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A response to:
We need more time, not more things
Brad DeLong our guest wrote on Mar 9th 2011, 11:56 GMT

PUT me down as one of those who thinks that Hal Varian and Paul Seabright are completely and overwhelmingly right--and that Tyler Cowen is almost completely wrong.

Hal Varian has already written here:


Over at Slate right now Annie Lowrey is agreeing with Tyler Cowen, and connecting the dots of Tyler's argument in the natural way:

Has the Internet, the most revolutionary communications technology advance since Gutenberg rolled out the printing press, done nothing for GDP growth? The answer, economists broadly agree, is: Sorry, but no.... [A] theory... espoused by Cowen himself... [is that] the Internet is just not as revolutionary as we think it is. Sure, people might derive endless pleasure from it—its tendency to improve people's quality of life is undeniable. And sure, it might have revolutionized how we find, buy, and sell goods and services. But that still does not necessarily mean it is as transformative of an economy as, say, railroads were.... [T]he Internet and computers tend to push costs toward zero, and have the capacity to reduce the need for labor... That the Internet has not produced an economic boom might be hard to believe, Cowen admits. "We have a collective historical memory that technological progress brings a big and predictable stream of revenue growth across most of the economy," he writes. "When it comes to the web, those assumptions are turning out to be wrong or misleading. The revenue-intensive sectors of our economy have been slowing down and the big technological gains are coming in revenue-deficient sectors."... [I]f our most radical and life-altering technologies are not improving incomes or productivity or growth, then we still have problems. Quality-of-life improvements do not put dinner on the table or pay for Social Security benefits...

In my view, this misses the most important point by at least fifteen parsecs.

We in the North Atlantic middle class already put dinner on the table perfectly well.

We—especially me—really do not need more calories, thank you.

What we need is the ability to quickly search and decide exactly what kind of dinner we want brought to us by an eighteen-year old if we are lazy.

What we need is the ability to figure out quickly what the tastiest and most nutritional recipe we can make with what is in the fridge if we are feeling industrious.

Those are the things that the internet is best at.

And that is where the internet, even though it does not generate revenue, adds enormous true value.

That the internet is not "producing revenue" is completely beside the point. What the internet is doing is, as Paul Seabright has already written, saving attention—and that is much more valuable.

Given a choice between doubling the amount of calories consumed by the typical middle-class American family—or doubling the amount of furniture purchased, or doubling the amount of automobiles owned, or doubling the number of clothes in our closets—and halving the time we must spend searching for what we want to buy, to read, to watch, to listen to, can anyone think that this is a difficult choice?

And to the extent that our price indexes do not take into account the improvements in quality of life from the internet, we don't have to spend as much on Social Security benefits as the CPI suggests in order to provide our seniors with a generous standard of living.

Readers' comments


Diego Urbina

I totally AGREE. Mr. Cowen do not take into account the way internet push down prices of durable goods, for example. Can we imagine all the costs we avoid by using the internet? Isn´t it benefit income, productivity, and so on? I believe that if we want to make a fair analysis of the way Internet as impact our economy, we should have been doing an hypothetical analysis: how would the economy (costs, revenue, etcetera)perform in the absence of the Internet? What would the productivity be if such a tool did not exist? I believe that the conclusion would be very different to that of Mr. Cowen. Let´s think of relativity :) .

