Comments on: "Distribution is the core of the problem we face."

"Distribution is the core of the problem we face."

kliuless — Tue, 04 Sep 2012 00:20:53 -0800

Trade-offs between inequality, productivity, and employment - "The poor do not employ one another, because the necessities they require are produced and sold so cheaply by the rich. The rich are glad to sell to the poor, as long as the poor can come up with property or debt claims or other forms of insurance to offer as payment..."

...in a zero-sum contest for relative advantage among producers, abundance becomes a threat when it can no longer be sold for high quality claims. Any alternative basis of distribution would undermine the relationship between previously amassed financial claims and useful wealth, and thereby threaten the pecking order over which wealthier people devote their lives to stressing and striving. From the perspective of those near the top of the pecking order, it is better and it is fairer that potential abundance be withheld than that old claims be destroyed or devalued... As polities, we have to trade-off extra consumption by the poor against a loss of insurance for the rich. There are costs and benefits, winners and losers. We face trade-offs between unequal distribution and full employment. If we want to maximize total output, we have to compress the wealth distribution. If inequality continues to grow (and we don't reinvent some means of fudging unpayable claims), both real output and employment will continue to fall as the poor can serve one another only inefficiently, and the rich won't deploy their capital to efficiently produce for nothing. Distribution is the core of the problem we face. I'm tired of arguments about tools. Both monetary and fiscal policy can be used in ways that magnify or diminish existing dispersions of wealth. On the fiscal side, income tax rate reductions tend to magnify wealth and income dispersion while transfers or broadly targeted expenditures diminish it. On the monetary side, inflationary monetary policy diminishes dispersion by transferring wealth from creditors to debtors, while disinflationary policy has the opposite effect. Interventions that diminish wealth and income dispersion are the ones that contribute most directly to employment and total output. But they impose risks on current winners in the race for insurance.

Four Futures: "There are therefore four logical combinations of the two oppositions, resource abundance vs. scarcity and egalitarianism vs. hierarchy." more on 'fiscal' policy -A Conservative Defense of a Jobs Guarantee Program [1,2] -An Electronic National Market for Efficient and Variable Publicly Directed Spending

In this essay I propose that the central bank be freed from its role of using interest rate policy to support aggregate demand. Instead, a truly variable public spending program is suggested to regulate aggregate demand. The program should be running constantly in order to minimize the time delay of fiscal responses. The amount of spending is variable and can be automatically computed from the realized nominal GDP so as to target a fixed growth rate for the nominal GDP. In order to gain popular support and avoid the pitfalls of traditional Keynesian stimulus programs, I propose that an electronic national market be set up to give voters direct control over where such stimulus spending is applied.

more on 'monetary' policy -Bernanke on the defensive -How about quantitative easing for the people?

One such radical measure is too controversial for any policymaker to mention publicly, although some have discussed it in private: Instead of giving newly created money to bond traders, central banks could distribute it directly to the public. Technically such cash handouts could be described as tax rebates or citizens' dividends, and they would contribute to government deficits in national accounting. But these accounting deficits would not increase national debt burdens, since they would be financed by issuing new money, at zero cost to government or to future generations, instead of selling interest-bearing government bonds. Giving away free money may sound too good to be true or wildly irresponsible, but it is exactly what the Fed and the BoE have been doing for bond traders and bankers since 2009... Suppose the new money created since 2009, instead of propping up bond prices, had simply been added to the bank accounts of all U.S. and British households. In the U.S., $2 trillion of QE could have financed a cash windfall of $6,500 for every man, woman and child, or $26,000 for a family of four. Britain's QE of £375 billion is worth £6,000 per head or £24,000 per family. Even if only half the new money created were distributed in this way, these sums would be easily large enough to transform economic conditions, whether the people receiving these windfalls decided to spend them on extra consumption or save them and reduce debts.

Monetary Policy, Fiscal Policy and Inflation: "the absence of inflation is not just a matter of the market trusting the US government to take care of its long-term structural deficit problems – uncertainty and the 'safe asset' status of the USD greatly diminish the efficacy of the expectations channel" [1,2] more on (hyper)inflation -Great hyperinflation episodes in history — and what they tell us about the Fed -Hyperinflation and War -Why you won't find hyperinflation in democracies: "hyperinflation is caused by many things, such as losing a war, or regime collapse, or a massive drop in domestic production. But one thing is clear: it's not caused by technocrats going mad or bad" China, dollars, gold, and a theory of relativity

Imagine that the number of dollar liabilities circulating through the system is actually akin to a dollar rationing system. At any particular time, there are either enough dollar rations to match the number of goods, services and assets that can be consumed with those dollars in the system exactly, or too many rations, or too few. When there is a shortage of dollar "rations" (or dollar stores of value), there is a relative abundance of goods, services and assets. This creates a deflationary effect. When there is an abundance of dollar "rations", there is on the contrary a shortage of goods, services and assets, creating an inflationary impact instead. The same logic also applied to gold, when it represented the basis of the rationing system that the world used. While the rationing system can work very effectively when there is an intelligently matched amount of rations to goods and services, it starts to fail when rations misrepresent the goods and services truly available (because someone has over-issued or under-issued rations relative to goods and services). It's like having butter, bread and sugar rations over-issued relative to the amount of actual butter, bread and sugar that is out there. In this scenario, the rations lose value as people realise that owning rations doesn't necessarily guarantee access goods. Conversely, when rations are under issued relative to the amount of butter, bread and sugar — the rations themselves gain value and also become much more poorly distributed across society. Since it's only by owning a ration that you can guarantee access to goods (even if the goods are abundantly available), this scenario translates to a have or have-not society.

