increasing inequality, competition from China) and looks at the evidence to evaluate them. It doesn't always make exciting reading, but it teaches the reader how not to jump to conclusions whenever he finds facts that are compatible with his view of the world.
The world would be a better place if more policy oriented books took this approach.
One of the must reads of this years for anyone with an interest in the factors determining our standard of living. Now someone needs to repeat the analysis for Europe.
October 20, 2020
Fully Grown tackles a complicated political and economic subject -- economic growth averaged 2.25% per year up until 2000 before plummeting and averaging just 1% per year in the nearly two decades since then -- and offers up its arguments in a way that is a model for every other non-fiction book. It doesn't quite deliver on the promise of its subtitle but it does by the end, in a way so understated you can almost miss it, offer up a surprisingly radical argument.
Before we turn to the content of the book's arguments first we have to comment on the structure which is so good that it is nearly worth 5-stars just for that. This is a book full of charts, linear regressions, tables, and lots and lots of numbers. And it is all open data. You can go to github -- https://github.com/dvollrath/FullyGrown -- and download all of the data and all of the programs that slice and dice the data. You can run A-REPLICATE-BOOK.do to regenerate every single chart in the book. This is amazing and I wish more books did this.
So, back to the book. Economic growth collapsed from 2.25% a year to 1% a year. Why? What happened to that missing 1.25%? The book is devoted to answering that question -- and examining (and mostly dismissing) competing arguments. One weakness of the book is the question is largely answered pretty quickly. After reading just 25% of the book you've basically got (most of) the answer.
Depending on what else you've been reading, this may not be news. It is part of parcel of the "secular stagnation" hypothesis that Larry Summers dusted off in 2013. One thing I find fascinating about these demographic explanations is that they were almost completely non-existent just a few years ago -- yet the data has been there for decades for anyone to see. Where were the people in the 1980s warning us that there was a demographic time bomb that was going to explode in 20-30 years?
In any case, after just one-quarter of the book Vollrath has given us two-thirds of the answer. He then gives us the next piece of the puzzle in short order.
So there you have it: between demographic changes and the shift from goods to services, we can explain 80% of the growth slowdown. This is what Vollrath means by "a sign of success". Our shift from goods to services is because we've reached material wealth. How many more TVs does a family need? How many cars? Our lower demographic growth is because women are empowered via education, via work outside of the home, via contraception. Do we really want to roll back any of those things? So it is hard to see how we "fix" the problem of this lost 80%.
The rest of Vollrath's book is spent exploring what might make up the other 20%. A lot of popular bugbears -- monopoly power, excess regulation, drop in geographic mobility, inequality, trade with China -- and mostly finds they lack explanatory power. It can be a bit down in the weeds -- and I wouldn't be surprised if he loses many readers here. I have a passion of this kind of economic stuff and even I was nodding off a bit at points.
But it is here where Vollrath is subtly fairly radical, though he doesn't really highlight that except for one or two sentences in his concluding chapter. Throughout the book, Vollrath's tone is of a disinterested academic investigating a curious phenomenon. Someone throws out a hypothesis, "Maybe lower growth was caused by economic inequality!" or "Maybe lower growth was caused by increased market power of large corporations!" or "Maybe lower growth was caused by increasingly excessive government regulations!"
And he dutifully goes off and investigates and generally finds them lacking. Trade with China? Maybe cost us 0.016% of that 1.25%. Inequality? Maybe accounted for 0.14% of that 1.25%.
On the one hand, it often feels like beating a dead horse. After all, he already accounted for 80% of the growth slow down so people are arguing (vehemently!) about the tiny 20% slice. We already know that, even if true, they are a very marginal impact.
But in the concluding chapter he subtly makes the point that if these factors don't account for the growth slowdown then they also don't contribute to growth. Reduced anti-trust enforcement. Increased market power of large corporations (usually at the expense of workers). Increased income inequality. Outsourcing to China. None of them seem to have actually contributed to growth so...why keep them as-is?
One understands why Vollrath didn't go deeper down this -- it risks turning the book from one of rather staid economic investigations into one of polemics. But I also think Vollrath does a slight disservice by burying motivations like this at the very end of his book. If they had been moved to the front they might help capture the attention of more mainstream readers.
Before we turn to the content of the book's arguments first we have to comment on the structure which is so good that it is nearly worth 5-stars just for that. This is a book full of charts, linear regressions, tables, and lots and lots of numbers. And it is all open data. You can go to github -- https://github.com/dvollrath/FullyGrown -- and download all of the data and all of the programs that slice and dice the data. You can run A-REPLICATE-BOOK.do to regenerate every single chart in the book. This is amazing and I wish more books did this.
