For all of human history, people have had to deal with a scarcity of resources. Yet in the last few years, that has changed. Our problem is not that we can't make enough stuff for everyone to be happy, it's that we're still acting like that is the case.
The age of inflation is over because producers in nearly every industry (there are a few notable exceptions) can absorb almost infinite demand for their products. The sooner governments and central banks accept this, and the sooner we move past the notion that a "job" is not an end but a means to an end, the sooner we can end poverty, achieve high levels of growth, and overcome our fear of globalization and technology.
I don't see any fundamental change in scarcity of resources in the last few years.
Additionally... to say that nearly every industry can absorb almost infinite demand for their products is absurd. Near infinite claims need near infinite evidence. Can we produce near infinite food? Can we produce near infinite precious metals?
There are certainly some very interesting characteristics about our economy right now, but this is not the right articulation. It's more that we are stuck in a liquidity trap, and we can grow our economy without increasing demand on the labor market.
You, as a human being, can only consume so much water. So much energy. So much food. Its already within our means to feed everyone (green revolution), shelter [1] everyone, and energy? Please! Enough sunlight hits the Earth in 5 minutes to power the world for a year (you will never see the price of power go up again [2] [3], renewables are simply too cheap now, and will continue to be deployed at a rate somewhere between linear and exponential, pushing out generation sources that have a consumable fuel with marginal cost).
Surely we'll need to drive down the cost of healthcare and housing [4]; that'll be tough and expensive to solve. But everything else? Its all clean energy, automated manufacturing, and bits across a wire.
We must choose to provide for everyone not because it is easy, but because it is hard.
The economy does not need to grow further; growth is not the problem, distribution is ("The future is already here — it's just not very evenly distributed." -- William Gibson).
So, in other words... you agree with me. We cannot absorb "near infinite" demand. Rather, it's the opposite: demand might even have a finite upper bound!
But this is neither true, nor does it need to be. Economics is all about marginal curves. And I think what we are finding is that demand does increase, but that we can adapt to increased demand for most goods and services without increased demand on labor. So, inflation is not a threat, because wages don't go up. But it means ever-increasing return on capital... which is precisely what we've been seeing for decades.
Maybe we agree? I think for all intents and purposes, "infinite" does not mean "need additional pylons for remaining segments of Dyson sphere in order to power interplanetary colonial fleet Mark I via laser tether". Maybe we call it "per capita demand maximum"?
But labor isn't alone in not being necessary to satiate additional demand; note the trillions of dollars in capital struggling to find "acceptable" returns. Investors are even willing to invest in negative return bonds in parts of the first world to protect cash holdings of portfolios.
Yes, there's a massive savings glut. But a big part of that is due to central banks. If they tightened up monetary policy, interest rates go up, and investors would start getting better returns. But central banks are afraid to raise interest rates because they worry about the possibility of deflation.
If companies repatriated their cash, the main thing they would do with it is pay a hefty tax bill to Uncle Sam. This would be a good thing to do when the central banks do increase interest rates.
Interesting comment. I had not considered central bank monetary policy was holding back corporate profit repatriation, which would realize significant revenues for the federal government, which could be spent on infrastructure.
>and investors would start getting better returns.
One-sided accounting fallacy. For every lender receiving an interest rate, there is someone borrowing at the same rate. Why do you assume that the person lending is more deserving, when it is the risk-takers with need of capital (ie borrowers) who are the inventors and entrepreneurs? This place goes nuts for Elon Musk's projects; well it would be a different world if capital was more expensive for him to access.
The distribution of savings has little to do with it. The savings glut is caused by secular stagnation [1]. There is not much investment happening in our economy (savings and investment are two sides of the same coin). Since the 70s, there has been a net "value extraction" rather than "value creation" in the capital markets [2]. That is, rather than "retaining and reinvesting" profits, companies simply "downsize and distribute". This certainly reinforces wealth inequality. It doesn't help that monetary policy of the last 8 years created a liquidity trop that reinforced all this.
Any economics projections made by Larry Summers ought to be taken with a metric ton of salt. After all, his track record at gambling with Harvard's money is just abysmal:
Isn't the simple solution to force capital tied up by individuals and corporations back into the public sector and markets via policy increasing taxes for those at the top as well as forcing some minimum percent to be spent on either lower end job creation or a basic income program? Capitalism is fine, but it's just gotten really stagnant with the money flow it seems.
There is not much investment because profits are quite high. Companies don't have an incentive to reinvest when they can instead just reward shareholders. Perhaps what we need is more competition to drive profits down.
Decreasing wealth inequality is an end, not a means to an end. If you want a stable economy, focus on prices: inflation and deflation. If you want a functioning society, focus on income and employment. If you want both, then you get the Federal Reserve. Sometimes the two goals stand in each other's way. (Stagflation). When that happens, it's now obvious that central banks prioritize the economy over society.
>There is not much investment because profits are quite high.
There's no direct causal relationship between profits and investment. There aren't any companies that think "you know what? we've got enough profits for now, why do we need more?".
There are plenty of companies who see tapped out markets that aren't growing and decide not to invest.
Indirectly I guess the accumulation of wealth at the top via profits is party responsible for no money at the bottom to buy products and services.
>Decreasing wealth inequality is an end, not a means to an end. If you want a stable economy, focus on prices: inflation and deflation.
That's exactly what the fed has had its laser-like focus on for the last ~20 years. Stable the economy was not. Prioritizing inflation while inflation is under 15% is simply prioritizing the needs of those who don't work for a living over those who do.
>If you want a functioning society, focus on income and employment. If you want both, then you get the Federal Reserve.
The fed only really cared about inflation in the last 20 years in spite of its mandate.
There is totally a causal relationship between profits and investment: either you reinvest the profits or you don't. And if a huge pile of profits rolls your way... you might not be able to reinvest all of it. Yes, you are right, it can be thought of as a lack of demand. But if the cost of production is plummeting, due to automation, and profits soar... then you would need equally soaring demand to meet it. In this vein, Larry Summers is right with his call for fiscal policy. He is just repeating what Keynes said many years ago -- the government should be the spender of last resort.
But this is a race to the bottom (or the top?). How do we stimulate so much demand to keep up with this? Then there is Piketty -- the return on capital outpaces economic growth, and therefore wealth inequality gets worse with time. He proposes we should instate a global wealth tax. This is more along the lines of what you are saying. But his solution doesn't necessarily solve the demand problem. It just solves the wealth problem directly. We don't know, with a global wealth tax, what the impact on demand really will be. Maybe it would lead to a massive deleveraging of consumer and student debt. Demand isn't ultimately the problem... the economy is functioning pretty well. We can make the things that need to be made in the quantities they need at reasonable prices. The problem is the wealth distribution in itself.
Central banks use open market operations. When they want interest rates to go down, they print money and buy debt on the open market until the rates reach their target. This new money is the cause... the new interest rates are the effect. The new money (aka "monetary base" or M0) is then multiplied 10x by private banks, due to fractional reserve banking. That M1 money is another effect. The controlled interest rate helps the private banks loan that money out.
Open market operations only change the "portfolio" makeup of the private sector on the margin. New new assets(new money) are added to the private sector. There is no money multiplier due to open market operations itself. Banks will lend as long as they can make a profit and since banks can create deposits out of thin air, what you are saying is inapplicable to modern monetary/banking systems. Banks can always create deposits to meet loan demand.
Right. Banks can borrow reserves to meet requirements. It doesn't prevent them from meeting loan demand. Money creation is congruent to loan demand. Also, reserve requirements are accounted for in the next accounting period not in real time.
There's some evidence that democracy is unsustainable without economic growth.
Most measures of economic activity like GDP are measures of the total movement of resources, where such movements are monetized. That is, increasing growth means increasing distribution. (There's no guarantee that the distribution is better, of course.)
>This is pretty much false, because on the one end we have people in poverty who will hopefully move out of it, which will cause growth.
They can move out of poverty by society distributing wealth more equally, which is not dependent on growth. Especially when people have 100000 the net worth of other people.
Why do people keep saying this? This is a huge misconception. The economy IS zero sum.
