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Fully Grown: Why a Stagnant Economy Is a Sign of Success

by Dietrich Vollrath University of Chicago Press
Pub Date:
01/2020
ISBN:
9780226666006
Format:
Hbk 296 pages
Price:
AU$67.99 NZ$69.56
Product Status: In Stock Now
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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 is: 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 economy: 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.

Preface


 


1              Victims of Our Own Success


2              What Is the Growth Slowdown?


3              The Inputs to Economic Growth


4              What Accounts for the Growth Slowdown?


5              The Effect of an Aging Population


6              The Difference between Productivity and Technology


7              The Reallocation from Goods to Services


8              Baumol’s Cost Disease


9              Market Power and Productivity


10           Market Power and the Decline in Investment


11           The Necessity of Market Power


12           Reallocations across Firms and Jobs


13           The Drop in Geographic Mobility


14           Did the Government Cause the Slowdown?


15           Did Inequality Cause the Slowdown?


16           Did China Cause the Slowdown?


17           The Future of Growth


 


Appendix: Data and Methods


References


Index

Brad DeLong, University of California, Berkeley


"For the past decade, Robert Gordon has written about the rise and fall of American growth, praising the first in our past that was and lamenting the second in our present that is. Now comes Vollrath with a lively, accurate, and essential corrective to Gordon's pessimism: growth is slow today, he demonstrates, not because our economy is failing but because our economy has succeeded."


Chad Jones, Stanford University


"Vollrath offers a provocative new explanation of the slowdown in economic growth experienced by the US economy during the past two decades: we are a victim of our own success. Rising leisure, declining fertility, and the shift out of manufacturing into services explain the bulk of the slowdown in aggregate income growth. Each is a feature of a mature, developed economy, and in that sense, the slowdown may be a symbol of success rather than a sign of failure. Brilliantly supported by the latest research and engagingly presented, Fully Grown provides a startling, novel assessment of economic growth in the 21st century."


 


Diana Coyle, Bennett Professor of Public Policy, University of Cambridge


“Anybody who has followed Vollrath’s blog will have been eagerly waiting for this book. Fully Grown is essential reading for anybody interested in the future of the economy. It investigates why the United States and other advanced economies are growing more slowly than in the past. Contrary to conventional wisdom, it argues this slowdown is due to success, not failure. All the leading economies have aging populations, thanks to past gains in health, and are largely service-based, as material goods account for a shrinking share of spending. These two characteristics alone mean the economy will not expand as rapidly in the 21st century. There are plenty of other problems to tackle, from unequal opportunities to excessive market power; but, Vollrath argues convincingly, the growth rate is the wrong way to assess how well the economy is doing.”
Dietrich Vollrath is professor of economics at the University of Houston. He is coauthor of Introduction to Economic Growth, now in its third edition, and writes the Growth Economics Blog.