> like scoring a soccer game based on how far your players run

That’s a pretty good analogy for what GDP is counting, actually.

But I think the larger point is that manufacturing is grounded in something real. It’s a measure of how many tanks and fighter jets you can make, no matter how much they cost to make.

Right, velocity of money! I think this is the meatier part of the essay and I wish geohot would have skipped the bit about the gold standard - our main measure of growth is how quickly we hand money back and forth (is there another measure that allows expenditures to cancel out ? Net Domestic Product ?)

The graph that shocked me tho was the electricity production, I didn't realize US was so flat but it rings true, I know there's a 2 year wait-list to even have your energy production considered to be hooked up to the grid, but I assumed there was some at least some throughput, now we're taking about onsite mini nukes while China is building.

Two quick thoughts… one, because every transaction in theory happens because the purchasing party values the good or service more than the money, every transaction does — in theory — create wealth, velocity of money is sort of measuring a proxy for growth. But I agree it’s weird.

Second, “GDP/watt” is absolutely an economic metric, and it captures something about energy efficiency but also the mix of an economy. Software and services scores highly; aluminum smelting does not.

Normalising GDP for the amount of money in the system suggests that velocity of money is the is actually the interesting metric.

Say the monetary base is $100 and the GDP is $1,000 initially, then the monetary base doubles to $200 and the GDP doubles to $2,000. It looks suspiciously like no real economic activity was generated and that suggests that velocity is the growth measure.

You're essentially assuming an increase in the money supply leads to inflation, which it does if nothing else is different either, but if you also have e.g. a larger population then you're looking at something else.

I don't buy the argument that every transaction in theory creates wealth. The only way that holds true, is by using a subjective/arbitrary meaning of wealth, which would imply, I can become wealthier/poorer by merely changing my mind. In such a case, I can be the wealthiest man in the world, and the poorest 10 minutes later, when no transaction or anything really even happened.

Sure mind over matter, but I'd prefer using a more objective definition for wealth, rather than an arbitrary one. It makes measuring and comparing things much more sensible, otherwise you are free to reason whatever you want and have no culpability, which is very unscientific.

If you can truly come up with an objective measure of wealth, I believe there might be a (quasi) Nobel Prize in economics for you.

The reason economics is hard, in part, is that there isn't some core firmament you can rest on; there is no fundamental, provable truth. And yet, with fancy statistics and clever experimental design, you can still make intelligent statements and understand the world better.

To me, economics is the field with the purest expression of "all models are wrong, some are useful." Which is actually sort of cool, if you let it be.

I think some people need to step back and ponder what's the purpose of economics? Why do we even study it? What are we hoping to achieve in analyzing it?

I can only think it began with the philosophy for making better decisions, solving problems, and improving society - particularly in the allocation of its resources.

As so, I think a huge part of the problem with economics, including most economists, is that people equate value for wealth. Value certainly is subjective, I mean, do you value having $80k, or a nice car? How about a pool, or a boat? Do you value your time less than the cost of a flight? All very subjective. But I think it's flawed to conflate value for wealth. Wealth is something real, the things you are evaluating in trade. Time is wealth. Money is wealth. Oil is wealth. Land is wealth. Why don't we simply measure these things, and how they're allocated? IMO, it seems more practical and more noble of pursuit to figuring out if someone actually needs food in society, rather than what people with plenty of resources ascribe their values to.

Economics has two broad disciplinces, micro and macro economics. Macro economics is for if you're trying to plan or consider the economy, micro economics is if you want to understand a business or person and how it makes decisions etc.,. Broadly, there's also normative and positive economics. Normative economics is stating opinions about what's right (e.g,. there should be a minimum wage so that no one can be paid less than X for their work) whereas positive economics is about facts (e.g., if you raise the price of something, you'll generally sell less of it).

Anyway, idk if that's useful. I'd say though, economists don't really need to care about what people value, except to the extent that they can e.g,. learn about what people value by observing their behavior, or use how they ascribe value to something to predict their behavior. That is to say, "real" economists _do_ study allocations of physical resources etc., don't think they just try to model some theoretical value function :)

  You’ll find that money is noise, this, us, together, is wealth
  The body’s just cosines and vectors, love is the real health

Dog with Rabbit in Mouth, Unharmed, Beauty Pill

https://youtu.be/0GENOl4sbiE

"The purpose of economics is to make astrology look respectable!"

> If you can truly come up with an objective measure of wealth, I believe there might be a (quasi) Nobel Prize in economics for you.

Is it actually that hard?

The material worth of something is what someone will pay you for it, i.e. the value it would sell for at auction. Your material wealth is the sum of the worth of what you have.

That means if you own something and the market price of it changes, i.e. someone changes their mind, then your wealth changes. But is that even wrong?

> The material worth of something is what someone will pay you for it, i.e. the value it would sell for at auction.

The problem is that this i.e. isn't right, because the vast majority of market transactions are not auctions. The value a pallet of rice would auction for is very different than the value a rice farmer would accept to load it onto a truck, which is very different than the value a supermarket would pay to get one a month deposited in its loading dock, which is very different than the sum of values individual consumers would pay for the bags on that pallet.

That's because those are all different products. Water in the desert is a different product than water at the river and they can still differ in value even in a competitive market because of the cost of transportation.

I think that's a very reasonable way to look at it. But it still means that the auction strategy doesn't always work, because water flowing to me is a different product than water flowing to the auction winner.

Those are differences in the buyer/seller rather than differences in the product. It's why people value something differently, not why something is a different product. Even if the water is in the desert in both cases, you might still value it less than someone else, e.g. because you already have some and they don't, but that isn't a difference in the thing being sold.

Also, "I become richer just because I think I'm richer" was actually a thing Donald Trump once said in a deposition:

"My net worth fluctuates, and it goes up and down with markets and with attitudes and with feelings, even my own feelings." [1]

1: https://en.wikipedia.org/wiki/TrumpNation#:~:text=During%20d...

It doesn't obviously. GDP isn't a sum of all transactions, it's the market value of all newly produced goods and services in a given territory.

It doesn't. Inefficient system like US healthcare increases GDP and if they implemented an EU system it would go down.

I know you qualified it as "in theory", yet I find myself thinking of wash-trading as an example where transactional value is neutral or even very slightly negative, because they actually value manipulating the metrics.

That's a fair counterexample.

In that case, you could argue that "true GDP" didn't change at all, merely our measurement of it had error. But pretty soon you ask 'well, what is the real signal?' And it's turtles all the way down.

Again, economics is weird, but perhaps interesting because it's weird. (I'll confess I didn't care about the field at all until it suddenly got very interesting in ~2008.)

Intuitively, if a toaster costs 5x in the US what it would cost in China, GDP says that a sale in the US was more productive when in reality it’s the same thing in both places.

My opinion is the money is a means to an end and we’d be served better by focusing on those ends instead: healthcare, housing, education, life expectancy etc.

That's what PPP is meant to measure.

Or even better, The Economist's "Big Mac Index":

https://en.wikipedia.org/wiki/Big_Mac_Index https://worldpopulationreview.com/country-rankings/big-mac-i...

The big mac index is quite literally PPP dumbed down to a single product that the general public can understand.

> in reality it’s the same thing in both places.

the utility of a toaster is different in different places.

It may also be the case that a toaster costing 5x in the US, because this is including an opportunity cost for that toaster being made (which means a different thing wasn't made).

The the benefits the new owner of the toaster derives from it.

Maybe toaster is not the best example to illustrate this by, so say we use microwave --and the time saving based off of it-- instead. A 100k/y worker's time savings are 5x the 20k/y workers savings when equal in time.

So the microwave is accepted to cost more. Sellers are great in caching in on this.

I think we have to be careful that by adding “utility” as an indirection we don’t accidentally traffic in “cost”. Because maybe I am dumb but it seems to me that the utility of a toaster is its ability to toast bread.

If I make 5x as much as someone in China and am willing to pay 5x as much for the same thing, at the end of the day we both just want toast. And if I buy a crappy toaster that only costs 2x as much and can only toast half as fast, “utility” (i.e. cost) says my toaster is still better despite it being an objectively worse toaster.

> at the end of the day we both just want toast

but the seller doesn't care about that. The seller will attempt to extract the maximum price of a toaster.

It is because americans are more productive, that their maximum price for a toaster is 5x that of china; they can afford to pay 5x. So this is a measure of their utility - not the ability to toast. An american finds that the ability to toast to be worth 5x that a chinese would be willing to pay for toast.

If america was poorer, the seller would not be able to sell the toaster for 5x (and instead would have to lower their price to match the price their customers can afford, up to the minimum margin the seller could afford to cut to).

I think my point is about an underlying quality of the toaster, the ability to make toast, which is independent of its cost in different places. The price of a product is complicated by many factors which are irrelevant to that underlying quality.

> an underlying quality of the toaster, the ability to make toast, which is independent of its cost in different places

and this is called intrinsic theory of value[0], which mostly has been superceded by other theories (such as the one in my post, which is the subjective theory of value[1]).

While the intrinsic theory of value isn't wrong per se, it is too naive, and "simple", such that this theory does not explain much when applied to real world scenarios.

[0] https://en.wikipedia.org/wiki/Intrinsic_theory_of_value

[1] https://en.wikipedia.org/wiki/Subjective_theory_of_value

The question is why would people buy a US-made toaster if the Chinese is 5 times cheaper.

Quality, perceived quality, nationalism?

Interesting, so to extend the metaphor - in the game of soccer it's the scoring of goals that matters, not the raw physical stamina of the player, but if that facade of civilized competition breaks down, then it's back to the basics.

Right. This facade is what makes soccer a sport instead of a brawl. In sports, and in life in general, there's all sorts of extra rules that make activities interesting and/or prevent them from decaying into violence. Playing for keeps - like, really, seriously, going for the win no matter what, is universally frowned upon and basically a telltale sign of dangerously pathological sociopathy.

Intangible products are very real

Manufacturing plastic one use sponge bob toys are also real. Real and not particularly useful and perhaps not what most people imagine when they vastly overstate the importance of manufacturing to an economy.

Now jets and planes and military supplies is a real issue. But Manufacturing in general isn't how many tanks and fighter jets you can make at best it correlated.

Having lots of money is great when you have people willing to sell you stuff. Not so much when you are trying to fight the ones you bought your raw materials from.

Makes me wonder, if anybody knows how economies were measured in more socialist countries before the 80s. Did they take other factors into account since a lot of things were shared (based on a documentary about east germany, people used a lot more social services, places, parks, libraries, and exchanged stuff without paying).

> or people who actually study these things

How do you define "actually study" here, and what makes you think the author didn't study the topic at all?

Its totally fine if you disagree with the author's view or have additional information that they missed or didn't consider.

Writing it off as coming from someone who didn't "actually study" the topic is unnecessarily dismissive.

Well, it's deferring to experts, but whether economists are experts at anything is a hot debate.

I have a lot of respect for economists, I know several.

They are among the most rational people you shall ever meet. And they are very aware of how incomplete their tools are. But they do a lot with such tools that is worth knowing.

It's only a debate if you reject the very principals of science. I realize we're getting there for a lot of people, but merely disbelieving in science is not a refutal of it.

This ignores so called Austrian economists however, who are just flat out lying to either themselves or everyone else depending on the person.

I think the problem might be that it's difficult to perform experiments in economics due to the size of the thing being measured and the fact that the people making up the economy generally aren't going to be alright with you performing experiments on them.

Economics experiments are actually a thing. You can have natural experiments, or you can uncover patterns in data, or you can try controlled experiments (in microeconomics), though that sometimes just feels like applied psychology. I dunno, I've never formally studied it.

But I have read NBER papers, and can confirm that there is real research. It's not a hard science, but among the social sciences it's pretty rigorous, and often very quantitative. I know how this crowd likes it quantitative.

Many economic concepts are part of our daily life. Supply and demand, comparative advantage, for example.

Multiple experiments are conducted using historic data, for example the 2024 Nobel.

I would like to note that there are many other fields in science which have even more trouble performing experiments, but nobody says that e.g. astrophysics or astronomy is not a science.

Economics isn’t a science though. There’s no scientific rigour to any central banks actions.

You mean these 'liars': https://en.wikipedia.org/wiki/List_of_Austrian-school_econom.... NB 'principles' and 'rebuttal'.

Is there a fundamental repudiation to Austrian economics?

