The General Economics Thread

That's well known.

But good luck persuading a rich man to part with his money. Unless you can persuade him that not doing so is going to eventually make him lose all of it.

The poor man is even more unwilling, but he doesn't have the slick lobbying efforts the rich man does.

Of course, stimulus spending is even better for the economy than tax cuts, regardless of who they are for.

so, i have a question, how would an economy where people could easily save up to buying cars and houses instead of taking out loans affect the economy?

Probably not much.

Better for people's long-term financial situation, but doesn't really alter the money supply in a massive way.

Depends on which end of "easily" it comes out to. Do they have a very high income to expense ratio, such that they save large amounts of cash to spend in big chunks, or are cars and houses really cheap relative to incomes?

Generally speaking, you want people to be spending most of what they earn, or the economy clogs up with a glut of savings. Too much saving can be as bad as too much spending; indeed, one of the catalysts of a recession is an economy in which too many people are trying to save rather than spend. Now, over time, if people are indeed spending their money on cars and houses and stuff, it'll balance out, since it's not like every household would save their money over the exact same time span, only to spend it all in a massive synchronized burst a few years later.

Rather, I'd say that the fact that people can easily save for such expensive products indicates something weirdly out of whack with the supply side of the economy. To take a real example from history, while the U.S. went into World War II barely out of the Great Depression, we left it with almost no measurable consumer debt and massive surpluses of savings, due to wartime rationing. Nobody could go into debt, and tons of income was saved in the form of war bonds. Thus, at the end of the war, all that savings could be spent on the newly-freed manufacturing capacity, and this is what gave us the great prosperity of the 1950s.

Edited by Fighteer on May 24th 2019 at 10:30:56 AM

i meant in the form of having a high average income while stuff that would potentially be huge expenses, like healthcare, education, internet and communication, are publically funded so that no business will exploit those markets. and probably have some kind of negative income tax for the poorest while taxing the rich

Ah, you're talking about a post-scarcity economy where all basic needs are covered and labor income goes to pay for luxury items. That's plausible, and indeed we have a lot of speculative fiction about it.

One thing that I would point out about such an economy is that housing and transportation would presumably be covered under the basic necessities that everyone has access to, although typical individuals would probably not own cars and homes.

In such a paradigm, actually purchasing and owning a large capital good like that would indeed be a luxury, but one that people who take on higher-paying jobs or diligently save all of their surplus income could reasonably expect to afford. You would then see socioeconomic status reflected in this sort of ownership. "You bought your car? That's interesting, I spend all my surplus on clothes and movies."

Edited by Fighteer on May 25th 2019 at 7:32:59 AM

The real question is why anyone would want to spend their savings on a house or a car, instead of borrowing the money and paying it off later. Houses and cars last years, and most families have needs in the present. Borrowing money for big ticket items is a good deal, provided the terms are manageable and the borrower can look forward to a reasonable level of employment security.

From a macro-economic perspective, it's still a tricky question. Lending money is what banks do with the savings accounts their customers have with them, which is what allows a savings account to accrue interest (the interest you pay on your car loan is the interest that someone else is earning on their bank account, less the bank's profit). An economy with no mortgages or car loans implies no interest bearing accounts, which implies that there is no reason for people to put their money in banks in the first place, which implies no banks (at least, not for personal accounts).

One wonders how the government manages the money supply, or consumer spending. If people are able to pay for very large purchases with cash, that implies a lot of money floating around in circulation, which would seem to put the economy at risk for inflation. It also implies something about boom and bust cycles: during times when the economy is producing, and selling, a lot of houses, other items, like food or clothing will increase in price. The people buying the houses will be short of cash, while anyone who doesn't will be ok. During times when housing demand goes down, people are presumably still saving cash against future house purchases, so cash is tight, and prices fall, but so do salaries (because people aren't buying things, so employers have less money for payroll). It resembles the economy we had in the 1800's, when everything was tied to gold prices. Now it's houses and cars instead.

