Schulz's wager: Great Stagnation or leap forward? Place your bets


Morning commuters walk past the New York Stock Exchange Aug. 20, 2012.

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  • Over the last 18 months, a debate has raged about what the future will look like. @NickSchulz

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  • Will the innovation and rapid economic growth that Americans have enjoyed over the past 2 centuries continue? @NickSchulz

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  • Call it @NickSchulz’s Wager: you should believe that The Great Stagnation is upon us.

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Over the last 18 months, a debate has raged about what the future will look like.  Will the innovation and rapid economic growth that Americans have enjoyed over the past two centuries continue? Or have we plateaued and are we now entering a period marked by persistent anemic growth and less rapid technological change?

On one side you can find economist Tyler Cowen, author of the best-selling e-book The Great Stagnation; investor/entrepreneur/intellectual Peter Thiel, who wrote an influential essay in National Review called “The End of the Future”; and now comes economist Robert Gordon, author of a new paper “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds.”  In case you couldn’t tell from the titles, these are the pessimists about the future.

On the other side you’ll find Eric Brynjolfsson and Andrew McAfee, authors of Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy; Mark Mills, author of a much-discussed essay “The Next Great Growth Cycle”; Singularity theorist Ray Kurzweil; and Matt Ridley, author of The Rational Optimist and the Wired cover story “Apocalypse Not.”

My instinctive sympathies lie with the bulls. After all, the pessimists of the recent past were often proven decisively wrong. Remember the Club of Rome and its book The Limits to Growth?

But the pessimists of the past were often ideological liberals and hard-green environmentalists of a Utopian bent; they were hostile to modern industrial technology and let politics cloud their analysis and judgment.  Their arguments about the impending limits to growth were stalking horses for an explicit political agenda, one that sought more central planning in the economy and  more limits on individuals’ liberties.

The pessimists today are of an entirely different cast. They are often politically libertarian-conservative, economic realists, and fans of new technology. This makes their critiques more penetrating and their analysis much harder to dismiss than the pessimists of a generation ago.

It also changes in important ways how an agnostic might feel about the entire debate.

Here’s a thought: the most fruitful approach to The Great Stagnation debate should be similar to how the great philosopher and mathematician Blaise Pascal considered the question of whether God exists.

Pascal argued that rational people should wager on the side of theism over atheism. The reason? If you believe in God and it turns out that God exists, then you lived in accordance with objective reality  and would enjoy the Heavenly reward of eternal life.

But what if God did not exist and a person chose to believe he did?  For Pascal, an individual would still enjoy great benefits in this life – a sense of peace, hope, and fraternity, and an impulse to do good works and to live harmoniously with others. These blessings would far outweigh any loss of autonomy or foregone material pleasures.

So for Pascal, the choice in his wager was obvious – choose theism over atheism: “I should be much more afraid of being mistaken and then finding out that Christianity is true than of being mistaken in believing it to be true.”

Now let’s think about The Great Stagnation.  There are powerful arguments for and against the Stagnation thesis, just as there are powerful arguments for and against God’s existence.  So what should a rational person conclude?

As much as it pains me to admit this, a rational person should conclude that The Great Stagnation is real.  Why? Because doing so would prompt him to think about all of the reasons innovation and growth might be stagnating and take steps to jumpstart growth again.

Indeed, Thiel and Cowen both offer useful suggestions for rethinking policies and attitudes that are harmful to growth (so does Cowen’s colleague Alex Tabarrok in his excellent book Launching the Innovation Renaissance).  Another good source of pro-growth ideas can be found in the new book “The 4% Solution,” published by the Bush Institute.

If we believe there is no Great Stagnation, however, we will have less of a sense of urgency about the need to remove barriers to growth; we may instead become complacent, believing that innovation is baked into the future cake and will deliver us from our national problems, when in fact no such thing will materialize.

Call it Schulz’s Wager: you should believe that The Great Stagnation is upon us.  Now it’s time to get to work and put growth at the top of the agenda again.

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About the Author



  • Nick Schulz was the DeWitt Wallace Fellow at AEI and editor-in-chief of, AEI's online magazine focusing on business, economics, and public affairs. He writes the “Economics 2.0” column for where he analyzes technology, innovation, entrepreneurship, and economic growth. He is the co-author with Arnold Kling of From Poverty to Prosperity: Intangible Assets, Hidden Liabilities, and the Lasting Triumph Over Scarcity. He has been published widely in newspapers and magazines around the country, including The Washington Post, The Wall Street Journal, the Los Angeles Times, USA Today, and Slate.

  • Phone: 202-862-5911

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