So, back to the book. Economic growth collapsed from 2.25% a year to 1% a year. Why? What happened to that missing 1.25%? The book is devoted to answering that question -- and examining (and mostly dismissing) competing arguments. One weakness of the book is the question is largely answered pretty quickly. After reading just 25% of the book you've basically got (most of) the answer.
To leave with a round number, let’s say that population aging due to smaller families accounted for 0.80 percentage points of the growth slowdown. Even with this lower estimate, the twin successes of rising living standards and women’s reproductive rights explain about two-thirds of the 1.25 percentage point drop in the growth rate of GDP per capita from the twentieth to the twenty-first century.
Depending on what else you've been reading, this may not be news. It is part of parcel of the "secular stagnation" hypothesis that Larry Summers dusted off in 2013. One thing I find fascinating about these demographic explanations is that they were almost completely non-existent just a few years ago -- yet the data has been there for decades for anyone to see. Where were the people in the 1980s warning us that there was a demographic time bomb that was going to explode in 20-30 years?
In any case, after just one-quarter of the book Vollrath has given us two-thirds of the answer. He then gives us the next piece of the puzzle in short order.
the previous two chapters showed that the shift away from goods production into services could account for up to 0.2 percentage points of the growth slowdown. This shift was, in turn, driven by an immense increase in material living standards.
So there you have it: between demographic changes and the shift from goods to services, we can explain 80% of the growth slowdown. This is what Vollrath means by "a sign of success". Our shift from goods to services is because we've reached material wealth. How many more TVs does a family need? How many cars? Our lower demographic growth is because women are empowered via education, via work outside of the home, via contraception. Do we really want to roll back any of those things? So it is hard to see how we "fix" the problem of this lost 80%.
The rest of Vollrath's book is spent exploring what might make up the other 20%. A lot of popular bugbears -- monopoly power, excess regulation, drop in geographic mobility, inequality, trade with China -- and mostly finds they lack explanatory power. It can be a bit down in the weeds -- and I wouldn't be surprised if he loses many readers here. I have a passion of this kind of economic stuff and even I was nodding off a bit at points.
But it is here where Vollrath is subtly fairly radical, though he doesn't really highlight that except for one or two sentences in his concluding chapter. Throughout the book, Vollrath's tone is of a disinterested academic investigating a curious phenomenon. Someone throws out a hypothesis, "Maybe lower growth was caused by economic inequality!" or "Maybe lower growth was caused by increased market power of large corporations!" or "Maybe lower growth was caused by increasingly excessive government regulations!"
And he dutifully goes off and investigates and generally finds them lacking. Trade with China? Maybe cost us 0.016% of that 1.25%. Inequality? Maybe accounted for 0.14% of that 1.25%.
On the one hand, it often feels like beating a dead horse. After all, he already accounted for 80% of the growth slow down so people are arguing (vehemently!) about the tiny 20% slice. We already know that, even if true, they are a very marginal impact.
But in the concluding chapter he subtly makes the point that if these factors don't account for the growth slowdown then they also don't contribute to growth. Reduced anti-trust enforcement. Increased market power of large corporations (usually at the expense of workers). Increased income inequality. Outsourcing to China. None of them seem to have actually contributed to growth so...why keep them as-is?
In fact, the lack of a significant effect of higher economic profits on growth should make us even more willing to question this redistribution, as it is hard to see which benefits it created for the economy as a whole.
[...]
The current constellation of government spending, regulation, and taxation benefits some and hurts others. But as we saw, there is little evidence that shifts in these policies would have a significant effect on economic growth. Thus the arguments over the proper level of all three are best had in terms of their effects on different groups, as opposed to their effect on aggregate growth. In particular, claims that specific policies will “pay for themselves” in any capacity are fatuous. Government fiscal and regulatory policy is, to a large degree, about the division of the economic pie, not its size.
One understands why Vollrath didn't go deeper down this -- it risks turning the book from one of rather staid economic investigations into one of polemics. But I also think Vollrath does a slight disservice by burying motivations like this at the very end of his book. If they had been moved to the front they might help capture the attention of more mainstream readers.
February 16, 2020
For the past several years in addition to the discussions about income/wealth inequalities there has been a discussion about something which Robert Gordon of Northwestern and Tyler Cowan have called "Secular Stagnation". The basic argument is simple, we have "picked the low hanging fruit" of innovation for the last hundred or so years, so achieving what we thought was reasonable growth is going to be tough.
Vollrath's book does a superb job of analyzing all the things which go into this apparent stagnation and wondering whether the various effects can be separately analyzed (he thinks they can) and whether the this "problem" is something we should be worried about. (He thinks, with some pretty good rationales, that it is a manageable issue.)
For many people Vollrath's book might be daunting. He goes through the various factors contributing to productivity (including an apparent decline in mobility, changing attitudes toward marriage, increasing concentration of firms in many areas and a host of other factors). He then attempts to measure each of the key factors and to discover how they interact. All of this is done without resorting to formulas (although there is a superb appendix which presents his methodology in detail for each of the issues discussed).