more on inequality -It's Inequality, Stupid -Majority of New Jobs Pay Low Wages, Study Finds -Big Income Losses for Those Near Retirement -Study: Middle class poorer, earned less in 2000s - "For the first time since at least World War II, middle-class families finished the first decade of the 21st century poorer and with lower incomes than they had 10 years earlier." more on productivity -Manufacturing Productivity -Time to resurrect the 'missing variable'? -3D Printing: Rise of the machines -Will the Unemployed Really Find Jobs Making Robots? [1,2] also btw, more robots... -Cheap Four-fingered Robot Hand Edges Closer To Human Dexterity -New Wave of Adept Robots Is Changing Global Industry -Here's the Robot that Foxconn Will Use to Build Their Million-strong "Robot Kingdom" -Industrial Automation: "China has hit its 'Lewis Turning Point,' in that the supply of rural surplus labor is diminishing rapidly. This, combined with demographic shifts and government efforts to push up wages, will drive elevated levels of automation investment." more on employment -Occupations with the highest job gains and losses -Corporations are saving more and paying less -What's keeping unemployment up? It's the demand, stupid -How the Great Recession Proved, Beyond a Doubt, the Value of a College Degree -What's the Single Best Explanation for Middle-Class Decline? "As economics went global, job creation went local." The Globalization Paradox: Democracy and the Future of the World Economy: "Rodrik presenting his ideas on global political economy to a popular audience. Basically, he argues, there is a trilemma, where we have to drop at least one of 'deep' globalization, democracy, and national sovereignty. This is convincing; and he is further persuasive that the obstacles to serious global governance, let alone democratic global governance, are still too big to overcome. This leaves trying to tame globalization, and keep it 'superficial' enough to let different countries preserve their own policies and institutional arrangements. Faltering Innovation: "future growth in consumption per capita for the bottom 99 percent of the income distribution could fall below 0.5 percent per year for an extended period of decades" [1,2] The Theory of Everything: "Basically the question is what will low skill/intelligence folks do for income? Throughout history there have been manual labor jobs available, of course there has been a fairly big change from agriculture to manufacturing. It does seem to me that continued automation can be highly deflationary, but are there other possibilities for the economy to distribute the gains? Capital and government seem to be obvious channels."

By: Just this guy, y'know

Just this guy, y'know — Tue, 04 Sep 2012 03:23:30 -0800

Wow, what a post! I'm going to have to go away and read all of this. When I was studying Robotics in university a tiny part of the course was on the ethics of factory automation. Often the discussion was simply, "Yes, jobs will be lost, but if we don't automate and someone else does then all the jobs will be lost". I hadn't thought (enough) before about the whole labour vs capital means of production implication of robotics.

By: ominous_paws

ominous_paws — Tue, 04 Sep 2012 03:33:20 -0800

Bloody hell, this is immense. Thank you. I'll be back with an opinion in about a week, I reckon.

By: jaduncan

jaduncan — Tue, 04 Sep 2012 03:37:27 -0800

kliuless, this is one of the best posts I've seen on Metafilter.

By: twoleftfeet

twoleftfeet — Tue, 04 Sep 2012 03:39:28 -0800

If I was rich enough to afford the five dollar membership fee, I would join Metafilter just for this post.

By: hincandenza

hincandenza — Tue, 04 Sep 2012 03:40:16 -0800

Good lord; this looks fantastic, but I assume we all won't start commenting in depth until sometime on Thursday, when we've actually read all of this. One thing I've been wondering: can someone more in the know offer a pocket description of Marxism? I've lately taken to thinking I may be a closeted Marxist, based on my one (almost assuredly misguided and incomplete) notion that one key element of Marxist theory says that social and economic structures organize around how current technology solves our basic human needs, and how the changing technological landscape will inevitably cause those old structures to become obsolete, and the resistance to change/transition leads to a painful and sometimes violent transition and class warfare. As a longtime software worker who is frustrated by the hierarchical, almost feudal structures within the corporate walls (see the game company Valve as an antidote to this thinking), a conversation I've been having a lot lately with friends and co-workers is that as our ability to automate (via software and machines) more and more of our labor means we are entering a transition where our old models (middle class, 40-hour work week, large management structures, etc) is making less and less sense. If I may quote my good friend and occasional MeFite molybdenum from a Facebook conversation we had just today:

It seems like the underlying problem is: human brains vary more widely than human bodies, and computers have unshackled our economic output from our bodies. So now the best programmer can outshine the best wheat harvester by orders of magnitude.