Diego Urbina


Gamesmith94134: Has there been a "Great Stagnation"?
Yes, the great stagnation is on due to the imbalance and inequality in adjusting the changes of the emerging markets and the monetarily sovereignties failed to cope with the debts and deficits that they created. At the same time, each must deal with its debts and deficits from the calls from the banker and lawyers. The question on the imbalance and inequality in trading with each other, the stagnation would continue till the issues on the currencies and value is resolved or won by single side. Considerably over-priced dollar or euro and unappreciated Renminbi are the cause of the debts and deficits and they became the hurdles and pitfalls made the global economy stand still.
There must be zones and boundaries to be established to alleviate further on the throw-weights on some dominant currencies and those excessive building from the debts and deficits; it is hard to tackle on the issue individually since the system at present does not satisfy the growing on the emerging market nations or the dominant ones.
In order to shift the throw weight to spread over to the emerging markets national. They must reclaim their funds to return to their zones and boundaries by developing the better transitional market including the bonds and open markets; so, infusion of their own currencies can ease the imbalance and inequality domestically. Eventually, the profits undercut the cost of labor will be dispensed to the poorer labors and domestic demand will build up and in flow of the imports can be trade off with the deficits and the debts will be consumed by the supply of better benefit and infrastructures domestically.
If currencies are merely the measurement on the values each consumes. Then, if we guarantee the freer cash flow on all sovereignties, the problem is not hard to be resolved. If there is less dependence on the dollar or euro; they can be less expensive since there are more choices of desired currencies from the emerging market nations. Consequently, the building on the inflow and trading on its own bonds can build a better domestic demand on the imports and it also cut export since laborer can benefit on the fluidity and transient trading conditions with the better mechanism from the transactions on bonds and stocks providing each zone can choose the currencies of its choices.
It is time for the world organizations to adapt the currencies policies and monitor each zone by its trading partners. So, each zone must be regulated through a system that must be guaranteed through the each sovereignties and not banks or exchanges. So, each can trade freely with more transparency and equality in the open market to the world instead of searching on the consumers from the wealthier nations, and they are not wealthy as expected. Now, we must look on to all consumers and not to target some with their currencies that are favorable by some; then debts and deficits can also be shared among all communities from the zones with less waiting on the lawyers and bankers. And, it is all fair and each must deal with it.
May the Buddha bless you?


1. Globalisation.
2. Debt.

1. The jobs market has been globalising since the 1990s. There is more competition. This competition creates downward pressure on rich countries' wages. The huge supply of low-cost labor in Asia and elsewhere is reducing the power of rich-country employees to raise salaries.

2. A sizeable portion of rich countries' growth has come from increasing debt since the 1950s. Governments, companies and individuals have been able to borrow more and more from tomorrow to appear richer today. That expansion in debt has come to a crashing halt in the 2000s. Less debt = less growth.

In short, the West is stagnating because it has less access to debt and jobs growth has tilted toward the lower-cost East.

Cranky on the left coast

Two related thoughts:

First, consider whether the low-hanging fruit for the most part were picked during the era of mass production, and that great profits will not be possible in the emerging era of mass customization. Customized products by definition take more resources to be produced and are consumed in smaller quantities.

Second, taking the (very) long view, consider whether the idea of continued growth in market share and profits will be possible once birth rates top out and global population eventually begins a slow decline. Look at Japan and some European countries. Some sort of new profitability model will need to evolve.

Stagnation may not only be real, but may be real for a very long time to come.


It's a detail which won't really Impact on anyones ideas, but peoples overall assessment of the economic impact of the Internet is broken.
10 years or so age we had just the same debate about the PC and "productivity" tools like word processors. Lots of analysis comparing expenditure on these thing compared with economic growth etc. and the clear result was that it was no-win. Then the connectivity of computers became an easily affordable commodity for just about all businesses while the mass market and Moors law took cair of performance per buck; the productivity value of the PC (and, more broad uses of IT) has - I believe - been realised, in large part, because of the Internet.
Start your clock with the Mac Plus or Windows 3.2 and you'll get one result; start it with the Mosaic browser and you'll get another.
Now the Internet has over-run from the PC, workstation and mainframe - into the palm, the TV and (soon enough) the washing machine... We're back in OS/2 territory looking fir value from smart grids or location based adds... it's still "the Internet".


What "you" need is a sustainable way to extract wealth from the private sector to spend on all this stuff out of your government funded iron rice bowl.

"Stagnation" results from eating all the seed corn -- from capital consumption, which is exactly what has been happening in America.

Brad writes,




I agree with DeLong insofar as he states that the internet provides a great value in reducing the amount of time it takes to do certain things. But the internet also functions largely as a replacement for television, and that is not necessarily a good thing. There are many time sucks (aka time wasters) on the internet, and if my affluent friends are any indication, we pursue the same sort of mindless drivel once found on television. We waste hours on social sites like Facebook, read blogs that do nothing more than affirm our existing prejudices, and once in a while actually read blogs that want to provide good information, letting the ideological chips fall where they may. The latter is an activity that I would wager polling would show is almost universal.

The number of wide open intellectual sites are few. That is one reason I read Marginal Revolution, and one reason I do not read Krugman. Well known political websites like Daily Kos and National Review Online are simply empty mirrors. So while the internet amuses, for most people who seem to want only to have their existing beliefs reaffirmed, the internet is no more valuable or enlightening to mankind than watching MASH reruns.

About our guest

Professor of Economics at U.C. Berkeley
United States
Contributions: 13




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