He seems to have two bottom lines here. First, many of the changes in the economy which look negative are actually not negative. Second, he argues that a sound immigration policy will help to boost productivity as society works through the large baby boomer cohort.
If you want to benefit from his thinking this is not a quick read. But it challenges the logic of the conclusions that Gordon and Cowan reached. I am not sure I agree with all of his numbers nor with some of his conclusions (although I think the immigration numbers are impressive and useful in thinking about this issue) but his methodology of dividing the issues in this decline and than trying to factor each is refreshing. This book should be read by a wider range of people interested in the long issues of growth and not consigned to that narrow band of wonks (like me) that read Gordon and Cowan's papers.
Vollrath's book does a superb job of analyzing all the things which go into this apparent stagnation and wondering whether the various effects can be separately analyzed (he thinks they can) and whether the this "problem" is something we should be worried about. (He thinks, with some pretty good rationales, that it is a manageable issue.)
For many people Vollrath's book might be daunting. He goes through the various factors contributing to productivity (including an apparent decline in mobility, changing attitudes toward marriage, increasing concentration of firms in many areas and a host of other factors). He then attempts to measure each of the key factors and to discover how they interact. All of this is done without resorting to formulas (although there is a superb appendix which presents his methodology in detail for each of the issues discussed).
He seems to have two bottom lines here. First, many of the changes in the economy which look negative are actually not negative. Second, he argues that a sound immigration policy will help to boost productivity as society works through the large baby boomer cohort.
If you want to benefit from his thinking this is not a quick read. But it challenges the logic of the conclusions that Gordon and Cowan reached. I am not sure I agree with all of his numbers nor with some of his conclusions (although I think the immigration numbers are impressive and useful in thinking about this issue) but his methodology of dividing the issues in this decline and than trying to factor each is refreshing. This book should be read by a wider range of people interested in the long issues of growth and not consigned to that narrow band of wonks (like me) that read Gordon and Cowan's papers.
June 17, 2020
In Fully Grown, Vollrath really takes you step by step through what was lowering the rate of GDP growth in the last couple of decades. For me, what really makes intuitive sense is the move from a more goods-producing, industrial economy to a more service-oriented economy. A service-oriented economy by nature has less opportunity to scale and thus is held back from growth. The classic example of Baumol’s cost disease here is a good illustration – 100 years ago you needed 4 musicians to play an hour of a quartet by Mozart, and even now you still need those same 4 musicians (OK, maybe not the same ones but four members of the set “musicians”) to play that quartet. In the same time our factory output has soared while seeing fewer workers.
Of course, this book, like any other economic books released before about 3/17/2020 is from the before-times but I feel that the general trend will hold as our new normal gets as close as possible back to the old normal. One final note – this book is systematic. While reading I noted to myself that it was very well organized. That’s not something that normally pops in my head while reading, so I must give the author and his editors kudos on that one.
Of course, this book, like any other economic books released before about 3/17/2020 is from the before-times but I feel that the general trend will hold as our new normal gets as close as possible back to the old normal. One final note – this book is systematic. While reading I noted to myself that it was very well organized. That’s not something that normally pops in my head while reading, so I must give the author and his editors kudos on that one.
December 22, 2020
I'm a big fan of Vollrath's blog and was excited to read his new book.
The book sets out to explain why the growth of the US economy slowed down in the last two decades. Most economists, policy wonks and politicians see this as a major failure and have various various policies to blame for it. But Vollrath argues that the slowdown is largely inevitable, a by product of prosperity and recent demographic shifts. Rather than blaming trade with China, growing inequality, the rise of monopoly power as others do, he demonstrates that a large share of the slowdown can be directly attributed to structural trends largely beyond economic policy: lower fertility, slower workforce addition (woman have joined en masse pre-2000), lower working hours and a shift from an industrial to a service economy.
The book's main argument builds on presenting the results of growth accounting calculations, a well-established and widely used statistical technique (building on Robert Solow's work from 60 years ago). But the author brings in three additional feats.
-First, it complements the basic results by discussing the relevant insights from a wide range of fresh, important and highly technical papers. But rather than just summarizing key messages of such papers, Vollrath extracts results and interprets the work of others to answer his own (often somewhat tangential) questions.
-Second, to estimates on the influence of some factors on growth, the book provides back of the envelope calculations. These are super easy to follow. While the author acknowledges limitations to such approach, this proves to be a powerful way to show how many factors suspected of being important are in fact order of magnitude smaller to the truly important ones.
-Third, the author does a fantastic job at introducing various economic concepts in a way that immediately demonstrates their importance but without getting lost in the weeds (Tobin's Q, Baumol cost disease).
Reading Vollrath is such a great way to learn macroeconomics, I wish more of the profession's writing was like this.