And to me, it seems that when we solve the energy problem- cheap, plentiful energy without consequence (say, some nanotube goo that has the energy density of existing fuels, but is easily recharged in solar arrays in the Sahara and releases its energy without the environment impact)- then just as you see idle gamers create map packs and mods in their spare time, you could start seeing idle programmers and hackerspace savants developing solutions like agricultural bots that can recognize and pick the very best crops, tirelessly, and for less pay and energy than even exploited immigrant farm workers. And when we enter that "Diamond Age"... how will the transition look? Will people starve to death while we have more food grown than the whole human population could even eat? Will large numbers people live in tent cities while one worker does the work of 100 people? Will we have the sense to create guaranteed income and more optional labor choices, with a last gasp of the old Puritan work ethic that demands we all work hard until old age, or be punished by extreme poverty or even death? I sadly think I know the answer to these questions, but I'm looking forward to reading the many, many linked articles for a more thorough understanding of this and related topics.

By: Happy Dave

Happy Dave — Tue, 04 Sep 2012 03:52:03 -0800

hincandenza: "how will the transition look? Will people starve to death while we have more food grown than the whole human population could even eat? Will large numbers people live in tent cities while one worker does the work of 100 people? Will we have the sense to create guaranteed income and more optional labor choices, with a last gasp of the old Puritan work ethic that demands we all work hard until old age, or be punished by extreme poverty or even death?" I personally regard this as the biggest question of our age. There will come a point when automation and globalisation will effectively make the current international system of labour and capital essentially worthless. I think we are already approaching it in many industrialised countries. At some point, something has to replace industrial production as the dominant engine of value creation, because the bottom will finally be reached, probably somewhere in Sub-Saharan Africa. When the cheap manufacturing has moved from China to Sudan or Angola in 2050 and the Chinese middle class is starting to lose ground the way the Western middle class has, what's the next step? Will war or economic crash have made it economical to produce things in the West again? Do we collapse into resource wars? Or do we start moving towards steady-state economies and a global reordering of priorities? The answer is going to be interesting to live through. And I mean that in the ancient Chinese curse sense.

By: bystander

bystander — Tue, 04 Sep 2012 03:54:19 -0800

Good post. I don't know if I quite buy the first link analogy that wealth accumulation as a form of insurance is a zero sum game. It seems to me that once you have "rocket ship wealth" (the idea that your wealth is increasing at such a rate that you need to work to spend it) the insurance metaphor breaks down, even that want is effectively sated. I think the insurance idea is more powerful in the middle classes where people have a little security, but can conceivably see it disappear through any of a million ways.

By: jaduncan

jaduncan — Tue, 04 Sep 2012 03:55:32 -0800

Marx actually states that capitalism is best until a society of superabundance exists, as it's really good at allocating scarcity. You're pretty much directly talking about the inefficiencies of that society of superabundance; the costs of private capital start to outweigh what a command economy can do. We've been here with claims a lot of times before. Nuclear would be too cheap to meter and all of that. But yeah, if you have cheap energy and effective robotic labour you've essentially eliminated the need for a working class. I think the links I've read so far from this actually understate the impact of robotic labour when they consider mainly manufacturing. We're actually at the point of prototype self-driving cars. That means we're not too far away from cabbies, train and bus drivers getting outmoded. Maybe a while until people are comfortable with that for aircraft. That's a self-reenforcing process, too; the more cars are automated and talking to each other, the more efficient things like close highway drafting can be and the less you want human control of those cars because of the fine margins. There will be a time where you are locked out of your own car controls during those moments. This also talks about manufacturing being local to a country or area. It doesn't look 10 years down the road and consider what happens if 3d printing gets good enough to be inside the house. Lose a fork, download an open source/government design/hacker giveaway and burn another one. Manufacturing suddenly just becomes for big ticket items. Those items are precisely the type of items that robots do well; it's predictability that you want in workers for cars and large electronics. There's just not much left on the table for manufacturing in general. So yeah, at that point it's hard to see how having 2% of the population have 40% of the money makes sense or, indeed, how much money is actually useful save for pointless IP wars and real estate/land purchases. We're reaching that point in big city internet connections, for example. Most people don't think about bandwidth, and using the internet is just fairly easy for most people. It's not very coincidental that city co-op and municipal ISPs suddenly have to be banned; the big telco profit margins no longer make economic sense.

By: jaduncan

jaduncan — Tue, 04 Sep 2012 03:56:14 -0800

(that was to hincandenza, btw).

By: compound eye

compound eye — Tue, 04 Sep 2012 04:01:08 -0800

labour vs capital means of production implication of robotics combine that with the democratisation of access to education and the biotech revolution and I don't feel I can imagine what the world 20 years from now will be. I hope it means that more people will have more tools, more skills and more opportunity and to build a better society, but it gives me vertigo trying to imagine where these developments will take us, just as reading mondo 2000 back in the 90's.

By: pharm

pharm — Tue, 04 Sep 2012 04:01:43 -0800

No MeFi post on money in an age of abundance can be complete without Izabella Kaminska's "Beyond Scarcity" series of posts on FTAlphaville: The Parable of Water, The End of Artificial Scarcity and Redefining Labour (Complete with fuzzy felt illustrations!) Will have to trawl through the links in this post when I have time...

