economy

[JohnRoberts]

I didn't want to attach this to one of the sundry political threads I started a new thread.

I try to pay attention to the economy and recently noticed a shift in the language from the federal reserve. They often mention economic (GDP) growth in passing as something we are still waiting to return to normal top line growth, but the latest statement from one of the fed governors last week suggested that the recent slow GDP growth may be the new normal and this weak growth could be structural (permanent) and not cyclical (temporary that will vary like an increasing/decreasing oscillation). 

This change in language was news to me, and bad news at that, since we need stronger economic  (GDP) growth to pay for all the federal government spending we are already committed to.

It seems every time the government tries to help us, they hurt us. The too easy mortgage lending, to put almost everybody into a house, even if they couldn't afford one, caused the home market to bubble then collapse and now several years later even after all the asset inflation to help increase home prices, there are still some 6 million underwater mortgages.

Then look at student loans. The government decided to "help" more students go to college. Roughly 40% of the 22 million student loans are not being paid back currently (I guess they were hoping Bernie would get elected). The government student loan portfolio is more than $1T.

Politicians seem to confuse correlation with causation... they observe that college graduates, and homeowners seem to have better lives, so the government swoops in with a superficial "looks like" solution. What they don't realize is a college degree without a job is not much good, and owning a big home without a job (or enough job) is not ending well either.     

Healthcare, don't get me started. Years ago i said the numbers didn't add up, and as we now see rates rise, and major insurance companies are dropping out because it isn't profitable. Still waiting to go active are increased cadillac plan taxes, and health device taxes.  Taxing health care to pay for health care, is just gimmickry and not so subtle wealth redistribution. Ironically some of the cadillac plans to be taxed are union.

I expect health insurance  rate increases to be in the news just before the coming election.

I doubt many will notice or understand the implications of a "new normal" slow  GDP growth rate.

Right now outlawing the "looks like" AR-15 is a high priority in congress instead of fixing societies root problems. I hope they make progress on a "no buy" list/background check that can't be abused like IRS et al have other government powers.

JR

 

[mattiasNYC]

Or the issue is tax revenue from you-know-where....

 

[Winetree]

After reading the above. Check out these figures.
20 trillion in Federal Debt.
65 trillion in all Consumer Credit Debt.
Go figure. What's the next big Crisis?

 

[benb]

A recent article had "good news:" Previously offshored jobs are coming back and the work is being done in the USA, the "bad news" is this work is now being done by robots.

The official US unemployment numbers currently look good, but a different and perhaps truer measure of how average Americans are doing, UNDERemployment has stayed pretty bad in recent years.

A lot of this is described in last year's book "Rise Of The Robots." Author Martin Ford has written many articles on technological unemployment, and how it's going to affect the economy. It's good for businesses and overall productivity, for example McDonalds has its first fully automated restaurant thanks to Momentum Machines, but for a lot of people it won't matter what the minimum wage is because they just won't be able to find a job.

This isn't a new idea, though it appears to finally be entering public consciousness. There was a book 20 years ago
predicting this, "The End of Work" by Jeremy Rifkin.

 

[Gustav]

the latest statement from one of the fed governors last week suggested that the recent slow GDP growth may be the new normal and this weak growth could be structural (permanent) and not cyclical (temporary that will vary like an increasing/decreasing oscillation). 

From the neoclassical side of theoretical economy, the cycle is a well known structural feature of the mixed command/market system, and the macroeconomic tools developed post WWII seemed to be sufficient in taming the cycle for a long time - government was in fact highly successful in this period. The empirical data supporting this is getting a bit long in the teeth, and the "bubble" terminology means a lot of the data from the past 16 years has been pushed into the outlier category, because we thought we had them "beat"  (Even though the bubble phenomenon is well known - google:tulip bubble).

In this thinking, the stagnated growth in real income is cultural (the lack of stimulation is "irrational"), and if that premise is abandoned, one of the main arguments for maintaining the one sided approach gets increasingly difficult. Its a rough bullet to bite, because times were good, and the consequences of doing so are not well known. What will happen to all the debt, for example?  Hyperinflation is not known to cause peace and prosperity.

Everything in the neoclassical system is founded on the idea of a perfect consumer, and when times were good, it was seen as a functional way of building macroeconomic models, even if its nonsense. Blaming the government in these not-so-good times seems to be focused on the premise of the perfect consumer (If government didn't interfere, we would be able to act as perfect consumers, and market equilibriums would not be superficial).