With regards to his thesis, it did convinced me to update somewhat my priors on the reasons for slow economic growth in US: past baby boom's lingering effect matters more than I had thought and competition / antitrust less.
But I also feel like the author got away with setting himself up to answer a question that is a bit too easy, less insightful. No one really disputes that demographic and societal change matter a ton.
- Rather than only explaining the difference in growth across decades, it would have been great to delve a bit more into cross country patterns among OECD. Why does Singapore continues to grow strongly, while Italy had decades of weak growth.
- It feels unsurprising that even huge policy changes will only have limited impact on 20 years' growth performance. But if they boost growth for couple of years, that would still be very important in terms level of GDP. I wish there was more differentiation between policies based on their impacts on GDP levels.
- My instinct is that the diagnosis underplays the importance of structural transformation. I would have loved to read more about the potential growth gains from major breakthroughs in automation, remote working, online learning, immigration (briefly discussed), etc.
- Why not discuss whether it follows from diagnosis, that bad policies won't slow growth down too much either?
Though this wasn't exactly the book I was hoping to read, I still enjoyed it quite a lot. I hope it will encourage policy wonks to take a similarly rigorous approach when making their case for various policies to boost growth, and more macroeconomic researchers to present results from their field of study in such a comprehensive and accessible way.
The book sets out to explain why the growth of the US economy slowed down in the last two decades. Most economists, policy wonks and politicians see this as a major failure and have various various policies to blame for it. But Vollrath argues that the slowdown is largely inevitable, a by product of prosperity and recent demographic shifts. Rather than blaming trade with China, growing inequality, the rise of monopoly power as others do, he demonstrates that a large share of the slowdown can be directly attributed to structural trends largely beyond economic policy: lower fertility, slower workforce addition (woman have joined en masse pre-2000), lower working hours and a shift from an industrial to a service economy.
The book's main argument builds on presenting the results of growth accounting calculations, a well-established and widely used statistical technique (building on Robert Solow's work from 60 years ago). But the author brings in three additional feats.
-First, it complements the basic results by discussing the relevant insights from a wide range of fresh, important and highly technical papers. But rather than just summarizing key messages of such papers, Vollrath extracts results and interprets the work of others to answer his own (often somewhat tangential) questions.
-Second, to estimates on the influence of some factors on growth, the book provides back of the envelope calculations. These are super easy to follow. While the author acknowledges limitations to such approach, this proves to be a powerful way to show how many factors suspected of being important are in fact order of magnitude smaller to the truly important ones.
-Third, the author does a fantastic job at introducing various economic concepts in a way that immediately demonstrates their importance but without getting lost in the weeds (Tobin's Q, Baumol cost disease).
Reading Vollrath is such a great way to learn macroeconomics, I wish more of the profession's writing was like this.
With regards to his thesis, it did convinced me to update somewhat my priors on the reasons for slow economic growth in US: past baby boom's lingering effect matters more than I had thought and competition / antitrust less.
But I also feel like the author got away with setting himself up to answer a question that is a bit too easy, less insightful. No one really disputes that demographic and societal change matter a ton.
- Rather than only explaining the difference in growth across decades, it would have been great to delve a bit more into cross country patterns among OECD. Why does Singapore continues to grow strongly, while Italy had decades of weak growth.
- It feels unsurprising that even huge policy changes will only have limited impact on 20 years' growth performance. But if they boost growth for couple of years, that would still be very important in terms level of GDP. I wish there was more differentiation between policies based on their impacts on GDP levels.
- My instinct is that the diagnosis underplays the importance of structural transformation. I would have loved to read more about the potential growth gains from major breakthroughs in automation, remote working, online learning, immigration (briefly discussed), etc.
- Why not discuss whether it follows from diagnosis, that bad policies won't slow growth down too much either?
Though this wasn't exactly the book I was hoping to read, I still enjoyed it quite a lot. I hope it will encourage policy wonks to take a similarly rigorous approach when making their case for various policies to boost growth, and more macroeconomic researchers to present results from their field of study in such a comprehensive and accessible way.
February 6, 2020
'While we do not have a problem with growth, we may have a problem with distribution. Across all these areas - market power, trade, taxes and regulation, housing - there are serious implications for who actually gained from economic growth, even though there were not major effects on growth itself. This suggests that we should engage with these issues on the merits of their distributional consequences and put less weight on their supposed effect on the growth rate.'
February 3, 2020
I wrote a long review/reaction here: https://medium.com/@mattclancy/fully-...
February 3, 2020
According to Vollrath we should worry more about why the median worker’s real earnings rose only mildly in the last 40 years. His most important point is, combined with sort of a secular stagnation argument (less demographic growth), that changing employment patterns explain most of America’s declining growth:
Correcting for the actual PER WORKER GDP (not per capita), the US basically grew almost the same all the time since WW2 (just a slight slowdown the last two decades). This is because just many more people are in the labor force now, mostly driven by more women working. And in some sense this shift was a one time "shock" to the economy that boosted per capita growth as well.
