Deflation and value

Picking up the returns to scale strand, there is one complication with all of this. I said that a lot depends on whether the main growth areas in the economy can be provided at low marginal cost.

If they can, then growth is likely to produce deflation. The gains come not so much in employment gains as falling prices, so they can be more readily available to society at very low cost. The music industry may not be as healthy as it was twenty years ago, but society has an immeasurable wealth of music available at a mouse click at no cost. Some things of great value cost next to nothing. Tyler Cowen discusses this in passing in his book The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will(Eventually) Feel Better.