As a functional argument, there is absolutely no validity in any study of economics to support the idea that consumers would magically turn into perfect consumers if the neoclassical market forces were freed.

As a philosophical argument, with normative implications, its more complicated.

Contractual arguments have a very long tradition in political theory (the US constitution is founded on these types of arguments), so it shouldn't be a completely nauseating concept, even to the self proclaimed "constitutionalists". They could probably argue that the basis of the constitution is irrelevant, while the history of the constitution is essential, but this would also force them to abandon the "back to scripture" approach, leaving them somewhat in the dark.

In the 70s, the American Philosopher, John Rawls, wrote a book called A Theory of Justice, which is a contractual argument, and the extremely libertarian (also US) philosopher Robert Nozick countered the social contract argument in the book by saying, that "A social contract holds the same worth as the paper is was never written on".

Its not an easy argument to counter, it never has been, and these two gentlemen have been the focal point of political theory ever since. It is very hard to establish "truths" - VERY hard - in these fields, especially truths with normative implications, but nevertheless, man has tried for about 2500 years now.

If the argument is "tax is theft, I see no justification for government spending my money", we venture more into the area of philosophical discussion than statements of fact to counter it. I can agree, that despite of many attempts, and many well constructed arguments,  we are still struggling when it comes to countering it. Following the same premis, we also struggle with putting any value-judgement on a lot of things we usually agree are horrible (theft, rape, murder).

Im waiting for a parcel, so probably spent my entire 2016 quota of Brewery posting here - I guess I can sum it up to.

- As a functional argument, blaming the government and regulations has no empirical basis, and wether it will create perfect consumers is guesswork at best.

- As a philosophical argument, it may be right.

Abandoning the neoclassic approach may be a better idea entirely. I recently read an article explaining that the neoclassic hegemony is coming to an end at the larger/prestigious US colleges, and the syllabus now contains social economics, behavioural economics, and other ways of thinking, that does not rely on the idea of the perfect consumer, and makes calculations based on this idea.

Gustav

 

[Gustav]

entering public consciousness. There was a book 20 years ago
predicting this, "The End of Work" by Jeremy Rifkin.

There was also one almost 150 years ago - by Karl Marx 

Gustav

 

[JohnRoberts]

Nice post, I'll try to understand it all...

the latest statement from one of the fed governors last week suggested that the recent slow GDP growth may be the new normal and this weak growth could be structural (permanent) and not cyclical (temporary that will vary like an increasing/decreasing oscillation). 

From the neoclassical side of theoretical economy, the cycle is a well known structural feature of the mixed command/market system, and the macroeconomic tools developed post WWII seemed to be sufficient in taming the cycle for a long time - government was in fact highly successful in this period. The empirical data supporting this is getting a bit long in the teeth, and the "bubble" terminology means a lot of the data from the past 16 years has been pushed into the outlier category, because we thought we had them "beat"  (Even though the bubble phenomenon is well known - google:tulip bubble).

The problem with bubbles is they are only recognized widely after they burst.

I have long questioned the effectiveness of central bankers economic manipulations. Our shorter cycles of growth, with brief contractions between to separate them, IMO have fooled the central bankers into believing that their "tools" (interest rate manipulations) actually reversed the contractions, and returned economic growth. I submit that these economic oscillations would have returned to growth even if left alone, but the political nature of government leads the central bankers to take victory laps at the end of every previous recession. This blind faith in their tools, has led them to keep pushing on the slack rope, into negative interest rates, and massive liquidity injections.   

In this thinking, the stagnated growth in real income is cultural (the lack of stimulation is "irrational"), and if that premise is abandoned, one of the main arguments for maintaining the one sided approach gets increasingly difficult. Its a rough bullet to bite, because times were good, and the consequences of doing so are not well known. What will happen to all the debt, for example?  Hyperinflation is not known to cause peace and prosperity.

Not sure I follow completely, but indeed sovereign debt borrowing will have real consequences, especially if interest rates return to historical levels, that will increase the cost to service all this debt, several times over.

Back to my primary point, some amount of deficit spending can be supported by healthy GDP growth, which increases the tax revenue stream painlessly.  Inadequate GDP growth, causes this deficit spending to increase the total sovereign debt. We can tolerate years of deficit spending, "IF" growth returns, but the recent statement from at least one central bank governor, that low growth may be the new normal has serious implications, IMO. 

Everything in the neoclassical system is founded on the idea of a perfect consumer, and when times were good, it was seen as a functional way of building macroeconomic models, even if its nonsense. Blaming the government in these not-so-good times seems to be focused on the premise of the perfect consumer (If government didn't interfere, we would be able to act as perfect consumers, and market equilibriums would not be superficial).

