The internet is a ponziconomy. The meme industry is a subprime bubble.

Once, publishers paid people to write stuff that mattered. Now, they pay people to create memes. Once, publishers invested in "content"--stories, pictures, essays, journalism, poetry, and much, much, more. Once, publishers paid young people, so they could earn a living learning and practicing these endeavours; already, now, they pay people to create slideshows and animated gifs; in the not too distant future, they will pay young people to use skills that could and should be better used elsewhere--3D modelling, CGI, storytelling, math, physics, design, etc--to create Tube Videos. Now, the only viable mass-market business model is to invest in faked videos that are meant to "go viral".

How do they go viral? By tapping our lowest and least controllable instincts. they titillate us, they shock us, they produce in us the warm fuzzy glow of sentimentality. They jolt us; we click. Together, we're not better--we're worse; a little duller, stupider, sadder, lonelier. This isn't "content", in any meaningful sense of the word. It's more like "emptent"--stuff that fills us up, only to leave us empty.

Today, I remarked on Twitter: The Democrats' biggest Achilles Heel is that they're as closed to fundamentally big new ideas as the GOP is. Alex asked me, in response, don't these count as new ideas? It's a very sharp question.



So here's my answer. Yes--and no. Let me be clear. I'm 100% for science and technology--and especially for basic research. I think it's crucial, vital, irreplaceable, and totally awesome.

But--here's the but. I don't mean any of the technological innovations above when I say "big new ideas". What do I mean? Well, consider a great and quintessentially American Big New Idea: basic research itself as a public good, hence eminently worthy of government funding, pioneered in the post-war era. Big New Ideas--great political and social innovations, more specifically institutional innovations--like that are in notably short supply in America today.

Let me explain, via a counterfactual. Imagine that I pioneer a wondrous nanomaterials startup that offers everyone a blindingly awesome new technology. What's likely to happen, without institutional innovation--without better building blocks for markets, corporations, and economies, in this case?

Well, the first thing that's likely to happen is...nothing. Wall St and Sand Hill Rd (aka the venture capital community) probably won't bat an eyelid at my startup, choosing, instead, to do what they've been doing for the last decade or so: allocating capital to Groupon, Zynga, and Facebook.

But let's assume, for the sake of argument, that by some miracle of virtue, that they do invest in my awesome nanomaterials startup. What happens next? Well, without political innovation, I'll get rich, and my backers will get rich--but the middle class is likely to continue it's long, slow slide into oblivion. The benefits of technological innovation, in other words, without institutional innovation, are likely to remain hyperconcentrated at the top.

Think I'm kidding? See the chart below, from @profsufi. Over the last few decades, we've had plenty of technological innovation--but what they haven't done is benefit people at the median. It's a kind of trickle-down thinking to think that, by itself, technology equals prosperity.


Please don't get me wrong. I don't think we need less big tech ideas--I think we need more and better. But to get the most out of them for people and society, we need Big Institutional Ideas. Tech and institutions are complements. Just as the industrial revolution's steam engines and factories needed corporations and capital markets to get the most out of them, so the eudaimonic revolution's radical technologies will need equally radical new institutions to bring forth their maximum, most disruptive potential.

Hence, if you ask me: we've never needed Big New Ideas--transformative ideas about how to organize the economy, society, and polity--more. Like what? Like reinventing GDP. Like redesigning democracy. Like reimagining corporations. Like rebooting "work". Like revolutionizing our conception of what prosperity is and why it matters.

Without them, though GDP may "recover", the real economy will probably continue to stagnate. So the challenge for tomorrow isn't just about technology, but about what we can do with technology to create real, enduring, meaningful human value; the unmet challenge for tomorrow is about Big Ideas for better institutions. Or, if you like, institutions are the circuit boards of prosperity.

I know we're not really allowed to think subtly in the great gladiatorial arena of the American national discussion. But, maybe, just maybe, both "sides" in the structural vs cyclical debate are right--and wrong.

Let me put it this way.

I'd bet that our immediate unemployment problem is, indeed, "cyclical"--and can be ameliorated, to some extent, with more, orthodox, stimulus.