Energy and physical resources are limited. When one person uses a limited resource, than another person will be unable to use that same resource. This is a Zero Sum.
I've heard people say that seemingly "unlimited" products like an idea, a painting or an abstract idea can be created out of thin air and because of this the economy is not zero sum. Well guess what? Have you ever heard of an economy that can exist while thriving only on abstract ideas and pieces of art? No. All economies thrive on energy and physical resources while abstraction only sits on top of these things as a luxury. AKA: A farmer can feed himself with his own crops, but an artist cannot survive without trading his painting with a farmer for food.
Another cop out people use is that although the sun is technically a limited resource (it will burn out one day), it is seemingly unlimited because it outputs more energy then humanity will ever need or comprehend. This argument is flawed too. We are limited by the amount of energy we can extract from the sun. There will always be a limit to the amount of energy we extract from the sun due to fundamental limits in technology and physics.
It gets worse than this, because technically speaking you are correct.. the economy is not zero sum, it's actually a negative sum. When you add up the numbers there will always be a net loss for all economic actors. The second law of thermodynamics dictates that even if an economic agent doesn't extract or use a resource, the resource on it's own will eventually, slowly degrade into an unusable state.
I have a saw, you have a log. If we bring our resources together, we can build something more economically valuable than the sum of the parts, and we both benefit. That's not a zero sum game.
It is zero sum. Did you even read past the first sentence of my post? The situation is much more complex, and unfortunately I can't elegantly shoot you down with one highly misguided sentence as you tried to do for my argument.
Let me spell it out for you in a way you can comprehend:
1. There is a limited amount of logs that the earth can produce.
2. There is also a limited amount of metal that the earth can produce.
3. There is also a limited amount of energy that we can extract from the earth or the sun.
4. Therefore, there is a LIMITED amount saws I can build with metal and energy.
5. With logs and saws being limited, then that means there is also is also a limited amount of "things" that can be built with the logs and saws.
What this all means:
The totality of "things" that can potentially be built with limited resources is limited because resources are in itself limited.
This totality can be referred to as our economic pie (or cake). Once a slice of pie is extracted and eaten another person cannot eat it. That is zero sum.
What's misguided is your fatalistic application of thermodynamics. I of course understand that there is a limited amount of energy in the universe, and that it will one day all stop due to heat death. I disagree that that has any impact on our much smaller, more limited human experience.
I also disagree that the entirety of human demand is about raw resources, ignoring art, romance, or other interests in our lives. Unfortunately, you'd then argue that there are only 10^78 atoms in the universe, with which we can only build 10^24 paintbrushes.
Thermodynamics does have an impact. I don't need to show you ludicrous examples to prove my point either.
Take gasoline. When you use it, you convert it to a unusable state. Oil is finite and as fracking wanes the supply will lessen and the price will go up.
This is not a unrealistic application, but a very real application of thermodynamics that will have a very real impact on your life.
>I also disagree that the entirety of human demand is about raw resources, ignoring art, romance, or other interests in our lives.
I don't ignore art or romance. But every economic product follows an economic food chain and the root of that chain is ALWAYS a raw resource. Take romance for instance:
IN order to experience romance you must be alive. IN order to be alive you need food and air (raw resource). In order to make food you need to grow plants or animals. In order to grow an animal you need to feed it plants. In order to grow plants you need to give it earth (raw resource), sun (raw resource) and water (raw resource).
Note how the economic chain splits into many threads and always terminates at a raw resource. This chain of dependence ends at a resource that is limited therefore all of art and other abstractions are limited.
>Unfortunately, you'd then argue that there are only 10^78 atoms in the universe, with which we can only build 10^24 paintbrushes.
What's unfortunate is not the fact that I have an argument but the fact that you have NO argument.
My argument is fairly straightforward. The universe is much larger than our appetites, and that's the horizon we're talking about with economics- centuries, not the heat death of the universe.
Your comment about gasoline is a good example of a resource that has a real world constraint, but it doesn't show that economics is zero sum. It shows that the limited game, where the goal is to obtain as much gasoline as possible, is zero sum. If I also use nuclear power, I'm not playing that game.
We have a sad tendency to ignore negative externalities, as a species. And it could be our undoing. But countering that by claiming that human econonic activity is zero sum is an abuse of game theory.
You argument is not straightforward. It is logically flawed.
> The universe is much larger than our appetites, and that's the horizon we're talking about with economics- centuries, not the heat death of the universe.
You don't have access to the universe. You only have access to the earth. If you reduce the time horizon to centuries you must also reduce the resource horizon to that which is available on earth. The earth is a highly limited resource. The situation is not even close to your flawed argument of limited appetites vs unlimited resources.
That is fairly straight forward. I never talked about the heat death of the universe nor any epic cataclysms outside of the human experience. That came from you. Thermodynamics applies to smaller systems as well as the universe and is highly relevant to the human experience.
>Your comment about gasoline is a good example of a resource that has a real world constraint, but it doesn't show that economics is zero sum. It shows that the limited game, where the goal is to obtain as much gasoline as possible, is zero sum. If I also use nuclear power, I'm not playing that game.
How is nuclear power not a zero sum game? Follow the economic chain. Nuclear power involves a resource called uranium. Uranium is used up in process of generating nuclear energy. Uranium is mined from the earth and therefore limited. Additionally, the global supply of uranium is nowhere near high enough to be classified as a seemingly 'unlimited' resource. You cannot escape the game.
Your best argument here is the sun. The sun can be classified as a seemingly 'unlimited' resource. However the bottleneck here is the amount of solar energy we can extract from the sun. That energy amount extracted is limited by technology and physics to a concrete amount. That concrete amount is significantly less than the energy we demand.
>We have a sad tendency to ignore negative externalities, as a species. And it could be our undoing. But countering that by claiming that human econonic activity is zero sum is an abuse of game theory.
By claiming that economic activity is not a zero sum game is an abuse of reality. Find an example that isn't zero sum. Find a resource that isn't constrained.
"It's not zero-sum" is a popular and lazy fallacy used by economically illiterate people to argue against welfare policies.
It goes hand in hand with the just world fallacy, which, in conjunction is used to justify the position of the currently capital-poor class.
E.G. Because the economy is not zero-sum, those people would have been able to produce wealth for themselves with the same ease as the people who are currently in possession of wealth/capital.
In terms of your statement:
>..."It's not zero-sum" is a popular and lazy fallacy
Simply look at the simplest case. Unless coercion is involved, if I make a trade with someone, the only reason I do it is because I am better off because of the trade or I wouldn't do it. The same goes for the other side of the trade. So we decide to do a trade and both of us are better off than we were before.
First of all, it's really not an insult and more of a statement.
Barging into a thread and yelling "economy is not zero sum" is the CS equivalent of doing the same and yelling something like "X is not a good programming language" with no explanation or context. Wouldn't you be considered illiterate in that programming language by someone who uses it?
> So we decide to do a trade and both of us are better off than we were before.
In a vacuum, yes. However, consider that no actual new goods have been produced. Does your example work in the case when one party is unable or unwilling to see the benefit of the trade? Does it work when no new goods can be produced by one of the parties, like in the example of land?
If you want a more detailed statement - in the short run, everything in economics is essentially zero-sum. As we progress towards a longer time frame, it shifts to being non-zero sum, with the exception of intrinsically limited resources.
> Simply look at the simplest case.
Yes, most users of this site look at Economics as some series of simplest case scenarios. I'm standing by this statement until I see evidence to the contrary.
NOT from America, so I don't have to hold the same cultural beleifs you'll do. I have no idea why welfare is linked with the non Zero sumness of the economy, nor subscribe to the other notions mentioned.
Matter of fact, I have diametrically different positions.
My question to you though, is how the economy being non zero sum is a fallacy. I've had to work directly in economics and finance, so if I got this wrong it would be a huge gap. I'd really like to understand how it's a fallacy.
For the record, I'm certainly sympathetic to arguments re: wealth inequality. I've just observed first-hand that it's possible to create value without taking something away from someone else.
The value was never created. It was extracted from a resource. Creation implies that it came from nothing. It is highly unlikely whatever you created came from nothing.