I am not familiar with a perfect consumer concept. Hayek and others suggest that individuals can act in their own self-interest more effectively than large government central planners. Perhaps we are talking about different things?

As a functional argument, there is absolutely no validity in any study of economics to support the idea that consumers would magically turn into perfect consumers if the neoclassical market forces were freed.

As a philosophical argument, with normative implications, its more complicated.

Complicated and economics is not a hard science like physics, so squishy human behavior is involved.

Contractual arguments have a very long tradition in political theory (the US constitution is founded on these types of arguments), so it shouldn't be a completely nauseating concept, even to the self proclaimed "constitutionalists". They could probably argue that the basis of the constitution is irrelevant, while the history of the constitution is essential, but this would also force them to abandon the "back to scripture" approach, leaving them somewhat in the dark.

In the 70s, the American Philosopher, John Rawls, wrote a book called A Theory of Justice, which is a contractual argument, and the extremely libertarian (also US) philosopher Robert Nozick countered the social contract argument in the book by saying, that "A social contract holds the same worth as the paper is was never written on".

Its not an easy argument to counter, it never has been, and these two gentlemen have been the focal point of political theory ever since. It is very hard to establish "truths" - VERY hard - in these fields, especially truths with normative implications, but nevertheless, man has tried for about 2500 years now.

If the argument is "tax is theft, I see no justification for government spending my money", we venture more into the area of philosophical discussion than statements of fact to counter it. I can agree, that despite of many attempts, and many well constructed arguments,  we are still struggling when it comes to countering it. Following the same premis, we also struggle with putting any value-judgement on a lot of things we usually agree are horrible (theft, rape, murder).

There are certainly valid functions to be served by a central federal government, while our founders tried to limit the scope of this central government. The government needs tax revenue to do the jobs it should be doing.

Im waiting for a parcel, so probably spent my entire 2016 quota of Brewery posting here - I guess I can sum it up to.

I appreciate the thoughtful discourse, even if i don't understand all of it.

- As a functional argument, blaming the government and regulations has no empirical basis, and wether it will create perfect consumers is guesswork at best.

More like an added friction to hinder private economic activity, and provide leverage for large corporations to dominate smaller companies that can't afford to service the regulatory burden. Even if not overtly intentional the established crony capitalists actually benefit from increased regulation that they can just pass the cost along to consumers. We need to be growing more new small companies, not bigger more powerful old companies.

- As a philosophical argument, it may be right.

Abandoning the neoclassic approach may be a better idea entirely. I recently read an article explaining that the neoclassic hegemony is coming to an end at the larger/prestigious US colleges, and the syllabus now contains social economics, behavioural economics, and other ways of thinking, that does not rely on the idea of the perfect consumer, and makes calculations based on this idea.

Gustav

It seems the modern university is focussed on "safe spaces" and shouting down new ideas. At least that seems to be the superficial view from a distance.

Regarding economics we are in a twilight zone episode where negative interbank rates are considered acceptable. Government "helping" with increased minimum wages, will result in less entry level jobs as predicted by all but the politicians. Kids need to study robotics and automation, somebody will need to service the machines. When the robots learn how to fix themselves, we're all screwed.  8)

JR 

 

[Gustav]

the recent statement from at least one central bank governor, that low growth may be the new normal has serious implications, IMO. 

I think I forgot to make my point along the way.

In neoclassical macroeconomics, there is something called the IS-LM model (interest-savings on the demand side/liquidity-money on the supply side) which is a mathematical model that lets us calculate exactly how changing one variable in the economy (like the interest rate/value of money) will influence other factors. It sort of looks like math, but its more akin to magical thinking, and includes terms like "marginal propensity to save".

Heres an example courtesy of first-hit googling http://www2.econ.iastate.edu/classes/econ302/alexander/Fall2006/solutionset2/solution2%20spring%202006/solution%20set%202%20fall%202006.html

The perfect consumer (probably has many names) is someone who acts 100% rational, in the sense that he knows how to optimise his ressources perfectly, and has 100% accurate information about the market.

In your first post, you gave examples of some classical arguments that point to regulation of the market being a problem to achieving natural equilibriums (as they are called in the model), since the market itself is the only ting that can give perfect information when left to its own devices.