By: twoleftfeet

twoleftfeet — Tue, 04 Sep 2012 04:02:21 -0800

I'm not a religious person, but I do believe Jesus Christ was onto something when he said "Blessed are you who are hungry now, for you will be filled. 'Blessed are you who weep now, for you will laugh" and "You lack one thing; go, sell what you own, and give the money to the poor, and you will have treasure in heaven; then come, follow me." and "The land of a rich man produced abundantly. And he thought to himself, 'What should I do, for I have no place to store my crops?' Then he said, 'I will do this: I will pull down my barns and build larger ones, and there I will store all my grain and my goods. And I will say to my soul, 'Soul, you have ample goods laid up for many years; relax, eat, drink, be merry.' But God said to him, 'You fool! This very night your life is being demanded of you. And the things you have prepared, whose will they be?' So it is with those who store up treasures for themselves but are not rich toward God." It's a very awkward thing for an atheist like myself to feel a greater sense of moral righteousness than a True Believer, but these things make sense to me. It's important to help others. If we all lift each other up we will all get higher. Is that so bad?

By: loquacious

loquacious — Tue, 04 Sep 2012 04:05:45 -0800

Maybe a while until people are comfortable with that for aircraft. As I understand it, modern commercial aircraft pretty much already fly themselves from takeoff to landing. This is especially true of fly-by-wire systems as found on the gigantic Airbus A380, which wouldn't be able to safely fly under traditional pilot control. Also, modern aviation wouldn't even exist without this pervasive automation and telemetry. The skies would be too crowded. Sure, there will likely be employed pilots for some time to come, but ask a modern pilot how they feel about the job. They'll likely say something like "I basically drive a bus. And it's really, really boring."

By: twoleftfeet

twoleftfeet — Tue, 04 Sep 2012 04:16:29 -0800

Jesus is my copilot. I kid. Jesus is only good when you are ascending to Heaven. Satan brings you down.

By: jaduncan

jaduncan — Tue, 04 Sep 2012 04:21:18 -0800

Sure, there will likely be employed pilots for some time to come, but ask a modern pilot how they feel about the job. They'll likely say something like "I basically drive a bus. And it's really, really boring." Oh yeah, and the actual utility of it is clear in the fact that drones can fly far more complex combat missions. But the point is that at the moment we are still paying for the meat in the seat in various roles and outside of face to face customer service and general reassurance there's not much point. See train drivers, for example. Or, come to that, see bank tellers. It's very hard to see them surviving in numbers too long. It's meat in a seat with no extra functionality, just like the factory workers discussed in the post. Go to the supermarket and scan your own items as you look at the one or two checkout people supervising. Until there's RFID, at which point you pretty much just need to employ a security guard or two to make sure people aren't ripping off the tags as they walk up to the till, get a total, and push their phone on the NFC pad to pay. Same with train ticket sales, same at the theater entrance. Same, eventually, when the local McDonalds has a full store of machines supervised by the checkout/press button to reset if this goes wrong for self-test people. Talking about manufacturing is missing so much of this. It's not about robots that look like humans. It's about a burger machine hooked up to the till that just beeps and delivers the cooked thing. Hell, you may as well have a touchscreen at the counter that does the upsells every single time and offers YOU unique deals that aren't just asking the slim girl if she wants to supersize. You can still have a couple of humans there, it just means having 2 people, lots of production machines, some roombas and a support contract rather than 10 people and a contract cleaner. There's just not going to be the jobs there once were, and thinking it's limited to manufacturing is myopic. For each thing, there's the question of why you need meat on a seat and if the price is worth it. Increasingly, there isn't the need for it, and at that point unemployment becomes structural.

By: jaduncan

jaduncan — Tue, 04 Sep 2012 04:24:06 -0800

Meat in a seat, mobile smiles, or super specialised work that doesn't need too many people (machine designers, for example, and even that's going to get a lot more efficient as AI gets good at machine design). That's what I'm suggesting the viable roles are. Programmers do something once manually, twice swearing, and the third time write a script. The issue is the increasing amount of tasks that just need code.

By: twoleftfeet

twoleftfeet — Tue, 04 Sep 2012 04:25:56 -0800

Metafilter: It's not about robots that look like humans. It's about a burger machine hooked up to the till that just beeps and delivers the cooked thing.

By: Thorzdad

Thorzdad — Tue, 04 Sep 2012 04:45:33 -0800

It's about a burger machine hooked up to the till that just beeps and delivers the cooked thing. Hell, you may as well have a touchscreen at the counter that does the upsells every single time and offers YOU unique deals that aren't just asking the slim girl if she wants to supersize. You can still have a couple of humans there, it just means having 2 people, lots of production machines, some roombas and a support contract rather than 10 people and a contract cleaner. At what point, though, does such a system end-up with lots of cheap automation, but no customers because not enough people have jobs (and, thus, income) to afford the burgers? I have this vision of sparkling, antiseptically-clean fully-automated McDonalds stores dotting the landscape, standing ready to satisfy the hunger of all who enter the doors, going unused because the last person in the US with a job was let-go from their 2-hour-a-week position as Roomba-polisher.