But I'd also bet that a panoply of other problems--stagnant median incomes, declining net wealth, underemployment, corporate cash-stockpiling, financial malinvestment and misallocation by the capital markets, to name just a few--aren't cyclical. They're structural, if only for the simple reason that most are decades-long trends, not the stuff of yesteryear.

I'd say there's a tradeoff between the two--a kind of dilemma of political economy. Sure, you can throw money at failing institutions, to protect failed incumbents and create near-term "jobs"--but unless you want an economy of service McJobs, while propping up yesterday's oligopolies and monopolies, it's probably not the greatest investment in the world. Conversely, it's difficult to simply twiddle thumbs and let a tide of human misery--human potential foregone--sweep the advanced world.

So here's how I'd frame the challenge. Institutional is how we fix structural and cyclical.

If we accept that unemployment is cyclical, then the crucial question is this: will a stimulus package (or whatever) exert an opportunity cost--will it further entrench already failing institutions? Can we design one not to? Can we, better yet, design one to tackle the structural problems above at the same time, escaping the tradeoff? I think we can--and that it will involve investing in better institutions, not just rescuing yesterday's, at the expense of tomorrow's.

Here are some curious facts about the state of America's economy.

1. Job "growth" is (in a simple, literal sense) outstripping economic growth. That is, jobs are being created at a faster rate than the dollar value of output is rising. That is, we're employing more people to make less stuff that's not worth as much (as we were before).
2. 93% of income gains in this recovery have been captured by the top 1%. Speaks for itself.
3. The median duration of unemployment is 40 weeks. It's effectively doubled from 20 in 2005.
4. The unemployment rate for youth is 18% and still climbing.
5. Median earnings are stuck at around $300 per week--where they have been since the 1970s.
6. The ratio of non-performing loans to total loans has risen from 1% to about 5% since the peak of the bubble. In case it's not obvious, for a bubble this historic, that's a strikingly low figure.
7. The total capitalization of the equity markets is now approaching 130% of GDP. It peaked at 140% of GDP in 2007.

What does this little collection of facts suggest to you? Let me connect some of the dots. Labour markets are struggling--what jobs they can seem to create offer, as they have for the last several decades--zero real income growth at the median. But financial markets are booming--not only have banks not had to write off loans to the extent that reflects the degree of wealth destroyed and foregone in the real economy, but because they haven't (and hence have fictional capital to "invest"), stock markets are approaching pre-crisis peaks.

Here's my suggestion. What we've done, very effectively, is begin to "recover". Not just for better, but perhaps for worse. We've resurrected yesterday's Ponziconomy, ligature by ligature. The same toxic dynamics that plagued the corpus last time are very much present, because we've done little to eradicate the disease. We've dug the body up, and shocked it back into life. But it's the same body--not a better vessel for life.

Hence, if people ask: "is this a recovery?", the answer's probably "yes". The industrial age economy is recovering--and so are all it's attendant vicious circles and shortcomings, which are likely to intensify. What's it's not is a transformation to an economy institutionally, structurally, or functionally fit for the 21st century--one characterized by broadly shared prosperity that matters in human terms.

That's not to say that recovery's inherently bad. Just to distinguish what I think many have it confused with. Digging up Frankenstein's zombified corpse is a way to eke the last bits out of a body, sure--but you probably shouldn't confuse it with healthy living.

So here's a question or two. Is it possible for a "recovery" to coincide with institutional failure? If it is, does a "recovery" have much meaning?

In simpler terms, is recovery always an economic "good", that one should desire, prioritize, want, laud, celebrate, etc?

First, let's be precise. A "recovery" simply means GDP growth.

So: is it possible for GDP to grow, even as institutions stumble, falter and fail? Or does the growth of GDP always reflect "working" institutions?

I've discussed at length the reality of what I've termed "thin value"--value that's merely transferred from one party to the next, instead of authentically created anew. Consider a related concept, Daron Acemoglu's position, neatly outlined in his new book, Why Nations Fail: that extractive institutions are the engines of national decline--institutions that extract value from society, instead of creating it.