All I know about them is that they don't like funny money, which to me as a systems thinker is perfectly reasonable. At worst you would expect it to be harmful, at best to obscure what is really going on.

Contrary to serious economists Austrians try very hard to avoid specific forecasts, but we all can nonetheless look at their writings and compare what actually happened during every crisis in the last 50 years - and nothing Austrians are postulating proved correct. Or just look at the very last, covid caused one: If you'd been doing prognoses with textbook keynesianism regarding inflation, demand, stimulus effects and so on, you'd been pretty spot on. Just read the old blog posts from krugman from 2020 onwards as an example. The Austrians, by comparison, predicted 5 of the last 0 hyperinflation scenarios correctly.

if you go down the austrian rabbithole weird stuff around praxis starts showing up. which is like logically true but probably unuseful (IMO) and used by the community to shut down any ideas from outside Austrianism.

i think focusing on M0 is also incorrect. the debt money multiplier is a real phenomenon, and at least the psyche of a user of the banking system must be accounted for.

Where mainstream economics is imprecise and frequently inaccurate, and credited with predictive powers it simply doesn't possess, it is at least an attempt to study economic reality.

'Austrian' economics is more akin to a religion, with associated dogma and moral tenets.

Not a valid one at least.

Austrian economics is openly an ideological movement and not a system of empirical predictive theory, and thus is inherently unfalsifiable in the broad sense.

Individual Austrian-school economists sometimes make falsifiable predictions, and they are often (either knowably at the time or determined later) false, but that's a different issue, because, again, those predictions are not grounded (in the predictive sense; while they are in an emotive sense) in the fundamentals of the school in a way which would make falsifying them a “repudiation” for anyone at risk of adhering to the school in the first place.

People who have dedicated multiple years of their lives to this topic, at a bare minimum. Technologists are not knowledgeable in economics, medicine, or the other technical fields they routinely embarrass themselves in. Narcissistic overconfidence can look like expertise to an outsider but it isn't. Being high IQ is a necessary but not sufficient condition.

If you want a center-right take on economics, go to someone like Tyler Cowen. There are also plenty of economists who argue in favor of onshoring some manufacturing under a security/defense as public good argument.

The fact that US gdp and population has grown while energy inputs have stayed flat is an important measure of both the energy efficiency of an economy and the mix of sources of gdp. "Energy intensity" is a measure of PPP gdp per capita per kg of oil. If you want to grow your economy then you either improve energy intensity (get more gdp for the same or less energy) or find new energy sources. China wants to reduce their energy intensity. Yet the author is showing a "graph goes up" to mean "better" with all the confidence of an engineer outside their circle of competence. The US energy intensity has halved since the 1980s - less oil and more IT.

> The US energy intensity has halved since the 1980s - less oil and more IT.

Part of their argument, and arguably also quite apparent fact, is that this is not efficiency improvement - it's just outsourcing the energy-intensive parts of the process abroad. This makes treating energy intensity as a measurement of efficiency just an accounting trick.

It's the same kind of trick as e.g. Germany shutting down its clean power plants, covering the energy deficit by buying electricity produced in coal plants abroad, and then claiming, "look ma, no emissions, no nuclear, so green".

Supply and demand goes both ways. You don't get to outsource the important parts and then claim they don't count because you're just buying - it's not like manufacturing or electricity production are natural phenomena you're just tapping into. The buying is what makes them exist, whether or not it's within or outside your borders.

> what makes you think the author didn't study the topic at all

Because this is George Hotz who is arrogant and enamoured by his own intelligence.

He famously derided Twitter's engineering team as being incompetent and that he could easily rewrite it. He lasted at Twitter for a month, delivered nothing and then resigned.

The average US citizen used to understand the importance of money, how it’s defined, etc. There were entire elections over it (see Andrew Jackson).

Now we’re told it’s too complicated to understand, leave it to the experts in Washington. If we put restraints on their ability to create money bad things will happen.

Separate money and state!

> But solution point 1 — brain drain the rest of the world — is an absolutely first rate policy. The fact that the US requires newly-minted PhDs educated here to get a different visa or leave is absolutely self-defeating. We should be welcoming skilled immigration from everywhere.

Even better, let them keep their visa and if they revoke their citizenship, we'll relocate their entire family if they come from a repressive regime.

Brain-draining the world is really the key to cementing American Hegemony in a post-Cold War world. Additionally, we should be funding basic research at historic levels and incentivizing, via the tax code, corporations to productize and apply this basic research. We should be expanding the frontier of knowledge without regard to its immediate application.

Also great about an easy pathway to CITIZENSHIP, rather than a 'work visa' is suddenly they aren't a serf to be abused by the employer (any more than any other citizen at least), and thus grow the market rather than undercut employment.

> Brain-draining the world is really the key to cementing American Hegemony in a post-Cold War world.

Why should we want that instead of an orderly, well-governed democracy? Do you think people in Sweden or Denmark are upset their countries aren't hegemons?

And what would that do to the country? Do you really think that, say, the top 5% of India and China (100 million people) would do better maintaining a democracy than median Iowans? That's a real bet that your assumptions about how society works actually reflect reality.

My suspicion is that for a lot of people that grew up in and only know the US, there's a sense of impending doom if "American hegemony" ever were to be replaced by something else.

But since there's no real practical experience of how that would actually feel (or rather, how a very high quality of life and subjective happiness are possible without an US salary in many other countries), they instead project from something that does exist in the US: Downward social mobility. (And given how US society treats its less fortunate in many instances, that seems scary to me too.)

Exactly. I had this exact thought experiment of "What if America were no longer Hegemon".

So, I looked at other historic examples. The British, Dutch, and Spanish. (You can add German/Austrian and the French, close contenders).

They're all still very well-off!

I actually grew up in one of these, and I fully agree.

Yes, my country was significantly larger and more influential a century ago. It even was an empire, with an emperor and all! But no, I don't feel like the average person born back then had a better life than me.

> I don't feel like the average person born back then had a better life than me.

This is true for (almost) anywhere in the world. Everybody has a better life _on average_ than 100 years ago.

> It even was an empire, with an emperor and all!

But the fact that your country was the capital of an empire a century ago is a large reason for why it is richer now, and generational wealth was indeed passed on.

This perhaps is visible if you look at countries that used to be subservient to yours, in empire times. Are they not - relatively - still poorer than the former empire capital?

Oh, definitely! Many former empires still benefit from their history.

But all I'm saying is that there's a path to preserving wealth beyond outright remaining an empire. (Whether it's still possible after making hypothetical full reparations is a difficult question I don't know the answer to.)

What you're missing is the role the U.S. has historically played in preserving and protecting democracy in the world and, particularly, Europe.

If America was suddenly no longer a hegemon, it would be qualitatively different. There are other hegemons in the world that would step into the void left by the U.S., and it would be their influence that would be felt most the world over, including by the countries you named.

Exactly. People act like if the US steps back there will suddenly be peace and everyone will get along. What will happen is someone else will step into the US position or multiple someone’s will fight for that position. Neither are probably good for the US or the world.

Another problem (which Trump is idiotically pushing) is for everyone else to grow their military. Do we really think the world is safer with more countries having larger militaries that are an election or coup away from no longer being allies?

At this point, and from this point onward, some other hegemons sound darn good compared to US. russia aint one, they simply lack competence for anything grander than petty squables at their borders. Everybody hates them, inclusing all former soviet bloc countries and only deal with them when they have to.

Ie China is not doing sudden backstabbing of its allies, strongarming weak at their weakest point. In contrary ie it helped develop parts of Africa that were severely neglected by western powers, not for free but that was never the case. They did some not so nice stuff, but so did US in the past, in much higher numbers. Tens of millions of civilians are dead because of failed US policies and invasions which ended in withdrawals and defeats in past 80 years.

With all negative stuff on China (uighur treatment, other cases of human rights violations) its still shines compared to US now. Now for any outsider (>95% of mankind), why should they still ally with US now?

Why do you present China as an alternative? I’d you’re a western country, the CCP is not a body you want anything to do with unless you’re desperate. They do not share western values. If you don’t ally with the US, you really, really want to be a separate center of power, because everyone who isn’t US wants to exploit you dry and admits it openly.

Why not?

China seems a lot more reliable than the US, and has seem more reliable for quite a while.

You speak as if the US does not exploit others dry. The US is a lot more malignant than you make it sound.

Most of the "protection" and for democracy stuff the US has been up to has been to protect their own corporate interests to extract resources from those countries, see all of South America and some of the middle east.

I don’t blame them for how the world works. I’m saying if I need to be under some ‘protection’, I’d rather it is US than China and especially Russia.

The British, Dutch, and Spanish

All whites, all allies of the Hegemon, and most importantly, all colonizers, what a coincidence

if this is a satire, I have to say it's a brilliant one

If Britain were a US state it would be between Mississippi and Alabama in GDP per capita.

Not sure I’d call the place well off. Granted, a lot of the reason they’re in this situation is because they put everything into stopping the Nazis and thus saving the world. The US kinda lucked into inheriting the UK’s wealth.

GDP is not a measure of wealth let alone well being, it just means Mississippi is more expensive than Cornwall.

Japan is even lower on the list, but personally I’d rather live in Osaka than Mobile.

Though with (for the moment) a rather better social safety net / services provision than the US as a whole, and MS/AL specifically.

I do agree with your larger point, it is however counterbalanced in part. Gross per capita income doesn't reveal the full picture.

India despite flaws is a democracy same as the US. It's a very different country then China. Plenty of immigrants from tyrannical countries are as if not more committed to democracy as those born here

And just because someone was born in China or India it doesn't make them any less American then someone born in Iowa. Their children might be born in Iowa

Democracy isn't created by intentions or "commitment," but rather the culture of the people, their attitudes, and mental processes. An Iowan born in Iowa to Iowan parents who were born to Iowan parents is steeped from birth in a culture that is very different from someone born in India or China--or even the American-born children of Indians and Chinese immigrants.

Immigrants may become legally American overnight, but they don't become culturally American overnight. Cultural attitudes are extrmely durable (https://www.sup.org/books/economics-and-finance/culture-tran...). My mom has lived here for 36 years, and she's still a low-social-trust south asian who has distinctly south asian views on credentialism, education, social hierarchy, etc. Are those attitudes compatible with the kind of egalitarian, self-governed democracy Alexis de Tocqueville wrote about? I am skeptical that's true at scale.

Even having grown up here, my cultural attitudes are very different--and again, distinctly south asian--compared to my wife's (whose family has been here since the early 1700s). If you took 1,000 people like my wife and put them on an island, you'd recreate America--including the parts of America I find perplexing and frustrating. I'm not persuaded that if you took 1,000 people like me and put them on an island you'd recreate America.

I think America in its best expression is an amalgamation of many different backgrounds and attitudes. Even differing opinions on the functioning of democracy, though I personally think some opinions denigrating democracy are a bit out of bounds and "unamerican" -- though that's obviously a "no true Scotsman" argument, I'm sticking to it.

I guess I'm just arguing for a more expansive view of what constitutes an American. If it was some precious fragile thing that gets diluted by immigration and threatened by cultural mixing and new ideas, well...

Oh... darnit.

> I think America in its best expression is an amalgamation of many different backgrounds and attitudes.

In my view, the best expression of America is somewhere like Iowa--a flat society with intense, local self-governance. In every multicultural society, the democratic rapport that people have with each other ends up being replaced with relationships mediated by an increasingly large and bureaucratic government that can reconcile the conflicting cultures and interests. Democracy is reduced to mere voting.

> In my view, the best expression of America is somewhere like Iowa--a flat society with intense, local self-governance.

You sound very Jeffersonian, but methinks you're idealizing Iowa — have you ever spent time there?

Anecdata: My dad's family is from Iowa — his people were small-holding farmers and village shopkeepers whose immigrant ancestors had come to Iowa from Germany. My dad and his siblings each left the state as soon as they reached adulthood and never once returned to live. Neither I, nor any of my siblings, nor any of our first cousins have ever lived there, nor have many of our second cousins (although we used to go back regularly to visit relatives). Feel free to conjecture why that might be.

after jan6 we can pretty much put all asian democracies (minus pakistan) above the US in terms of democracy. SK recently had a similar coup-lite situation, not tolerated there.

accepting loss is a core tenet of democracy

“Americans have had democracy for so long they now take it for granted.” - an EU friend of mine.

The peaceful transfer of power is not common in human history. It’s a miracle it’s gone on as long as it has in the US.