Others would argue that the equilibrium is skewed because of structures of power that inhibits information, and we need to increase taxes and put spending in the terms of a more rational agent. Some may even call for regulation, simply because people are not rational. (Everyone seems to agree its never rational to spend your income on drugs, but people do so anyway).

Theres a real chance we will be seeing some alternatives in the debates within a foreseeable future, and that is truly a positive thing - unless people start killing each other over the right way to reorient the neoclassical approach, rather than realising, they agree the model does not work, and there are solutions available outside of the known framework - including solutions with an openly, normative approach, and solutions that are not build on self reference and/or rely on constant,  economic growth.

Gustav

 

[JohnRoberts]

the recent statement from at least one central bank governor, that low growth may be the new normal has serious implications, IMO. 

I think I forgot to make my point along the way.

In neoclassical macroeconomics, there is something called the IS-LM model (interest-savings on the demand side/liquidity-money on the supply side) which is a mathematical model that lets us calculate exactly how changing one variable in the economy (like the interest rate/value of money) will influence other factors. It sort of looks like math, but its more akin to magical thinking, and includes terms like "marginal propensity to save".

The problem with economic experiments and equations, is real life is rarely limited to only a few variables.

One unintended consequence of the prolonged low interest rate "pushing on the rope" is that the reduced income from conventional  debt instruments is causing people to invest more in dividend paying stocks, and actually save more for retirement (spend less) which slows economic growth.

I'd like to sell stocks, but I don't know what to replace them with, I'm too old to buy a bigger house.

Heres an example courtesy of first-hit googling http://www2.econ.iastate.edu/classes/econ302/alexander/Fall2006/solutionset2/solution2%20spring%202006/solution%20set%202%20fall%202006.html

now that is scary stuff... (impressive but scary, blinded me with math),  ;D

The perfect consumer (probably has many names) is someone who acts 100% rational, in the sense that he knows how to optimise his ressources perfectly, and has 100% accurate information about the market.

Consumers act in what they perceive as their self interest, not their actual self interest, while across enough samples and time it may be more true than not.

In your first post, you gave examples of some classical arguments that point to regulation of the market being a problem to achieving natural equilibriums (as they are called in the model), since the market itself is the only ting that can give perfect information when left to its own devices.

Others would argue that the equilibrium is skewed because of structures of power that inhibits information, and we need to increase taxes and put spending in the terms of a more rational agent. Some may even call for regulation, simply because people are not rational. (Everyone seems to agree its never rational to spend your income on drugs, but people do so anyway).

Theres a real chance we will be seeing some alternatives in the debates within a foreseeable future, and that is truly a positive thing - unless people start killing each other over the right way to reorient the neoclassical approach, rather than realising, they agree the model does not work, and there are solutions available outside of the known framework - including solutions with an openly, normative approach, and solutions that are not build on self reference and/or rely on constant,  economic growth.

Gustav

I think that is a little optimistic,,, A huge fraction of the (younger) US voting public think socialism is attractive.  :

We are surely close to if not already past the tipping point where voters believe their self interest involves getting even more "free" stuff from the government. Of course there is no such thing as free anything in the real world.

=====
This morning Janet Yellin gave testimony to congress and was asked about stalled or chronic low rate of economic growth wrt entitlement spending. At least it was mentioned but people seemed more distracted by the domestic impact from the upcoming BREXIT vote (bookmakers still betting on STAY).

Again thanks for the thoughtful discussion and I regret I cannot respond up to your level. I am not an economist, but have tried to pay attention for several decades.

JR

 

[Gustav]

One unintended consequence of the prolonged low interest rate "pushing on the rope" is that the reduced income from conventional  debt instruments is causing people to invest more in dividend paying stocks, and actually save more for retirement (spend less) which slows economic growth.

Exactly - the "scary stuff" I linked to are equations that are constructed to predict this type of behaviour in the form of "if we adjust this variable (tax), we will get a 0.75 factor back on spending, which will influence X, Y, Z. Causality is assumed all the way through the system, which is highly dependent on (lets call them) "human factors".

When you see equations like that, and realise they are the basis of toying with the economy, it should be food for thought.

I took courses where this type of sheets were basics, but when I scroll through this (its seems to be an exercise sheet from an economics 101 course, lesson 2), I just blank out. Theres no systematic logic in it, like electronics, but rather fragments and a lot of memorisation....No idea how I managed to pass any of those exams

I think that is a little optimistic,,, A huge fraction of the (younger) US voting public think socialism is attractive.  :

All things being equal, I dont think it negates the point that there are waves of  different schools in economics coming on to the field - and all things not being equal, while I do know the term socialism leaves a bad taste in the mouth of many americans, since its somewhat equated with Stalinism, I have to stress that socialism is in no way as controversial a normative approach when constructing political institutions as its sometimes made out to be in the US debate.