By: jaduncan

jaduncan — Tue, 04 Sep 2012 04:53:15 -0800

At what point, though, does such a system end-up with lots of cheap automation, but no customers because not enough people have jobs (and, thus, income) to afford the burgers? I have this vision of sparkling, antiseptically-clean fully-automated McDonalds stores dotting the landscape, standing ready to satisfy the hunger of all who enter the doors, going unused because the last person in the US with a job was let-go from their 2-hour-a-week position as Roomba-polisher. Well, exactly my point. Then we're back to talking about the inefficiencies of capitalism in a society of superabundance as compared to the sort of schemes discussed in the post and minimum incomes and such. Having the 1% have all the nominal economic value is going to look increasingly stupid in a situation of a very efficient supply chain, a large degree of automation and increasingly simplistic jobs if we don't all want to be easily replaceable serfs. It did all tie into hincandenza's question originally. At that point the economy as we know it breaks because structural unemployment becomes really high. It's not even particularly unpredictable.

By: dragonsi55

dragonsi55 — Tue, 04 Sep 2012 04:54:58 -0800

"A lot has changed in three hundred years. People are no longer obsessed with the accumulation of 'things'. We have eliminated hunger, want, the need for possessions." Too soon?

By: RonButNotStupid

RonButNotStupid — Tue, 04 Sep 2012 04:55:29 -0800

See train drivers, for example. Or, come to that, see bank tellers. It's very hard to see them surviving in numbers too long. It's meat in a seat with no extra functionality, just like the factory workers discussed in the post. It would be nice if we could use a less offensive term than "meat in a seat" to refer to the many actual humans who are currently performing these tasks

By: jaduncan

jaduncan — Tue, 04 Sep 2012 05:05:29 -0800

It would be nice if we could use a less offensive term than "meat in a seat" Given that it was me rather than we, I apologise for that choice of words. It's not my intent to denigrate them as people, just point out that everyone's a lot better off if we get them an actual living income outside of a fairly pointless job role. It's the almost utterly pointless jobs that I dislike rather than the people, given that we could choose a future of more leisure, family time and education. Really the issue is a huge increase in productivity per working human; making people cheap enough to do low-skilled and repetitive tasks that a robot should be doing seems pointlessly vindictive when they could be doing something more interesting like creative work or having the viable choice to be a full time parent.

By: lucien_reeve

lucien_reeve — Tue, 04 Sep 2012 05:06:25 -0800

One thing I've been wondering: can someone more in the know offer a pocket description of Marxism? I've lately taken to thinking I may be a closeted Marxist, based on my one (almost assuredly misguided and incomplete) notion that one key element of Marxist theory says that social and economic structures organize around how current technology solves our basic human needs, and how the changing technological landscape will inevitably cause those old structures to become obsolete, and the resistance to change/transition leads to a painful and sometimes violent transition and class warfare. Marxism is a complex and vital intellectual tradition that encompasses a wide variety of views, but that is indeed one of its key insights. As for the broader question of whether or not you are a "closeted Marxist", I would urge you to read some of the Marxist writers and discover for yourself. Even if you find that you disagree with Marxist ideas, it is better to do so from a genuinely informed position (a surprisingly large number of American economists seem to teach Marx in a very sketchy way, rushing to dismiss him). If you are interested in understanding Marxism better - and getting a good introduction to the subject - then there is actually an AskMe post that (blushes modestly) I posted a few months ago, here. I particularly recommend listening to some of the work of Marxist economist Richard Wolff, such as the following: - A basic introduction to Marxist economic ideas - His Marxist overview of the past 100 years of American history (previously on Mefi) - His radio show, looking at the news through a Marxist lens Richard Wolff is notable for being a Marxist with a very practical solution to capitalism that doesn't involve central planning (he is a big advocate of worker-owned businesses and cooperatives and recently launched the "Democracy at Work" project to provide examples of them working). I would also recommend this superb Amazon.com reading list (part 1, part 2), which maps out a veritable intellectual feast of books that first underpin, then explore, a more Marxist way of viewing economic activities. And if you want to look at some texts by famous historical Marxists, there is always Marxists.org. Hope that helps!

By: Wild_Eep

Wild_Eep — Tue, 04 Sep 2012 05:24:53 -0800

By: atrazine

atrazine — Tue, 04 Sep 2012 06:07:34 -0800

you could start seeing idle programmers and hackerspace savants developing solutions like agricultural bots that can recognize and pick the very best crops, tirelessly, and for less pay and energy than even exploited immigrant farm workers. This is already happening. One of the largest costs for producing organic vegetables is hiring migrant labour to weed the field several times a season. There's a company now that's building a little cart that will drive around the field and zap broad leaf weeds (initially with a laser, but I think they switched to a puff of hot food grade oil). A lot of other agricultural work that used to require human hands is also being automated, including things like berry picking that requires quite a lot of delicacy.

By: ennui.bz

ennui.bz — Tue, 04 Sep 2012 06:08:16 -0800

Consider a libertarian Titanic, whose insufficient number of lifeboat seats will be auctioned to the highest bidder...

money is worthless on a sinking ship.... eponysterical.

By: ennui.bz

ennui.bz — Tue, 04 Sep 2012 06:19:30 -0800

(just to be clear, money becomes worthless, not because of some idiotic bidding process where it's marginal value goes to zero, but because the market for it's exchange instantaneously ceases to exist. )

By: FJT

FJT — Tue, 04 Sep 2012 06:34:21 -0800

human brains vary more widely than human bodies I'm still trying to find the context for that quote, but I'm having a bit of trouble. Does the quote mean that mental effort can have greater results than physical effort? Or does this mean that the difference between the dumb and the smart are greater than the weak and the strong? If the former, I could agree, but not with the latter.