The book you cite and more generally the arguments traced in the Deep Roots literature are not very strong and often deployed to support anti-immigrant, anti-assimiliationist views.

I'm not persuaded we could recreate America even if we took any 1000 people, even people who can trace their apple pie eating back to the Mayflower, because you know, America is a country and more generally complex arrangement of stuff that involves and entangles hundreds of millions of people (if not the entire planet).

> often deployed to support anti-immigrant, anti-assimiliationist views.

So what? Immigration is optional. The people supporting large-scale migration from countries without functional democracies should have the burden of proving that cultural attitudes salient to democracy are not durable.

Even in the U.S., I'm not persuaded that the Anglo-American republic as originally conceived survived the mass immigration of continental Europeans in the late 19th and early 20th centuries.

> 'm not persuaded we could recreate America even if we took any 1000 people,

We have a real-world experiment of this! America, Canada, and Australia are all oddly similar countries, demonstrating strong alignments along many dimensions.

The US, Canada and Australia were all formed at times where the origin countries where not liberal democracies, so where did that "democratic seed" come from, and why should people fleeing totalitarian regimes not have it?

This argument really does not make sense, and lest we forget those "enlightened democratic western cultures" created some pretty gruesome dictatorships in the intermittent years.

The modern Bangladesh constitution, created in the 1970s, has concepts like “due process.” That phrase comes from a 1354 English law implementing the Magna Carta: https://constitution.congress.gov/browse/essay/amdt5-5-2/ALD.... If you study British history, you’ll see that foundation for what became America, Canada, and Australia has being built for 900 years, even when British society was ruled by a king.

Turning to Western europe more generally, there are cultural traits arising from Christianity and the historical development of the Catholic Church: https://news.harvard.edu/gazette/story/2020/09/joseph-henric....

Protestantism also played a significant role. Puritanism in New England heavily influenced what became American political culture: https://democracyjournal.org/magazine/37/our-puritan-heritag...

This isn't a good argument as the importance of "due process" in British and American systems differs and diverges significantly both currently and historically.

Actually if you study British history you'll find that what is most striking is that the United States is a departure from rather than a continuation of British legal or governance norms.

I’ve extensively studied British history and British legal history specifically. What’s striking is that America, for all the influences on it, has displayed such remarkable continuity with British tradition.

Obviously there’s differences in application of those concepts after hundreds of years. But the point is that when Bangladesh drafted a modern constitution, it reached for concepts dating back to 13th century England. Democracy as we understand it was a long time in the making. They didn’t reach back to the Mughals or the Nawabs of Bengal. This was no indigenous foundation for law-based democratic society. And experience has proven that you can’t transmit such a system from one society to another with ideas or words on paper. It’s the organic result of mother teaching child over generations.

Remember, the american revolutionaries were fighting to vindicate what they saw as the ancient rights of Englishmen, unlike say the french revolutionaries who sought to institute a new regime.

You haven't studied well enough as due process being largely secondary to both royal prerogative and parliamentary sovereignty, with there being (even to this day) a scepticism and sometimes outright hostility to the role and scope of the judiciary, is something you missed.

Immigration is core to American identity and America's success.

It's one of our core defining values

The American that was originally convinced was imperfect and much worse then the America we have today. We literally had slavery and most adults couldn't vote.

Find my anywhere in the federalist papers (or the anti-federalist papers) that says anything about immigration.

What you’re talking about is a 20th century creation. We never tried to be an “immigrant nation”—we were a big open country with no welfare state, and it was favorable for us to allow extensive immigration to populate the continent and displace the native americans.

In the 20th century we accidentally found ourselves with British Americans being a minority then created this idea of an “immigrant nation” to assimilate all the Germans, Italians, etc. But it’s a retcon.

It doesn't matter what the federalist papers say, as no one is going to argue that your deep-nativist view aren't also espoused by Publius.

You're being informed as to actually, as messy as it might be, what the US is and was. This isn't going to be neatly described in any papers or appeal to core enduring features, however much that might suit your ends

America has changed significantly since that time for the better much better.

The fourteenth amendment in particular changed the US in fundamental ways (one of which was birthright citizenship).

> we were a big open country with no welfare state

One of the countless ways we are better country today then in the past. No social security, no Medicare

> But it’s a retcon.

It's an evolution and a vast improvement

> So what?

The point is you have a view and the after that fact have found an argument (not a particularly compelling one).

Unfortunately (for you) the burden of proof at the very minimum (or maybe more properly on everyone in this domain) is on you as immigration from non-democracies is as older than the United States itself, you are the one advocating for a departure from this historical fact.

The countries you list are actually not as similar as you might like to believe, in so far as they are similar not for the reasons you believe, but it might be your own inability to see the differences here, nor do they prove your proposition that somehow there is some determinism by deep roots (or lack thereof) of people.

> If you took 1,000 people like my wife and put them on an island, you'd recreate America--including the parts of America I find perplexing and frustrating. I'm not persuaded that if you took 1,000 people like me and put them on an island you'd recreate America.

That depends on the constituents of your sample. I doubt a city girl from New York and a farm boy from East Tennessee would have the same approach to life in this hypothetical thousand-person colony. They'll likely work and trade together as needed, but they would otherwise form and primarily associate with their own sociopolitical milieu, thus forming cultural enclaves.

In short, I don't think you could really create another USA without the historical happenstances, upheavals, and transformations that changed country from a collection of colonies primarily divided on religious grounds to a unified secular republic.

Tocqueville was a colonialist who wanted to apply a racial segregation system in Algeria. He also wanted to indemnify slave-owners and traders if the slave went free. In France, we see Tocqueville as an "egalitarian but for the bourgeoisie". That's what the French Revolution was about : abolishing nobility so nobles and bourgeois are equals.

I believe your personal experience may be narrowing your view.

I have a similar family experience with drastically different outcome. Including ties to your idealize Iowan people (born to Iowan w/ Iowan grandparents, great grand parents and so on back to Jamestown for a couple), who are simply that, just people. Most Iowans come from late 1800 immigrants, many from East Europe. Some of my Iowan family lines are outliers in terms of origin (first families), but there is at least one from 1800 East Europe that I know of. If you moved on from British history to American History, you would better understand the real mixing of immigrants/cultures, and that is distinctly American. They did not all stick to their kind, as it were.

Some recent family has integrated with Asian immigrants and they are more "American" than some of my Iowan families in-laws that have been radicalized into anti-American values, much to my Iowan families horror. That has nothing to do with "cultural attitudes" etc, and everything to do with living in internet bubbles.

Iowan's I know and come from are blue through and through--Union loving gun toting Democrats. Most of them have kept their values, some have let Fox "news" take that thinking over for them.

I'm not persuaded that if you took 1,000 people like me and put them on an island you'd recreate America.'

A rare moment of strong agreement.

I was going to disagree with you, but instead I'm curious: How does one commit themselves to democracy?

>Do you think people in Sweden or Denmark are upset their countries aren't hegemons?

Funny that you chose those two countries. Denmark is a founding member of NATO. Sweden is one of the two most recent admitted, almost a year ago.

My point is that it's U.S. hegemony that has protected its own democracy and that of liberal democratic Europe to a large extent.

Sweden and Denmark haven't been hegemons because they haven't needed to be.

> Sweden and Denmark haven't been hegemons because they haven't needed to be.

That's exactly right, and I used nearly exactly those words in a recent comment.

Important to note: The free world - economically advanced democracies excluding the US - is the largest economy in the world, larger than the US by about 30%, with an even larger population.

These countries have a historically unprecedented incentive to work much more closely together now, and there is a massive void to fill.

That is not how it works, many of those countries will need to align with China or be conquered.

We're long past the point where we can say "how it works" from how it used to work.

The incentive is there now, when it wasn't before. Cooperation emerges under external pressures, almost as a rule.

Align with China so they can protect us against the US?

U.S. hegemony has also destroyed and subverted democracies and propped up very illiberal dictatorships. Protecting democracy for white countries only isn't exactly what I think of when I think "world protector of liberal democracy".

The U.S. hasn't been perfect, but I'll take it over the alternatives.

And, I'd say protecting democracy for "white countries only" is a simplification. If you're talking about Europe, then we have to consider that the U.S. has also pretty famously fought against European nations and that our subsequent "protection" there was to serve as a bulwark to maintain a world order that benefited the U.S. and democracy.

And, you have to consider that we later "protected" the non-white Japan, Korea, and Vietnam at great cost.

In some of the countries wherein the U.S. could be said to have propped up dictators, there tended to be other geopolitical realities. For instance, many of these were in the Middle East and the U.S. elected to align with the most pliable of the available alternatives. And, in spite of this, the U.S. has also promoted democracy in the region.

You have to also consider the sentiment in many of the countries or regions is/was decidedly anti-American and the choice to support regimes less hostile to U.S. interests is a practical one. Many do not want democracy and the alternative for the U.S. is frequently to topple regimes and attempt to stand up completely new governments (i.e. nation-building). This is an extraordinarily costly endeavor with a high failure rate.

And, all of this in the context of adversarial nations doing the same to promote their own interests.

Again, we're not perfect but the world is a messy place.

> Many do not want democracy and the alternative for the U.S. is frequently to topple regimes and attempt to stand up completely new governments (i.e. nation-building). This is an extraordinarily costly endeavor with a high failure rate.

Yes, and this is one of the stupidest things about American foreign policy. Every european democracy spent hundreds of years as an authoritarian regime first, while it developed the underlying infrastructure of state and civil society. America repeatedly trying to short-circuit that process by toppling authoritarian regimes is in the long run bad for the people in those countries. Those countries are not ready for democracy and the fledgling democracies that the U.S. has tried to install, like in Iraq, have led to horrors.

Coups in Haiti, supporting gangsters and strongmen, overthrowing democratically elected presidents multiple times - supporting Democracy!

Pushing fake candidates in Venezuela - supporting Democracy!

Ousting left-leaning governments in Australia - supporting Democracy!

Overthrowing the democratically elected government of Iran, returning it to authoritarian monarchy - supporting Democracy!

Overthrowing the democratically elected government of Chile, installing a dictatorship - supporting Democracy!

Supporting the overthrow of democracy and establishment of a military dictatorship in Brazil - supporting Democracy!

And so on and so forth, with plenty of logistical and moral support for mass killings, disappearances, assassinations, and political imprisonment mixed in to boot.

We have never promoted democracy, we've only ever promoted the interests of American corporations and opposed socialism.

You are judging the U.S. in the context of an otherwise utopian world that doesn't exist.

Yes, it gets messy. And, yes, United Fruit Company et. al. happened. We've absolutely had government capture and promotion of special interests. But, even these aren't always so neatly separable from U.S. interests, which are not always so neatly inseparable from promotion of democracy. For instance, a weak economy would make it nearly impossible to have influence in the world.

There's a simplified world view that ignores the good, measures each discrete misstep on its own (or interprets every difficult choice as a misstep), then tallies a final score. But this is not realistic in a world where lesser evils are frequently the viable option. America does not operate in vacuum and you have to look at the entire arc.

You'll not see me defending every egregious thing this country has done or endorsing the instances when it has truly veered from its creed. But, to measure us by only that metric and declare the country evil or completely non-democratic is to exonerate other bad actors on the planet.

Worse, adopting such a simplistic point of view makes it impossible to recognize when we've entered a truly treacherous phase, wherein an authoritarian regime comes to power and eschews democracy entirely. Everyone would just throw their hands up and declare "we were never democratic anyway, so it doesn't matter". And, by the time they're shown the difference between our imperfect democracy and frank authoritarianism, it's too late.

I'm not claiming the US is not democratic - by most definitions of democracy, it is. I'm claiming the US has never promoted or protected democracy.

I'm not judging the US in comparison to anyone else. I'm judging it in comparison to your statement that it has promoted and protected democracy around the world.

US interests justify all kinds of nastiness, sure. But we claim to be civilized, claim to be champions of justice and democracy, and say we act for the good of the world. There is no evidence at all to give any credence to those claims. Claiming that other countries would be even worse is just a strawman. We should be better, and we know we should be better, because we feel the need to hide and deny the things we do. I don't care what other countries do - I don't live in them, have no vote in them, and am not represented by them. I want MY country to be good and just, rather than pragmatically evil because we can't let anyone else "win".