People who blindly read textbooks, as well as anyone with real world market experience. If you believe in economic value as an objective truth, and not based on the subjective view of a buyer or seller, we have no common ground to continue this discussion.
We do have common ground. The common ground is exactly as you say: real world people with real market experience.
But before I get into that real world example... you just threatened to end the discussion if I disagree with you. This is weak. I am telling you I can end this argument not on a mere disagreement... I can end this argument with factual, non-subjective evidence that will prove you wrong.
Now, onto the real world example: Warren Buffet, arguably one of the most successful investors on the planet. Warren Buffet operates on a investment strategy known as investing on intrinsic value. In other words he believes that the market fluctuations of a stock price by the daily subjective valuations of day traders are meaningless, he peers beyond the noise and picks stocks based off of a very real economic concept called "intrinsic value" or a true value separate from the subjective valuations of people. Intrinsic value is a very real and actual concept. Warren Buffet believes it and many many other real world and experienced investors follow the strategy as well. See sources below:
Academia and "most people" are not unanimously sided with you. The above argument is solid proof. This is not a mere disagreement and if you end the discussion here it's an admission of total and utter loss.
You didn't provide any "non-subjective evidence" - you just reframed what you think my position is to knock it down.
I'm familiar with value investing. It's not clear to me why you believe the occasional success of value investors is proof in inherent value as a universal economic truth. I haven't claimed anything about value other than that it's subjective- that doesn't preclude, for example, a company's perceived value relying on a number of other subjective values.
Anyway, again, I don't think we're getting anywhere here, and I think framing a discussion as requiring "admission of total and utter loss" to leave is childish and the hallmark of a troll. I'm equal parts embarrassed and impressed that I've been strung along this long.
Non subjective evidence? I gave you actual sources and actual real world people who use the concept in the "real world". Actual sources and actual people is not subjective evidence. These are things that directly contradict your statements.
>I'm familiar with value investing. It's not clear to me why you believe the occasional success of value investors is proof in inherent value as a universal economic truth.
Occasional success? I gave you a person who has year after year of success for around 50 years. There is no quantitative way of expressing this unparalleled success rate as "occasional success." Also what is a universal economic truth? There is no such thing. Economics is a soft science which consists of a bunch of varying theoretical models and schools of thought, none of which (like all science.) can ever be fully "proven" as a universal truth.
I presume you are actually asking whether or not intrinsic value is valid school of thought in the academic landscape? It is. See the economic definition of intrinsic value in the link I posted above. Or google it.
>I haven't claimed anything about value other than that it's subjective- that doesn't preclude, for example, a company's perceived value relying on a number of other subjective values.
Perceived value is subjective and therefore according to your definition a logical interpretation of value. There are many cases where the "Perceived value" of a company is different from the the sum of its parts or other "subjective valuations" in which the company is built upon. This leads to an inherit contradiction in the subjective theory of valuation. Meaning that a company has two different values: The subjective value of the company as a whole and the subjective value of the company as a sum of its parts. A contradiction indicates that this is a highly flawed way of thinking about valuation.
>to leave is childish and the hallmark of a troll.
You insulted me and called me a troll. Am I being the one being childish? I am simply stating facts. If you leave saying we have no subjective common ground when I only offer hard facts. The only logical conclusion is that you are trying to exit the conversation because you have no hard facts to prove your point.
Alternative conclusion- I'm exhausted by this conversation, and don't want to continue it. It has little to do with your argument and everything to do with the way you're arguing.
> It has little to do with your argument and everything to do with the way you're arguing.
Sure that's a valid possibility. But my hypothesis is valid as well.
One thing is solid though: Your statement is a subliminal personal attack on the "way" I "argue" and has nothing to do with the argument itself.
Perhaps another alternative conclusion is that you have no way of continuing the discussion because you have nothing solid left to say, so you decide to reframe the situation and end it with a cheap excuse that has nothing to do with the argument itself.
Love that Gibson quote. Have you come across research or pilots that have made progress on the distribution problem? Without being an expert, it appears to be caused by greed.
> I don't see any fundamental change in scarcity in the last few years.
I do. There have always been economies of scale, but the first shipment of Call of Duty costs tens of millions of dollars. Shipments #2 to #1000000 over the wire cost next to nothing.
A movie like The Avengers exhibits the same behavior.
Sixty years ago, a new car rolling off an assembly line of a Detroit factory was the epitome of the world economy, technology and engineering. Which was not all that different from the process of a weave rolling off a flying shuttle in 1740. This is a new thing, where piece #1 of a piece of IP is very costly, but the next few million pieces are cheap to produce.
To have a focus on the old thing of a scarcity of materials as this goes on seems to be missing the boat on what is happening. Not that I put much creedence in the scarcity focus before, but it has just become completely ridiculous.
The first car for a given model year might cost a billion dollars the second might cost 10k. So, it's more the gap has been growing than it's suddenly a new thing.
This is something I've been interested in, the idea of having a marginal cost lifestyle.
The main problem with it for physical items is that there is always a large upfront lump sum cost. A small hydroelectric system produces energy for practically free but costs a lot to build. It will last until your grandchildren are old though, it is a true investment.
Think about a book with information in it on, oh I don't know, basic first aid principles.
1000 Years ago it wasn't available.
200 years ago, it was available only to those who could afford to go to university, and had reached a very socially expensive and scarce educational level.
Now you can download it for nothing. With pictures. Ditto music, film, etc.
The financial apparatus that you're referring to can solve more or less for the scarcity case, but it cannot solve (i.e. find prices for) the abundance case. The liquidity issues are a sideshow to what will be the main event.
> The financial apparatus that you're referring to can solve more or less for the scarcity case, but it cannot solve (i.e. find prices for) the abundance case.
Prices should be declining if supply are increasing.
If you're right, which you're not, then prices should be decreasing very quickly.
Food and energy bills for the average person in my country and others I've been to are steadily increasing.
The other factor in pricing is monetary expansion. Every 10 years the US money supply doubles.
Factor that in, and essentially what we´re looking at is a world where production is increasing, reducing prices, money and credit supply are increasing, increasing them - at the same time. At the moment the two are more or less (more in the case of TV´s, less in the case of housing) balancing each other out.
I'm not sure that computation is much of an exception. Yes, we have more transistors on chips, but can we actually make them do more useful things? It's not always clear cut. Also it seems like many employed in software are mostly reinventing older ideas poorly.
I agree, but I try to lead with my strongest case that can't be denied objectively. The concern about implementing 'actual useful shit' e.g. not flinging birds at pigs, is very much at the forefront of my mind but it's a harder case to argue even if it would be more meaningful, esp. to the uninitiated.
20,000 calories per day is not better than 10,000 calories per day. Thus, food has reached a point where enough no longer the problem, and if we made twice as much we probably would burn it not eat it.
As to stuff, it's content which tends to be the real limitation not the TV. And content can be unlimited we simply impose artificial limitations.
We are already throwing massive amounts of food away.
"Getting food from the farm to our fork eats up 10 percent of the total U.S. energy budget, uses 50 percent of U.S.
land, and swallows 80 percent of all freshwater consumed in the United States. Yet, 40 percent of food in the
United States today goes uneaten. This not only means that Americans are throwing out the equivalent of $165
billion each year, but also that the uneaten food ends up rotting in landfills as the single largest component of U.S. municipal solid waste where it accounts for a large portion of U.S. methane emissions." [1]
>There are certainly some very interesting characteristics about our economy right now, but this is not the right articulation. It's more that we are stuck in a liquidity trap, and we can grow our economy without increasing demand on the labor market.
Financial metrics can grow without substantially increasing demand for labor. Most of the nonfinancial economy, however, is stuck in recession or stagnation. The tech sector only differs in being fueled by the flood of capital into VCs.
After the Second Great Depression was narrowly headed off by TARP, we're still stuck waiting for the Second New Deal and Second Post-War Reconstruction.
Of course we can't produce infinite anything. We can't even make infinite copies of a piece of software.
So instead of "infinite" or "near infinite", let's say "at least two orders of magnitude".
