Tyler Cowen’s The Complacent Class: Reviews and Discussion

I have compiled a list of reviews for Tyler Cowen’s new book, The Complacent Class, along with some insight.

From Arnold Kling:

My Review of Tyler Cowen’s Complacent Class

3. I am still not happy with Tyler’s use of the term “complacency.” I can think of three senses of the word that are floating around in the book.

a. Complacency is “a general sense of satisfaction with the status quo.”

b. Complacency is a desire to avoid risk and resist change.

c. Complacency is a belief that the current social order is stable, that we will not suffer from a sharp increase in violence or a major breakdown of norms and institutions that maintain order.

Full review: Complacent or Pathological?

IMHO, ‘c’ the most likely outcome. Tyler seems like a ‘c’ person as well. ‘b’ seems wrong–a complacent person would be indifferent to change, not resist it. Americans may not like the status quo, but they aren’t doing much to resist it, which is is why ‘c’ will prevail.

This book has generated considerable discussion and many reviews..everyone wants to know, why do Americans seem so complacent?

Have Americans Given Up?

Third, the growth of large companies has clearly sapped some of the dynamism from the U.S. economy. As I’ve reported, the decline in entrepreneurship has coincided with the rise of new monopolies—across retail, healthcare, and tech—that make it harder to start a new successful firm in these industries. Starting in the late 1970s, antitrust regulators stopped cracking down on large companies as long as they provided cheap products for consumers. Since 1978, the share of U.S. firms that are startups has fallen by 50 percent.

I disagree…as stated earlier, my ‘theory’ is that entrepreneurship has declined not because of monopolies (although it is a small contributing factor); rather, because start-up costs are too high (when adjusted for inflation) and credit is too scarce. Everything is just too expensive and difficult, and lenders have become too risk-averse.

As shown below, for example, after a long lull between 1950-1980, New York real estate and rent between 1980-2006 inexplicably shot up 700%, far outpacing inflation, straining budgets for cash-strapped small businesses. This rent and real estate explosion was not limited to New York and occurred in many cities, particularly cities on the East and West coasts.

Another reason is that people are choosing ‘capital’, which beats labor and entrepreneurship.

If given a choice between spending hundreds of thousands of dollars starting a small business, which has a 80-95% chance of failing within a decade, or buying stock and or real estate (such as New York, which gained 500%, or S&P 500, which is up 300% since 1998) the choice seems obvious. Capital wins, hands down. Small business is hard unless you get lucky or can secure venture capital. Venture capital, not surprisingly, has become risk-averse, plowing billions into large, safe companies but only peanuts into tiny start-ups.

Capitalism has gotten much smarter, choosier, and efficient since 2008…as capitalism gets smarter, ROI and ROC (return on capital) will increase, but there will be fewer winners and lots of losers, and the winners will get very big (Matthew effect).

Furthermore, not only is rent for office space surging on an inflation-adjusted basis, so to is residential rent. People are unable to create businesses because of expenses for student loans, rent, healthcare, phone bill, daycare, and insurance…all of which exceed inflation. The US economy is growing at 2-3% a year, the federal funds rate is only 1/2 percent, but inflation for many services is more like 6-10%/year. And credit card debt has the highest inflation of all. People are being squeezed by these growing, unending rents. If that isn’t bad enough, add a perpetually weak labor market and an already strained social safety net. Due to all these factors, it’s little surprise the average American has less than $1,000 in savings and isn’t in much of an entrepreneurial mood.

From NPR: America’s ‘Complacent Class’: How Self-Segregation Is Leading To Stagnation

It is truly a shocking fact. Now you could argue the measurements are not perfect, that’s true, but that even the numbers can come out that way. So many of the advances in our economy have come from women working more, working harder, getting more educated. That’s great. But when it comes to males, something has very badly gone wrong.

I think we have switched to a service-sector economy — most jobs are now service sector. That’s bad for some percentage of men. Jobs require more and more that you be skilled in information technology. That’s great for the top 1 percent, 10 percent, 15 percent. Not so great for the median or the bottom third for males.

Men are falling behind, as I describe in Society is Failing Men (or how men are failing at society)

Women tend to excel at structured, academic environments. Men, due to higher testosterone and other biological factors, generally thrive under more chaotic situations. America’s post-2008 economy rewards people who have lots of academic credentials and can sit still, take orders, and retain rote knowledge quickly, not those who literally want to get their hands dirty. Most service sector jobs (especially the service sector jobs created since 2008) are monotonous, low-status, and low-pay. In earlier generations, men had manufacturing jobs, but many of those jobs are gone, and those that remain have lower inflation-adjusted pay and fewer retirement benefits than in the past.

Referring to Ravi Batra’s social cycle theory, since 2008, especially, we are in the an era of capital acquisition and intellectualism, not warriors and laborers. After 911 and then the invasion of Iraq and Afghanistan, ‘warriors’ (soldiers, firefighters, police, etc.–all of which are male professions) gained some status, but that faded. The aftermath of the 2008 crisis gave the aquisitors more power than ever, because the system was reshuffled and restructured in their favor, and their power keeps growing with each passing year.

Return of Kings is right: we are not living under a patriarchy anymore.

From Virtue Signaling and Status:

In accordance with Ravi Batra’s Social Cycles, physical dominance may be losing its potency. Nowadays, especially since 2008 or so, society and culture seems to revere smart ‘gammas’ and ‘betas’ more so than the alpha ‘tough guy’. The former are making all the money in tech, real estate, stocks, and other high-IQ means, while getting all the prestige whether it’s in science (Higgs boson and gravity wave detector stories which made headlines globally, for example) or technology (web 2.0 founders making headlines and billions, the idolization of Musk, Buffett, Gates, and Jobs etc) it seems. The latter, on the other hand, are losing their jobs, whether it’s oil falling from $100 in 2014 to $30 today, hurting lots of blue collar energy workers, or the housing bust of 2006-2009, which hurt blue collar construction workers. Or the rise of the low-paying service sector, replacing obsoleted but high-paying factory jobs. Meanwhile, high-IQ tech is doing better than ever, impervious to pretty much all macro conditions, save for a blip in 2000-2002 during the dotcom bubble or in 2008 during the recession. This dichotomy is also observed in the housing market, with real estate in high-IQ regions such as the Silicon Valley constantly making new highs, versus almost everywhere else still well-below the 2006 highs.

A combination of various social and economic trends have rendered a lot of people, especially men of working age, ‘useless‘.

Another review: The future will be good for matchers and bad for strivers:

“[Millennials] are not actually indifferent or lazy or lacking in enthusiasm — quite the contrary — but more and more of their passions take forms other than those of the old climb-the-social-ladder variety,” Cowen writes. “Millennials might therefore appear to be lacking to the older generations who don’t quite get the new terms of competition and satisfaction. In reality, the Millennials are doing pretty well with respect to the options the world has given them, and they are helping move that world toward more contentment and also less interest in grand projects or topping previous records of achievement.”

This could explain why so many millennials are embracing intellectualism and minimalism, rejecting the ‘rat race’ and materialism, and choosing to live a life that may even seem ‘boring‘ to some. Millennials would rather make money on their own terms than be cogs of the corporate machine, but also many millennials see knowledge as being the same as wealth. Intellectual wealth is as important, if not more so, than monetary wealth.

But also the concept of the ‘American Dream’ is begin redefined or downgraded. The future is one of less entrepreneurship and creation, but instead more passive consumption, such as idling away for hours on Netflix and Facebook.

75-minute video presentation: The American Dream and the Complacent Class