>I'm judging it in comparison to your statement that it has promoted and protected democracy around the world

The point I'm making here is that this doesn't always look like we think it should (though it also frequently has). The world doesn't just cooperate. It's a nasty place filled with competing, often hostile ideologies. And sometimes nastiness is required.

>There is no evidence at all...

Of course there is. If I give you examples, you might wave them off as the U.S. merely promoting its interests versus democracy, but these are frequently directly linked. The U.S. does have an interest in promoting democracy in the world, even if there are counterintuitive scenarios wherein we must take a short term approach that reads anti-democratic. For instance, if a candidate were democratically elected, then ruled as a dictator, removing that democratically elected president would conceivably be a democratic action.

Beyond this, the U.S. must protect its interests (and power) if it is to continue wielding influence in the world.

But, it's true that there have also been grave missteps along the way. I want my country to be perfect too. But, alas. Still, I don't believe it's so binary (though I once did).

In any case, we seem to disagree and I'm not sure that this goes much further without us simply repeating ourselves. Thanks for the chat.

> Brain-draining the world is really the key to cementing American Hegemony in a post-Cold War world.

One of the keys. Others are the USD as the defacto world reserve currency, the ability to project military might anywhere, and the US's ability to keep other countries from growing their militaries too much (making the other items in this list easier to manage). The US is quickly throwing all this away though.

Not the any% speedrun I think I was going to see but definitely the top runner right now.

While the USD is still the de facto reserve currency for some, many larger countries and blocks have made sure they are not reliant on it. Up to the point where weakening or strengthening the value of the dollar is far less than a power it used to be.

They are reliant on it. The US is still the currency used for trade. The world economy is tied to the dollar and outside of countries we've sanctioned no country has made large steps towards using something else because using something else would be more complicated and would cost them money

> They are reliant on it. The US is still the currency used for trade. The world economy is tied to the dollar and outside of countries we've sanctioned no country has made large steps towards using something else because using something else would be more complicated and would cost them money

What happens when you "sanction" a significant portion of the world because they don't share your "values" or want to play ball elsewhere ? Well guess what ? These countries will inevitably look at each other and form their own trade routes and alliances.

Unfortunately, no hegemony is eternal.

What sanctions are you referring to?

Too bad we're going to do the exact opposite of all that for at least the next 4 years

So many spies would happily take up that offer.

The US is already the brain drain destination #1. Nowhere else can highly skilled people generate comparable levels of income.

Adjust for living expenses and the situation already looks very different. Then adjust for quality of life...

This has been done before, and America comes out consistently on top. Even the median purchasing power parity (PPP) in the US is frequently ranked highest in the world. The majority of American households in the poorest US states are doing better than the majority of Europeans.

This gets amplified if you're a highly sought after professional. Top senior engineers are getting paid $500k-$1M in the US. These are figures you'll never find in Europe or Asia, not even close. Put on top the rising costs of living, and 45% top tax brackets (France, UK, Germany, Spain), the US is incomparable.

Yes, if you're a professional in high demand, you can live a great life in the US. But how does the quality of life of everybody below the median look like?

> This gets amplified if you're a highly sought after professional. Top senior engineers are getting paid $500k-$1M in the US. These are figures you'll never find in Europe or Asia, not even close.

But what does that buy you really, in a high cost of living area? What if you ever want to do something else? What if demands for your profession change? How expensive is it to raise children?

I have first hand experience of both the US and Europe, and while nominal salaries are (much) lower in the latter, subjective feelings of safety and quality of life seem much more comparable than the numbers might make you believe.

That said, the US system of highly rewarding relatively few people at the top certainly motivates the masses like few others: Most people are bad at statistics and like playing the lottery.

> But how does the quality of life of everybody below the median look like?

This discussion is about whether or not the US is a top brain drain destination. That means we're talking about exceptionally skilled or promising scientists/engineers/doctors at the top of their field. I'm not claiming life is great for everyone in America. I agree it isn't.

> But what does that buy you really, in a high cost of living area?

Look at the PPP in CA. It buys you a lot. People in HCOL cities that manage their finances well can become multi-millionaires in their early 30s. They will already be able to retire in 99% of the world, with enough savings to lead incredibly comfortable and luxurious lives. Meanwhile, people in Europe have on average lower assets and savings, low levels of home ownership, and lower likelihood to retire early at a comparable standard of living. Not to mention the pension crisis many of them are or will be facing in the near future.

> This discussion is about whether or not the US is a top brain drain destination.

And my point is that this is increasingly the case due to a combination of inertia and people’s bad EV calculations:

> They will already be able to retire in 99% of the world, with enough savings to lead incredibly comfortable and luxurious lives.

Just demographically, this will never be viable for a large fraction of the population, regardless of any economic concerns.

This leaves truly exceptional talents, and those that incorrectly assume that that’s them.

And this isn’t even considering how AI is potentially going to shake up knowledge work.

Have you lived in Denmark, Japan, China, Netherlands and some other countries in the past 10-15 years? I really don’t think you weigh in people’s personal preferences and general quality of life into your equations.

There is a very big reason why there’s no more large swaths of immigrants from European and some Asian countries flocking into the US. Yes there is some, but the times when it was objectively much better to live and grow in the states is in the past. Money is really not the only thing people care about, but it’s hard to understand for people for whom money is the only thing they care about.

>There is a very big reason why there’s no more large swaths of immigrants from European and some Asian countries flocking into the US.

Yeas, and this reason - US visa is one of the hardest to get.

Denmark is much much harder than the US.

How so?

    > The majority of American households in the poorest US states are doing better than the majority of Europeans.

I'm so tired of this trope on HN. It comes up over and over again, but never considers non-economic quality of life issues. Take for example public schools: They are awful in poor US states, and good-to-excellent in most highly developed European nations.

I swear, none of these people have been to Louisiana, West Virginia, or any of the empty-looking cities that used to be lively 50 years ago. And I’m saying this as a person who isn’t American, but wanted to check it out myself before I made assumptions about the world.

Living in New Orleans right now I concur.

Also GPD per capita is a terrible measure of standard of life considering 40k in Louisiana when you need to pay for most of health care education etc. isn't that much.

The average life in these countries is undeniably better, even if poorer on paper.

Money buys you freedom to live you life anywhere you want, and do whatever you want. Do you think grinding away for low pay until your mid 60s, only to end up facing a collapsing pension system in your final years with little savings is the best way to spend your time on earth?

Also how can a person that hasn't experienced the economic freedom the US provides to top talent accurately judge if their country of choice is better? I would like to see the statistics on SWEs that got wealthy in America, that regret moving to the states and would prefer to revert all those years.

(I've lived in Europe for most of my life by the way. Lots of good places to retire, but mostly poor choices for spending my productive years there.)

My friend, not everyone makes 150K/year. Like yes, we can do it, and choose our freedom because of the industry we live in. But you might be very disconnected from an average person’s life. Average or poorer person in the US does not get to choose where they retire either. I promise, 70 year retired old ojiisans over here in Tokyo don’t think their life would’ve been better if they lived in Oklahoma.

You guys think everyone wants the same as you do, but it really isn’t like that.

> Average or poorer person in the US does not get to choose where they retire either.

I've already addressed this in another thread. We're talking about brain drain. That means we are talking about highly skilled professionals for in-demand fields that can easily get this level of pay.

A skilled senior SWE can very realistically demand $300k+ comp in US tech companies. In the startup space $150k + equity has become table stakes, and their hiring bar is often significantly lower. These are not anomalies, tech companies employ hundreds of thousands of engineers.

> You guys think everyone wants the same as you do, but it really isn’t like that.

Ok, so tell me, what are things people want? Because people in the aforementioned circles can retire in their 30s, and spend the rest of their lives traveling the world, taking care of their family, and pursing their passions without worries. Is that somehow controversial?

For an entire career and beyond (to support themselves after retirement)? For their spouse and children too?

If you're single and flexible to move away if any part of that calculation changes it's definitely a great deal, but the more attachments you have in life, the worse the deal becomes arguably.

> Because people in the aforementioned circles can retire in their 30s, and spend the rest of their lives traveling the world, taking care of their family, and pursing their passions without worries. Is that somehow controversial?

I think you have an unrealistically rosy view of the average outcome here. I work in this field, and people "retiring in their 30s and traveling the world while providing for their family and pursuing their passions" is still an extreme outlier.

> Ok, so tell me, what are things people want?

Maybe I'm an outlier here too, but personally, I value long-term societal stability and safety quite highly, as I don't have many illusions about being able to buy my way out of certain kinds of problems caused by a large and increasing rift between people of various income levels.

It's not just money. There's another aspect which the US has that edges out the competition. The fact that everyone is treated as an American in the place without racism/xenophobia. This is a huge benefit over impenetrable countries like Denmark/Netherlands.

Half of your country actively rallies on the idea of sending back Chinese, Indians, Mexicans and etc. I think you just live in a bubble or educated circles where that’s bot tolerated, but that’s not the experience of every single immigrant.

Immigrants from the Global South definitely have it worse in his examples, the Denmark and Netherlands, where even liberal parties have turned against immigration. The Republicans want to deport illegal immigrants, starting with those who have criminal records, they haven’t pursued anything as perverse as Denmark’s “Ghetto Law”. PVV’s platform in the Netherlands is self-explanatory.

Immigration remains overwhelmingly popular in the US, much higher than other places in Europe and Asia.

https://eig.org/hsi-voter-survey/

I'm saying this as an immigrant, muslim name but white.

You've no idea of the blatant ongoing racism in Europe that's so normalised it's basically a non issue. Like Zwarte Piet in Netherlands.

The xenophobia in EU is head and shoulders above the US. I've lived in both places for years. In Germany for example you will never be considered German even if you were born in the country.

Was. Was the brain drain destination #1. It's been Europe, India and SE Asia for a while now.

Not everyone with a brain just wants more money. Some want to do interesting research that doesn't have a short term commercialisation strategy.

Do you have the statistics to back this up?

Do you have the statistics to back up the opposite argument ?

a chinese student graduating from Harvard is 60% likely to voluntarily return to china. its on borrowed time now

I agree. One other thing that the US has that no other country has is freedom of speech.

My entire family was killed in my previous country for daring to speak up against the leader at the time. It has something that has shook me to my core. Now, even to this day, I cannot find another country besides the US who not only respects freedom of speech, but encourages it among its residents. I will not move to another country no matter how drastic it gets.

> I agree. One other thing that the US has that no other country has is freedom of speech.

Unless you speak ill of america's greatest ally.

This comment is not going to age well.

Aren't colleges and universities liable for any "illegal" protest on their grounds, since yesterday? Whether a protest is illegal or not will be decided by the local politburo office.

Not under this president.

I'm not convinced that that's sustainable though, and I think it might be an artifact of the dollar reserve currency status etc., because US firms cost more for a given yearly profit. Just look at Boeing vs Airbus.

I also lived better in Sweden when I was a PhD student, than I would have if I went to Washington and took an H1B job for 100k. I think the cutoff would be at somewhere soon above 120k. Maybe at 130k-140k, I would be able to live in Washington approximately as well as I could live in Sweden as a PhD student, but it would substantially more stressful. Maybe 130-140k isn't much to long-term Googlers, but I think this is closer to salaries that people actually pay for H1Bs than these 500k+ salaries.

The built environment in the US doesn't really correspond to the nominal prices, so in a way, America is only interesting economically if you're planning to go back home.

seemed like a good article until he went into "back the dollar on gold" and revealed he was a total crackpot, sad

Care to elaborate? It’s thought provoking as a mechanism to reduce all of this zero sum (or even worse, parasitic) effort that dominates our system.

Making an inelastic resource (gold) the unit of exchange in a growing economy is a recipe for deflation. You don't want the most economically sensible decision to be holding onto capital, since that results in precisely nothing useful being done.

Deflation is fairer and reduces moral hazard in finance. The weak point of gold is that it’s too slow to settle transactions (you have to move it), so a paper gold system on top of it inevitably arises. [0] “broken money” by Lyn Alden

Deflation (defined as, the value of the currency goes up with time) means that prices go down with time. This however tends to accumulate wealth and not have it move around in the economy (it being more remunerative to hold on to your currency because its value increases). This makes it harder to run an economy because eventually, with a fixed supply, all the currency gets hoarded and only a bare minimum circulates to buy essentials.

A little inflation means that your currency buys stuff _today_ that's worth more than hoarding it for _tomorrow_, so you spend, vitalizing the economy.