Can we produce 100x as much precious metals? Yes.[1]
Can we produce 100x as much energy? Yes.[2]
Can we produce 100x as much food? Yes.[3]
Can we produce 100x as much living space? Yes.
1: Exercise: think of an elemental metal we're short of. Look it up in Wikipedia, look at what % of the Earth's crust consists of that resource, and compare that to current usage.
2: With enough money, we could do this with nuclear power today. I don't think we're too far away from being able to do this with solar, again given enough money.
3: Greenhouses.
Precious metals, food, energy and prime living space are very scarce in economic terms. It would cost very real and very significant amounts money to produce more. But given enough money, we could produce a lot more of them. If the world economy grew 100x too, could we increase these scarce resources 100-fold? I assert yes.
> 1: Exercise: think of an elemental metal we're short of. Look it up in Wikipedia, look at what % of the Earth's crust consists of that resource, and compare that to current usage.
Just because it is somewhere in the Earth's crust, it doesn't mean that we are able to harvest it.
> 2: With enough money, we could do this with nuclear power today. I don't think we're too far away from being able to do this with solar, again given enough money.
You are talking about producing 100X as much energy as we do today. Nuclear power is already used in many countries. Scaling up our energy production with a factor 100 just by replacing traditional power plants with nuclear will never reach that factor.
And solar power is not even able to fulfill our current energy need, there is just not enough free surface on the earth for all those solar panels.
> 3: Greenhouses.
The claim that the use of greenhouses could scale up our global food production with a factor 100 is absurd.
> Just because it is somewhere in the Earth's crust, it doesn't mean that we are able to harvest it.
That's basically what we already do for copper. A copper "mine" takes something that isn't much different from random rocks, and separates out the copper. Copper ores that have a high percentage of copper have been gone for a while now. Copper used to be so cheap they used it for pennies, now it's so expensive that people break into houses to steal the wire. But we haven't run out.
>Scaling up our energy production with a factor 100 just by replacing traditional power plants with nuclear will never reach that factor.
Well obviously we'd need to build new plants. What's the limiting factor preventing us from creating 100x as many nuclear plants, provided sufficient money to build them?
> The claim that the use of greenhouses could scale up our global food production with a factor 100 is absurd.
Why? Greenhouses produce far more than 100x the calories/acre than wheat or corn land. It's far less absurd than urban vertical farming which uses artificial light instead of sunlight, yet there are several startups that think vertical farming is viable and have received tons of investment.
People will pay any amount for goofy food. There's always a market among people with money.
To change food for everybody, it has to scale. Greenhouses are a pretty expensive way to grow food. Just look at the prices charged for greenhouse vegetables.
100X would be hard to hit. Iowa grows enough corn to feed 2 USAs (if we were content to eat just corn). But that's a long way from 100X.
I should have stated the original statement more clearly. If the global economy was 100X the size per capita, and demand for food was 100X (implying there's 100X as many people), could we feed everybody? With an economy 10,000X as big, could we grow 100X as much food?
I say we could easily do so. But you need all three 100X's: miss one and it would be probably impossible, as you say.
Easy to say "the economy". But Iowa, for instance, is all planted up. Not going to find another 3 million acres to plant. Much less 100X that. No matter how many people you throw at the problem. It just doesn't scale.
And most any place else has less yield per acre. So now what? Its a big world but the low hanging fruit is already in use.
100X is a mighty stretch. Even Wallace and Borlaug would throw up their hands.
3 million acres? That's the 10 largest ranches in Texas. Cover them over with greenhouses rather than the prime farmland in Iowa. And Texas ranches are relatively productive compared to Montana or Alaska or the Sahara or ...
Nope. Its impossible. There is a finite amount of nutrients. Phosphorus turns out to be the limiting reagent. Then there are freshwater supplies, and other problems.
> Our problem is not that we can't make enough stuff for everyone to be happy, it's that we're still acting like that is the case.
The real issue is that the ruling class makes their money off capital. That's why Tiny Houses are banned in San Francisco and elsewhere. Because no one really needs more than 400 square feet of (well-designed) living space, but if people were allowed to buy houses and apartments that small then they wouldn't need to go into debt.
If the basic necessities of life become free then capital itself becomes devalued, so don't expect it to be an easy fight.
I lived in new, modern, fairly-well-layed-out 330sqft and 450sqft apartments for four years, and you know what? It was fine, but you definitely get tired of it. I will gladly pay more to get more space. Things that can quickly make this even more urgent: pets, relationships, children, certain hobbies, a social circle that enjoys private get-togethers, working from home, etc.
I also find stuff makes me happier than experiences, so I realize I'm not representative of current fashionable lifestyles, but pretending everyone's the same or telling people "you shouldn't want that" isn't a practical policy solution.
(Or let's talk about medicine. Can we grow new livers, kidneys, etc, yet? How about when can we do it cheaply enough to easily be able to afford one for everyone who needs one?)
>I lived in new, modern, fairly-well-layed-out 330sqft and 450sqft apartments for four years, and you know what? It was fine, but you definitely get tired of it.
To put it in perspective, hundreds of millions of families of 4 and more live in non-well-layed out 330sqft and 450sqft apartments in the developing world, to which a couple or a family of 3 living in a fairly-well-layed-out apartment with our modern trimmings would seem like a dream.
I also find stuff makes me happier than experiences, so I realize I'm not representative of current fashionable lifestyles,
Current fashionable lifestyles? The idea of earthly possessions not being the source of true happiness (and really being the reason for suffering) is as old as at least Buddhism. If you want just an American source, we're still talking Thoreau, here.
It is backed up by scientific research. With the exception that stuff which enables you to do something has a lot of value, however your 5th car is almost meaningless in terms of happyness. What's easy to forget is advertising is designed to push past that minimal stuff threshold.
Well, recently I am taking any psych research with a saltmine.
Also, "once you reach certain amount" is quite a disclaimer.
Sure you often hear, that experiences not stuff makes you happier, however when the money is no longer a limitation you can afford much reacher experiences. E.g.: how remarkable it would be to visit space? How many can afford that?
Money means you can do a wider range of things, but those things are different not nessisarily better. I don't think going to space would be all that much more interesting than going snorkeling coral reefs the first time.
Also, if you look at the lives of people that inherent lot's of money they tend to do the higher versions of the same kind of things. It's like throw a party with great music, vs throw a party with a live band when what makes a party fun is not the music it's the people there.
This is true but it has to do with habituation more than the 'stuff' itself.[1]
People quickly become accustomed to any new positive thing introduced into their lives, make that the baseline and then start wanting something better.
The minimal stuff threshold is about survival and homeostasis, once that is achieved, anything beyond that does not produce lasting gains in happiness.
Having a computer with internet connection can increase happiness. For example elderly that feel more connected with their families. The important thing is the minimum threshold is a computer, so a 200$ laptop can fill this need just as well as a 10,000$ laptop.
Further, in that case it's connecting to people that's bringing happiness not the physical device.
It might be old but it's more trendy than it used to be. In the 80's it was considered normal to want to get a big house with a big backyard, big car, etc.
It fine for you to have preferences about living space, but can you at least recognize that other people have different preferences and that their preferences shouldn't be outlawed any more than yours should?
Sure, just arguing against claims that it would be "easy" to solve housing, income equality, etc, if only we could kill the evil marketers etc and do with just what we "need." (Taking it to hyperbolic extremes there, but essentially while one can certainly be happy in small spaces, there are lots of things even beyond the simple accumulation of stuff that can take advantage of a lot more space.)
NIMBY has many reasons behind it, and one of them is trying to increase housing values. Other things are guarding precious "free" parking spaces, being old and not liking change, or being afraid of changes effecting the quality of your children's school and other things.
the parking spot issue is real (I don't drive, but I can see people struggling with that every day). Adding too many units in an area plagued by grid lock can also be problematic and you have to add public transportation first.
My personal reason for being NIMBY is pretty simple though: I just want to sleep at night. and since municipal rules are hardly ever enforced in high density areas, I'll have to deal with kids screaming, idiot drunks trashing the place at 3 am, graffiti and people having parties at all hours of the night and day with the cops telling me to just deal with it because I live in a high density area. So when they try to build more on top, I'm like "Err, no".