For now, my optimism is purely about the entry of different schools into the prestigious colleges. These are attended by people who will be instrumental in making decisions some day, so I think what they read matters.

For example, I once read the book used for the international relations/political theory  course at West Point. Given my experience with how things are usually lumped together in the political debate, I  have to admit, I was surprised at how nuanced and honestly ideologies were presented.  It certainly challenged some of the prejudices I used to carry around 

We are surely close to if not already past the tipping point where voters believe their self interest involves getting even more "free" stuff from the government.

Disregarding normative issues from either side of the political divide, I think that even from an functional perspective, gathering ressources into singularities can be beneficial....

I am honestly puzzled as to why buying toilet paper in bulk at wallmart is often considered capitalism in action, while trying to do the same for healthcare is not.

Of course there is no such thing as free anything in the real world.

If the arguments are purely functional, prosperity does not abide to Newtons second and third law, so in fact, there often is such a thing as "free" when it comes to welfare.

Again thanks for the thoughtful discussion and I regret I cannot respond up to your level. I am not an economist, but have tried to pay attention for several decades.

JR

No such thing as this as far as I am concerned - I dont remember having to apologise about discussing electronics, just because I dont have a degree

We´re all friends here, right!?

Gustav

 

[JohnRoberts]

One unintended consequence of the prolonged low interest rate "pushing on the rope" is that the reduced income from conventional  debt instruments is causing people to invest more in dividend paying stocks, and actually save more for retirement (spend less) which slows economic growth.

Exactly - the "scary stuff" I linked to are equations that are constructed to predict this type of behaviour in the form of "if we adjust this variable (tax), we will get a 0.75 factor back on spending, which will influence X, Y, Z. Causality is assumed all the way through the system, which is highly dependent on (lets call them) "human factors".

When you see equations like that, and realise they are the basis of toying with the economy, it should be food for thought.

There's an old economics joke if you want three answers to a question, ask two economists. Precisions is not inherent in the practice of economics (IMO) .

I took courses where this type of sheets were basics, but when I scroll through this (its seems to be an exercise sheet from an economics 101 course, lesson 2), I just blank out. Theres no systematic logic in it, like electronics, but rather fragments and a lot of memorisation....No idea how I managed to pass any of those exams

I think that is a little optimistic,,, A huge fraction of the (younger) US voting public think socialism is attractive.  :

All things being equal, I dont think it negates the point that there are waves of  different schools in economics coming on to the field - and all things not being equal, while I do know the term socialism leaves a bad taste in the mouth of many americans, since its somewhat equated with Stalinism, I have to stress that socialism is in no way as controversial a normative approach when constructing political institutions as its sometimes made out to be in the US debate.

Yup sorry, I was speaking in broad strokes. Arguably the US is already a little pregnant with socialist government programs, so it's a matter of degree.

I haven't studied the different flavors of socialism well enough to name them but IIRC Stalin was a bad guy, didn't he consider socialism a mid point on the path to communism? 

In this political campaign there is much vagueness about the difference between nordic socialist countries, and others like Cuba or Venezuela.

Some (politically motivated) economist (from moodys) is on TV claiming how many jobs would be lost in a recession caused by electing  Trump....  no doubt based on taking Trumps off the cuff tax cut comments at full face value. No politician ever does literally what they promise, not to mention a president cannot dictate tax policy, that is a negotiation with the congress.

For now, my optimism is purely about the entry of different schools into the prestigious colleges. These are attended by people who will be instrumental in making decisions some day, so I think what they read matters.

For example, I once read the book used for the international relations/political theory  course at West Point. Given my experience with how things are usually lumped together in the political debate, I  have to admit, I was surprised at how nuanced and honestly ideologies were presented.  It certainly challenged some of the prejudices I used to carry around 

We are surely close to if not already past the tipping point where voters believe their self interest involves getting even more "free" stuff from the government.

Disregarding normative issues from either side of the political divide, I think that even from an functional perspective, gathering ressources into singularities can be beneficial....

I am honestly puzzled as to why buying toilet paper in bulk at wallmart is often considered capitalism in action, while trying to do the same for healthcare is not.

Of course there is no such thing as free anything in the real world.

If the arguments are purely functional, prosperity does not abide to Newtons second and third law, so in fact, there often is such a thing as "free" when it comes to welfare.