The reality is, it needs to be balanced. There needs to be enough money in circulation such that economic activity is not stymied, but not so much that it starts price wars.

Kinda like blood sugar!

You have it reversed.

Currency inflation leads to unfair distribution because the value of financial assets grows faster than the real economy (it inflates).

Currency deflation benefits the poorer. As technology and productivity grow, it costs less to produce goods, so their prices should decrease.

The currency hoarding behavior that you describe is no different than today’s financial investment.

It is trivially easy to avoid the effects of inflation by investing - if you have assets to invest, that is. But if you live month to month, you get screwed by inflation, because your salary is sticky as prices rise.

What if everybody's correct in some way and things like this are so uncertain simply because a "consumer" economy no longer bears much resmeblance to a "producer" economy.

This seems to be an orthodox opinion I see often, and I get the intuition. But time preference is a real thing. Tech is the easiest example. People buy tech that they don’t need that will be significantly cheaper in the future. I’m not a historical expert, but this specific point didn’t seem to be an issue during the time periods we were on the gold standard.

Having lived through the 1990's, "Deflation = bad" is a claim I am very skeptical of.

In the 1980's and 1990's computer industry, your dollars could buy a lot more megahertz or megabytes every year.

If the "deflation = bad" people were correct, everyone should have held onto their dollars waiting for next year's tech, knowing it would be a lot better than this year's tech. No one should have wanted to buy computers, and the tech industry should have been in a gigantic depression.

There's a difference between deflation due to productivity growth and deflation due to lack of money. Deflation is good if it's the result of us producing more of a thing better and thus driving the price down.

Broad-based deflation due to a lack of money to buy goods and services is bad.

There's a history.

How does the rate we pull gold out of the ground relate to the rate of production and value growth?

The United States tried this as a multi-decade experiment in the late 19th century. Greenbacks were taken out of circulation in order to increase their value in comparison to gold. It led to tightening of credit and was a drag on investment. Workers most frequently struck due to wage decreases. Farmers and other small business owners would frequently be unable to expand due to credit being unavailable.

The United States has attempted several times to use a gold standard. However, it results in unacceptable outcomes every time. In the 1970s, President Nixon led the US to leave the Bretton Woods system of fixed exchange due to trading partners converting excessive amounts of gold (specie). It has been found time after time that central banks need to adjust the value of their currency to account for financial shocks with countercyclical monetary policy.

US is prosperous because it produces the world currency. Need to buy steel? Just print more dollars and buy it from any other country. Need to buy food? Ditto. Need to buy brains? Ditto.

No working is required, when you can print any amount of currency and can buy anything from any part of the world with it. Yes, printing speed up inflation a bit, but unlike in any other country of the world, when US is printing dollars, they spread the effects of inflation on all of the world: US becomes richer and all other countries a bit poorer.

This is why linking dollar to the gold would kill US prosperity. Also, one reason is why US is so heavily militarized and is fighting wars all over the world: you need to constantly threaten all the world so that they can't even think of choosing any other mean for world trade other than dollar.

> This is why linking dollar to the gold would kill US prosperity. Also, one reason is why US is so heavily militarized and is fighting wars all over the world: you need to constantly threaten all the world so that they can't even think of choosing any other mean for world trade other than dollar.

Bingo ! Many people conveniently overlook this reality. Most countries don't simply choose to trade and hold USD because it's the most stable currency pegged to a stable, rationally driven economy. No, it's because if they choose not to, they suddenly become a "nuclear threat to world peace" and we magically find non existent WMDs. It's a bullying tactic.

Making money with money (a.k.a. finance) existed long before fiat currency, you can't get rid of it by going to the gold standard. It would be much more effective to ban speculation in investment markets (calls and puts).

For me it was “Socialism Bad”

Especially since the core of the article is China is surpassing the US.

That's what kills me about these sorts of takes: the action plan is on the money, but their ideology shows they haven't actually learned anything of value from the failures of the current systems. They're essentially just looking at how others do a thing, rather than also looking at how we do a thing, and why we do that thing in that way, and what the knock-on effects of that process are.

He gives away the game at the end when he decries socialism (because of course he does, it's practically a Free Space on the "Highly Intelligent Engineer has Opinions on Things" BINGO card) and fingerpoints at Europe, despite China having Communism on some scale yet is also somehow what we should be emulating for growth? It reveals the naivety of his position, assuming he's making the argument in good faith.

But getting back to his action plans (which are, generally, not bad), I totally agree that a good step forward is reforming immigration to promote movement of people provided they're willing to contribute to society. He couches his standards in nebulous vagaries like "production" and "productivity", but the core concept is sound, even if his rationalizations leave a lot to be desired. We should be courting smarter and harder workers with pathways to Citizenship, not highly exploitable visas like H1Bs or the various farmworker visas, and we should be holding companies' feet to the fire in ensuring imported talent stays here, on American wages, in American living standards. I've been screaming the same to my EU friends of late, stating that now is the best time since Operation Paperclip for a foreign power to import brilliant talent from a failing state.

On the topic of the EU, something I'd like to challenge is this popular (with laissez-faire Capitalists and Libertarians) narrative that the EU is somehow failing because it hasn't exploded with growth like the USA or China. From what I've seen, Europe has been remarkably stable on the whole (with pockets of success and failure, a la the United States) precisely because it built up modern infrastructure when it could, maintained a diversified economy, and didn't give in to scams or grifts - like the ones he cites in the American economy as artificially inflating the economic numbers to create the appearance of growth where none has really occurred. If we had real growth, like China, we'd have the same amenities - high speed rail, modern freeways, high levels of infrastructure replacement and improvements, and a burgeoning middle class. China built these things as part of its rapid industrialization over the past century, whereas we squandered our post-war advantage on corporate subsidies and hawkish conflicts abroad for decades. If anything, I'd argue that the EU may very well be a model of a sustainable economy of sorts, provided there's not some crisis boiling beneath the surface that could cause a collapse; the people there generally have everything they need, and healthy regulations minimize the risk of exploitative or anti-consumer practices.

But I digress. The TL;DR is that he has valid points, but man does he undermine his argument with the same tired tripe at the end exposing his ignorance on the subject.

“there is more to an economy than manufacturing”

Not really, no. If China cut off the US, for any reason, who gets hurt more? Who has a bigger house of cards to collapse? Who will have a harder time rebuilding?

If the next leader is bolder than Xi, and is of the same kind that once killed tens of millions of people, losing an arm and a leg to behead an enemy might be a viable strategy.

Arguing that manufacturing is strategic is not the same thing as manufacturing being “all that matters in an economy.”

There’s a logical fallacy in your rebuttal.

There are other important outcomes of an economy, like better healthcare, education, housing, and well-being. But it seems like those real, tangible outcomes have become decoupled from “the line goes up” economy.

I think the original reply was itself a strawman of the point the article was trying to make. Manufacturing isn’t the only important thing about an economy but it’s an important one.

I don't think my point was straw-manning the article. The article directly conflates economic output with manufacturing output, by using manufacturing signals (like power consumption!) as a corollary for some hidden, Real Economy.

That's crackpottery. I was succinct in my criticism, but there is plenty of room for elaboration.

If the essay instead took those economic indicators and delved into why manufacturing output should matter more than other output in determining the Real Economy, then hey, we've got an essay to discuss. But just eliding that and saying "manufacturing is real because atoms are real, everything else is b.s." -- that's not really an argument, that's just laying your biases extremely bare. Which I pointed out.

That said, geohot is close to some real points, I just don't think he has the background to articulate it rigorously. And for the record, I do think the US economy is entirely too financialized.

But again, that's a different -- likely better -- essay.

Exactly, people forget we build things for the sake of consumption, not the other way around. You can build a thousand factories for some good but it's dead weight if there is no one to buy their outputs.

The Soviet Union had strong consumption power, but they did not know how to manufacture. The final result was obvious.

I would say that the Soviet Union had strong manufacturing power but they manufactured too many units of things that their citizens didn't want, and not enough of what they did want. By the end they could make more tanks and tractors than anyone needed but household goods were in short supply.

Yeah I think this might actually be backwards; the Soviet Union had explicit production targets, and (iirc) in like the 70s they actually had more industrial output than the US. Remember the "missile gap," when the US was concerned that the industrial might of the USSR would bury the US?

But the output was mismatched to demand; it was a classic example of "when the measurement becomes the target, it ceases to become a good measurement" -- the centrally-planned industrial targets were inefficient, so a lot of that industrial production went to waste.

And to be fair, this is what's hard about economics: you can't just count tractors, or tons of steel, or whatever, as the output of an economy. Because every marginal ton of steel matters a different amount based on demand. The genius of capitalism (yes, I said it!) is it is an extremely elegant system for optimizing an incredibly high-dimensional system with a slippery, dynamic cost function, by incentivizing a bunch of independent agents to collaborate in price setting (and therefore sending signals about production via pricing, vis a vis supply and demand).

This is also why China's economy has done better than the USSR; let's not forget that Deng Xiaoping's "limited market reforms" helped unleash the modern Chinese economy. The structural issues in the Chinese economy now stem from the lack of development of consumer demand, which does echo some of what the USSR struggled from. But China has come very far; the criticisms of its current economy that I like best are well-articulated by Michael Pettis, fwiw. But I'd encourage you to do your own reading and form your own opinions.

How about I put it this way: Manufacturing is the bedrock of power. Everything else above it, particularly fiat currency, is built on that bedrock. While those cards can be mighty attractive, losing the bedrock for any reason would destroy everything.

Apple isn’t going to be worth $3 trillion when they can’t sell an iPhone for the next decade. Heck, General Mills won’t be selling much breakfast cereal, when the parts to the equipment can’t be imported. How much do you think a bare shelves Walmart is worth? Heck, how will American manufacturing rebuild when the CNC motors are made in China? When even a Prusa uses motors from China (LDO)? Will software sales save us with no hardware to run it on?

The value of everything on the stock market collapses in such a scenario, and the power of the US Dollar goes with it.

The endpoint of this argument is pure self-reliance, for strategic reasons. And that endpoint is North Korea.

https://en.wikipedia.org/wiki/Juche

> Not really, no. If China cut off the US, for any reason, who gets hurt more?

China gets hurt more. They are an export economy. US will face some temporary pain, sure, but other countries build stuff as well. Meanwhile what does China do with all the materials piling up, millions out of jobs and a half a trillion dollar hole in their economy?

Exports are a little under 20% of China’s GDP. For reference, they are a bit over 10% of US GDP.

China’s current government quite literally killed 30 million people under the cultural revolution and Great Leap Forward, and until 2015, killed all children past the first.

China is not motivated by what makes economic sense. The party openly says this - the very fact corporations exist is a concession to not having achieved pure communism yet. The party openly hates the fact they need an economy, after having failed for the first few decades to operate without one.

All it takes, quite literally, is one hardcore communist after Xi who isn’t afraid of a second cultural revolution. Maybe a chance to fix all their consumption, housing, and youth issues once and for all in one painful societal restructuring? The very economic and social issues we point to as why they would never do it, I fear, might actually become reasons they will do it.

I swear, “Chinese collapse” has been on the news headlines since 2000s. At some point people need to give up on the idea that their system doesn’t work. Yes, it sucks from our perspective, because we would have less rights and freedom. But quality of life of an average Chinese has been increasing YoY, despite some hiccups. They obviously screw up big time (pandemic lockdowns, current above average youth unemployment), but they don’t mind pivoting hard. Baseless hate when a country fails to compete is just sad to watch as an outsider who has no skin in the game.

It's a coping mechanism that needs to be parroted to keep the people in the west from questioning the status quo. "Look china/russia/iran/india bad ! Sure, we're not doing well and your quality of life is eroding year on year but hey ! In china you can't question tienanmen square so there's that"

It's sad, but as long as people continue to believe in this mythology of "absolute freedom", it will continue to work.

I don't know anyone trying to move to china/russia/iran/india. The outflows however continue to be extensive.

A lot of people are moving to Russia China and India from non western nations that use to send their top talents to the EU/US.

A lot of people are moving to Russia, now? China also has seen their ex-pat communities reduced by 90% since Covid.

ex-pat meaning westerners right ? You do know the world doesn't revolve around the west ?

I did, but those numbers include all foreigners. Where are you getting your data from?

I do think there's some mutually-assured destruction here. If trade truly ends, I suspect it might end in a hot war, and no one knows how that would go. (Though to support some of the comments here, and the implied point of the original essay -- China's manufacturing base becomes much more strategically important in a hot war scenario.)

