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).
[1] https://www.youtube.com/watch?v=4YcrO8ONcfY
[2] https://www.google.com/search?q=energy+deflation
[3] http://dqbasmyouzti2.cloudfront.net/content/images/articles/... (TL;DR Cost of energy from solar is dropping faster than Battlestar Galactica through a planet's atmosphere [3a])
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.
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.
http://money.cnn.com/2016/04/14/news/tax-us-companies-offsho...
"Top 50 U.S. companies hold $1.4 trillion in cash offshore"
Assume these companies brought that cash back to the US. What would they do with it? Where is there to grow?
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.
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.
It's more a feature of wealth and income inequality than central bank policy.
Central bank policy accelerated this trend but the "savings glut" (1% wealth) has only been going up since the 70s.
[1] http://larrysummers.com/category/secular-stagnation/ [2] https://hbr.org/2014/09/profits-without-prosperity
There is not much investment in the economy because there is not much demand. There is not much demand because of income and wealth inequality.
After all, what's the point of producing goods and services for people who can't afford them?
>http://larrysummers.com/category/secular-stagnation/
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:
http://www.alternet.org/economy/larry-summers-federal-reserv...
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'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.
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.
As for the Fed only caring about inflation in the last 20 years: https://en.wikipedia.org/wiki/Paul_Volcker
That causation is backwards. Raising interest rates makes money tighter. But tight money causes low interest rates.
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.
And once the reserve requirement is maxed out, the only thing that can permit more private money creation is central bank money creation
Why not have a shot of deflation?
We also have the highest population levels ever, the most assets ever, and the most wealth ever.
Debt to GDP has fallen, drastically:
But they took a risk taking on that debt and perhaps they should go bankrupt.
Seems like I've triggered a nerve!
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.)
Democracy is how a society chooses to govern itself.
Above a certain point (e.g. when food is so scarce people kill each over for it) it's not about how much money or resources it has.
There have been in ethnography tribes with democratic self-governance that had 1/1000 the resources we have, and no "growth" year over year.
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.
On the other end, most people on this forum are involved in finding new ways to unlock "value" and thus create new wealth.
The economy is not a pure zero sum game.
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.
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.
See cake example in the very short first paragraph: https://en.wikipedia.org/wiki/Zero-sum_game
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.
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.
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.
> 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 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.
Please don't insult people on this forum.
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.
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.
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.
There is value and then there is intrinsic value aka True value. True value is extracted not created.
Only people who blindly read economic textbooks will take that misguided definition at face value.
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:
This link is solid proof intrinsic value exists as a theory in economics: https://en.wikipedia.org/wiki/Intrinsic_theory_of_value
This link shows intrinsic value applied in finance: https://en.wikipedia.org/wiki/Intrinsic_value_(finance)
This link shows intrinsic value applied as a stock investment strategy: https://en.wikipedia.org/wiki/Value_investing
This is a biography on warren buffet: https://en.wikipedia.org/wiki/Warren_Buffett
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.
>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.
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.
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 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.
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.
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.
USA 2011 http://www.cbsnews.com/news/food-prices-increase-most-in-36-...
USA 2014 http://www.cbsnews.com/news/food-prices-soar-as-incomes-stan...
World graph http://www.worldwatch.org/global-food-prices-continue-rise-0
EX-computation, tell me something good. We can't eat silicon wafers.
The cost of energy alone is exponentially higher than it was in the early 70s.
We're not living in an enchanted forest, formerly progressive trends are going into reverse on most counts outside of computers.
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 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.
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.
"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]
[1] https://www.nrdc.org/sites/default/files/wasted-food-IP.pdf
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.
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.
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.
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.
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 say we could easily do so. But you need all three 100X's: miss one and it would be probably impossible, as you say.
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.
http://www.livescience.com/16493-people-planet-earth-support...
Freshwater is synthesized from seawater now. If the GDP increases 10,000% it will be inexpensive.
http://blogs.ei.columbia.edu/2013/04/01/phosphorus-essential...
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.