In the may issue of Reason, Brink Lindsey reviews Tyler Cowan's "The Great Stagnation." Cowan's book addresses the decline in rising living standards. Lindsey -- whose review I can't find online, but a shorter version can be found here -- responds that the post-1973 period isn't all that stagnant:
Tyler correctly points out that median family income rose smartly after World War II only to fall off sharply in the '70s. GDP per capita figures reveal the same trend, albeit a little less dramatically (because of the rise in income inequality). Between 1950and 1973, the average annual growth rate of real GDP per capita was 2.5%; for the period between 1973 and 2007, the corresponding figure was only 1.9%
But look what happens when you put these figures in larger historical context (note: I'm using calculations by Angus Maddison for earlier periods and Census figures for post-WWII periods):
1820 - 1870 1.3%
1870 - 1913 1.8%
1913 - 1950 1.6%
1950 - 1973 2.5%
1973 2007 1.9%
From this broader perspective, what Tyler calls the Great Stagnation looks like a return to normalcy after the "Great Boom" of the post-WWII decades. Indeed, recent growth rates are better than those of all other earlier periods. So yes, growth has cooled down since the postwar "Golden Age," and that fact poses real economic and political challenges. But the Golden Age was the outlier, not our present era; it just doesn't make sense to talk about the present period as stagnant after centuries of easy growth.
If you look closely at Lindsey's argument, the work of it is being done by switching measures. Cowan uses median family income. Lindsey uses GDP per capita. Why does this matter? Because we've seen significant growth in total wealth over the last few decades, the only problem is that a massive share of it has been enjoyed by a tiny handful of very rich people. If you divvy all that rising income up on aper capita basis, then we're doing fine. But it isn't being divvied up like that. In the real world, most Americans have experienced stagnation.
Now, Lindsey does note parenthetically that income inequality is the cause of the difference here. But I think this fact merits more than a parenthetical. Lindsey is conceding that the U.S. economy is producing enough income growth, but the income growth is distributed so unequally that most people have derived little from it. In other words, he's conceding that the recent rise in income inequality is the difference between a period of normal historical growth and a period of stagnation.
Now, a libertarian like Lindsey -- even a liberaltarian -- isn't going to conclude that all we need to do is redistribute that income from the rich to the poor and everybody will be happy. I wouldn't even conclude that. But it does seem like this conclusion merits some critical reexamination, right?