I mean, we've sort of long assumed that increasing trade ties led to peace, and the detente between the US and China was long taken as proof of that axiom. But morons with half-formed ideas about trade policy can blow up detente in less than 100 days, as it turns out.

> If trade truly ends, I suspect it might end in a hot war

Have two nuclear powers ever gone to war directly?

I'm pretty sure it isn't going to happen because ultimately the leadership on both sides would be assured of being vaporized, and no leader on either side has the guts to actually die in a conflict (especially where there could very likely be no real winner, and no glory, at all).

As long as that holds, we're actually pretty fortunate in that we avoid these stupid types of wars, and we're forced into these frustrating (for chest-beating tough guys) economic rivalries instead.

I daresay the US has all the resources it currently gets from China on its own landmass as well. It’s just not doing anything with it.

>there is more to an economy than manufacturing.

Not really. Most developed economies are basically 70% Baumol's cost disease[1]. The 20% of the American GDP that goes to healthcare, half of the military budget that goes into salaries, public services, the police isn't billed on productivity. Those are non-tradeable services whose compensation inflates with growth in the productivity gaining sectors of the economy.

That's why you can go not to a wealthy Tier 1 city in China, but to a Tier 2 or 3 city and it has better public services despite having like 10% of the per capita budget of a US city. Most compensation is.. fake. If you want to know what an economy does look at the stuff they make.

[1]https://en.wikipedia.org/wiki/Baumol_effect

How is "Baumol effect" different from supply and demand for any limited resource?

Let's say that some new use for copper is discovered, that drastically increases the demand for copper. The cost of existing items that use copper is going to go up, even if those items are no more productive than they used to be, because the new items are now in high demand.

You can see this effect in real life with GPUs; it's much more expensive to buy a gaming graphics card today than it was a decade ago, because GPUs are in high demand for other applications.

So, increasing the productivity of labor in some sector is going to do the same thing supply and demand does to anything else -- the cost of labor goes up, but not as much as the productivity in that sector, and the producers of labor will enjoy higher demand.

>How is "Baumol effect" different from supply and demand for any limited resource?

It isn't, but nominal growth as a consequence of demand without increase in real output makes you no better off, that's the "fake" part. More practical example than graphics cards is houses. Large chunk of the US market, constantly goes up in price, but not because housing is becoming more productive. It's because money from other sectors spills over. Good for landlords, bad way to measure real economic activity. You'd be better off if you could roll houses from the conveyor belt and collapse prices.

Not to shill too hard but was recently in Northern china for a month, mixture of Tier 1 and Tier 2 cities (including cities in major decline [1]).

A lot of folks say China is decades in the future, this is not my belief. They are ahead in some major areas for sure but in other areas they are still a developing nation. China just does it's own thing and doesn't concern itself too much with the whims of the west.

One thing was abundantly clear however, China does not suffer from financially engineered Baumols disease. It was incredibly refreshing to spend time in a "functioning" society. Housing abundance, cheap EVs / public transport, great services, lively small businesses etc (no abandoned high streets).

If I were to guess this is probably because productivity growth so far has been able to keep up with the expansion of money supply. Where as the west tried to print itself out of structural deflation with a decade of ZIRP/QE. How do you avoid deflation in an aging economy? Is it even avoidable? I guess we'll find out [2].

1. https://www.scmp.com/economy/china-economy/article/3133397/c...

2. https://www.wsj.com/world/china/china-xi-debt-economic-plan-...

> But solution point 1 — brain drain the rest of the world — is an absolutely first rate policy. The fact that the US requires newly-minted PhDs educated here to get a different visa or leave is absolutely self-defeating. We should be welcoming skilled immigration from everywhere.

At what quantile of an R1 does graduate education become something other than a visa scam? What domestic student is going to toil for years for poverty-level wages? The further pursuance of policies that are turning research institutions into immigration scams is a bad idea.

>What domestic student is going to toil for years for poverty-level wages?

Do you want entire swathes of the country to have no exposure to higher education personnel?

Ibn Khaldoun said that once a state economics start deteriorating, everyone becomes an expert.

The way I see it, if the markets led by PhD and Noble laureates fails, people start looking for alternatives. Since the "establishment" has been proven useless, the door is open for "anyone" to chime in. The reality is that the economist at the top do not want to see the deficiencies because they have their salaries on the line.

I don't think economics itself has gone wrong -- I think the US economy in particular has done a poor job of distributing the wealth it has created.

Ironically, that has created a populist backlash that has vaulted even worse economic ideas into power.

Anyone read "Capitalism in the 21st Century"? It's long and dense, but it does make some excellent, well-supported points about the structure of an economy that explains the current situation very well with historical antecedents.

This won't do it justice, but: inequality always increases, by definition, if the returns on capital outstrip the overall growth in the economy. (Think through that if it's not obvious; it's literally a mathematical truth.) The book argues that history is a series of long, slow accretions of wealth, with increasing inequality, until some shock (usually a violent revolution) overthrows the old system, resets inequality, and the cycle starts again. The latter half of the 20th century, for the US, was one notable exception: growth outstripped returns to capital, so the benefits of that growth were widely shared: inequality decreased. That trend ended in the ~1980s, and the widening inequality gap has fueled unrest.

And the book points out that we've seen this show before. I think we're in the "history repeating itself as farce" phase, though.

> I think the US economy in particular has done a poor job of distributing the wealth it has created.

The US financial system is structurally orientated towards distributing wealth poorly. It's an unavoidable economic fact that when someone spends newly created money there's a wealth transfer from currency holders to them (that's why counterfeiting is illegal), and in the US means there's a persistent, systematic transfer of wealth from currency holders to the banking/financial system. Which is extremely regressive, as poorer people hold the largest fraction of their wealth in cash, while the middle and upper classes have more of it in assets like housing and stock.

Economists funded by the banking system will try to distract you by arguing about inflation vs deflation, but it's a smoke screen. It's perfectly possible to have a non-regressive inflationary economic system, e.g. one where the government directly prints money and gives it to the poor, and such a system would avoid the systematic transfer of wealth from the lower classes to the financial industry.

I think this comment is a little bit reductive and conspiratorial, even if it gets first-order correlations correct.

You don’t need a conspiracy, you just need a philosophy of small government and low regulation to let grifts expand through the financial parts of the economy. The history of financial regulation in the US is the banking industry finding new ways to evade regulation, which lead to moral hazards and privatized gains / socialized losses.

But it’s not that the “system” is explicitly designed that way; instead, it’s an adversarial system and the US in particular (for cultural reasons) has long favored the vigilante over the regulator.

The story works even without simple Hollywood villains. The system isn’t malicious, it’s just stupid.

Which is a long way of mostly agreeing with you.

(Oh, except on printing money. That’s a surprisingly deep subject that’s often misunderstood. You’re spot on about government-sponsored wealth redistribution, though. Fully on board with that.)

To add to this point: We can look to China to see that the financialization of the economy, like it happened in the US, is not a natural law but can instead be restricted. China has explicitly said that they see the development of financial markets in the US as a problem for the US economy they decidedly aim to avoid.

Stories like what happened to Jack Ma have to be interpreted in that context, I think. In my reading that wasn't about politics at all, but about an unregulated peer to peer lending product (i.e. a tech based loan shark system for exploiting people in need) he was about to release.

People like to forget China was aggressively combating financialization [1] long before Jack Ma was forced to step down. Ant financials ambitions were an absolute disaster in the making [2].

I still remember my wife casually mentioning, back in 2019 or something (well before Evergrande), that China was restricting property speculation. Prohibiting folks from taking out loans on third properties etc. As an Australian this was mind blowing to me, property speculation is a sacred religion there.

I far from agree with their politics on social matters, but their financial regulators aren't asleep at the wheel and haven't been regulatory captured.

1. https://en.wikipedia.org/wiki/Three_red_lines

2. https://www.forbes.com/sites/georgecalhoun/2020/11/16/why-ch...

Most chinese are storing wealth in real estate its the prime investment vehicle. People in china have been speculating on properties for decades. The chinese government realized a bubble was forming because house builders started using crazy leverage. The fact this crazy bubble formed has shown the regulators were in fact asleep.

Regulators caught on since early 2010s, they were just soft because hard messing with wealth.

Before 3RL, RE bubble was being addressed since 2010s, TLDR is policies led to domestic construction slump in 2012-2017 - where indicators like floor space completion and construction employment peaked. ~2017 crack down on shadow banking which drove developers + local gov to increase presales, turning it into a financial instrument to keep the taps going. Then hard 3RL in 2020.

Could have probably smashed skulls harder, sooner, but they've been regulating for 10+ years, developers kept finding loopholes thinking central gov would be soft, until central gov wasn't.

See:

https://www.ceicdata.com/datapage/charts/o_china_cn-floor-sp...

At minimum getting floor space completion to peak in 2014 = mitigated bubble.

E: IMO also important to note 3RL happened AFTER 12TH & 13th 5YR PLAN that build out PRC renewable manufacturing. Reason why 3RL is feasible was it became possible to shift construction to renewable rollout to keep jobs and gdp, minus RE speculation, i.e. why PRC can grow at ~5% instead of 5% + 3% RE speculation. RE was never 30% economy, about 15% + 15% in construction and downstream industries. The 15% RE growth got cut down, but other 15% shifted to growing renewable infra.

Western coverage on this is just terrible.

I think a lot of folks who were dismayed by the 2008 bailouts during the GFC would have a lot of sympathy and respect for whats going on. China didn't bail out, they let them burn.

The deflationary conditions are the next challenge and I'm very interested to see how they are combatted. It's interesting that Xi has come out strongly against Abenomics, and direct cash transfers, arguing that they'd distort things and "breed laziness".

Obviously this is a very unconventional view point, but looking at the financial shenanigans that have happened in the West and Japan over the last couple decades it's hard to argue in favor of the conventional methods.

Big issue is neither approach really increases the velocity of money, and just leads to it ending up in savings and bloating balance sheets. You've got to get the cash moving.

E: I do ponder how much of the deflation actually is an "efficiency dividend" due to the mass adoption of renewables and electrification. Saul Griffith (one of the folks behind the inflation reduction act) is working on a macroeconomic analysis that suggests renewable energy is inherently deflationary. Solar panels cost less as time goes forward but oil always costs more (due to getting harder and harder to extract).

Trend recentlyis producer price index PPI has been falling (i.e. inputs cheaper). Core CPI rising (i.e. minus food+energy volatility, really deflating pork prices from overproduction recovering from african swine fever). IMO proxy indicator that cheap power is driving efficiency divident. Western reporting last couple years fixated on porkflation than deflation due to pork deflation (big part of CPI basket) because... well western media.

My intuition is also that PRC deflation = PRC producer simply better at cheaper inputs and value engineering products. A 10K USD domestic EV today is significantly better than a 10k USD domestic IC from 5 years ago. PRC manufacturing very good at Model T-ing everything. And it's the "correct" model since PRC is large income disparity society. Common prosperity means driving quality/costs down so the 5000k USD per capita in tier 3_ cities have something reasonable to buy. And also makes migrating/sustaining to those cities viable because T1s/T2s are full. It's why we see stats like aggregate sales during major events (11/11) or travel going up, but per capita spend down. Market is creating products forbottom quantiles who are price sensitive to consume. Common prosperity is giving T3+ cities a taste of T1/T2. Get's obfuscated by western reporting because their source in T1 cities are buying less Prada handbags because they have to shut down one of their 3 hotpot restaurants. Also just general PRC branding improving in popularity and domestic blends tend to be cost-concious, this gets labelled as consumption downgrading (and some of it is), but a lot of it is also PRC value-driven products are increasingly competitive with imports. Enough to drive patriotic purchasing. Bonus this means very cost-competitive goods for exports and displacing (western) incumbants on increasingly higher value sectors.

Then add government driven consumption, i.e. vouchers for cars, appliances, tourism, industrial upgrades. Underdeveloped safety net = people will have propensity to save. So more prudent for gov to pull targetted consumption lever, IIRC accounting for gov social transfers on top of household consumption, PRC consumption around OECD average. They can consume more, but not as prolific as Americans unless CCP gets more sectors to extract service rent. Which I don't think they want to, at least not as much as US - crippling education debt not good if you want to maximize broad talent development. The other generic suggestion is improve investment market / financialization, and there's some efforts to. But to be blunt, too much of PRC poor are undereducated and vunerable to... not sound investment. IMO recipe for social disaster when grandma gambles away nest egg on stocks because mass speculation / herd mentality / scams / superstition . AKA shenanigans. So really just leaves household saving what they need, buying what they can afford, and gov boosting consumption via levers, and indy policy stretching more consumption per rmb by making goods better/cheaper.