The second set of arguments do not seem very new to me and refer mostly to the shift into the service sector and all the accompanying productivity growth reduction. Plus the overregulation of many important things that reduces the potential for improvements.
Finally he sets some common misconceptions straight and informs the reader (in non-econ jargon) that inequality, market concentration, and the "China shock" are not to be blamed for the productivity slowdown.
Correcting for the actual PER WORKER GDP (not per capita), the US basically grew almost the same all the time since WW2 (just a slight slowdown the last two decades). This is because just many more people are in the labor force now, mostly driven by more women working. And in some sense this shift was a one time "shock" to the economy that boosted per capita growth as well.
The second set of arguments do not seem very new to me and refer mostly to the shift into the service sector and all the accompanying productivity growth reduction. Plus the overregulation of many important things that reduces the potential for improvements.
Finally he sets some common misconceptions straight and informs the reader (in non-econ jargon) that inequality, market concentration, and the "China shock" are not to be blamed for the productivity slowdown.
March 4, 2020
Five stars! "Slow growth, it turns out, is the optimal response to massive economic success" (216).
I found this one in:
We’re facing the ‘great American slowdown.’ Should we celebrate?
By Robert Samuelson
https://www.washingtonpost.com/opinio...
"This sounds sensible, but I doubt it would work in practice. Americans are an impatient people who are easily dissatisfied with the status quo. The future promises less cooperation and more contention, as groups and individuals fight over limited funds." Why? Why is it just never part of the conversation that we might share?
I also found it in:
www.newyorker.com › magazine › 2020/02/10 › can-we-have-prosp...
Can We Have Prosperity Without Growth? | The New YorkerFeb 3, 2020 - Published in the print edition of the February 10, 2020, issue, with the headline “Steady State.”
John Cassidy has been a staff writer at The New Yorker since 1995. He also writes a column about politics, economics, and more for newyorker.com.
DEPT. OF FINANCE FEBRUARY 10, 2020 ISSUE
CAN WE HAVE PROSPERITY WITHOUT GROWTH?
The critique of economic growth, once a fringe position, is gaining widespread attention in the face of the climate crisis.
By John CassidyFebruary 3, 2020
https://www.newyorker.com/magazine/20...
Unlike other growth skeptics, he doesn't base his case on environmental concerns or rising inequality or the shortcomings of G.D.P. as a measurement. Rather he he explains this phenomena as a result of personal choices--the core of economic orthodoxy.
According to a recent report from the Global Carbon Project, carbon emissions worldwide have been edging up in each of the past three years."
Also see:The Age of DecadenceBy ROSS DOUTHAT
Cut the drama. The real story of the West in the 21st century is one of stalemate and stagnation.
https://www.nytimes.com/2020/02/07/op...
"Even running water and flush toilets were available in only about two-thirds of households in 1940" (4).
"As they note, because the growth rate of transistor density has not changed, It is about eighty times harder to double transistor density today than it was in 1970" (76).
"The first explanation the long-run shift in the composition of our spending away from goods and toward services" (78).
"The second big idea for explaining slower productivity growth was the rise in market power of firms over the past few decades" (79).
"The movement of workers different jobs, including the movement of workers to different physical locations, slowed down over the past few decades" (79).
"The shift into services is a consequence of our incredible success at making goods, not a sign of some failure or problem with the economy" (100).
"In short, the rise in economic profits and markups we see at the aggragate level is part of the shift toward services we discussed a few chapters ago" (113).
". . . . firms with fewer competitors invest less" (123-124). Investor monopsony also!
"This decline in antitrust enforcement coincided with the rise in market power" (136).
"It turns out that the rate of reallocations fell over the past few decades" (140).
". . . . the relative GDP per worker in an MSA has a positive relationship with its size" (160).
"The decline in geographic mobility is not trivial, but it does not explain the growth slowdown" (169).
"There is no evidence that higher taxes caused the growth slowdown" (174).
". . . . there is a consistent story that the government did not have a signification effect on the slowdown" (178). I think the author must have meant significant.
". . . . there was no substantial shift in government policies around 2000 that could explain the growth slowdown" (184).
"The rise of wages as a source of top-end inequality reflected a rise in the role of 'superstars' in the income distribution. . . . . athletes and actors" (189).
"The increase in income of these top executives and finance professionals explains two-thirds of the increased share of national income accounted for by the top .1% since 1993 (and more if we go back to 1979)" (190).
"People did not move out of commuting zones that experienced losses from trade but rather stayed unemployed or exited the labor force" (202).
I found this one in:
We’re facing the ‘great American slowdown.’ Should we celebrate?