Now, extractive institutions, are, of course, failing institutions. What's their effect on "growth"? They, too, can yield "growth" (for a while). If for example, a lobbying industry is reasonably efficient at extracting value from, for example, corporations, growth will result. If, for example, an education industry is reasonably effective at burdening students with effectively unpayable debt, growth will result. If more McJobs are created this year than last--and people take them because there are few alternatives, "growth" will result". It won't be high quality growth--built to last, endure, and multiply. But it'll look, for a brief enough while, like a recovery.

Put more simply, recovery can equal failure if the broader imperative isn't merely propping up broken institutions, not merely recovering them--but escaping and reinventing them.

So, sure: it's (eminently) possible for "recovery" to coincide with institutional failure. In fact--and here's my point--if all you're looking at is the numbers, sans the deeper quality of institutions, you might just mistake a "recovery" for renewed prosperity.

Here's the big question everyone's asking. Is this a "real" recovery? To what extent is this "recovery" likely to restore prosperity to America--and beyond?

Mostly, proponents of recovery rest their case on a few months of solid "jobs" growth. And sure, (the social construct known as) "the economy"has been adding "jobs" for the last several months.

But for this recovery to be a meaningful recovery--instead of a transition to what I've termed neofeudalism, a political order bereft of meaningful prosperity, where the substantive rights and responsibilities of self-governance have been traded for (Acemoglu's) institutional extractivism--I'd say a few conditions have to hold.

1. The jobs that are created must be at a bare minimum not McJobs.
2. New jobs must "pay" at least as much or more than the jobs that have been destroyed.
3. The income gains that accrue to new jobs must be sustainable.
4. New jobs must be concentrated in areas of the economy that reflect a eudaimonic structural transformation (high value services, green products, etc)

Why the conditions above? Without them, jobs might be created--but they might be of such low quality that they reflect the entrenchment of institutional failure, instead of the reality of institutional transformation.

So, which way do "the numbers" suggest we're heading? Consider the two biggest gainers over the last month (which tend to have been among the biggest gainers over the last year or so--data's from, of course, here).

First up: "temporary office services". You might think that's a good thing, since temp work is thought to precede "real" work. Except that "ladder of employment" hypothesis has failed to have been found to hold, time and time again. Conversely, there's almost no surer expression of neofeudal decline than the rise of "temp work": higher profit margins for firms, little security, fulfillment, meaning, purpose, or just plain income for people, diluted incentives for meaningful innovation and value creation all around. Indeed, the iconic image of American's economy stagnation is, at this point, the (twentysomething) "temp", overeducated, cubefarmed, and trapped.

Second up: "food services and drinking places". If you think a solid recovery--in an economy where inequality's spiked, and left gaping holes in the structure of demand--can be built on an economy of waiters and McCashiers, then good luck to you on your voyage back into the Dark Ages.

Sure, it's eminently possible to argue that things are getting better in America. But I'd suggest if you bother to take more than a cursory look beneath the numbers, the fact is: we still suffer from a malady--broken institutions, failing the challenge of real prosperity. And instead of curing the disease, we might just be turning it chronic.

I've been struck, recently, by the sheer thinness of our discourse about this Great Stagnation. On the news, in the papers, I consistently encounter the same underlying assumption--that "fixing" this crisis is a function of money. That the real problem is that Americans are growing financially poor (whether in the sense of a middle class collapse, or a coming "debt crisis"). And hence, that if we get fiscal and monetary policy "right"--if the right amounts of money flow into the right buckets--prosperity will as if by a dark magic, resume it's upwards course towards the stars.

I couldn't disagree more. I think this crisis isn't just about money, credit, or debt. I think it's about why they're created, and whether they matter in human terms.

So let's do a tiny thought experiment. Let\s assume we take the entire globe's income ($60 trillionish), and distribute it to the total number of households in America (112 million or so)--giving every household in America about $535,000. And that we do so until the rest of the world starves to death; giving Americans, while it lasts, a basic income of (the equivalent of) about $500k per year.