Three red lines was definitely reactionary and perhaps late, but better late than never. I'd consider any form of intervention/deleveraging prior to a full blown meltdown evidence of being "not asleep". It's very hard to pass laws that negatively impact peoples life savings.

The sibling commenter was nicer about this, but what are you even talking about?

If anything, I think the finance industry is more built on stock markets, real estate, etc., and manipulating or trading on them to extract value from people participating in them, which are generally wealthier people and businesses.

When were markets run by PHDs and Nobel laurates?

They were always run by politicians, oligarchs, capitalists and interest groups.

Long-Term Capital Management [1] was run by PHDs and Nobel laureates. And as far I understood you basically need to be at least at the PhD level in order to be a quaint on Wall Street, and for better or for worse Wall Street runs West's very financialized economy, it's not the politicians (see for example how a recent British prime-minister who had to back up and then quickly resign when her decisions were not viewed under a good light by said financial markets)

[1] https://en.wikipedia.org/wiki/Long-Term_Capital_Management

I think I disagree, specifically because geohot does security. Security is fundamentally about finding the difference between what people wish or think is true, and what is actually true on a mechanical physical real and actionable level. That involves deep analysis skills and disregarding common consensuses in order to rebuild how things actually work from the ground up.

Questioning establishment dogma is largely forbidden, no matter what your establishment is, so it's absolutely worth considering outsider assessments.

Wars test base assumptions. It seems obvious that in a war, ability to take things out of the ground, turn them into bullets/drones/etc, and then get them to the front line is what matters, not what the stock market says, and not claims made with the backing of a military (such as how much the US dollar is worth, or who owns what IP).

I don't necessarily agree with his conclusions, although I understand where they come from.

Your first paragraph is like saying "this train conductor does transportation, so we should let him fly a plane." Perhaps knowing security proves that the author is intelligent, and perhaps some of the same skills apply, but it's not a given that he will have good ideas, especially on fraught topics where it's easy to be misled by ideological bias. The author doesn't deserve any more consideration than any other outsider perspective.

Yeah, there's a known problem with smart, technical people approaching fields about which they know very little. The analysis, to a third party, often sounds smart (the author is undeniably smart!), but without having expert context, you miss why it's so, so, so wrong.

And I'm not even an economics expert. I've just read more about it, or read more critically, than geohot. And I can tell you he's wrong, not because he's an outsider but because his analysis does not make sense.

Copernicus had well-reasoned, self-consistent arguments that incorporated previous models, and produced better results. This doesn't. There is a rubric for how one should score outsider contributions, even if you want to allow for revolutions in a particular field. This essay doesn't rise to that level.

In fact, it matches the first pattern -- smart person outside their field, makes ass of self -- much better.

https://en.wikipedia.org/wiki/Nobel_disease

I agree with your overall point. I think software security in particular is a skillset that is very well suited to deconstructing establishment dogma. The entire exercise of (novel) software security (specifically research) is ignoring what everyone says and asking how things actually work detail by detail. You look for indirect signals that betray other information to help understand underlying structure allowing you to better poke at it with whatever information prodding tools you have access to.

The electricity graph is a very good example of that. A machine plugs into a wall and uses electricity. An aggregate graph of electricity consumption contains the information of how many machines are running in aggregate. You can argue that data is wrong, and I'm open to believing it is since I believe you can have a privately owned power source, but if you don't dispute the data, then a graph of electricity is very much a graph of aggregate manufacturing, also aggregate computing. Aggregate electricity should have a deeply entwined relationship with aggregate economic output. I'm not an economist, so apologies for any misused terms.

Electricity is basically a raw material component for almost any good, even services likely have a relationship with electricity.

I find that analysis cogent and satisfying. I've traveled a fair amount, and the amount of "third world"ism I see in the US is shocking. Before traveling it never occurred to me that San Francisco literally literally has slums. Meanwhile many places in "poorer" foreign countries are nicer than things I can find in the US even if I were to go looking for them.

I do security. It does not make me an expert in economics. In fact I know, even with no real economics education past high school, why going back to the gold standard is generally unworkable.

Well at least he is not writing how he got himself addicted to meth because he wanted an extra challenge

>there is more to an economy than manufacturing

I don't agree with all of his premises or conclusions either, but I believe he's exactly right about the financial engineering and outsized rewards that frequently accrue to non-productive activity in general.

I see the manufacturing fall-off he notes as a proxy for that. It's not the only evidence, but it's one piece.

> I prefer my economic takes from economists, or people who actually study these things.

Keynesian economists and now mmt advocates are the reason that most of the productivity gains of the last hundred years have ended up in the hands of a few hundred people while most struggle.

I'd say it's high time to stop listening to these people who are nothing more than useful idiots of the elites.

Can you give an example of countries listening to MMT economists?

The US since the GFC is probably the most obvious one.

As I understand it, pretty much every developed country employed mmt practice in response to covid.

Now we have (even more) rampant inflation and wealth inequality with no sign of slowing down.

"Pretty much every country" couldn't possibly employ "mmt practice" - a significant number of countries don't have sovereign currencies. That's ignoring the fact that MMT is descriptive rather than prescriptive, it doesn't have practices, it is a theory used to describe how a modern economy with sovereign fiat currency works.

I said developed country which is a pretty major distinction. Maybe my definition is off but it appears to prescribe the printing of currency which is consistent with what we've seen in most major economies and low and behold - we have rising inflation and wealth inequality.

Most of Europe doesn't fit in with your idea of "developed countries" though. Printing currency in order to have more money is as old as currency itself, what does that have to do with MMT? Give me a citation or quote where someone is advocating just printing more money as the MMT solution to anything.

I see, by “MMT” you mean quantitative easing. Not really the same thing.

Yes, please. But you know, these days, everyone is doing their own research, and think they nailed it. But it's often sloppy research, unfunded arguments, etc.

Just looking at the map in this article, and whatever source this comes from (some people don't seem to bother sharing sources) - it seems not accurate. (e.g. why is Greenland a different color than Denmark...)

I don't think economists overall, even when generalizing, have a good track record. Too often hidden interests modify the core of their messages. Krugman for example has a poor record on predictions, not sure about the other ones.

That said, this isn't all "gold" either in my opinion. Money is still tied to productivity. At least it works as long as people believe debts can be repaid. If they wouldn't, there would be runaway inflation.

It is more sensible to back that debt with productivity or "economic potential" instead of gold, but the idea isn't that far off as people generally say it is. In general it still is more loosely tied to real productivity though and that is a problem. The solution isn't to return to gold backing though.

And there is a development of poor economic ideas, like that creating debt is always good on a national economic level. You should never neglect to mention that this new debt would require something like a hegemonic military position to underline the "securities" of said debt.

The interesting question would be how to tie the currency to real productivity in a way that makes financial engineering, and fraud unattractive.

Not a crypto shill but proof of work isn't so terrible, particularly something ASIC resistant. Energy isn't such a bad thing to peg your currency to (lot more flexible than gold). But nonetheless you still end up with a lot of weird distortions.

The legacy of ZIRP, and the effects of decoupling the financial and real world, are going to be felt for years to come.

I always find gold weird. It has value for exactly same reason any money has. People believe they can later trade it for something else. And main argument for proponents seem to be that it was always valuable so it should also be now and in future.

And when market changes drastically(extra gold, or lot of removed supply). The value also swings a lot. Possibly even more than with other currencies.

Some level of floating currency is clearly most reasonable solution. But just how is still very open question.

“Some level of floating currency is clearly most reasonable solution. But just how is still very open question.”

I think the answer is to tie it to lifespan.

How many years does it take for a family to purchase a home on the gold standard? 200? 350?

In our time, we have turned the dial so far that some families can purchase a home in five years.

So it becomes a question of expansion over time for real people - and nobody wants to live in a world where it takes 400 years to save for a house.

Perhaps, however, it should take more than five…

> there is more to an economy than manufacturing

And what would that be? "Services"? The author tried to explain how that is basically a scam.

And, getting back to our present, hobbes-ian world, services won't help you put tanks on the ground and airplanes in the air in the event of a grand war, you need a pretty solid manufacturing base to back it up, you need to be the "arsenal of democracy".

It ain't necessarily gold, but a dollar 'IOU' in the end should give the holder something to concretely purchase besides military equipment.

You can argue dollars can also buy 'IP', but IP is virtual and only as good as the police and military enforcemennt of its regulation.

You can argue dollars buy oil, but once again only because of military enforcement of the imposed rules of not to trade in other currency.

In the end an empire based on massive consumption of the world's resources in return for not much else besides the threath of 'take this paper or we bomb you' will not hold.

As for the braindrain. This was/is still a huge thing. But it hinges on the desirability of attrackting the right brains. If you abandon meritocracy as the US has been speedrunning, why would a capable person want to go/stay there? Seems like the attraction incentives are there more for the subpar performer in the 'modern' US.

> I prefer my economic takes from economists, or people who actually study these things.

I think the ideas are interesting and worthy of discussion. If you want an actual credentialed economist talking about similar issues — here’s one: https://www.yanisvaroufakis.eu/2025/02/21/donald-trumps-econ...

But you need to recognise that there is an “orthodoxy” and challenges to that. You aren’t going to hear the questioning of the status quo without looking outside the “establishment”. Here’s a taste (note that Yanis is old school left as far as politics goes)

“Faced with President Trump’s economic moves, his centrist critics oscillate between desperation and a touching faith that his tariff frenzy will fizzle out. They assume that Trump will huff and puff until reality exposes the emptiness of his economic rationale. They have not been paying attention: Trump’s tariff fixation is part of a global economic plan that is solid — albeit inherently risky.”

I like Varoufakis; watched a short video interview he did just a few days ago. I doubt he'd agree with geohot's take.

Oh definitely, he would not agree with the proposal, but the problems identified I think he would. That’s why I’m saying the general ideas are worth discussing.

What is a good economy and what's the purpose of economy?

Arguably, the economy just is. It has no purpose, other than what it does[0].

It's not like anyone designed it, or has any control over it. Some people are in position to make adjustments, nudge some aspect of it towards a desired goal or away from undesirable one, but there's only so much they can do - it's all strongly path-dependent.

Put another way, the shape of the economy is just an exercise of descending down the gradient. Any individual or group has very little control over this, and major changes to the economy basically only happen when war or technological inventions reshape the entire gradient.

--

[0] - https://en.wikipedia.org/wiki/The_purpose_of_a_system_is_wha...

Many countries in the former soviet block would very much contradict this take.

Entire economies were indeed planned and designed, and their shape was controlled and changed at will. Individuals and groups had control, and did do major changes, including but not limited to forced resettlement and labor camps.

You can of course argue that this ended almost universally in failures, but people did try, and the amount of control over economies is very much a spectrum.

I don't disagree - in fact, this is a great study. It shows both just how much it takes to have any noticeable, direct control over the economy, and also how little it amounts to anyway.

Specifically, to have this level of control, you basically have to go full-totalitarian and rule with iron fist, and sustain this rule even as The Economy pushes back, in form of unrest, civil war, revolutions, military coups, as well as sabotage or direct attack by foreign forces. Yes, all this is part of the economy too. And, if you somehow manage to keep control in spite of all that, you'll quickly see the rest of the world, with its uncontrolled economy, zip past you in terms of wealth and power, and find yourself at its mercy.

Fundamentally, people want to trade; they both need this to survive and want it to improve their lot. If you make trade hard for them, they'll invent workarounds - alternate currencies (see e.g. use of dollar in the soviet block to work around rationing), barter, smuggling of goods; if you crack down on it, they'll conspire to depose you - and yes, even your military and security personnel, at every level, would like to make the lives of themselves and their families better too. There's only so much blood you can spill before you run out of people to kill, or out of goodwill of people doing the killing. And, as history shows, The Economy will win anyway.

As for sane, free, democratic countries - there's shit all you can do there, as the economy will push back through support of the voters and other politicians, strongly limiting the kind of decisions that are possible to implement. Try to make too big a changes, you'll get sidelined and removed from position of power.