Again thanks for the thoughtful discussion and I regret I cannot respond up to your level. I am not an economist, but have tried to pay attention for several decades.

JR

No such thing as this as far as I am concerned - I dont remember having to apologise about discussing electronics, just because I dont have a degree

We´re all friends here, right!?

Gustav

Yes, were like a big family, we can have disagreements but at the end of the day we are still family.

I am always willing to learn. I need to shift gears from the normally combative political discussions on social media. I like the more thoughtful, calmer discussions here.

JR

 

[mattiasNYC]

Others would argue that the equilibrium is skewed because of structures of power that inhibits information, and we need to increase taxes and put spending in the terms of a more rational agent. Some may even call for regulation, simply because people are not rational.

I think I'm sort of on board with the above, though I think "structures of power" is possibly a bit misleading, or narrow a view of that which "inhibits information". I would actually add "noise" to that, and the fact that the consumer has no way of sorting through all the information that is available.

I think that is a little optimistic,,, A huge fraction of the (younger) US voting public think socialism is attractive.  :

All things being equal, I dont think it negates the point that there are waves of  different schools in economics coming on to the field - and all things not being equal, while I do know the term socialism leaves a bad taste in the mouth of many americans, since its somewhat equated with Stalinism, I have to stress that socialism is in no way as controversial a normative approach when constructing political institutions as its sometimes made out to be in the US debate.

Gustav

The US debate is dumbed down for the masses, it's really incredibly simplistic. But seemingly everything one encounters in this country reinforces the proposition that capitalism is the best way forward and other ways are simply discarded and often colored, as you point out, as being some horrible Communism. Trying to even define "socialism" in the US is like pulling teeth.

 

[benb]

entering public consciousness. There was a book 20 years ago
predicting this, "The End of Work" by Jeremy Rifkin.

There was also one almost 150 years ago - by Karl Marx 

Gustav

Oh, so you see where this is going.

Rifkin's answer to underemployment, at least temporarily, is to lower the work week to 20 hours per week, so at least we have two people making half the pay they used to, rather than one person with a fulltime job and one totally out of work. Indeed his website says he's been a consultant with European governments which are doing just that sort of thing (IIRC, France has strict laws against working overtime). I thought of it as instead of "spreading around the money," this is doing almost the same thing, "spreading around the work."

Ford's answer (so you don't have to read the book) is Basic Income, a regular payment to every adult citizen. This idea apparently has historical (at least back to the 1970s, anyway) support from both liberal and conservative economists. The conservative/libertarian attraction to it is that it's not means tested, you don't have a government bureaucracy approving the various different food stamps/WIC/housing aid entitlement programs, the money is just given to people and those people get to decide for themselves what to spend it on. Basic Income is meant to REPLACE these other things, but in the current political climate it's hard to believe that would happen. If it does it would probably only be in addition to current entitlements.

But so far, industrial and commercial robots are owned exclusively by those with the capital to buy them and put them to work, and it seems few in the general public have noticed that each one of these robots replaces (very approximately) one human being and the associated pay of minimum wage or more, and the money saved is going to the owner of the robots. In the long term this can only make a two-tiered society, the robot owners who will live in an overabundant society and everyone else who will look like the current residents of Venezuela.

Will this not happen? Maybe I'm brainwashed by all those articles (see http://singularityhub.com posts for the last year or two), but I don't see how it won't happen. I've seen a few articles that technological unemployment will not continue to increase, but I found the arguments weak and unconvincing. I'm surprised to not see it discussed more in current economics discussions.

 

[living sounds]

Really interesting thread!

The whole premise of a "natural equilibrium", in nature or in an economy has been long discredited scientifically, but it continues to shape discussion and - alas! - policy.  Systems do not naturally strive towards homeostasis, and humans don't naturally behave in their best interest, let alone rationally.  Voters don't either, BTW.

We need to build the feedback loops into the system ourselves. That's what taxes are for IMO.

 

[Gustav]

I haven't studied the different flavors of socialism well enough to name them but IIRC Stalin was a bad guy, didn't he consider socialism a mid point on the path to communism? 

Stalinism is only vaguely associated with socialism and communism.

The father of Commnunism, Marx, was heavily inspired by the rather "difficult to read" philosopher,  Hegel.