By Robert Samuelson
https://www.washingtonpost.com/opinio...
"This sounds sensible, but I doubt it would work in practice. Americans are an impatient people who are easily dissatisfied with the status quo. The future promises less cooperation and more contention, as groups and individuals fight over limited funds." Why? Why is it just never part of the conversation that we might share?
I also found it in:
www.newyorker.com › magazine › 2020/02/10 › can-we-have-prosp...
Can We Have Prosperity Without Growth? | The New YorkerFeb 3, 2020 - Published in the print edition of the February 10, 2020, issue, with the headline “Steady State.”
John Cassidy has been a staff writer at The New Yorker since 1995. He also writes a column about politics, economics, and more for newyorker.com.
DEPT. OF FINANCE FEBRUARY 10, 2020 ISSUE
CAN WE HAVE PROSPERITY WITHOUT GROWTH?
The critique of economic growth, once a fringe position, is gaining widespread attention in the face of the climate crisis.
By John CassidyFebruary 3, 2020
https://www.newyorker.com/magazine/20...
Unlike other growth skeptics, he doesn't base his case on environmental concerns or rising inequality or the shortcomings of G.D.P. as a measurement. Rather he he explains this phenomena as a result of personal choices--the core of economic orthodoxy.
According to a recent report from the Global Carbon Project, carbon emissions worldwide have been edging up in each of the past three years."
Also see:The Age of DecadenceBy ROSS DOUTHAT
Cut the drama. The real story of the West in the 21st century is one of stalemate and stagnation.
https://www.nytimes.com/2020/02/07/op...
"Even running water and flush toilets were available in only about two-thirds of households in 1940" (4).
"As they note, because the growth rate of transistor density has not changed, It is about eighty times harder to double transistor density today than it was in 1970" (76).
"The first explanation the long-run shift in the composition of our spending away from goods and toward services" (78).
"The second big idea for explaining slower productivity growth was the rise in market power of firms over the past few decades" (79).
"The movement of workers different jobs, including the movement of workers to different physical locations, slowed down over the past few decades" (79).
"The shift into services is a consequence of our incredible success at making goods, not a sign of some failure or problem with the economy" (100).
"In short, the rise in economic profits and markups we see at the aggragate level is part of the shift toward services we discussed a few chapters ago" (113).
". . . . firms with fewer competitors invest less" (123-124). Investor monopsony also!
"This decline in antitrust enforcement coincided with the rise in market power" (136).
"It turns out that the rate of reallocations fell over the past few decades" (140).
". . . . the relative GDP per worker in an MSA has a positive relationship with its size" (160).
"The decline in geographic mobility is not trivial, but it does not explain the growth slowdown" (169).
"There is no evidence that higher taxes caused the growth slowdown" (174).
". . . . there is a consistent story that the government did not have a signification effect on the slowdown" (178). I think the author must have meant significant.
". . . . there was no substantial shift in government policies around 2000 that could explain the growth slowdown" (184).
"The rise of wages as a source of top-end inequality reflected a rise in the role of 'superstars' in the income distribution. . . . . athletes and actors" (189).
"The increase in income of these top executives and finance professionals explains two-thirds of the increased share of national income accounted for by the top .1% since 1993 (and more if we go back to 1979)" (190).
"People did not move out of commuting zones that experienced losses from trade but rather stayed unemployed or exited the labor force" (202).
November 10, 2020
For the twentieth century, the average economic growth rate (per capita GDP, inflation-adjusted) has hovered around 2% per year. Since 2000, this has been halved, with growth rates of around 1%. “Fully Grown” tries to explain why. Be forewarned, in the author’s own words, the answer is “a somewhat boring accumulation of changes in markets, spending patterns and family decisions that took place over decades.”
More specifically, two factors account for almost all of the growth slowdown. People are having smaller families, changing the ratio of workers to population. As we get wealthier, demand for goods saturates, so extra discretionary income goes into services, which have less scope for productivity growth, due to the quantity of labour being an integral component of many services. You probably don’t need 100 pages of national accounting statistics to understand those rather obvious points, but that’s what you get here.
More interesting to me was the second half of the book, which looked at some marginal factors that might influence the growth rate, even though their impacts are dwarfed by the two factors noted above. Vollrath looks at concentration of market power, the rate of creative destruction (change in the rates of firm entry/exit, job change, and geographic mobility), government regulation, inequality, and offshoring. He ultimately concludes that most of these have little or no impact, with the interesting possible exception of restrictions in the housing sector, which may impede geographic mobility to more productive areas.
So 2% increases in growth each year probably aren’t coming back, no matter what we do. The one obvious fix Vollrath notes is increasing immigration. I think on the whole, immigration probably benefits both the sending and receiving countries, although I do have concerns about the brain drain of selectively taking the best and the brightest from developing countries.