> I prefer my economic takes from economists, or people who actually study these things.

hows that going? economists have been giving advice to policymakers for decades, and we have a widening gap between the haves and the have nots, society increasingly in debt, etc.

Maybe economists have it wrong.

The gap between haves and have nots is more related to politics than economics IMO. It's about how the value is (re)distributed.

Specifically, krugman believes that inflation is required to confuse laborers to stay in their jobs and not take pay cuts (sorry, can't find ref), which creates labor stability.

so yes, it is about economists. interest rate policy is crafted around this principle and designed to screw the have nots (it is not only krugman, it is encoded in the fed's dual mandate). since every country has a central bank with a similar mandate its hard to know if gettimg screwed is inherent in captalism or if it's only a feature of central bank capitalism.

It's maybe telling that the nordic central banks have the lowest interest rates in general

> The gap between haves and have nots is more related to politics than economics IMO

in human history there have been few societies that haven't had a widening gap; gaps typically have contracted during times of revolution. no social democracy in the current epoch doesn't feature a widening gap, so i would doubt that active redistribution helps all that much (inflation is a compounding effect that overtakes all redistribution)

Citation:

https://archive.nytimes.com/krugman.blogs.nytimes.com/2010/0...

He is explaining a market dynamic, not prescribing a political policy. He's correct: with zero inflation, normal market dynamics means that some jobs become less valuable over time, and others become more valuable. This is natural progress caused by all kinds of factors like scientific advancements. In such an environment, it is very difficult for employers of the now antiquated jobs to cut wages. So they simply cut jobs instead, leading to higher unemployment. Inflation mitigates this effect by effectively giving workers of antiquated jobs pay cuts (in real terms) rather than firing them. What politicians do with this knowledge is a policy choice. You are shooting the messenger.

You cant be serious. Inflation is a policy. it is mandated in the fed charter. and at the end of the article, he says "let's have more inflation". he is prescribing it.

> rather than firing them

Absolutely nuts outcome. why dont we enable capital to be lazy terrible dishonest management instead of having them actually respond to market forces with hard truths and look their employee in the eye and fire their employee. what could go wrong with this sort of social policy?

I strongly disagree with your policy prescription. I would prefer lower unemployment. Workers are still free to leave their jobs and seek out better wages. It's just that they're no longer forced out, and I think that's an objectively better outcome.

well im sorry your worldview has been captured by depressing corporate fetish of measurement and Goodhart's law.

imagine a society where not everyone had to be employed. some could afford to stay at home and take care of the kids, or take care of someone else's kids, the elderly, or just do random social improvement activities.

well in a society incentivized to maximize the employment statistic, the society will craft policies to incentivize people to be employed, and a lot of unemployable social good will be imobilized and the capacity to do it will be undeployed. by far the worst mechanism to do this is inflation, whose mechanism of incentivizing individuals to be and stay employed is a compounding treadmill which if you fall off, youll be homeless or foodless or both.

It is also that we can't see the counterfactual of letting the banks fail in the Great Financial Crisis.

If all the banks failed we would certainly have a more equal society in 2025.

It is really hard to say though if spending my 30s and 40s largely in a depression would have been worth it just from a personal standpoint.

Imagine instead of the boom of 2010s we had a depression.

Rather intellectually dishonest for a technologist to complain about this really.

> economists have been giving advice to policymakers

Exactly advice.

Which is then promptly ignored because the rich are a uber-powerful voting bloc.

voters don't run the fed (or ecb). it's specifically the institution of policymakers that is the most insulated from voters.

Most of those economists are political propagandists first and academics second. Unfortunately, there is no way of avoiding politics so all work gets tainted. If psychology has a reproducible crisis, economics has an integrity crisis.

To be clear, I am talking about the ones who get the limelight, no all of them, in general.

Uh oh, go read Taleb if you want to know about economists. They are also behind some of the chaos we have today.

> I prefer my economic takes from economists, or people who actually study these things.

Hmm

> you’re better off reading Krugman

It used to be kind of a meme to make fun on how wrong Krugman was but now it's kind of like beating a dead horse.

https://foreignpolicy.com/2019/10/22/economists-globalizatio...

https://www.theguardian.com/commentisfree/2018/jan/10/paul-k...

In particular, Krugman was the flag bearer of "countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt". (paraphrasing) This was incredibly wrong. It ended up in sky high debt and now interests on it are non-zero. And most of the added money ended up in the top 10% making inequality much, much worse.

Also, his article on why the internet is going nowhere. Definitely missed a few things

Krugman discussing the Internet might be like geohot discussing economics.

Or are you referring to the fact that he said it didn’t show up as having caused growth in the underlying economic data? I think he was pointing out something quantitative at the time, and in recent years he speculated that the strong growth in US GDP was finally reflecting efficiency and productivity gains from IT and the Internet. (The US’s strong growth until very very recently was an outgrowth of strong and rare increases in worker productivity.)

And that sort of thing is predictably wrong. It's premised on the combination of low interest rates and a lack of inflation, even though low interest rates generally cause inflation.

As soon as you get inflation, keeping interest rates low would make it worse, but raising them explodes the interest rate on the debt. And your other alternative to paying the high interest is to print the money to pay the debt, which also worsens inflation. So taking on that much debt is just a bomb that goes off as soon as inflation becomes non-trivial, and on top of that, is a thing that generally causes inflation.

To understand how people like that succeed, realize that there is always a market for someone who will tell you what you want to hear.

I think you’re confusing correlation for causation.

I trust a Nobel Prize winner has thought through it more deeply and integrated the causes and effects more than most random internet commentators. I am happy to report that “low interest rates” do not cause inflation by themselves on any scale less than a decade. Source: 1995-2021.

What actually causes inflation is more a function of overall demand and supply in an economy. Interest rates have an indirect effect on that balance that can also have higher or lower leverage depending on a lot of other factors.

This is an important point, and thanks for pointing that out in this discussion.

The reason why raising interest rates breaks inflation is usually because it chokes off economic activity to a point where labor ceases to have bargaining ability to ask for higher wages, which then chokes demand, which then helps bring supply and demand back into equilibrium and breaks the inflationary spiral.

It's a mechanism that is quite clear, but also rarely discussed in polite company, because "breaking the bargaining power of labor by intentionally choking economic activity to create enough unemployment" is, when spelled out, prone to creating pretty emotional reactions.

I don’t think you are going to convince people to start liking or agreeing with Paul Krugman with your posts. People criticize him because they have read his stuff. The dude has been a very public figure for a very long time.

At some point “Actually he is good and strong and smart and he is my friend” posts start sounding more like a fandom argument than anything actually salient to a discussion about any particular economic subject.

> I am happy to report that “low interest rates” do not cause inflation by themselves on any scale less than a decade. Source: 1995-2021.

Interest rates in 1995 were about average, not particularly low. The zero interest rate period really started at the end of 2008 in response to the housing crash, with a very specific goal: To counteract the deflationary effect of the housing crash.

A major deleterious effect of that policy was to effectively re-inflate the housing bubble, which is now Causing Problems. But it was quite effective at doing the thing it does, which is increasing the rate of inflation relative to the alternative. When the rate of inflation would otherwise have had a minus sign in front of it, that can be what you intended to do, but that doesn't mean that's not what it does.

Krugman is also the guy who said that minting a $1 trillion dollar coin wouldn't be inflationary.

That was in response to the artificial debt ceiling. The coin was to be “deposited” and used a justification for why there didn’t need to be a vote to lift the debt ceiling for funds Congress has already allocated.

Conflating that with Keynesian principles is false. He didn’t propose that the trillion dollar coin would ever affect actual spending.

You’re describing Modern Monetary Theory (MMT), or really the parody of it that was popular in discussions online.

Krugman actually generally felt it went too far, and was not a proponent of it.

There is some similarity to his making fun of people worried about “bond vigilantes,” iirc. But I don’t think your characterization of his positions is accurate.

Krugman and Pettis are among the small group of economics / finance people I follow. Do you have any other recommendations of people to follow?

Regarding Pettis, I still haven't decided whether I agree with (and understand) his worldview.

I took Krugman's advice to read DeLong at one point and don't regret it, though he's not on my regular rotation:

https://braddelong.substack.com

Oh, and of course I read Patrick McKenzie:

https://www.bitsaboutmoney.com

And subscribe to Bloomberg's Matt Levine's "Money Stuff" newsletter and podcast:

https://www.bloomberg.com/account/newsletters/money-stuff

The issue with mainstream economy is that it is way too abstract. It does not discriminate between USD 100 worth of marketing consulting and USD 100 worth of crops.

Yes, water it cheap. But you die if you can't access it for just a couple of weeks - this is a risk based approach. And this is something traditional economists do not look at too much.

People like Krugman are one of the reasons USA is in a hot mess and wealth has concentrated into a select few.

Neoclassical economists have been selling themselves as “scientists” (think physicists) for decades and their theories are cited as reasons for economic policies in the USA.

One of these days I’ll write a post on it. But one of the areas they get wrong repeatedly is on the minimum wage.

Neoclassical economists would argue that increasing minimum wage ultimately hurts the people it’s trying to help. For example, by increasing minimum wage you would see a decrease in businesses and/or number of jobs available. In neoclassical theory and “Econ 101”, they would chalk it up to supply and demand.

However, this has been disproven in regions or states where the minimum wage has well exceeded the federal minimum wage. Take Seattle, WA for example where min wage is ~$20/hr. Local restaurant industry didn’t collapse. Region itself didn’t collapse. Sure jobs or businesses closed (Subway franchises, lol), but were eventually replaced by ones that could compete. Likely local businesses. And since all businesses pay the same wage to remain competitive, workers get more money in their pockets. This leads to increased spending by those same people.

There’s a ton of other factors as well but it’s well beyond commenting here.

>economists, or people who actually study these things.

From my experiences over the decades, the Venn diagram that includes both and have worthwhile understanding is a small minority of either group, and even smaller when you consider the total of those outside the set as the mainstream.

When this showed up on HN, there were no comments for quite a while.

I had casually heard of Hotz as a recognized hacker, interestingly one who was respected for figuring things out that other people could not. But with no real familiarity, I couldn't recall what he had hacked or where he had worked. Maybe I had retained the impression that he started out quite young.

And then he comes out with this.

Last time I heard of him, I knew he was smart, I just didn't remember why any more.

This time it's different.

Something must have escalated.

All I could think of now was "How did he get to be so smart?"

That would have been my entire comment, which I didn't post because I thought it was not very substantial, and I was wondering if there would be any comments anyway. No interest was being shown at all.

Study takes many forms and some people can figure things out better than others.

No one person can solve all the problems, or even recognize them, and when you start looking from fundamental principles you can end up so far off the mainstream that there is overwhelming misunderstanding that can not be overcome. Any mainstream can look so sensible across-the-board because the experts are standing on the shoulders of those who came before, and some of these are lifetimes of intense study. It can add up to more than one person can usually do in a single lifetime themself.

But if the foundation is wrong to begin with, or turns out that way later, it can be like a pro-cheerleader pyramid where the top rallying cry comes from someone who can still not see out of the pit of their own making, not actually elevated above the crowd like it appears. What could be incorrect about all the shoulders they are balancing on and the adoring crowd of high-dollar ticketholders to boot?

One thing's for sure and I don't think it's the title by accident.

"The Demoralization is just Beginning"

I've seen this movie before.

He doesn't even try to discuss this main point at all. People are nowhere near ready for that, look at the comments, many from quite educated positions pooh-poohing him from different directions.

All anyone can do in a short blogpost like this is throw out a little evidence and people can decide for themselves how demoralizing it already is, or how it might turn out.

Which is what people are doing, as righteously as they can, bless their hearts.

So my advice to Hotz at this point is keep doing what you are doing, and illegitimi non carborundum.

No different than the comment that popped into mind at first, now just a little more substantial than a quick drive-by.

They really should, but nobody listens to economists :(

If they did, we'd have had a land value tax for a century by now...

As a quant who went back and took the PhD economics classes, I can tell you that macroeconomists are not experts. The number that predicted the Great Financial Crisis is a handful. They study these things, but they know little.

The microeconomists know a bunch and have some powerful mathematical tools. I have some confidence in those studying trade and cities. But comparing and measuring countries is messy and hard.

And I totally agree we should lure other countries’ brains here. The return on investment for a STEM degree is about 3 times the stock market index and we should get as much as we can.