Should-Read: Alex Field: Review of Marc Levinson: An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy

Should-Read: Alex Field: Review of Marc Levinson: An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy: “1948 to 1973 has long been considered the golden age of the U.S. economy…

…And then it fell apart.  TFP growth in the United States, except for a modest revival between 1995 and 2005, experienced retardation.  Labor productivity and the material standard of living grew more slowly, with almost all of the gains going to the top.  Consumption was sustained by rising women’s labor force participation and increasing household debt levels.  Financial crises, including in developed countries, became more frequent.  And governments and all their economic advisors seemed largely powerless to change this reality. Marc Levinson provides a well written narrative of the descent from the golden age into what has become the new ordinary….

The book has many strengths. First, the narrative is based in part on original archival research…. Second, it can be thought of as a G-7 book…. The juxtaposition of narratives from different states reveals differences but also the worldwide incidence of a sea change in the developed world starting in the 1970s. Finally, Levinson’s assessments of policy regimes and policy initiatives are data driven and balanced….

There are, however, several instances in which Levinson does not quite get on top of important conceptual or accounting distinctions…. Levinson (along with many others) doesn’t understand the distinction in bank regulation between liquidity and capital requirements…. Levinson’s discussion of why labor’s share has declined is something of a mish-mash.  The main cause, he suggests (p. 142) “was most likely a speedup in the rate of technological change.”  But all the data that Levinson reviews shows that the drop in labor’s share coincided with the drop in TFP growth that marked the post-1973 period. It’s possible that if the bias of technological change altered — if it became more labor saving — it served to weaken labor’s bargaining position, and Levinson seems to be making that argument as well…. A related confusion pops up on p. 155, where he observes that politicians, in the face of the sea change, continued to offer programs devoted “to dividing up the fruits of plenty, not to reviving productivity growth and adjusting to a world of rapid technological change.”  It is difficult to imagine an economy simultaneously experiencing both declining productivity growth and an accelerating rate of technological change….

My noting of these issues should not discourage academic economists from reading this book…. The book provides a welcome introduction to very important chapters in twentieth century economic history.

Marc Levinson, An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy.  New York: Basic Books, 2016. vii + 326 pp.  $28 (cloth), ISBN: 978-0-465-06198-3.