Tyler Cowen: Why I'm a Happiness Optimist but Economic Pessimist

The author of The Great Stagnation on why, for all the economy's disappointments, we're better off than ever


FAIRFAX, Va.--Tyler Cowen says he's a "small-l libertarian," but as the prolific George Mason University economics professor talks about jump-starting the economy, it's clear his ideology isn't easy to pigeonhole. Cowen says he believes government can spur innovation, but he's skeptical of regulations and would slash 80 percent of them. In his 2011 book, The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, he argues that we can fix things. The United States, he says, hasn't lost its greatness.

Cowen, 50, earned a Ph.D. in economics at Harvard but has further-flung interests. After watching the legendary Spassky-Fischer chess match in 1972, the 10-year-old Cowen started playing the game and, five years later, became the youngest state champion in New Jersey history. He gave up chess for economics. "More interesting," he says. "And it pays better."

His curiosity is eclectic. His most recent book, An Economist Gets Lunch: New Rules for Everyday Foodies, explores the food marketplace, which has interested him since age 20, when he first lived abroad in Germany.

"Food is about innovation, small business and big business, entrepreneurship. How do you judge quality? Globalization. Key themes for the world."

Edited excerpts from an interview follow.

How big an economic fix are we in?

COWEN: It depends on relative to what. We're still one of the richest countries in the world. A lot of the nonmaterial aspects of our life have gotten a lot better, including social tolerance. So it's hardly dystopia. But it is still the case we're planning and spending as if we'll grow 2 to 3 percent [annually], and we might just grow 1½ percent. That is a disaster. We are not adjusting our expectations to the reality. That said, I do think we will get out of the great stagnation. A lot of the stuff that will get us out of it, we've already done. 

Such as?

COWEN: The Internet. The Internet is still [a] somewhat immature technology, and you'll see education, health care, and retail all fundamentally restructured for the better through the Internet. The Internet and smart machines, software, artificial intelligence--that conjunction of concepts is getting better rapidly. 

Can we return to economic greatness?

COWEN: We have never left greatness. In some ways, you could argue we are the only great country in the world--though Canada and Australia have good claims. In absolute terms, this country has never been better. It's just the rate of economic improvement has slowed.

Does government have a role in spurring innovation?

COWEN: If you turn on a TV show from, say, the early 1970s, it is remarkable how much life looks familiar. You could take the people from that show and put them [here and now]. Except for computer Internet stuff, they could operate everything. That suggests progress has been slower than [since] earlier in the 20th century. But Internet, computers, artificial intelligence, smartphones--all that has been phenomenal. The government should fund science much, much more--basic research. 

Must we change our expectations of what government will do for people?

COWEN: In terms of spending and borrowing, our expectations have been out of whack with reality since the end of the Clinton administration. Now, these forthcoming technological breakthroughs will help, but we shouldn't always assume they will translate into tax revenue. You can see a lot of great things coming and still worry about the budget. Take the music sector, which for listeners is better now than it ever has been by a lot. But the revenue in that sector has kind of collapsed. Journalism, too: A lot of stuff is great for readers, not good for revenue. It's because of technology. We need to be very careful about equating progress with more revenue. For now, this connection between revenue and well-being is a much bigger disconnect than in the past. I sometimes say I am a "happiness optimist" but a "revenue pessimist."