Is the Great Stagnation a great opportunity?

by on February 16, 2011 · 7 comments

In his [column on Monday](, David Brooks put his finger on what I found most interesting about Tyler Cowen’s *[The Great Stagnation](*. Namely:

>It could be that in an industrial economy people develop a materialist mind-set and believe that improving their income is the same thing as improving their quality of life. But in an affluent information-driven world, people embrace the postmaterialist mind-set. They realize they can improve their quality of life without actually producing more wealth.

As Tyler points out in this book, and catalogued at length in his other excellent book, *[Create Your Own Economy](*, recent increases in happiness come from growth in internal economies. That is, internal to humans. In the past, increased well-being came from not having a toilet and then having one, or the invention of cheap air travel. Today they come from blogging, watching *Lost* on Netflix, listening to a symphony from iTunes, tweeting with your friends, seeing their pictures on Facebook or Path, and learning and collaborating on Wikipedia. As a result, once one secures a certain income to cover basic needs, greater happiness and well-being can be had for virtually nothing.

The problem some see with this is that the Internet sector, while it may give us amazing innovations, produces little by way of revenue or jobs. Brooks also laments that because American’s have not come to grips with this growing distinction between wealth and standard of living, we tend to live beyond our means, which is certainly true in a personal and public fiscal sense.

But I’d like to see this seeming decoupling of wealth and well-being as an opportunity.

If we’ve doubled our productivity over the last 50 years, why are we not working 20 hours a week and enjoying the difference playing with our families and reading books? Well, it’s because the opportunity cost of leisure is high. Time spent on leisure means time not spent generating income, and if happiness is tied to material wealth, then that may be an expensive trade-off.

However, if happiness is increasingly decoupled from material wealth, then perhaps the cost of leisure is going down and we can finally afford to indulge in more of it. If you can grasp the distinction, then you realize that it is now truer than ever that beyond a certain point, accumulating more material wealth will not contribute to your happiness. The opportunity that presents itself is to live “below your means” yet be happier than ever.

Though anecdotal, there is some evidence that young people are choosing this route and “opting out.” [Here’s a *NYT* “trend piece” on the topic]( One of its subjects is a 31-year-old woman who traded her investment management job for more leisure:

>Today, three years after Ms. Strobel and Mr. Smith began downsizing, they live in Portland, Ore., in a spare, 400-square-foot studio with a nice-sized kitchen. Mr. Smith is completing a doctorate in physiology; Ms. Strobel happily works from home as a Web designer and freelance writer. She owns four plates, three pairs of shoes and two pots. With Mr. Smith in his final weeks of school, Ms. Strobel’s income of about $24,000 a year covers their bills. They are still car-free but have bikes. One other thing they no longer have: $30,000 of debt.

>Ms. Strobel’s mother is impressed. Now the couple have money to travel and to contribute to the education funds of nieces and nephews. And because their debt is paid off, Ms. Strobel works fewer hours, giving her time to be outdoors, and to volunteer, which she does about four hours a week for a nonprofit outreach program called Living Yoga.

Portland, as Fred Armisen tells us, is where young people go to retire. Now, what I haven’t considered are the effects of “opting out” on innovation, or the distributional issues. (That is, can everyone afford to sleep ’til eleven?) I’ll try to address these in later posts.

**UPDATE:** Geniuses think alike. Jacob Grier points me to the Oregon Economics Blog’s [similar take on Portland as youth magnet]( For the record, that post was published at 8:47am PST, and my post at 7:20am PST. ;o)

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