By: syntaxfree

syntaxfree — Tue, 04 Sep 2012 07:14:50 -0800

As a professional economist working in a top yadda yadda yadda, I just wanted to say I've been following Waldman's blog since the crisis hit, and he's the real deal. He's never really in the "orthodox" or "heterodox" camp, he's just providing cogent analysis of issues new or old-and-renewed. When the crisis (2008) hit, we were all a bit at a loss. I went to grad school in 2006 thinking I already knew everything that needed be known as far as practical policy-making goes, and to a large extent I did -- but the world was upside down in 2010, and again in 2011, and again, possibly never to be restored to Washington Consensus conditions. I suspect many economists employed out of academia are still quite lost. (People in academia can choose to focus on technical details of their models and ignore what the bleep is going on) Waldman kept thinking clear about things -- he's probably more influential than many professionals would care to admit. That said, I disagree with some key arguments in this post. I'll sketch a pseudo-riposte in a few points, none of which completely cover his analysis because that's not what I'm trying to do. What the post ignores

Samuelson's reswitching theorem claimed that the capital-labor ratio utilized in production could be seen as a function of interest rates, and could fluctuate up and down. Neo-ricardians showed him otherwise, and not by means of path-dependency, staggered technical change and such. But these matter too, so let's just say that making the use of physical capital expensive is not guaranteed to increase the demand for labor.
In a 30+-year view, this ratio can be seen as "the core" of the rise of inequality in developed countries, as well as the strange-attractor patterns Waldmann notices (and I see in Brazil) that some countries that had rapid industrial development during the last decades see. This isn't a consensus view, but the data supports that, and it's what best makes sense to me.
I've recently been in a commodity price econometrics symposium, got to meet a few of my heroes, and saw a shared theme that was always in my head, yet I was too afraid to articulate. Theoretical models of resource depletion pretty much show a race between technology and depletion, the technological singularity before peak borax and peak lutetium. But if inequality is driven by capital-labor usage and technical progress in primary resource extraction is either made of enhanced humans or enhanced machines, we'd be either seeing massive dysgenics programs or massive research programs in mining. (Hint, it's the latter). Trouble is, as capital usage goes to 100%, labor usage, um.
Does this mean we have to choose between peak lutetium (no more cheap touchscreens) or a poverty singularity? Not really if we have redistributive policy-making. Not really if we have (all over the world, simultaneously) governments staffed by technocrats that are thinking in depth about all these issues and more, and tentatively designing a long-run path that staves off Dutch disease, leads to energy sustainability (hint: thorium reactors. Nukes, yeah), etc. etc. and manages to give a guaranteed basic income to everyone so the non-infrastructural economy even works. (If it doesn't, the infrastructural economy gets no ROI, and investment isn't made -- radiant decay scenario). Norway more or less achieves this, but they shoot horses, don't they?

What does this imply for the post?

Waldmann's main point is that wealth is about aversion to risk in individual lifetime consumption planning. Maybe to some; surely to me, but I run a real risk of becoming prematurely incapacitated for work because of certain medical conditions. But if wealth must be even posited as something other than capital, one begs for an explanation of the difference. Waldmann merely says that the "wealthy" are grubby people.
In Waldman's world [in this post], production is an epiphenomenon to a circular flow of claims. This is hyperkeynesian, and gets things upside down. The circular flow of claims is a precondition for investment in productive capacity to perpetuate itself. No demand, no business. No business, no investment. No investment, no new jobs. (Stagnate the population and we're a-ok). The issue here, of course, is that capital goods are part of the circular flow of claims, and neither "supply" nor "demand" cause each other -- they're both an emergent phenomenon of the economic process.
Waldman (and many others) are trying to find rationales for a basic income guarantee that doesn't hinge on "c'mon, let's be nice to our neighbors", which, to his credit, is political nitroglycerin. There's certainly a "short-run keynesian" argument for temporary shocks when the economy gets in a slump to be delivered to the poorer first, and some measure of employment insurance assuming employment still exists. But look, none of this assures you that employment still exists at any given form in any point of time. As Marx once said, everything that's solid melts into the air.

So what do you do when the capital goods sector grows relatively to the rest of the economy, as far as wealth-as-insurance goes? 10 and 20-year oil futures, that's what you do. People run on ramen, machines run on heat, oil is canned heat. It is possible that the future doesn't need us at all.

By: immlass

immlass — Tue, 04 Sep 2012 07:31:13 -0800

Fantastic post. I'm going to need more caffeine in the system to start making sense of any of it, though.