Vollrath concludes that “While we do not have a problem with growth, we may have a problem with distribution. Across all these areas – market power, trade, taxes and regulation, housing – there are serious implications for who actually gained from economic growth, even though there were not major effects on growth itself.” Addressing that, though, is a topic for another book, and is not covered here.
More specifically, two factors account for almost all of the growth slowdown. People are having smaller families, changing the ratio of workers to population. As we get wealthier, demand for goods saturates, so extra discretionary income goes into services, which have less scope for productivity growth, due to the quantity of labour being an integral component of many services. You probably don’t need 100 pages of national accounting statistics to understand those rather obvious points, but that’s what you get here.
More interesting to me was the second half of the book, which looked at some marginal factors that might influence the growth rate, even though their impacts are dwarfed by the two factors noted above. Vollrath looks at concentration of market power, the rate of creative destruction (change in the rates of firm entry/exit, job change, and geographic mobility), government regulation, inequality, and offshoring. He ultimately concludes that most of these have little or no impact, with the interesting possible exception of restrictions in the housing sector, which may impede geographic mobility to more productive areas.
So 2% increases in growth each year probably aren’t coming back, no matter what we do. The one obvious fix Vollrath notes is increasing immigration. I think on the whole, immigration probably benefits both the sending and receiving countries, although I do have concerns about the brain drain of selectively taking the best and the brightest from developing countries.
Vollrath concludes that “While we do not have a problem with growth, we may have a problem with distribution. Across all these areas – market power, trade, taxes and regulation, housing – there are serious implications for who actually gained from economic growth, even though there were not major effects on growth itself.” Addressing that, though, is a topic for another book, and is not covered here.
February 21, 2020
Overall a well grounded discussion of why US economic growth has slowed down. He uses a well established economic formula of GDP and divides growth into 3 categories - physical capital, human capital, and residual, and then measures all 3, and finds that the slowdown is mostly due to low growth in human capital and in the residual (innovation)
He then goes into possible causes of human capital and residual slowdown and does an adequate job reviewing the evidence. We are left with demographic changes, changes in market power and geographic mobility, and the shift from goods to services as the main culprits.
He then critiques a few common explanations of the slowdown and shows why they are wrong - trade with China, regulation, inequality.
Here are the weaknesses:
1. He accepts without much discussion or depth that services cannot improve as fast as goods production. He leaves out any discussion of major service industries that have been transformed - the movie industry for instance. He shows that spending on healthcare and education have gone up and accepts that this is simply a market shift, rather that evidence that those industries are ripe for disruption.
2. His discussion of regulation is inadequate. He does do a good job of discussing general regulation over the whole economy. But he misses the possibility that long-standing or specific regulation may be having a delayed impact. Here are two examples. First, social security may be shrinking the work force. Second, long-standing healthcare and education regulations and subsidies may be preventing disruption of those industries.
He then goes into possible causes of human capital and residual slowdown and does an adequate job reviewing the evidence. We are left with demographic changes, changes in market power and geographic mobility, and the shift from goods to services as the main culprits.
He then critiques a few common explanations of the slowdown and shows why they are wrong - trade with China, regulation, inequality.
Here are the weaknesses:
1. He accepts without much discussion or depth that services cannot improve as fast as goods production. He leaves out any discussion of major service industries that have been transformed - the movie industry for instance. He shows that spending on healthcare and education have gone up and accepts that this is simply a market shift, rather that evidence that those industries are ripe for disruption.
2. His discussion of regulation is inadequate. He does do a good job of discussing general regulation over the whole economy. But he misses the possibility that long-standing or specific regulation may be having a delayed impact. Here are two examples. First, social security may be shrinking the work force. Second, long-standing healthcare and education regulations and subsidies may be preventing disruption of those industries.
This entire review has been hidden because of spoilers.
August 28, 2021
This book suits a wide audience. It is easy to read and follow, provides insight that is noteworthy to many within the field of economics as well as those outside, and it has details in an appendix that may interest those who are further intrigued or want to understand the data. It even has a github page with all the data available in case you want to replicate the results of the study with recently-published data or want to evaluate them yourself.
The insights that the author presents make sense yet are strangely radical. As another reviewer put it, the author manages to present these radical theories in a way so understated you may miss them. Such is the nuance yet superb writing of this book. It focuses on growth and macroeconomics and delves into why humans make the decisions we make as our circumstances change (and hence why growth has slowed as our economy has matured), which is incredibly important in the field of economics.
Highly recommended.
The insights that the author presents make sense yet are strangely radical. As another reviewer put it, the author manages to present these radical theories in a way so understated you may miss them. Such is the nuance yet superb writing of this book. It focuses on growth and macroeconomics and delves into why humans make the decisions we make as our circumstances change (and hence why growth has slowed as our economy has matured), which is incredibly important in the field of economics.
