still think that economics has nothing useful to say about the business cycle, and crank doctrines continue to flourish.
The crank doctrine du jour is something widely known as the “New Paradigm” it amounts to the assertion that new forces such as globalization and technological change have cancelled all the old rules, that old speed limits on growth have been repealed, perhaps that the business cycle itself has been abolished. There are many things wrong with that story line, among them the question of whether globalization and technology are really proceeding as dramatically as its adherents claim. “We Are Not the World” already described my doubts about globalization; the first essay here describes some similar doubts about technology.
More important, however, the New Paradigm seems to involve confusion about the difference between the business cycle and long-term growth, coupled with a misunderstanding of the things that monetary policy can and cannot do. I try to explain those distinctions in the second essay, “Four Percent Follies.”
To be skeptical about the prospects for rapid growth is, it turns out, to run the risk of being identified with another, equally misguided camp: that which believes that controlling inflation is the only priority of policy, that nothing can be done to fight recession and unemployment. This belief, especially acute among central bankers, is arguably imposing huge, gratuitous economic pain in much of the world; the third piece here, “A Good Word for Inflation,” focuses mainly on Europe and makes the case against a single-minded emphasis on price stability, while the fourth essay argues that monetary passivity accounts for much (not all) of Japan’s economic malaise.
Finally, in “Seeking the Rule of the Waves,” I made use of a book review assignment to say some things I always wanted to say about economics, history, and the reasons why the business cycle is surely nowhere near dead.
Technology’s Wonders: Not So Wondrous
Lately many business leaders and thinkers have become preoccupied with something called the Information Technology Paradox. It goes like this: We live in an age of unprecedented technological progress, which is making everyone far more efficient than before. Yet where is the payoff? The standard of living of ordinary Americans doesn’t seem to be soaring; if anything, many people are finding it harder, not easier, to make ends meet. If we’re so smart, why aren’t we richer?
A lot of ingenious things have been said about the reasons for the paradox, but there is one explanation that hardly anyone dares mention: Maybe the wonders of technology we keep hearing about aren’t really all that wondrous.
To get an idea of what I mean, think about 2001. No, not the year—the movie 2001: A Space Odyssey, which came out in 1968. Most readers must have seen it. The middle part of the movie offered what was supposed to be a realistic picture of life thirty-three years in the movie’s future, but barely four years from now. In that world there were regularly scheduled commercial flights to space stations with Sheraton-style lobbies, and computers smart enough to go on a postal worker–style rampage when they felt unappreciated. But airlines aren’t offering orbital vacations to their frequent flyers; Shannon Lucid could not call room service; and my computer’s idea of murderous revenge is to tell me “An error has occurred in your application. Terminate/Ignore?” If 2001 is actually going to look anything like 2001, technology had better get a move on.
The point is that if you measure the progress of technology not by Mips and bytes but by how it affects people’s lives and their ability to get useful work done, you realize that the last thirty years have been a time not of unexpected achievement but of persistent disappointment.
Surely, for example, the startling thing about computers is not how fast and small they have become but how stupid
The crank doctrine du jour is something widely known as the “New Paradigm” it amounts to the assertion that new forces such as globalization and technological change have cancelled all the old rules, that old speed limits on growth have been repealed, perhaps that the business cycle itself has been abolished. There are many things wrong with that story line, among them the question of whether globalization and technology are really proceeding as dramatically as its adherents claim. “We Are Not the World” already described my doubts about globalization; the first essay here describes some similar doubts about technology.
More important, however, the New Paradigm seems to involve confusion about the difference between the business cycle and long-term growth, coupled with a misunderstanding of the things that monetary policy can and cannot do. I try to explain those distinctions in the second essay, “Four Percent Follies.”
To be skeptical about the prospects for rapid growth is, it turns out, to run the risk of being identified with another, equally misguided camp: that which believes that controlling inflation is the only priority of policy, that nothing can be done to fight recession and unemployment. This belief, especially acute among central bankers, is arguably imposing huge, gratuitous economic pain in much of the world; the third piece here, “A Good Word for Inflation,” focuses mainly on Europe and makes the case against a single-minded emphasis on price stability, while the fourth essay argues that monetary passivity accounts for much (not all) of Japan’s economic malaise.
Finally, in “Seeking the Rule of the Waves,” I made use of a book review assignment to say some things I always wanted to say about economics, history, and the reasons why the business cycle is surely nowhere near dead.
Technology’s Wonders: Not So Wondrous
Lately many business leaders and thinkers have become preoccupied with something called the Information Technology Paradox. It goes like this: We live in an age of unprecedented technological progress, which is making everyone far more efficient than before. Yet where is the payoff? The standard of living of ordinary Americans doesn’t seem to be soaring; if anything, many people are finding it harder, not easier, to make ends meet. If we’re so smart, why aren’t we richer?
A lot of ingenious things have been said about the reasons for the paradox, but there is one explanation that hardly anyone dares mention: Maybe the wonders of technology we keep hearing about aren’t really all that wondrous.
To get an idea of what I mean, think about 2001. No, not the year—the movie 2001: A Space Odyssey, which came out in 1968. Most readers must have seen it. The middle part of the movie offered what was supposed to be a realistic picture of life thirty-three years in the movie’s future, but barely four years from now. In that world there were regularly scheduled commercial flights to space stations with Sheraton-style lobbies, and computers smart enough to go on a postal worker–style rampage when they felt unappreciated. But airlines aren’t offering orbital vacations to their frequent flyers; Shannon Lucid could not call room service; and my computer’s idea of murderous revenge is to tell me “An error has occurred in your application. Terminate/Ignore?” If 2001 is actually going to look anything like 2001, technology had better get a move on.
The point is that if you measure the progress of technology not by Mips and bytes but by how it affects people’s lives and their ability to get useful work done, you realize that the last thirty years have been a time not of unexpected achievement but of persistent disappointment.
Surely, for example, the startling thing about computers is not how fast and small they have become but how stupid
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