Hegel believed that history is like an engine, moving forward, determined to find middle grounds between thesis and antithesis, (middle grounds are synthesis). Bubbles,  recessions and resulting equilibriums is a good example in the context of this discussion

Marx was also quite fascinated by the efficiency and drive of technological development experienced in the industrial revolution, but he also saw it as a unique period in time (as opposed to older slave/master relations), because the individuals relation to the product was completely lost, and humans were identified as workers before they were identified as human beings.

So on this basis, everything ”up till now” (when Marx did his writing), was driving by this push/pull and release, but he was convinced he was seeing something different.

In short, Marx saw capitalism as a fantastic system for driving us forward (this is often lost, even on students of political theory), but an impossible system to be humane in.

The idea goes something like this.

1 worker + 1 hoe = 300 carrots and hour
2 workers and 2 hoes = 600 carrots an hour
1 worker and one tractor = 9000 carrots an hour
0 workers and robot tractor = 9000 carrots an hour

At the final point, the worker is no longer needed, and it  assumed that the majority of wealth is accumulated in the hands of a very small elite. Ressource abundancy means, that money is mostly made by moving money around, and for that, you need money to begin with.

Marx predicts that the people who have accumulatd the wealth are not likely to share it out of the goodness of their hearts (the system creates inhumane human, power corrupts etc), and this is why the idea of revolution is introduced.

Revolution is brought about to seize the means of productions, and reset to a ”classless” society, where human beings are human beings first, and whatever function they serve in society second.

The part about bloody revolution is  not pleasent, but the chain of thought up untill that point (depending on the analysis of capitalisms ability to drive technology) should make sense as an "If, then" while some of the premises are questionable.

Stailn did not wait to see if capitalism would drive technology and production in the manner predicted by Marx. He decided to kill everyone who disagreed with him (which were a lot of people) and tried a fast track for development (with help from American industry).  This has nothing to do with communism and socialism, it is purely insane dictatorship.

For perspective in ”our day and time”, check what Ben wrote.

But so far, industrial and commercial robots are owned exclusively by those with the capital to buy them and put them to work, and it seems few in the general public have noticed that each one of these robots replaces (very approximately) one human being and the associated pay of minimum wage or more, and the money saved is going to the owner of the robots. In the long term this can only make a two-tiered society, the robot owners who will live in an overabundant society and everyone else who will look like the current residents of Venezuela.

The biggest problem with Marx is the idea that humans are not really themselves in the capitalist society, and a very legit complaint (even if we reach the finish line with no bloody revolution) is, that its probably not capitalisms fault that human beings are wanting creatures when it comes to goods and power, even if they have enough.

We are surely close to if not already past the tipping point where voters believe their self interest involves getting even more "free" stuff from the government.

This is mostly a problem within the neoclassical system, and hence, within a specific, normative mindset.

Functionallly, and even within the system, you could take a less distrusting approach by asking concrete questions like, "what is the status of the supply side of the labor market?", and "can this be affected in any way by kicking the supply side?", or softer questions like, "could we be looking at a systemic failure, if people are not able to buy a house and put food on the table, even if they work two jobs, given that there is no scarcity of ressources in society as a whole?".

In a court of law, we are ready to assume innocence, unless guilt is proven. We accept that criminals are set free, so we do not punish anyone wrongfully.

In the labor market, there seems to be a reverse sentiment. Unless you can prove its not your own fault, as a individual, you are not able to support yourself, you should not expect society to help you - even though theres plenty to go around.

I am not so naive as to think there are not people who would do anything to avoid work, but I do think nuances are often lost in these discussions. I find joy in working, but working my ass off is sometimes hard, when I count my pennies to make rent and buy clothes for my kids. It creates a dissonance.

One can easily say that redistribution is unfair,  a la Nozick, but on a mushy note, I think keeping everyone happy is sometimes a better goal than keeping everything fair.
If its hard to make rent, my perspective on sharing is quite different from when I have enough, but when voters and politicans forget that this is actually what is going on, and start refering back to ideology, and the ideology sticks so hard that we forget to be kind, just because we now feel entitled.

Just to tie this back to economics, we have seen some research in the neoclassical tradition that disproves concepts that Trickle down economy and the like, but the well meaning people doing that type of research are still working within a frame that may be broken. Its good we are seeing alternatives, and GDP may just turn out to nothing to do with anything, if we change our perspectives a bit.

Gustav

 

[living sounds]

1 worker + 1 hoe = 300 carrots and hour
2 workers and 2 hoes = 600 carrots an hour
1 worker and one tractor = 9000 carrots an hour
0 workers and robot tractor = 9000 carrots an hour

Marx also said "cars don't buy cars". So the robot economy ultimately cannot work as a capitalist system, since people who cannot work and thus don't earn money won't be able to buy and consume the goods the robots create.  An economy only works as a cylce, a feedback system that fuels ressources back and forth.  A lopsided allocation of resources thus results in stagnation.