Highly recommended.
October 7, 2020
Amazingly accessible and clear accounting (ta dah!) of why the growth rate of the US economy is slowing down. Each chapter is succinct and informative, building to the final table in Chapter 17 that puts all the factors together in one consolidated view.
In general, the premise of the book (that the slowing of our economic growth rate is a "success") is really compelling and - to my first glance - non-intuitive. It was for that reason that I especially appreciated Vollrath's arguments. Also, I'm glad he included a number of the "common cast of characters" (rise of China, income inequality, etc.) to ensure these counter-points were pre-empted.
NB for later- some interesting takes on market power + innovation too :)
In general, the premise of the book (that the slowing of our economic growth rate is a "success") is really compelling and - to my first glance - non-intuitive. It was for that reason that I especially appreciated Vollrath's arguments. Also, I'm glad he included a number of the "common cast of characters" (rise of China, income inequality, etc.) to ensure these counter-points were pre-empted.
NB for later- some interesting takes on market power + innovation too :)
December 28, 2020
First of all, a poor title. At no point does Vollrath touch on the idea that our economy might be “fully grown.” Subtitle fits much better.
Otherwise, a wonderful read. One may raise points on exactly how accurate Vollrath’s accounting is (and he raises many of those points himself), but his general claims are hard to argue with. A growth slowdown in the last century is due to demographic shifts that are generally neutral or even positive for the economy, as well as a decrease in productivity growth that is at least partially the natural result of a more prosperous economy. Wish there was a little more on immigration, but on the whole I enjoyed tremendously.
Otherwise, a wonderful read. One may raise points on exactly how accurate Vollrath’s accounting is (and he raises many of those points himself), but his general claims are hard to argue with. A growth slowdown in the last century is due to demographic shifts that are generally neutral or even positive for the economy, as well as a decrease in productivity growth that is at least partially the natural result of a more prosperous economy. Wish there was a little more on immigration, but on the whole I enjoyed tremendously.
February 8, 2023
GDP in the US grew a lot in the 1950s up until around 2000 when it slowed down. Why is that? It's a question that economists have asked. The author spends the first part of the book explaining how the economy works with some poor metaphors. In the second part, the author steelmans their argument by proposing and rejecting other reasons. Their conclusion is that moving from goods to services, and an aging population have led to productivity drops.
The author concludes by saying this is actually a good thing, though they don't provide a good justification for why that is. It is a sad ending in which the author's lack of imagination seems to suggest that there's nothing left for us to do.
The author concludes by saying this is actually a good thing, though they don't provide a good justification for why that is. It is a sad ending in which the author's lack of imagination seems to suggest that there's nothing left for us to do.
January 31, 2020
This book asks us not to worry about slow economic growth but to love it. Low growth is an outcome of our choices to lead a better life: to marry late, empower women, enjoy the benefits of technology. In the process, the author demolishes pet theories of slow growth such as regulation and China. The book is written in an easily digestible style.
January 4, 2021
Not an economist, and this book got pretty repetitive and sometimes mundane with economic terms and explanations. Not the easiest read. But even though it wasn’t the most enjoyable book, it was very informative and insightful.
January 23, 2022
Easy Read
Shows how economics as a social science can explain the world around us better than the news and politics. Also takes a step further in the final chapter by explaining that these realities don't universally justify the status quo. Much to think on here.
Shows how economics as a social science can explain the world around us better than the news and politics. Also takes a step further in the final chapter by explaining that these realities don't universally justify the status quo. Much to think on here.
January 15, 2020
Some of the clearest writing I've read. Makes a clear, convincing argument, and along the way explains a variety of economic concepts in plain language.
October 17, 2020
Superb. Highly recommended.
December 17, 2020
It's a really hard read, I struggled to follow all the arguments and figures presented.
At the end the explanations make sense, but it could have been summarised and presented in a better way.
At the end the explanations make sense, but it could have been summarised and presented in a better way.
December 26, 2020
there are lots of nice graphs
February 22, 2021
The first 70 pages or so are simple, clear and extremely important. The rest is interesting but doesn't add much.
March 23, 2021
Somewhat bloated and dry presentation. Vollrath is not a gifted instructor, at least on this evidence...
April 13, 2023
Toont aan waarom langzame economische groei een teken van succes is, enige achtergrond in economie is wel nodig.
November 30, 2021
A persuasive argument that declining economic growth rates aren't a 'problem' per se with our economy because 75% of the decline is due to an ageing population/lower fertility rates, plus a switch to the service economy (rather than goods). Pours some water on the argument that increased antitrust issues are a preeminent driver of lower growth, though it seems like the last 25% of the story may have something to do with it insofar as fewer Americans switch jobs and start new firms. Also pours some water on the argument that inequality is lowering growth--does the math and the effect seems too small to be a major player.
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