I literally dont care if my property value dropped to zero, as long as I can sleep without needing earplugs. I already have to run the A/C or heat twice as much as I should because I can't open the windows without "enjoying" whatever activity my neighbors are doing that involve screaming on top of their lungs.
Besides, I live in one of the top 10 most densely populated neighborhoods in the country, and then people want to add more. ::shrugs::
In my home country this was not an issue because people could respect each other, and rules were enforced. In that case, build as much as you want in my backyard.
>In my home country this was not an issue because people could respect each other, and rules were enforced.
It sounds like you came from a nice, civilized country. Why then did you move to whatever 3rd-world hellhole you currently live in? It sounds like you'd be happier going back home.
I did not know this when I originally moved, and now I managed to find a decent spot in the hellhole. When its harder to keep it nice than to move back, I will.
Uh, there are plenty of ways to get 400sqft or less living spaces in SF, just not as a freestanding structure (and tiny houses are kind of a waste when we could be building more tall stacks of several adjacent tiny apartments).
True and not true. It is true that economists have not factored in the economics of information into their analysis of GDP yet but it isn't true to say we live in a post scarcity world or that we are even yet approaching such a world.
What is true is that we've probably reached the point where competition for programming jobs will put negative pressure on salaries. Basically Google and AWS make 90% gross margin on the electrons they convert from electrical power to search advertising or web services. They can live on probably a third of that. Today we see the excess margin being spent on speculative things (Google X as an example) but as the margins get squeezed that will go away, then excess salary will go away. We talk about ageism but really there is a ceiling on salaries for most people and if they aren't in the "special 1%" they are replaced by cheaper people as soon as their salary hits that peak. That used to be around 50 now it seems it is around 40 and has been coming down nearly linearly for the last 5 years. Basically any job that can be done by someone fresh out of college with a modicum of search skills on Stack Overflow or other forum sites is going to have zero real wage growth.
I had a really interesting exchange with senior folks at IBM talking about office space and office plans. Looking at it at the surface, saving money on office space helps increase the money you can pay the employees and keeps margins up. But when you look at it in the context of dollars of margin per employee, it makes no sense at all.
Consider a classic "widgets" company. Perhaps 5 people designing widgets, 10 engineering the parts and designing flows for assembling them, maybe 20 on a factory floor putting them together, testing them, and putting them out for shipping. All to sell thousands of $45 widgets making $15 gross margin. How much do you spend on office space for those 35 people affects if it is $15 gross margin or $10 gross margin. But when you have 3 people designing, 2 developing, and 2 testing and releasing a software product that sells millions of units at $4 with $2 gross margin, you have cut revenue per sale 10x but increased sales 1000x. And because the employees are still living in the lie about "we have to keep costs down" you get these companies pocketing billions of dollars in free cash flow that they just sit on.
The economics of information are completely different than the economics of goods and using "classic" economic analysis you get really out of whack numbers and expectations. Think about this, Google could literally lay off half the engineers in the company with zero impact on their revenue numbers.
It will be interesting to see how this settles out, I don't expect programmers to suddenly get a proportional share of the revenue from information goods, but I also think work is going to be vastly different. I can easily see the goods economy moving to large conglomerate fabricators like FoxCon which end up manufacturing anything and everything to the wishes of a handful of designers and engineers. Their forte' is electronics, LG has appliances pretty much sewn up (no pun intended), can you imagine if Ford or Toyota could create the 'foxcon of auto manufacturing' ?
Existing economic models have a bunch of ways GDP recirculates in an economy, those ways are mostly toast in an information economy leaving behind giant pools of cash. Finding a way to put that cash back into the economy will be the challenge for the information revolution.
Nobody on earth would suggest that google's margins are derived from their revenues minus the cost of 'electricity'.
To be slightly pedantic, I did assert that and I do live on Earth :-). But to be fair, the claim is a way of illustrating the challenge.
In the goods economy the analysis of a widget factory and the widget business might reasonably start with the cost to the factory of the parts that were consumed in assembling a widget. This is something of a game where folks tear down the electronics of our age and tell you what the cost is of each of the parts in the gizmo. So we'll start with "An iPhone is only $245 in parts."[1] and it cost $650[2]. And then start walking through the costs that are also incurred by the widget maker until you run out of costs and are left with profit (or loss).
And one way in which we know that its not too far off to consider that as the first cost are Google's public statements about power efficiency[3]. Power is their "raw material of most impact."
And that is another way of saying that without R&D or Sales or Marketing people could buy and use their product but without power or "a little bit of ops" they have no business. And since HWOPS/SRE are the goods economy equivalent of factory workers and manufacturing engineers, an information business' core production capability is just those groups and the electricity they use.
Of course if you really want to get metaphysical consider who pays for the electrons and photons that compose the product as it moves from data center to my computer screen. Its like a giant marble game where the electrons cascade through the chips, one of which turns them into photons, and theh they fly through a fiber and kick of another cascade of electrons which result in more photons, and they bounce through the system until the photons they create emerge from my screen in the form of a search result.
The problem is that stuff isn't what makes people happy. Sure if you give a poor person money they'll be happier, but that effect doesn't work for the middle class and above where people generally want a little more than they had before, and a little more than their neighbor. Of course a lot of people realize that material wealth won't make them happy, but that's an individual philosophical point that doesn't carry a lot of weight when you feel comparatively disadvantaged.
The real problem you have to solve then, is not the quantity of stuff, but the allocation of stuff. This is very difficult one to solve, especially in America, because of the deep puritanical culture. It's going to get a lot worse too as robotics, software and automation lead to ever greater consolidation of wealth. This is where capitalism starts to break down as economies of scale push us towards something resembling a feudal society, but the problem is we don't have any other system that people are ready to accept as "fair".
The problem is wealth affects happiness more than it used to because of things like health care. Give yourself a nice middle class healthcare plan. Give me wealth. If we both get cancer I have a lot more options and more ways to guarantee the highest level of care. Wealth makes happiness if it enables you to stay alive.
Likewise with opportunities for raising children - there are lots of ways to help children thrive with wealth, but it's not what i would consider the classical "material need".
I disagree with you, because there are countries on earth where wealth doesn't play as big of a role in happiness as it does in the American culture. Take Sweden for example, where I'm from, where literally every citizen has access to top-tier healthcare & education that's free (funded through taxes), 16 months paid parental leave, among many other nice things. This while still being very liberal (although social democratic) and one of the world's most developed countries in terms of technology, energy, transportation and taking care of the environment.
Over here happiness can be found without being wealthy, and generally you don't have to worry about your financial status as much because you'll always have access to top-tier healthcare, education and benefits if things goes south at some point, no matter what.
If you get what appears to be a routine cancer in Sweden, does an entire team of leading oncologists meet together in a room to fully review your diagnosis and discuss what additional cutting edge techniques you might benefit from?
Do they apply machine learning to help you that is so good 30% of the time it suggests actionable ideas that the oncologist didn't notice or even know about?
In Sweden if you have hepatitis C, do they give you the gold standard treatment that costs $70,000 US for 90 days of pills, or do they give you the older cheaper option?
Today, you get all of that and more if you have enough money.
I did live in Canada for a while, and noticed it was very common for the wealthy to bypass lines and access higher quality care by paying for private treatment out of pocket.
The reality is not many governments have the resources to afford the best possible care for all people in all situations. And innovation makes it worse. There is always something newer, better, more expensive.
You have to understand that this is a cultural difference between Sweden and the US, and Canada is more like Sweden but far from the same. In Sweden, the culture of things like the best possible healthcare and education is not a "premium" thing like it is in the US, over here it is seen as a basic human right to have access to the best possible healthcare and education no matter what your financial status is.
Thanks to this culture, ideas like making a profit off of peoples health issues is frowned upon and therefore medicine for example is not even close to as expensive as it is in the US. It's the same with the 16 months parental leave, it's considered a basic human right to be able to spend more time with your newborn if you want to, without impacting your finanical status as much.
Of course there is always something better available if you've got the dollar for it, but the Swedish healthcare is generally very good. I've had an uncle done heart surgery, a friend with brain tumour and both are healthy as horses now and they didn't have to spend any money.
