The General Economics Thread

Growth is unlimited in the long term, provided that the population continues to increase, and employee productivity continues to rise. What would limit it?

R and D does create jobs, for the purpose of selling consumers new stuff, which is how businesses create new markets. This keeps people employed, which allows them t buy stuff. It's a cycle, with clear inputs and outputs. If there were some way to draw here, I could make you a flowchart. Credit, skilled labor, tools and raw materials go in, products and services, plus paychecks go out, the pay checks pay for the goods, repeat.

Work isn't valuable in itself (at least not within economic models- it is psychologically) but consumption is. Consumption drives the economic cycle. People love consuming stuff. It makes them happy. The money to pay for their consumption has to come from somewhere however, so if employment goes down, so does consumption. This is what leads to recessions.

I'm not sure reducing work would be of value. People like work. They just want a fair wage for it.

edited 5th May '16 4:51:38 AM by DeMarquis

People like productive work. They like seeing the results of their efforts. They hate work where the results are impossible for them to see or understand, where they're just an invisible cog in an abstract machine, and where they feel obligated to take unpleasant work simply to survive.

And frankly, if people like work so much why should we even pay them for it? They would just naturally do what they want to do anyway. They don't need incentives. If people didn't need to work as much, they'd just spend more time volunteering. Because they'd actually have free time.

edited 5th May '16 4:56:51 AM by Clarste

Human psychology has a built-in need to be useful. Western culture refines that in childhood to "get a job, raise a family, retire with money". It's not the only possible way to fulfill that need, though.

edited 5th May '16 5:00:09 AM by Fighteer

And economic growth is limited by population. While demand might increase with more population, the increased efficiency of production means that, for example, the needs of a 10 people can be met by 1 extra job. That's 9 people with no reason to work. That's simply what efficiency means. If the demand and the labor needed to produce that increased at the exact same rate, then increased efficiency would be pointless.

So you have to make up new things that people suddenly need, which they've never needed before. Which isn't impossible, but it's certainly not predictable either. And it's unclear why that has value to society, compared to increased leisure time and art and whatever.

edited 5th May '16 5:16:19 AM by Clarste

For the record, I am a bad ninja-editor who keeps correcting my posts, so here's something I added the previous page that you might have missed:

I think we would fill the psychological need for usefulness with games and sports in a post-work society.

Not all jobs are production jobs, the service/entertainment industry has potential unlimited growth, the only thing that limits the number of cafes/restraunts/art galleries/gaming clubs we have is the amount of people we have and the free time and disposable income that said people have.

You don't need a lot of people to run art galleries, and there's no reason why food service can't be automated just like other jobs. Creative occupations will remain the purview of humans for quite a while, but not indefinitely. Artistic performances will certainly be in demand, but you need a certain ratio of people watching them to people doing them: you can't employ everyone that way.

Frankly, attending live performances in person is a really inefficient way to distribute entertainment; it exists mainly to provide a source of income for performers.

Volunteer work is well and good, but in an efficient robot economy, most jobs that can be done without specialized training would easy candidates for automation. Said volunteers might become superfluous.

edited 5th May '16 7:26:01 AM by Fighteer

Also, volunteering in places such as hospitals and mental institutions around the world (both religious and non-religious volunteering).

edited 5th May '16 7:22:48 AM by Quag15

We are in fact entering a post-work society. It may not be particularly apparent yet, but give it 20-50 years and watch as most places around the world suffer around 50% unemployment. The transition point occurs at the equilibrium point between people wanting more stuff and people wanting more free time. The value of free time is climbing due to innovations in entertainment and the value of stuff is falling due to innovations in entertainment and growing supply of stuff

@DeMarquis: Environmental concerns and finite resources are the ultimate limitors of productivity.

edited 5th May '16 7:44:47 AM by war877

There's no reason that basic or cheep food/other services can't be automated, but luxury services? Where part of the luxury is that the service is provided by a person? You can't automate that short of human-like AI.

But still, how many of those people do you need for each person in the world?

Also, when talking about to human services, take note that a lot of customers prefer humans to serve them.

Regarding the whole question of how automation would impact the economy, do consider that every person put out of work by a machine could be theoretically doing something else productive; automation is not the same thing as strong artificial intelligence, and until such a time as the latter is possible, there will be economic roles an unmodified human can fulfill; time a person spends doing one task as opposed to another will always be worth something.