Further, assume that it's "real" money--not freshly digitally minted by the central bank, but extant capital that flows into the American capital account (invent whatever reason you like, from an alien invasion to a viral outbreak of mass global generosity).

What happens next? Have we "fixed" the problem? Well, it depends. If Americans then proceed to hit the mall, fill their coffers with lowest-common-denominator faux-designer junk, buy several SUVs, a membership to the VIP room at an ultra-trendy nightclub or five, and a McMansion--well, then, in a few short years, they're likely to be right back to square one: broke and jobless. For the simple reason that the above don't create much more than McJobs and capital flowing upwards, from the collapsing middle to the super-rich. Worse, because they haven't invested in public goods, they're likely still to be absent the basic safety nets of health, life, and unemployment insurance, not to mention working infrastructure. If, in short, people choose the post-modern American dream of opulence, this crisis will recreate itself--forever.

Here's my point. The financial determinists aren't just mistaken--they're mistaken to the point of a kind of naivete. Money alone cannot and will not "fix" this great crisis. Instead, it demands a great transformation of our preferences--not just money, but doing the right stuff with money: the stuff of a Tocquevillean "self interest properly understood": fundamentally smarter, wiser, fairer, more humane values.

And that should be economics 101 (should the financial determinists care to remember it). For what we value shapes how we spend our money--whether we have molehills or mountains of it. What we value molds the investments we make in creating the future, or the malinvestments we make in merely recreating the faltering, anxiety-inducing present.

This chart from the ever-insightful Mike Konczal has been making the rounds lately. It's a Venn diagram of proposed "solutions" for dealing with the never-ending global economic crisis.

I think it's just as interesting for what it doesn't say than for what it does say. Take a hard look at it for a second. See what's missing?

Here's what's included: the hoary old reliable standbys of monetary and fiscal policy. Housing policy as a potential alternative, since this crisis was, superficially at least, manifested in a housing bubble. Guess what's not included--at all?

Institutions (like I discuss here). The Venn diagram says: this crisis is about either money, budgets, or mortgages. In other words, while it might be severe, it's superficial--not a function of gigantic cracks in the economy's fundamental institutional building blocks, but more that those building blocks need a lick or two of paint. They're mostly short-term fixes for a standard (if significant) financial crisis--not long-term redesigns for badly cracked foundations.

Here's my point. The institutional perspective is one of the 20th century's great economic breakthroughs. Further, we know that institutions are amongst the most powerful determinants of the trajectories of the wealth of nations. But that perspective isn't included in our national and international conversations about the crisis--still. We're now half a decade into a never-ending perma-crisis--and the idea that the rot might go deeper than still seems to be too tough to swallow.

The thinking seems to be that the mechanics of finance will lift nations into prosperity once more--if we can just find the magic formula that unlocks the gears of the machine. But I don't think it's that simple: I think this crisis is here to stay because it points to a set of deeply broken institutions, whether corporations, governments, banks, schools, or healthcare systems--and the more money and budgets we throw at them, the more broken they'll get. I think what this crisis really says is: it's time to get serious about reimagining all the institutions above to yield benefits that matter disruptively in human terms; as engines for the pursuit of lives lived meaningfully well.

So I'd add a fourth bubble to the Venn diagram, and call it institutions (see this post for more). In it, I'd put ideas including the following. That corporations as we know them are outdated relics of centuries gone by. That industrial age "profit" isn't an adequate foundation for 21st century economies. That real prosperity isn't ignited by optimizing for Gross Product. That "incentives" to do work that matters don't merely consist of more money, right now. That industrial output does not equal human outcomes. That a deep democracy isn't merely about choosing between lame and lamer.

Want to know why we're stuck in this mess? I'd say that it might be, just a little bit, because we keep having the same old debate--forever. It's one that doesn't go deep enough--right down into the roots of what prosperity is, why we seek it, where it got lost, and what it means now and in the future. By now, I'd bet, we all know there's something seriously, fatally wrong with the ways we live, work, and play--and I'd suggest we're going to have to get lethally seriously about reinventing them.