EZRA KLEIN: I mean, but take South Korea, take the U.A.E., take China. I mean, you can pick your country here. The kind of question I’m trying to raise about your thesis, because it’s also relevant, frankly, to my thesis, is, if the problem is that America makes a series of policy mistakes in the ’70s, why, then, in the ensuing five decades, don’t a bunch of our competitor countries race past us.
There are theories that they would. Japan, in the ’80s and ’90s, seemed like maybe they were, right? Japan was going to be the future. There were a million books written in the ’90s about this. Germany at different times, right? But I don’t think you would look at anybody today, any rich country of significant size, and say, they really got it right, and we really got it wrong. So how do you understand that if the story is about mistakes we specifically made in the ’70s?
JIM PETHOKOUKIS: Well, we can make mistakes that are very specific to us. And other countries may have made different mistakes, even though there was, as you say, this great enthusiasm in the ’80s that Japan had it sort of figured out, that they could do economic growth and innovation in a brand new way, which turned out not to be the case. And then you mentioned Germany, and we seem to have this insatiable desire to find — at least some people do — to find some other model. I don’t think those models have turned out better than the American model.
EZRA KLEIN: If you were to try to make an argument about why things look not the same, but why nobody has achieved the Jim Pethokoukis world across Canada, across Western Europe, across Asia, right, all countries during this period that were rich enough to do much of what you’re talking about, do you have theories that unite the answer?
JIM PETHOKOUKIS: Yeah, I mean, listen, I don’t think it is wrong to do sort of a cross-country because this productivity slowdown didn’t just happen in the United States. Clearly, there was some sort of macro reasons. It’s just becoming harder and more expensive to do research. Those things affected everybody.
So once you’ve assumed, OK, there was sort of this umbrella effect that would make it difficult to do productivity and economic growth and faster tech progress everywhere. So that mattered. And then to what extent do our decisions matter? At first, we didn’t understand what happened. And then when we did, I think we’ve just underestimated the difficulty, at least certainly in the United States, of returning to fast growth.
And the ideas that we put forward, whether it was a little more spending on this program, a tax cut here, maybe those are individually great ideas, but given, I think, the headwinds from these macro factors, sort of the tailwinds need to be much, much stronger. And even now, when we’re talking about spending more money on R&D, I don’t think it’s enough.
EZRA KLEIN: Let me try some thesis on you that I think can work across countries. One is that as countries get richer, they become more risk averse. Some of the innovations you’re talking about, like colonies on the moon and flying cars, they require a high tolerance for risk. Maybe as societies get more affluent, people have enough. Their lives are good enough. They aren’t as motivated to take that risk. What do you think of that?
Why not cultural evolution in the sense that David Hays and I have argued in our work on cultural ranks? That's as macro as you can get. I addressed the issue of of economic growth in: Stagnation and Beyond: Economic growth and the cost of knowledge in a complex world, Working Paper, August 2, 2019.
Abstract: What economists have identified as stagnation over the last few decades can also be interpreted as the cost of continuing successful engagement with a complex world that is not set up to serve human interests. Two arguments: 1) The core argument holds that elasticity (ß) in the production function for economic growth is best interpreted as a function of the interaction between the economic entity (firm, industry, the economy as a whole) and particular aspects the larger world: physical scale in the case of semi-conductor development, biological organization in the case of drug discovery. 2) A larger argument interprets current stagnation as the shoulder of a growth curve in the evolution of culture through a succession of fundamental stages in underlying cognitive architecture. New stages develop over old through a process of reflective abstraction (Piaget) in which the mechanisms of earlier stages become objects for manipulation and deployment for the emerging stage.
