Is the problem stagnation or education?
For George Mason economist Tyler Cowen, it was all about his grandmother. Debating MIT economist Erik Brynjolfsson, Cowen reminded us that a long list of innovations including cars, antibiotics and refrigerators revolutionized his grandmother’s life. More recently? As he says in his book, The Great Stagnation, relatively little has changed. His conclusion? Stagnation is our problem.
Disagreeing, Brynjolfsson specifically cites his brother’s heart transplant and the digital technologies that are transforming the workplace. In his book, Race Against The Machine, he takes us to the 3 gaps that are leaving many people behind: 1) higher skilled/lower-skilled workers; 2) superstars/everyone else; 3) capital/labor. His conclusion? Education is our problem.
The Economic Lesson
As a factor of production, capital can be divided into 2 categories.
- Physical capital: The machines, buildings, and inventory that make labor more productive.
- Human capital: The education that make labor more productive
While both economists’ ideas intersect, we could conclude that Cowen is saying we need more innovative physical capital while Brynjolfsson is emphasizing how human capital needs to change.
An Economic Question: How does the following relate to the Cowen/Brynjolfsson debate and economic growth? Defining the problem shapes the solution.