I should also mention that the Swedish people is generally very healthy thanks to our laws and EU directives surrounding food and medicine standards. Overall the quality of food is better here than in the US, due to new chemicals has to be proven that they are not harmful to your health, while in the US new chemicals has to be proven that they are harmful to your health before it can get banned (so all new chemicals are banned by default, and allowed when proven otherwise). Additionally, antibiotics and other harmful medical treatment for livestock is banned in Sweden, so the resistance towards antibiotics is generally lower here as well. The reason I mention this is because it goes hand-in-hand with our government-funded healthcare. We invest a lot in making the people healtier overall.
This is a cultural difference, and the reason I stress that so much is because I don't want you to mistake this for a socialistic country, like so many do, because Sweden is very liberal overall.
It sounds like a great place to live and I appreciate the difference of culture you describe.
However, you didn't answer my three real life questions, which I take to mean most people wouldn't get those benefits.
The people there who decide what is allowable treatment are optimizing for a certain cost/benefit ratio. While wealthy people only optimize for quality of life and longevity.
The reason I didn't answer those question is because I am not a doctor and personally don't have any experience with any of those particular cases. I'd love to answer each of your questions point blank, but I just don't have an answer to them.
But the point of my response is that there are cultures in the world where healthcare and education isn't a problem for your happiness, because your citizenship has those benefits covered. I do however fully agree with you that it is as you say in the American culture, and many others.
That's not true in all countries. In France no matter what your wealth is, when you get a long-lasting disease like cancer you get 100% coverage from the public healthcare for that and can be cured in high quality hospital.
Now if you're extremely rich you might be able to get a famous surgeon that middle class doesn't have access to, or get a new treatment only available in foreign countries, but at the end of the day I don't think it's going to have a huge impact on your chances of survival because what you get from healthcare is already really good.
I think it is true in almost all countries. Please see my reply above to Svenskunganka's comment.
I'd be willing to bet most wealthy people in France have occasion to pay out of pocket beyond the healthcare they could get for free from the government.
Yes, there is always something better that only the wealthy may afford-but that doesn't mean the baseline level of care for most people can't be improved. People don't expect the world's best surgeon to work on them.
And either way-the care for most Americans isn't necessarily better than Canadian or Swedish care, many rankings are significantly worse while costing the most.
I know one thing-if I had health care covered, I'd be more willing to start a business or take a break from work. That would make me happier.
The point is that being very wealthy can in fact improve happiness. This is contrary to conventional wisdom that once basic needs are covered, any additional money only serves to keep people running on the hedonistic treadmill.
To support this argument I cite real world scenarios where the difference between your loved ones living and dying could possibly come down to how much money you have.
Distributing things equally is not possible. For example, if you need heart surgery, who gets the best surgeon? For another, who gets the dwelling with the nicer view? Even parents who try to treat their kids equally soon realize it is an impossible task.
Note that the comment you replied to didn't mention distributing things equally. Just noted that allocation is the problem that needs to be solved.
Not speaking to you in particular, but many people seem to equate any talk of redistribution to the extreme case of absolute equal distribution. But I've never seen anyone rationally arguing for that case. In reality, what most people seem to want involve some concept of 'fairness' in deciding who gets what, or minimums to what people should get just for being a part of society, or perhaps sane limits to the deviations between bottom, middle, and top.
So, yes, the questions you ask are exactly the questions we need to solve. How do we decide who gets the best surgeon, and who gets the trainee? How do we decide who gets a mansion with a view and who gets a closet with thin walls, if that? Most people seem to think that the way we are doing it now isn't ideal, so what is ideal, and how would we get there?
Your questions are unresolvable, because the person who gets the worst heart surgeon is inevitably going to agitate that the system is inequitable and unfair.
It isn't solvable in a binary way, certainly, but we can potentially find an optimal solution that at least reaches a level of fairness that the vast majority of people are comfortable with. Yes, you're always going to end up with some people unhappy with their lot, but there's a huge gray area between not pleasing everyone and not pleasing anyone (aside from a very few very lucky people).
"The age of inflation is over because producers in nearly every industry (there are a few notable exceptions) can absorb almost infinite demand for their products."
why do we need so much crap?
lets roll back the consumerism.
Just say that you will keep your cell phone over a year or two and you'll get 10 replies here on why they upgrade their perfectly fine phone every year. Waste is an addiction, and it's a common one when it comes to electronics.
Resource consumption is growing, but as economies have long ago shifted to services and advanced products, it's less a part of the equation.
Your mac, your iPhone, your 'Internet' your 'wireless mobile' , your Netflix, your 500 channels - these are all new services which everyone pays for and consume very little 'resources' in the classical sense.
Even as we switched from drip coffee to Lattes, from crappy restaurants to better ones - this does not affect 'resources' so much.
George was right. Productivity is accelerating towards infinity, and that value is being captured in land values and being allocated to rentiers rather than the population as a whole. Tax land value and distribute the proceeds.
Building a factory is a social contribution. More generally factories are (usually) subject to the normal laws of supply and demand: if they get too expensive, people can build more, if there are too many people can convert them into housing etc.
(if we have a fixed supply of factories e.g. because of zoning laws then it could become a case of economic rents. But the simple solution there is "don't do that then")
UBI probably, but funding it with newly printed money.
Another way to think of what I'm saying is this: there are billions of people out there in the world who want more stuff. There are lot of companies and workers who want sell those people more stuff. And there are enough resources out there to make all that stuff for them (energy for a long time was the big limiter). Obviously, there is an economic disconnect that is limiting people from getting the goods that they want and need. What's really happening is that poor people just don't have anything to trade with. The solution is to give them something to trade with.
We don't have to do a UBI. I think we would be fine if central banks did something like give the bottom 20% of income earners a one time payment of ~$20k.
It sucks because it is irreversible. This is unnecessary. Just have the government finance UBI. After all, people like Larry Summers, with his "secular stagnation" theory, are calling for a shift from monetary policy to fiscal policy. And I think UBI, as you say, would be a very effective fiscal policy tool.
In other words, people who already have money would see that money devalued, perhaps very significantly and in excess of the new money they receive. I'm not terribly averse to the concept, but it would seem to be a redistribution of value that would significantly impact the wealthy. Which makes it tough to actually pull off, because they have a lot of resources to fight such a thing.
The UK had huge coal reserves and decent sized oil reserves - the former powered the Industrial Revolution and the latter kept the lights on during the 1980s.
Inflation has nothing to do with scarcity. It is the result of the supply of money increasing relative to the value in the economy. It's supply & demand, which applies to money just like everything else.
Scarcity does raise prices, but that is not inflation, because if X's price rises, you spend more on X, but you have less to spend on Y, which lowers that price.
Inflation can really be thought of as expansion of the money supply while all other things remain steady - stuff just arbitrarily gets more expensive.
Central Banks target 2% inflation so that we don't fall into a deflationary trap. It's like keeping the treadmill running just a little bit, to force the person to run forward.
Austrian school economists basically equate inflation with money printing - to them it's the same thing.
But most things increase in price due to a) better quality product and b) regular dynamics of business c) currency.
So when the beer gets more expensive it's:
a) Better beer (at least in the eyes of the consumer), i.e. longer brew times, better taste, better ingredients
b) More expensive input costs
c) Currency issues with imports etc.
Those are not inflation, just price fluxuation.
Inflation is when the exact same thing gets costlier, all other things being equal.
Prices are driven up when there is too much demand competing for a limited amount of goods. When a company can scale infinitely, they don't have to raise their prices. Lower prices keep demand up, so producers tend to want to keep their prices low.
This is why I think I'm in favor of basic income. With robots doing all our labor, "a job" is not how we can support basic needs like food and shelter. (Money still changes hands with robots doing all the work, so we can tax that and use it to fund basic income for everyone.)
This assumes that people want a job because they want the income, not because they want to do something rewarding all day. Not sure how to solve that problem.
The Milton Friedman model gave you a tax deduction twice as much as the BI check. So, if you're getting $500 a month in BI, but you decide to work a little, up to $1000 dollars in taxes is deductible. The idea is, you always make more money by working.