By: MattD

MattD — Tue, 04 Sep 2012 07:35:16 -0800

The labor market dislocation from the agricultural revolution (automation, chemical fertilizers and pesticides, hybrid seeds) was (where it is still happening, is) of an order of magnitude greater than the dislocations which we might see from the automation of a limited set of manually performed service jobs. It seems highly likely that the wealth thrown off by that automation will create more jobs than are lost. Take automated roads & cars. A driver of a commuter bus with 50 passengers loses his job. 40 passengers ride the robot bus, and 10 passengers start to ride their (now automated) private cars because they were commuting to avoid hassle, not save on expense. Let's assume incremental technology cost consumes half the driver's salary and benefits, and the other half are savings. The tech companies add headcount. The passengers and taxpayers inject the savings back into the economy (spending the lower fares, cutting taxes or redeploying public subsidies). The 10 people who start to drive buy more cars (higher wear and tear), demand ten extra parking spot each year which have at least some staff attendance, buy more fuel, work longer hours because they control their schedule more easily. Massively accretive to employment in total.

By: Happy Dave

Happy Dave — Tue, 04 Sep 2012 07:43:16 -0800

MattD: "Take automated roads & cars. A driver of a commuter bus with 50 passengers loses his job. 40 passengers ride the robot bus, and 10 passengers start to ride their (now automated) private cars because they were commuting to avoid hassle, not save on expense. Let's assume incremental technology cost consumes half the driver's salary and benefits, and the other half are savings. The tech companies add headcount. The passengers and taxpayers inject the savings back into the economy (spending the lower fares, cutting taxes or redeploying public subsidies). The 10 people who start to drive buy more cars (higher wear and tear), demand ten extra parking spot each year which have at least some staff attendance, buy more fuel, work longer hours because they control their schedule more easily. Massively accretive to employment in total." Unlikely. Robo-cars would be sold at a premium, because they're shiny and new. Fares would rise, because... robo-buses! Tech companies would add headcount during rollout, then cut it as soon as they figure out how to automate routing, mapping, conflict resolution etc. What are the 10 additional robo-cars going to run on? I can't see it, honestly. What I can see is a system with steadily less use for more and more people which will eventually buckle and break under the weight of millions of people with no jobs and no hope for the future. Hopefully not violently.

By: philip-random

philip-random — Tue, 04 Sep 2012 08:27:03 -0800

It was 1970, I believe. Buckminster Fuller gave a talk in which he declared actual scarcity officially over. That is, due to various emergent and evolving technologies, there was now enough food, shelter etc for every human being on the planet, and the means for distribution. Up until 1970, that hadn't been the case. There hadn't been enough to go around. Since 1970, all scarcity has been manufactured, a failure of political-social-humanitarian will. And there's this: We must do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest. The youth of today are absolutely right in recognizing this nonsense of earning a living. We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian-Darwinian theory, he must justify his right to exist. So we have inspectors of inspectors and people making instruments for inspectors to inspect inspectors. The true business of people should be to go back to school and think about whatever it was they were thinking about before somebody came along and told them they had to earn a living. "The New York Magazine Environmental Teach-In" by Elizabeth Barlow in New York Magazine (30 March 1970), p. 30

By: philip-random

philip-random — Tue, 04 Sep 2012 08:27:46 -0800

the quote there is Fuller -- as reported by Elizabeth Barlow ...

By: notsnot

notsnot — Tue, 04 Sep 2012 08:35:14 -0800

dragonsi55: ""A lot has changed in three hundred years. People are no longer obsessed with the accumulation of 'things'. We have eliminated hunger, want, the need for possessions." Too soon?" "Why don't you come back later on an' you and me'll find us a couple o' low-mileage pit woofies and help 'em build a memory?"

By: pointless_incessant_barking

pointless_incessant_barking — Tue, 04 Sep 2012 09:36:17 -0800

Great post, kliuless. From the headliner article: However, another way to think about it is that the poor collectively sell insurance against riot and revolution, which the rich are happy to pay for with modest quantities of efficiently produced goods. "Social insurance" is usually thought of as a safety net that protects the poor from risk. But in very polarized societies, transfer programs provide an insurance benefit to the rich, by ensuring poorer people's dependence on production processes that only the rich know how to manage. This diminishes the probability the poor will agitate for change, via politics or other means. Wow is that depressing. It also seems to imply that by cutting the social safety nets, the Republicans are sowing the seeds of revolution.

By: Happy Dave

Happy Dave — Tue, 04 Sep 2012 09:40:09 -0800

For those who dig this kind of thing, Metafilter's own Charlie Stross did a great post a few months back on the the marginal utility of wealth and how it affects societal organisation. It's good stuff.

By: bukvich

bukvich — Tue, 04 Sep 2012 12:00:43 -0800

Guardian: 13 trillion pounds hidden from the tax authorities by global elite.

By: hincandenza

hincandenza — Tue, 04 Sep 2012 12:02:46 -0800

human brains vary more widely than human bodies
FJT: I'm still trying to find the context for that quote, but I'm having a bit of trouble. Does the quote mean that mental effort can have greater results than physical effort? Or does this mean that the difference between the dumb and the smart are greater than the weak and the strong? If the former, I could agree, but not with the latter

