As you might imagine, a spirited debate is underway on economics blogs about [Tyler] Cowen’s view that the Internet may not really be the productivity bonanza that was once predicted. So far, he notes, the Internet has generated far less income and far fewer jobs than earlier innovations – think of the automobile – and the benefits it has yielded have been confined largely to the upper end of the income scale.
For me, however, the more intriguing argument in “The Great Stagnation” is that much of our recent growth may, in fact, have been a mirage. It is no coincidence, he writes, that during the recent decades of slow growth in incomes and productivity, three of the fastest-growing sectors of the economy have been education, financial services and health care. And while government statistics show productivity in those sectors growing at the same pace as the rest of the economy, other data suggest otherwise.