The big issue with automation is that a post-automation economy, and thus society is radically different from our modern economy, and major economic transitions can be a major source of social unrest and political turmoil. The transition from pre-industrial society to our modern industrialized society was hardly painful, and the resulting unrest was a major factor in the rise of authoritarian regimes in the early years of the 20th century.

@Clarste:

(15927)- We must pay them for it because they refuse to give their labor away for free (even if they enjoy it). From an economic modeling perspective, we have to pay people so that they can buy stuff. If they didnt buy stuff, there would no point in assigning them jobs in the first place.

(15929)- Technically, efficiency means that the work which was done by ten people can now be done by nine. Need, on the other hand, that is the capacity for public consumption, is presumed to be infinite. At least no one has found a limit to it yet. People seemingly are always ready to consume more stuff.

Increased efficiency is not pointless because it reduces costs to the producer, but not to the consumer. The difference is kept by the producer as profit. That's what actually provides the basis for economic growth- an increase in net profit.

Provided, of course, that the producer invests that new profit in new forms of production, which creates more jobs, resulting in more wages, which allows people to buy more stuff.

The problem with leisure and volunteering, of course, is that they won't help pay for new stuff. And people like new stuff.

The goal, therefore, is not to work more, nor to work less, but to maintain economic growth, which is what allows our population to expand while simultaneously improving the average standard of living. The single most popular form of "new stuff", of course, are babies.

edited 5th May '16 9:21:48 AM by DeMarquis

This is entirely circular logic. It is the way it is because it is.

Need, or rather demand, is artificially (and intentionally) introduced. Why would advertising even exist if demand was naturally infinite? Businesses spend billions of dollars creating demand, just so they can make more billions of dollars. It is unclear how this actually benefits anyone or society.

Or you could give that surplus away to people who want it. You're essentially saying that human satisfaction, a basic right, needs to be help hostage behind work, which people don't want to do without being paid for it, by your own admission. I call that wage slavery, and I don't see how it's supposed to be a good thing. And people would make new stuff on their own, if they had more free time. Lots of people want to be artists, but only a very few can actually succeed at any given time, because there's only so much money people are willing to spend on them. Birthrates in developed countries go down because the costs of raising children become unbearable, and would require the parents to work even more.

I feel like you're describing the current economic system without even attempting to justify why it's a good option for human society.

edited 5th May '16 9:35:41 AM by Clarste

Just take a glance at Kickstarter or any other crowdfunding site. The world is absolutely filled with people who would love nothing more than to make stuff or do stuff, but can't because they don't have unlimited time to work on their pet project, and therefore need a living wage, and probably don't seem like good investments to most people who own capital.

And, you know, most of them probably aren't good investments. But why should that stop them from doing what they want to do, from making what they want to make? How many great artists and scientists of our era spent their entire lives earning minimum wage to feed their families? How is economic growth a good thing if it inherently prevents people from being happy in the ways they want to be happy? Who is the growth for, if not society? It's an engine that feeds on itself, as you've described, but taking it for granted as a kind of natural order seems like a bad idea. As I already mentioned, I'd expect it to crash within the next century, and I'd rather our society be prepared to wind it down than let it destroy everything with its own momentum.

edited 5th May '16 9:55:37 AM by Clarste

If demand is artificially introduced, then you'd have no need to buy toiled paper. Most goods also need to be replaced or constantly purchased and you also have lots of new things that can replace them or serve as an alternative. Demand also changes with many factors, like price changes, alternatives, consumer tendencies, new products and the like.

You could argue that perfumes are an artificially introduced product but no one wants to smell human stink so people buy them. While clothes are something that there will always be a natural demand because clothes get torn and worn out and no one is going naked around, specially when it is cold.

There are many products and many companies manufacturing them, if they want to stand out they need advertising, other products are new and can make living easier or more enjoyable but if you want people to know they exist you also need advertising.

Also people don't make stuff on their own. No one can make a car or a computer on their spare time, most of the self made things are small and simple and far from being the ideal replacement from an industrialized product which requires a chain of workers from the fronts salesman to the truck driver hauling the product and from the assembly line worker to the miner extracting the raw resource needed to make those things.