It was in a conversation I'd had with a friend on FB (who happens to be a MeFite but that's not really relevant), and note the bit about a programmer being able to produce changes quickly that outpace any physical strength or stamina changes. I don't want to put words in his mouth, but I read it not just as the idea that range from weakest to strongest is narrower than the range from least creative to most inventive, but that the output of the human brain isn't mere labor, but ideas. And ideas can have more of an impact than labor. So where new techniques in physical activity- oh, the Fosbury Flop for example- might increase the amount of high jumping by say 30%, new techniques in invention could replace an entire industry in a few years. And if you're the fast strawberry picker on the planet, you're probably still not picking strawberries more than 2-3 times faster than an "average" picker. Maybe at extremes, 5-10 times. But someone could delve into a world of ideas, of math, and of computer science and develop a fruit picker that works 100 times faster, and never tires. And that ultimately, the blueprint for a new device could be sent as 1s and 0s around the world at the speed of light. Our knowledge, innovation, and productivity as we move more of our economy into thought are accelerating wildly. The Buckminster Fuller quote is telling; I think we went past natural scarcity a long time ago, excepting in the field of energy (and there, use of clean renewables and conservation might be enough without any new invention), and for several decades have basically artificially hurt people, starved people, and kept people unemployed and hopeless for no good reason. Well, I guess the reason is something related to the Guardian article that bukvich just posted while I was commenting.

By: homunculus

homunculus — Tue, 04 Sep 2012 14:16:56 -0800

Guardian: 13 trillion pounds hidden from the tax authorities by global elite. Previously.

By: nixerman

nixerman — Tue, 04 Sep 2012 16:42:51 -0800

It's a really excellent essay. But I do wonder if any of it is actually true. Specifically, the key insight: Idle unemployment is a problem in societies that are highly productive but very unequal. Here basic goods (food, clothing) can be produced efficiently by the wealthy via capital-intensive production processes. The poor do not employ one another, because the necessities they require are produced and sold so cheaply by the rich. This dynamic will certainly lead to the rich piling up their debt claims ever higher for a while but eventually the rich will catch on to the fact that their debt claims are increasingly worthless. At this point they might eagerly convert such claims into "hard" assets like, say, housing and natural resources. But there is a finite limit of such hard assets and so this can only delay the problem while inciting bubbles. The point is that this idea that the rich would endlessly accumulate debt claims for "insurance value" is highly suspect. They will eventually have to accept that accumulating debt claims is not a useful thing to do and stop doing it. Another thing is that it seems highly unlikely that poor in such societies are in any way content. They would still have plenty of unsatisfied desires including, I would think, the desire to work. They might be able to survive without working thanks to the hyper-productive elite but this hardly means that they don't want to work. (Especially with prices around them ever-climbing.) And what exactly does it mean to say that the poor can only produce inefficiently? Indeed this is the real issue: the poor are might be plenty efficient but, for various reasons, it is not efficient to pay the poor in the in the artificially inflated currency of the rich. But, as Izabella Kaminska wonderfully points out, in a zero-sum contest for relative advantage among producers, abundance becomes a threat when it can no longer be sold for high quality claims. Any alternative basis of distribution would undermine the relationship between previously amassed financial claims and useful wealth, and thereby threaten the pecking order over which wealthier people devote their lives to stressing and striving. What is interesting is that the relationship between financial claims and real wealth cannot be a fixed thing. One is fundamentally infinite while the other is fundamentally finite. There is no limit to what I can promise but there is a very real limit to what I can deliver. Alternatively, the relationship between financial claims and actual happiness cannot be a fixed thing. There is no limit to what I might want to consume but there is a very real limit to what I can actually consume. And because we are talking about needs and abilities, about desires and talents, we are working in a very, very subjective realm. And yet we believe in prices, we believe that there is a single price, denominated in a single currency, that everyone must pay for the market to clear.

By: bukvich

bukvich — Tue, 04 Sep 2012 19:30:37 -0800

The #2 google hit for Steve Randy Waldman's blog was this essay: Depression is a choice.

By: miyabo

miyabo — Wed, 05 Sep 2012 11:12:13 -0800

another way to think about it is that the poor collectively sell insurance against riot and revolution, which the rich are happy to pay for with modest quantities of efficiently produced goods It seems to me that, after a few more decades of growth in GDP, technology, and inequality, it will be possible for the very rich to subsidize the very poor without making much of a dent in their massive fortunes. In this future, the top few thousand of the richest families in America could get together and contribute 1% of their wealth into a foundation, which would use the money to build houses and provide food and health care for the bottom 30 or 40 million people. Perhaps they could guarantee them some kind of meaningless unproductive job, in order to give all those people a sense of purpose and prevent them from overthrowing their overlords. The numbers don't work out today -- the rich aren't that rich -- but if trends continue for a few decades, it will probably happen. Also this would be a good premise for a short story.

By: homunculus

homunculus — Sat, 08 Sep 2012 12:26:18 -0800

Here's the Robot that Foxconn Will Use to Build Their Million-strong "Robot Kingdom" In the meantime: Students say they are forced to work on new iPhone 5

By: Monkey0nCrack

Monkey0nCrack — Sun, 16 Sep 2012 08:46:05 -0800

The fate of Earth, seems to me, is that we may adopt a sort-of "Democratic Socialism" so that there isn't so much of a class gap, and when we start talking to the ETs, we may have to consider banding together as a species to survive - no longer US vs THEM, it will be US vs ET. The almighty dollar, at first contact, may become meaningless. Assuming the ETs are friendly, we may find ourselves in the same situation as in the South Park episode "Cancelled" - in which case, everything will stay the same.