The Agenda

Hal Varian and Brad DeLong Think They Disagree with *The Great Stagnation*

… but I’m not sure they actually do


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 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.

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. [Emphasis added]

All of this tracks arguments Tyler raises in The Great Stagnation, particularly that last part.

As Lane Kenworthy has argued, it’s not clear that we wouldn’t have been better off had we developed all of these attention-saving and labor-saving technologies and doubled the amount or the value of stuff we could own if we chose. So I’m not sure “producing revenue” is not the point, particularly for those who believe that we should redistribute more to less-affluent households.

DeLong’s observation on slowing the growth of Social Security benefits tracks Tyler’s arguments precisely: slower visible or hard or revenue growth doesn’t mean that we’re not getting better off. Consumer surplus has increased dramatically, as Hal Varian rightly notes:

The problem with the internet, according to Mr Cowen, is that it doesn’t contribute much to jobs or revenue. But these facts just show that the internet is hugely efficient in producing consumer surplus: a relatively small amount of labour (plus a substantial dose of capital and know how) produces a huge amount of benefits.

But consumer surplus is hard to tax! The kind of people who think Social Security benefits should actually be higher certainly don’t think producing revenue “is completely beside the point.” 

I actually believe that attention-saving technologies have made us much, much better off, which is why I’m an ardent techno-optimist — but again, attention-saving technologies don’t benefit everyone equally. Rather, they benefit the kind of people who like and need to pay attention to lots of different things, e.g., the kind of people who enjoy reading blog posts and tweets, freelancers who manage a variety of different clients, etc. 

So we’ve seen consumer surplus for infovores zoom while it’s grown somewhat more modestly for those who value other things in life. That’s hardly a terrible thing. It does, however, account for a certain unease. The fact that consumer surplus is hard to tax implies that the effective tax burden of novelty-seeking aspiring intellectuals — who I think it’s safe to say are sprinkled more liberally in the top rather than the bottom half of the income distribution — is actually plummeting, while people who prefer sitcoms to YouTube and stability over risk find themselves economically squeezed and generally unamused. 

You don’t think this accounts for at least some of the tenor of our politics?