No one is going to give surplus income to others for free either, human satisfaction isn't a right, it is a drive and motivation to do something. I could as well live in a shack and receive some government payments and live the rest of my life like that, but since I want to have a better standard of living I have to work in order to afford it. In order to afford better stuff I need a job and for me to have a job there must be someone willing to hire and pay me for the work because they provide a service or good. That good or service is consumed by people seeking to keep, maintain or raise their standard of living.

Kickstarter and crowdfunding only work because there are people with ideas to make a product and they only get the funding because people want that product. It isn't something closely related to having free time, it is related to having a product and getting the funds to make it. Even if the kickstarter crowdfunding results in a product, you'd still need to hire people to make them, pay those people and those waged employees are going to spend money on other stuff too.

edited 5th May '16 10:02:20 AM by AngelusNox

As Brad De Long likes to put it: "People like smiles."

Vox did an article on this recently, the basic point being made that there's a fair amount of work that keeps a human around because people HATE dealing with robots and automated systems

Toilet paper and clothes have finite demand based on the population. If it takes 10 people to meet all of our needs in terms of paper, clothes, perfume, cars, etc, and then technological advances allow 8 people to make the exact same amount of stuff, then theoretically you have 2 people free to do whatever they want. Except capitalism doesn't let them do that, because it won't survive if people are allowed to have free time. Instead some brand new thing comes out of nowhere, like iphones, we're all told we need it through advertising, and then the 2 free people get put to work making those. Tech advances again, we can make everything + iphones with only 8 people, and those 2 people are made to work on something else. It's a hamster wheel that's impossible to escape and exists solely to eat up everyone's free time so they're never happy.

Edit: And of the 3 people born during that time, 1 is needed to keep with the new demand and the other two are just unemployed. Which is somehow a bad thing instead of a good thing.

Now, realistically, you wouldn't just have 2 people with no jobs at all, you'd have everyone working a 20% shorter work week. Productivity would remain constant, all the cars and clothes and computers and whatnot we need would keep getting made, but people would have more free time and less stress. But our current society would never allow this. And it's sad. Society is built on making sure that we're all constantly unsatisfied.

Also, people build cars and computers and stuff in their free time all the time. I mean, sure, they're not mining metals and machining parts on their own, but there's no reason for us to abandon the infrastructure we've created. There's just 1 guy pulling a lever at the factory instead of 10, and it's delivered by a self-driving truck. People are fundamentally motivated to create, and will do so on their own using the resources available.

Edit: Regarding Kickstarter, I was talking mostly about the failed attempts, which I think is more meaningful. People are trying to get around their capitalist chains, regardless of whether or not they succeed. We've created hell, basically.

edited 5th May '16 10:30:20 AM by Clarste

Only because the robots and automata suck, though. Get voice recognition software up enough and a call center will be just as good as talking to a person (since they're slaved to decision-trees anyway).

I'll grant that capitalism was originally designed for the capitalists. It was for the benefit of the few, not of society as a whole, but in a way that made economic growth more accessible (since growth has been a reality for much of human history, but the kind of extractive growth like slaveholding sugar plantations that makes some people better off and most people worse off in real terms, whereas capitalism makes most people better off most of the time).

Even Marx conceded that capitalism represented a significant improvement over the previous economic systems of the world, insofar as, under capitalism, the most significant oppression is felt by the lower working class, which is a big step up from the ancien régime. There's still a lot of room for improvement however, in my opinion.

edited 5th May '16 12:57:36 PM by CaptainCapsase

There are a few very strong reasons why automation won't catch on, at least not anytime soon, in the customer service industry. A) A machine isn't going to bend the rules when a customer starts screeching at it. It won't care. B) There are tons of people out there who outright refuse to learn how to use something. It doesn't matter if they've been through the self-checkout line dozens of times, they ignore the instructions. And C) People get their own orders wrong all the time and will bend over backwards so far that they break their own backs to avoid admitting it. I can guarantee you that the first automated Mc Donalds will have someone standing there screeching at it for a really stupid reason within an hour of it opening.

I don't see why you can't program a machine to apologize profusely and revise the order.

Mostly because the people who screw up their own orders don't notice that the order is "wrong" until they're out the door.