So maybe you sell a painting for $500, 20% taxes would be $100. At the end of the month, you wind up with $450 from BI and $500 from the painting (because you can deduct all the taxes at a 2 for 1 rate).
So maybe you're a fancy doctor that makes $10000 a month. to keep things simple taxes would still be 20%, $2000. You get to deduct $1000, from those taxes, because you didn't take any BI benefits.
One of the things i think is great about it, it provides a soft launch for anything you might want to do.
(I think you know this, but some people sort of miss the "it's better to work" part of BI)
> provides a soft launch for anything you might want to do
Similar argument gets thrown a lot when advocating a minimum wage raise, for instance, and on surface it seems clear - a person with $11 in his pocket has more buying power than someone with $10.
The question is why hasn't that previous wage increase cause a long-term boom in economic activity? The answer is that eventually it gets priced in. Whether into the cost of housing, cost of food, cost of daycare, cost of healthcare, newer car or a cable package that now has Showtime.
The retail industry is quick to anticipate any cash influx and appropriate not only immediate cash, but future cashflows as well, which explains so many "tax refund day" sales at mattress stores and car dealerships come April.
> The answer is that eventually it gets priced in.
There's really not a lot of data supporting this statement. For the most part, minimum wage has remained pretty static between $5-15 in inflation-adjusted dollars.
We do have a significant counterexample which disproves your thesis from the early 20th century - minimum wage was set at 25 cents (previously there was no minimum wage) and increased 5 cents per year until it reached 40 cents. So that's at least an 80% increase, and all of this during a big economic recovery. Obviously the WWII boom was also a factor, but the nation went from abject poverty to boom times in a scant 20 years, and I don't think you can say that the minimum wage was eroded. To the contrary, it set the standard of living that has prevailed to this day.
Frankly, a market crash precipitated by a minimum wage hike has never happened, and I don't think it would happen. The worst case scenario you posit is modest inflation. That sounds like a pretty tame worst-case scenario, and well worth the risk if we can do what FDR did again, and raise the minimum standard of living for the next century.
I'd have to ask you more about the details, i.e. which decades you're referring to, and how much of the recovery was simply cyclical (with Black Friday being the rock bottom), but two observations about using that time period as an example:
1) People had limited or no access to credit facilities, and therefore had little ability to accrue large household debts. One of the phenomena that bothered the economists ever since the dip in oil prices is why isn't US retail sector booming as expected - cheaper gas historically led to more shopping. I am on mobile to google this properly, but eventually they found out that a shopping boom has happened, except slowly and over a previous decade, and most people were using their newfound savings simply to deleverage their credit card debt.
2) The economy was much more localized back then. Local butcher paying the local milkman paying the local seamstress paying the local travel agent paying the local florist paying the local asphalt paver paying the local butcher. The money got recycled. Today the recycling path is more of consumer -> big-box store -> Asian manufacturer.
Because $1 * 77 million workers * 2000 hours is only $160 billion dollars? The department of labor said "Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front."
I don't think anybody claimed there would be a boom. BI on the other hand, might. With minimum wage you're still spending all day working. it's tough to be enthusiastic about much of anything beyond a book or a video game (or it was for me).
I would guess A few people would do nothing. Most people would try a bunch of different stuff and kind of suck at it. A few people would have moderate success. And finally the occasional superstar. Pretty much the same expected outcomes as venture capital, but way way more breakevens.
edit
Oh, you're making the argument that because the cost of labor increases everything gets more expensive. That's true, but it's in proportion to the labor cost of the thing. Tomatoes are labor intensive, so they cost more. Pasta is mostly automated, so it doesn't go up as much. Relative pricing changes, making books and computers cheaper in terms of tomatoes.
Tomatoes are actually a good case study for wage increases. The last time we had a serious effort to curb illegal immigration we got the usual "crops rotting in the fields" rhetoric from growers, but somehow they lost the political argument. Wages went up due to the resultant labor scarcity.
So growers introduced Roma tomatoes, which are not labor intensive because they can be machine harvested.
Raising minimum wage raises salaries all the way up the chain, as retail staff now make as much as assistant managers, then assistant managers get a raise and make almost as much as managers and so on.
well, if the bottom rung gets 10%, the next one up gets 5%, then 2.5% and so on till you hit the top, where you probably get 20-50%. which sounds horrible but is a tiny fraction in an organization with tens of thousands of people.
But again, that only affects prices to a degree that labor is a component. 10% across the board at Ford is .1% increase in the price of a car.
>The question is why hasn't that previous wage increase cause a long-term boom in economic activity?
It has. The money multiplier of raising the minimum wage is higher than almost any other place you could put the money.
Increasing debt levels also spurs economic activity but that can only go on so long.
The story of the last 30 years is that debt levels were used to spur economic activity while wages were suppressed. Once debt levels reached a peak, it all ended. In 2008.
>The answer is that eventually it gets priced in.
It usually leads to a decline in profitability. Dividend income comes down. Share prices come down. Prices do not usually go up:
The businesses that area threatened by an increase in the minimum wage always put up a big political fight. They simply wouldn't bother if they could just pass the cost on to the consumer.
Do you foresee large movements of population to cheaper geographies (Detroit, Mississippi, Alabama) given freedom from employment? Why are we not experiencing it with the population segments currently receiving a fixed monthly income (social security, disability, annuities)?
Instead of UBI, wouldn't be better to empower people and communities of people directly by providing financial help and technology, including automation. Each community, city or country needs to be self reliant and not need much external financial help. If a city has enough land to cultivate its food, it can build a vertically integrated economy, with everything necessary for its citizens to live by. People would be directly involved in providing for themselves, using automation as well. They would not feel robbed of their agency and self determinacy.
Practical measures to achieve that would be: to invest in energy tech such as solar, make sure automation and 3d-printing are open source and easy to employ, heavily tax imports in order to encourage reliance on local production, tax automation and AI, provide financial help for local projects, provide healthcare and education for free. With all those in place, the need for UBI would be much reduced.
If people were left with no jobs and insufficient social protection they would not simply roll out and die. They would associate to find alternative means such as self sustaining farm communities, some of them would provide professional services to others, creating a human-based parallel currency. Such communities could invest what they had before into the common pool and have their own capital. With capital they can have the ability to use automation as well. What is essential is that the entry barrier to AI and automation be made low, in order to empower everyone.
This doesn't really make sense. If you give a city full of people the money and technology they need to be self-reliant, then how do you make sure a few assholes (the managers) don't take everything for themselves and leave others homeless? If you have automation doing all the actual work, how are people in this city supposed to earn money to survive? After all, who's going to own the financial help and technology that's being provided to the city? The government of course, but then how do you distribute that? Well either you make people work for money, or you give everyone a UBI.
Finally, there's no practical way any city can be self-reliant anyway. Humans have relied on trade for millennia now. Cities in the frozen north aren't going to easily be able to grow all their own food, cities in other places won't be the best place to run factories, our entire global economy is run on the idea of specialization of labor, and it's been this way since before Roman times. People specialize in certain things, they form groups (companies) that excel at doing certain things, and then they trade with each other. That's how an economy works. Hindering that isn't going to help anyone, at least until we invent replicators (and no, 3D printers are not like replicators).
A low barrier to automation doesn't work because someone has to own the automation, and whoever owns it first has the first-mover advantage and puts everyone else out of business.
>If you can't buy anything with BI it's worse than worthless.
That's their point. There are goods and service that have income-elastic pricing.
A chief example of this is housing. As income increases, so do housing prices, which is why welfare programs are typically tied to specific goods and services (food stamps, medicare, etc.)
Saying tech doesn't create jobs is like saying Petroleum is only about fuel for cars. It creates ancillary jobs [people making apps, people selling phones and data plans] but also improves the aspects of many other jobs [like addressing disasters with up to date information, or ability to monitor a protest which could turn violent, or facilitating access to education for people who would not have had the chance, otherwise] There are a lot of benefits elsewhere...