 

[mattiasNYC]

The biggest problem with Marx is the idea that humans are not really themselves in the capitalist society, and a very legit complaint (even if we reach the finish line with no bloody revolution) is, that its probably not capitalisms fault that human beings are wanting creatures when it comes to goods and power, even if they have enough.

I agree that if that's what Marx meant it's not really correct. I would say however that the system exacerbates those inherent bad traits. The outcome is similar but the distinction is important and necessary to make.

Functionallly, and even within the system, you could take a less distrusting approach by asking concrete questions like, "what is the status of the supply side of the labor market?", and "can this be affected in any way by kicking the supply side?", or softer questions like, "could we be looking at a systemic failure, if people are not able to buy a house and put food on the table, even if they work two jobs, given that there is no scarcity of ressources in society as a whole?".

In a court of law, we are ready to assume innocence, unless guilt is proven. We accept that criminals are set free, so we do not punish anyone wrongfully.

In the labor market, there seems to be a reverse sentiment. Unless you can prove its not your own fault, as a individual, you are not able to support yourself, you should not expect society to help you - even though theres plenty to go around.

Spot-on. Everything you've written I think.

 

[mattiasNYC]

Marx also said "cars don't buy cars". So the robot economy ultimately cannot work as a capitalist system, since people who cannot work and thus don't earn money won't be able to buy and consume the goods the robots create.  An economy only works as a cylce, a feedback system that fuels ressources back and forth.  A lopsided allocation of resources thus results in stagnation.

But in order to come to any further conclusions from the above we need to look at what motivates people to do things.

If an economic system is used to allocate resources and if people accumulate wealth because they want to, then those robots can still create wealth for those who own them. This is of course on a much broader scale than just one owner of X robots that do just one thing. The point being that those means of production produce wealth, i.e. goods and services, and that's the entire goal of the economic system. They can continue to do so even if the system itself crashes.

Just to illustrate the point, imagine a hypothetical future scenario where 1,000 Americans own all the means of production in the US, and the last worker has been laid off. If it's all run by machines the economy makes no difference at that point. They can continue to grow and harvest crops, build cars, computers etc, because they own and control the means of production. So as long as the goal is that they can get a hold of whatever wealth they want it's not really a "problem".

If the goal is control and power I would argue they still get it this way. The poor get whatever the owners then allow to be handed out. Of course, long before that happens I think we might see a revolution, should we head in that direction.

But at any rate all of the above is just to say that I don't think it's a problem that "cars don't buy cars" because the goal might not be the economy but the accumulation of wealth and power. After all, how many of the wealthiest people on the planet do what they do with the goal of most efficiently and fairly distributing resources globally?

 

[DerEber]

Just to illustrate the point, imagine a hypothetical future scenario where 1,000 Americans own all the means of production in the US, and the last worker has been laid off. If it's all run by machines the economy makes no difference at that point. They can continue to grow and harvest crops, build cars, computers etc, because they own and control the means of production. So as long as the goal is that they can get a hold of whatever wealth they want it's not really a "problem".

Yea, let the machines pay our taxes and rent and we can start concentrate on things we really feel to be important.

 

[JohnRoberts]

What a great discussion...... It also answered my question about what to buy instead of stocks, I need to buy some robots.  ;D ;D ;D

I have mentioned before that Hon Hai, the huge contract manufacturer in China has announced their plan to buy 1 million robots.

It seems we are still some time away from robots taking over all human tasks, while ironically minimum wage laws are a strong incentive to advance automation of many fast food industry entry level jobs. Another unintended consequence of government helping. 

From my perspective I see some competing trends. CAD computer aided design is making it easier to create new unique product designs, all within the computer environment. In the past with tape and exacto knife the odds of a first pass PCB design being right were pretty slender. On the other side of the ledger regulation and government intrusion has made starting and running a small business harder.

I don't have an easy answer for the wealth divide***. Using government force to redistribute wealth can create perverse incentives against creating wealth by the makers, and incentives against working by the takers.  We need a win-win solution not this lose-lose approach.

JR

*** I just saw an article that suggests that not just the top 1% has benefitted from current economic trends but the top 25% are benefitting. Of course 75-25 will still lose any political tug of war. At least it's not as inflammatory sounding as the all too familiar 1% screed.