Of course, the creative destroyers in question would much rather focus on the "creation of value" narrative, because it avoids attracting attention (and competition or regulation) from the industries that they're about to destroy. So there are pretty significant information distortions in the popular narrative.

Interest rates and corporate taxes have the property that they affect the whole market, which makes them much more useful to the Fed. If you bought NVidia in 2022 or Apple in 1998, congrats, you made a good investing call. But if you bought the S&P 500 in 2009 and are congratulating yourself on your 600% returns over the decade, you should know that most of that is because of low interest rates, and if the low interest rate environment unwinds, so will your stock portfolio.

Then if you held from 1982 to 1987, the S&P 500 nearly tripled, despite low inflation and relatively few major technological changes. What was the difference? Interest rates went from 19% to 6%.

A useful lens with which to view this and other phenomena is "Which factors cancel out, and under what timeframes?" Technological development leads to large microeconomic winners and losers but little macroeconomic effect under short time frames, less than the business cycle, because the mechanism by which it increases overall welfare is to put workers out of work and firms into bankruptcy, freeing up those workers and that capital to be invested in new enterprises. Interest rates have a large effect over that timeframe, because they affect all firms in the economy equally. Over long time frames (multiple business cycles), the effect of interest rates washes out because they go up and then they go down and eventually they equilibrate near the long-term average. Technological development dominates then because you've given the economy a chance to adapt to new production methods and re-employ workers in obsolete jobs.

Zoom out to "Max" to get the full 60 year history. You can clearly see a full four decades of declining interest rates running from 1981-2020. That very neatly corresponds with the amazing stock market growth most HN readers, myself included, have grown up with.

The stock market growth is neatly correlated with declining interest rates, not with the actual value of the interest rates currently. That is, until the interest rates can't go any lower. The 10-year yield got as close as I hope it will ever get to zero back in 2020. There's nowhere to go but up from there.

For myself, I'm dusting off the old magic - a 60/40 stock/bond portfolio, with the stocks focused on value funds, plus a relatively small amount in "breakout" funds that could multiply a few times if technology goes the way I think it will. Maybe if interest fall a little bit I'll dial it to a 70/30 mix, but bonds are definitely part of the equation now.

On the other hand, I may be missing something. Ray Dalio's All Weather Portfolio is 55% bonds, and it's supposed to be safe-ish for any market conditions.

Yes, of course, but this frequently comes with significant productivity benefits. This is what I'm referring to when I say "creating for free". These marginal productivity improvements are going to be harder and harder to come by over time. Huge fan of Schumpeter, btw.

There are definitely companies that are winning from the tech you pointed out, sure. The companies that make robotaxis and the companies that sell AI subscriptions are going to make bank.

But at an aggregate level, that robotaxi means a human tax driver is no longer working, and if every sales person has their own personal robot translator for talking to foreign clients, then none of them has a competitive edge over the others, they've just had to invest that money in order to avoid giving up a competitive edge.

That OP paper's argument is basically that the only rising tide that truly lifts all economic boats is being able to keep more of the money you make instead of having to spend it on interest or taxes. So the age-old wisdom of "just buy an index fund" may have run its course, and you will actually have to pay attention to valuations instead of just blindly buying the market going forward.

I also think a goal of full employment naturally leads to a flattening of productivity. We hire a lot of people to do work that isn’t super productive because we consider employment more important than raw numerical superiority. We probably could let go many people and improve productivity at a great expense to social cohesion. This doesn’t seem like progress to most people if we had 30% unemployment. To the papers point low interest rates and reducing taxes creates a lot of space for inefficient employment. There even might, if you get particularly breathless, be a time post scarcity when employment itself is anachronistic. But as we have no method of social or communal distribution today in capitalists societies, we would need to find a way to keep people pecking for food pellets. Productivity would fall off a cliff at that point.

I thing what this paper illustrates more than anything is that productivity as a measure of value is pre-automation industrial thinking that we largely stick with because it’s really a lot harder to measure anything else. Valuations in the stock market IMO have decoupled from traditional economic measures because those measures are flawed and don’t explain how we value things in modernity.

The efficient-market hypothesis would probably disagree. If "paying attention to valuations" ever consistently produces greater returns, then index funds will start weighting their holdings in such a way to capture that value. If it produces greater returns, but not consistently, then we're back to gambling and things like technical analysis and trying to time the market.

I agree that we're still producing new technology, but just because a certain technology is impressive doesn't mean it's going to yield a lot of value to investors or yield a lot of marginal improvement to productivity. Perhaps I'll be demonstrated wrong when we start mining asteroids and flooding the market with massive productivity shifts again, but there's not exactly any sign this is right around the corner. There's certainly no reason to assume growth as a market invariant just because of technological development has led to growth in the past.

?? Did I miss a news article?? I know we've successfully landed on the moon, but we don't have reliable ways of commuting there let alone setting up a colony.

I even hear about astronauts stuck in orbit for months at a time.

mars is just a little bit further away and has similar atmosphere problems as the moon.

Ruelle gives some thoughts on economics but ultimately concludes something like "we don't currently have the tools needed to properly study this subject".

I mean, there was value created in the 1960s and 1970s, too - computers! Minicomputers! Microcomputers! Transistor radios! Walking on the moon! 747s! Much better railroad engines! The start of the internet! The interstate highway system! And on and on. But it wasn't showing up in the stock market. Why not? Because the interest rates were rising, and almost all of the gains were disappearing into that headwind.

Also, larger streams of money create the economic multiplier effect.