That said, automation in many fields will finally claw away low skills jobs from people. I don't think we, as a society will dodge that bullet this time. We may come up with job substitutes, but we won't be able to do "value-add" indefinitely. And, eventually, this will filter down quickly to poor countries too [unless they close the borders to technological change, but I don't see that happening, their oligarchs will make sure they also can bring that tech in-house]
I disagree with this entire article. Every company I've worked for in the tech industry has had incredible difficulty finding talent/people to fill the roles we had. Also, there are more software companies than Google and Facebook. Also, I don't see salaries dropping anywhere for these jobs, I see them going up. Sure, help desk is the new car mechanic, but that happens in every industry. Now, you probably want to be a developer or DevOps guy to make what help desk made in the 90's. The real issue seems to be exploding cost of living making earning more feel like earning less. And I believe companies that are willing to allow remote work are helping combat that by giving workers the freedom to move somewhere cheaper.
It is a scam. They're not looking to fill in those positions. They just open those positions up, under no obligation to hire, then report to their gov censor that they have created x amount of jobs without the intent of filling those positions.
When they have to fill in the positions, they complain about the lack of "talent and skill" in filling the roles and then push for h1bs to fill with cheaper Indian and Chinese workers.
Every once in a while they'll fill it with a techbro "hip to the game". The entire thing is a complete hoax.
>They just open those positions up, under no obligation to hire, then report to their gov censor that they have created x amount of jobs without the intent of filling those positions.
Are solicited but unfilled jobs counted in "job creation" statistics? I did not know this.
I agree but I also disagree. We have a fair amount of difficulty finding talent to fill our tech roles when they come available. However, much of my job is to automate away other people's jobs. I've literally taken more than handful of good paying / medium skilled jobs out of the market with my software.
If the trend continues, and it is, more and more of these jobs will go away. There is, in my opinion, a limit -- you can't run a company with nobody. But historically my company hired large amounts of people to do jobs that have now been obsolete for decades because of technology.
A software company employs infinitely less people than a manufacturing plant used to and doesn't provide the same mix of high skilled and low skilled labor. That's the problem that many areas of the country are dealing with: that the economic boom is becoming a lot more concentrated than it used to, which only increases income inequality.
Back when I worked for a large telco my division(SE ie the heir to the part of the GPO that built colossus) had over 60K FTE most of which where managerial and professional.
If they find it that difficult to hire people with the skills they need, why don't they teach people the skills, or if they can't do it in-house, pay someone else to?
Er, the article was about jobs in all the other sectors, not in technology. Technology is what is replacing all the other jobs; of course jobs in tech are rising. That doesn't mean the total number of jobs across all sectors is doing anything other than declining.
Does WSJ writer get to decide how many jobs should be 'enough' for an industry? Weirdly written article, in my opinion... and the writer seems to cherry pick anecdotes, 'see now there are robots doing things in Amazon warehouses! Now we can't have enough slave labor sweatshop type jobs in the US to go around!'
I agree, I kind of feel like they aren't in tune with the actual reality of the industry. In my experience, there are tens of thousands of jobs out there, just not enough people with the qualifications to fill them.
The "American dazzle tech boom industry" is a scam and a hoax. It is a government protected endeavor by government protected and connected organizations.
I feel like the author stressed too much on the word "Tech" without differentiating much between the very basic nature of SW-Tech and HW-Tech. In hardware assembly lines you need more workersa and bodies, let them be in the USA or China or Taiwan. But for SW once you have developed and refined your algorithm, routine or process it does not need to have multiple people handling, managing or maintaining it. It can be replaced but let's be honest such replacement does not happen for quite some time at enterprises, in some case it takes years. My point being, yes big SW companies like Facebook, Google, Twitter etc did not create enough jobs because they produce and maintain software, not actual physical products (Google until recently). Yet they have sucked a large portion of money from the economy (Think of ecoonomy as a shared pot with fixed $ coins in it). The problem is with the financial and employment regulators for being short sighted and not predicting this trend lets say 15-20 years ago. It is a bad unbalanced financial "equation" when weight on one variable is too much and on the right one it is too low. A company with $X amount of positive revenue must invest a certain portion back into the economy. In this way we can maintain a economically balanced society. Also, people need to start getting serious about continuing education. Skills learned and obtained in the 80s or 90s is not necessarily going to be employable in the year 2016.
Click the link near the top of this page which says "web". Basically does a Google search and then you can get in if you click the first search result.
The amount of fossil fuels it takes to produce each calorie of food is increasing exponentially over time, so many scientists expect that eventually we'll need to start replacing machines with human labor.
While this will probably happen to some extent, I also suspect that AI will soon make urban permaculture viable. E.g. the main reason why all the trees in our cities aren't edible fruit and nut trees is because they make a huge mess and attract rodents when they fall on the sidewalk. But if you were creating a new city today then it would make sense to heavily incorporate edible landscaping, and in twenty years when it's actually at peak productivity we'll have inexpensive autonomous robots to clean up the mess and periodically check the soil for contaminants or whatever.
The muscles of humans and other mammals are only about 20% efficient at turning food into mechanical work. Overall efficiency is even worse when you consider resting metabolism during non-work times, such as when people are asleep. That profligate waste is happening on top of the inefficiency of using plants to produce human-edible "fuel" for workers; less than 5% of incoming solar energy gets stored as something humans can eat, or a bit better if you include parts that ruminants can eat.
Motors running from battery-backed solar power can do much better than that. Cheap solar modules made of multicrystalline silicon can convert 16% of incoming solar energy to electricity, and after going through a battery and a motor you can still get 80% of the original electricity back as mechanical work. A solar farm "feeding" electrical machinery is 1-2 orders of magnitude more productive on an areal basis than a plot of land feeding manual laborers with human foods. Additionally, the solar farm doesn't need weeding, irrigation, fertilizer, or fertile soil. A reversion to muscle power would be expected following a massive societal collapse, but it would not be a rational plan for a high-tech society to increase its efficiency and sustainability.
Agriculture has been reducing their inputs in recent decades. With precision farming and a lot more data collection, farms use less of everything. Using lots of water and fertilizer is out.
It looks like we're not going to run out of energy. Solar and wind have now become Big Solar and Big Wind, and fight it out with Big Oil and Big Gas. (Big Coal went bust.[1]) Electric cars aren't a joke any more. We can still do nuclear if we have to. We're more likely to have metal shortages than energy shortages.
The trends over the 20th century generally fit the narrative of exponential growth in energy consumption. Major drivers have been fertiliser (especially nitrogen fixation via Haber-Bosch), farm equipment (especially considering both embodied energy of manufacture plus fuel use), and irrigation costs. Two additional factors are the growth in consumption of both animal products (eggs, dairy, poultry, port, and beef, roughly in that order of increasing feed:food conversion cost), and in the consumption of non-staple foods: fuits and vegetables are vastly less energy dense than corn, wheat, rice, and soybeans, and hence have a higher energy cost:calorie ratio.
Vaclav Smil's 1994 Energy in World History has an excellent exposition of these trends generally, though ending 22 years ago. Manfred Weissenbacher's Sources of Power updates the story to 2009.
It's also helpful to realise that sub-Saharan Africa still has very little mechanised agriculture (fewer tha 1 million tractors per Weissenbacher), and little fertiliser or pesticide use. Even in the US and Europe, nitrogen fertiliser use didn't take off until the 1950s -- for the first 30 years or so, Haber-Bosch were largely in the munitions business.
Since ~1990, energy productivity of ag seems to be increasing (that is, less input energy to output crop) in the US and EU (USDA and DOE have several reports). Global data and graphics are much harder to find, I don't know what the situation is.
That abstract mentions nothing about exponentially-growing energy requirements.
It's also an abstract for a paper from a forum sponsored by Negative Population Growth, a non-profit devoted to encouraging a reduction of the world's population for sustainability reasons. I am talking this with the same salt I take a climate change paper put out by energy company scientists.
The age of inflation is over because producers in nearly every industry (there are a few notable exceptions) can absorb almost infinite demand for their products. The sooner governments and central banks accept this, and the sooner we move past the notion that a "job" is not an end but a means to an end, the sooner we can end poverty, achieve high levels of growth, and overcome our fear of globalization and technology.