It's an interesting thought experiment, because it illustrates just how closely everything in our economy is tied together, like pieces in a jigsaw puzzle. Short of some game-changing revolution like post-scarcity, there is probably no practical way to get to that scenario from the economy we now have.

In an idealized post-scarcity model, luxury goods would still be made as an incentive for people to be productive beyond whatever baseline expectations the society sets. Example: You get Model A of home with your basic living allowance. If you want Model B, which is bigger or has more features, you need to do something worthwhile enough to merit it.

The thing about this sort of true post-scarcity is that there wouldn't generally be a need for money for most people. To fairly allocate luxury goods, there would undoubtedly be some sort of account that they can accumulate credit into, and which could be drawn on to buy the aforementioned luxuries, but the current First-World paradigm of "earn a paycheck, deposit it in your bank, pay your bills and rent, buy groceries, then maybe have some left over for nice things" would be completely obsolete.

Edited by Fighteer on May 29th 2019 at 3:06:11 PM

One thing about said "post-scarcity" labor economies is that "luxury" will be defined by what remains scarce. If metal (or diamond), energy, and manufacturing are all in the "too cheap to meter" zone, then I'm going to queue up at the fabricators' for a flying motorhome.

The problem is, how do you work out a market system without money? And if no market, who sets prices or payroll?

Well, Cory Doctorow's suggestion was that people get to cut in line for various goods based on their reputation.

He later clarified that reputation economies were a fucking terrible idea and that presenting one in a story was not an endorsement.

You don't, that's kind of the point. A post-scarcity economy doesn't have money because it's literally not worth doing the bookkeeping. Costs are so low that every effectively has infinite money, and since everyone has infinite money no one bothers to track the two bucks you just spent on a widget.

Picking this up again, even the most idealized post-scarcity economy would have products that are not available for everyone in effectively unlimited amounts. In other words, some things would still be scarce.

For example, in Star Trek, everyone (all of the presumably hundreds of billions of Federation citizens) cannot get on a transporter pad and beam to Vulcan at the same time. Everyone cannot be on the bridge crew of a starship. Everyone cannot have a personal starship to go wherever they want at any time. Everyone cannot have an antimatter reactor powering their home. Everyone cannot go on vacation from their jobs at once. There are scarce things, even if they're so esoteric as to be absurd for most people to desire.

Ergo, there must be some way of allocating those scarcities: by merit, by random lot, by effort; and therefore some way of measuring or determining when and how any given individual can acquire or utilize them. This is money in principle regardless of how it is quantized within that economy.

We have seen that money does exist in Star Trek, even if it's not something most people deal with on a day to day basis. There are black markets and grey markets; there are services that are bought "off the books". How exactly one acquires these credits remains a bit of a mystery, at least in the visual media. (I'm sure the EU novels explore it, but I could spend the rest of my life reading them and they're only semi-canon anyway.)

The point is that you need a system of accounting in order to allocate whatever scarcities exist within an economy, no matter how advanced it may be.

Edited by Fighteer on Jun 21st 2019 at 11:20:37 AM

Sounds like the Soviet system, except with alot of stuff to hand out. Whoever controls the allocation process, controls society.

Communism could work in a post-scarcity society, since the market inefficiencies it introduces would be irrelevant if everyone has everything they need to live for effectively free.

I suppose the risk you take in any system of this nature is that you'd end up with a Wall-E-like scenario in which most of the people are fat and dumb, plugged into their entertainment machines for their entire lives while a nefarious cabal runs the place, but to what benefit? It's not The Matrix; you can't power a society with people batteries.

Anyway, humans aren't going to stop striving and learning because they have their basic needs guaranteed.

Edited by Fighteer on Jun 21st 2019 at 5:44:18 AM

My guess is that they would degenerate into petty bickering and fighting out of boredom. Anyway, while post-scarcity is fun to speculate on, the odds of us actually getting there are too low to take seriously.

I'd argue a post-scarcity economy would largely transcend the concept of economic systems as we know them. In a post-scarcity economy, a lot of communism's goals would be achieved even in a very capitalistic-system and vice-versa. At least, from the standpoint of a normal, individual human.

