


Cowen gives us the long view in his most recent book, ” Average is Over: Powering America Beyond the Age of Great Stagnation “.

James Stafford: You have written at length about “Great Stagnation” and its relation to technology and natural resources. How do we trace the “Great Stagnation”, and are we seeing the end of our unexploited natural resources?

Tyler Cowen: The Great Stagnation first shows up in the data in 1973, when income growth slows and productivity growth falters. It’s hard to avoid the conclusion that this has something to do with the end of the age of cheap energy. In my view sustainable economic growth is more dependent on energy than the share of the energy sector in GDP would indicate. Energy-intensive investments are more likely to build for our future, compared to the productivity mess known as our service sector.

I do not, however, think we are seeing the end of unexploited natural resources – just look at fracking. But every now and then we take a pause before extraction technologies race ahead once again. We’ve been living in that pause for much of the last 40 years–a scary thought.

James Stafford: Should we still be talking about “Peak Oil”?

Tyler Cowen: I don’t see “peak fossil fuel” being a binding constraint over most of the next 30 years. That said, new supplies take a while to come to market, and the global economy is still constrained by oil supply scarcity. This was evident during the price spike dating from the time of chaos in Libya. There just wasn’t enough oil for the global economy to manage a higher growth rate, and only now is the US economy moving beyond that constraint. India still faces it.


Tyler Cowen: It would depend what we do and when we do it, and in any case I don’t see this as an easy matter to predict. Perhaps the best prediction is that the situation festers and we don’t have a direct US intervention at all.



James Stafford: As the debate continues over whether the US should export unlimited natural gas or keep it at home, what would be better for the US economy over the long-run, and why?


James Stafford: 



Tyler Cowen: Our trade balance will be coming into order and markets already see this. Energy prices are cheaper than they would be. We’ve even cut carbon emissions, unexpectedly.





James Stafford: In the world of finance and banking, energy market manipulation has become a hot topic, most recently with the scandal around JPMorgan. How does this style of energy market manipulation affect consumers?

Tyler Cowen: Not much at all.

James Stafford: Is this a trend we can’t stop?

Tyler Cowen: We can’t stop it easily. Consumers are not really the losers here, rather some traders benefit at the expense of others. There is more churn than we would like to have in prices and short-term inventories. That’s a problem, but pretty far down on my list of worries.

James Stafford: On a social level, with the fashion for choosing to become a banker rather than, for instance, an engineer, are things like market manipulation becoming . acceptable-a sexier sort of crime?


James Stafford: As the “debate” over climate change has taken on polarizing political proportions, it’s better to ask an economist. How can climate change affect the economy?

Tyler Cowen: We’re going to find out, I have to say.


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