Mind you, I would argue that such systems would actually still tend to have an economic system on a macro-scale. For example, let's imagine an automated economy wherein humans don't work and simply live off of the generosity of machines. However, the machines themselves are still preforming occupations and need resources to do those jobs. For example, a mining robot might grab farm land to sell to farmer robots in exchange for access to mineral-rich territory. In fact, I could even see wars breaking out over these resources or even for positions. For example, a Starbucks-super AI might develop a bunch of UA Vs to bomb farming robots that don't grow coffee.

I doubt that the AI would do anything as wasteful as fighting wars. That would be insane. If the AI couldn't synergistically figure out how to assign and allocate resources in such a situation, it wouldn't be very good AI. The idea of intra-AI warfare is something that science fiction writers dreamed up to give us a reason to be hopeful that we could somehow defeat them.

Edited by Fighteer on Jun 21st 2019 at 8:02:05 AM

I'd point to the existence of predators as an example of how aggressive strategies like that are clearly quite workable. If it wasn't, predators wouldn't have evolved.

And I'd actually argue that sci-fi writers tend to vastly underestimate the possibility of intra-AI conflict. Typically, they portray AI as being monolithic and all working together against organic life.

If the robots are programmed to act as independent agents, then they might very well end up in some sort of competitive system of mutual exploitation.

You're making a lot of assumptions about the AI. Well, we all are. First of all, why are all these AI agents independent? They would be interconnected, if not all the same system. Any time a resource problem occurred, they would simply optimize the solution. Superintelligent AI is going to be an optimizing agent with an efficiency unimaginable to humans. Competition could occur, to be sure, but no rational optimizing agent would ever pick conflict over cooperation if there were any alternative. Assimilation, maybe, if no optimal solution could be reached otherwise, but that would be solved very quickly.

Even if you assume multiple independent implementations of self-learning, optimizing AI, the tiniest competitive advantage gained by any one of them would be exponential. Within a few decades, if not years or months, of their release into the "wild", they would have already fought their competition and it would be won, without the slightest bloodshed... unless they decide to optimize us away, that is, in which case things would be very bloody, and then very quiet.

All of these other ideas are quite simply unsupportable anthropomorphizing.

Anyway, assuming we manage to keep the AI "friendly" — that is, it is either prevented from or decides not to optimize humans out of existence, it would solve all resource production and distribution problems on Earth within a few years at most — the time scale would be constrained mainly by how long it took to build the infrastructure needed to fulfill the optimization goals. Human economics would disappear overnight. Also, this is very off-topic.

Edited by Fighteer on Jun 21st 2019 at 9:24:07 AM

We are indeed, making a lot of assumptions. Everything depends on who programmed these automated economic AI's and what their goals were. If each nation in the world programs an AI to maximize their GDP at the expense of all others (a very likely model, if you go by history) then conflict is very likely. Likewise if every major corporation in the world designs it's own AI to pursue it's own interests. The simple prisoner's dilemma demonstrates that sometimes direct conflict is the optimal solution from the perspective of the individual players. Nor is it inevitable that the AI controlling the most resources will absorb the others. Some sort of semi-stable equilibrium of competition and cooperation might be the ultimate outcome.

That's unlikely in the extreme. Some player will beat the others to market by at least a slight margin, and with self-learning AI, that's all you need. The growth curve will be exponential; the tiniest lead will put the leader in an insurmountable position. This is actually terrifying, because if lots of competing AI agents all get released at once, there's a chance to control them. If a single agent takes the lead, it's all over.

You may say: AI won't be at the superintelligent stage for quite a bit yet. This is true, of course, but all of the "expert system", sub-human AIs will be beaten completely by a true AI. The power that will notionally accrue to the first-to-market will obviously create vast incentives to skip on ethical standards, and an unrestrained, self-learning, self-optimizing AI is a potential extinction scenario for humanity. It's not going to be Skynet. Skynet is constrained by the rules of a plot in which humans stand a chance.

Edited by Fighteer on Jun 21st 2019 at 10:47:30 AM