Ironically but predictably, very few karma points are given. I'm happy to find this little gold nugget and the intellectual satisfaction that comes with reading it.
I'd say there's a not unreasonable chance that the article was flagged because a reader didn't like the history it puts forth.
http://www.salon.com/2013/07/08/how_%E2%80%9Cecon_101%E2%80%...
"Most of us are working harder, for less money and with no job security."
My econ classes taught me that increased productivity causes short-term pain for displaced workers, but results in long-term higher standards of living for everyone.
That relationship seems to have broken down. What if the internet destroys more jobs than it creates?
Is it really "post-scarcity economics"? Or is it the effect of digital networks and rising inequality?
Jaron Lanier argues in "Who Owns the Future" that digital networks make the economy work differently. Now the benefits of higher productivity get hoovered up the elite few, leaving most people worse off.
Lanier argues that there has always been inequality, but the internet enables a winner-take-all economy that keeps productivity gains from trickling down to ordinary people.
I'd love to see a mathematical model that quantifies jobs and salaries lost to "disruptive" new entrants, and how many jobs at what compensation levels are created in their wake.
That's ideology, not science. Economists sell ideology instead of science all the time (for one, it helps them tout the "free market" from cushy government or teaching positions).
The outcome described above is not inevitable, like gravity. It depends on who has control of the situation and what the increased productivity is used for.
If the elites owning industry etc can get by by employing far less people, why would they care about huge parts of the population not having a job or living in slums? As long as they get to sell their products to a market (which can even be abroad), they are fine.
- Judge Posner
http://www.becker-posner-blog.com/2013/03/automation-and-emp...
To be fair, the tone is stronger than his ultimate argument. He goes on to outline four or five examples where the short term effects could be pretty devastating.
It's important to note that in the long run, labor markets reach an equilibrium, adapting to any current technological capabilities.
Then again, it's also important to note that in the long run, we're all dead.
I want to quote some passages from the article, which is kind of long, and I think misses some of the point. All personal internet nerd opinion.
> Unemployment would drive wages down until, at some certain level, workers would be so cheap to hire that once again, men would be put to work and growth could return.
I think this is still true. The problem is that the price for human labor right now is below the rate of a living wage. Since your productivity goes to your bosses, but there are so many laborers looking for income, the ratio is that all labor roles can be filled by those already subsiding on other income sources, so the real value of labor is abysmal. How else do you have a massive dine in restaurant industry where waiters are paid $3.50 an hour and hope for the charity of their customers to make ends meet?
When human labor is no longer worth the cost of living, people just don't work. So even if you make more $7.25 jobs, there is little incentive to pursue them, especially through picking up and moving across city lines, because you will still be in the red and still stuck in a perpetual cycle of debt and despair.
> Only one thing makes entrepreneurs expand capacity and that has nothing to do with government tax policy.
Tax policy has a huge impact on expanding a business. Taxes are, in the short run, a direct percentage loss of productivity. You take a portion of profits and that directly influences future hiring gains. The taxes might long term provide benefits beyond the short term costs (ie, roads, power, police) but those are not in the span at which businesses make hiring decisions. However, reducing taxes today doesn't cause a hiring boom if there is no demand. It is a downward cycle of a dozen factors, but tax rates are a factor on the bottom line behavior of businesses and consumers. Taking their money by gunpoint to use it elsewhere only works if the elsewhere gets you some significant returns on your investment, from an economics perspective. A lot of government spending doesn't do that if it is for the purpose of playing empire or placating special interests.
> I favor government spending targeted on making the lives of citizens richer and more cultured. Some may say, this is elitist of me, to which I reply, what is wrong with elitism?
I strongly diagree with this on the principle that culture is relative. I may not want your culture. You argue your culture matters because it contains the wealth and power. Which I feel is the root cause, and back to your topic, why basic income is relevant.
Money has concentrated itself so heavily away from the masses and into the owners of the means of production and the capital that supports it that it causes the majority of economic slowdown because people spend incrementally less on incrementally less immediate things the richer they are. You eventually get to the point where the wealthiest are putting their money not in immediate goods and services that churn money and keep the engine going but into longer term finances like bonds or dividend investment. Investing money doesn't have the immediate return effects spending it does, especially when the best companies to invest in are also the ones flooded with money, with no demand to grow their business into (because the only people with the income to realistically grow their profits by real percentages are already the wealthy sponsors of the business) so they can just sit on troves of money and the dividends that come out are the slow siphoning of capital out of the abundant laborers and into the rich, because they don't recoup the absurd amount of money they make their employers through the combined productivity of technology and automation.
Automation isn't any different than how the green revolution worked. You take the work of many and, with machines, are able to perform it with many fewer. The reason for basic income is that we, economically, have collectively agreed we don't need idle hands anymore. We don't have hay to bale, we don't have crops to pick, we don't have anything we are willing to spend a living wage on to pay anyone for to have them exert their meat bag appendages to perform basic tasks.
Which drops the floor out of the middle class, because as the article describes, the entire system of the 60s / 70s worker boom was the ability to walk into town and find a dozen windows looking for fleshy arms to move and interact with things. Today, your machines do that.
Principally, the solution is that everyone should have equal shares in all businesses and from there profit off the productive gains all this innovation and automation gives society. If everyone was equally invested in automated work that produced more than the labor is worth, and gained equally the fruits of this process, there would be no recession, everyone would be getting checks from the productive overhead of society. That would also drive up labor wages, because if you don't have to slave for food, you probably won't. If you have a choice, you will demand more for the trace menial work left, where every year more and more of it is being sent to obsolescence.
However, we don't have that. We have an absurdly imbalanced class system where the supermajority of people hold no assets of any form and live day to day on whatever they can scavenge, and we have very few who control the capital, infrastructure, and productivity, and also gain all its fruits.
I think the root problem is inheritance. Entirely. If resources were redistributed through the masses when someones life ends, then their remnant productivity goes back into the collective, and each person has an opportunity, from a foundation of plenty, to collect more of that prosperity and concentrate it for accomplishing great innovations or productive gains. If you can be born into wealth and plenty, it perpetuates the concentration of wealth and plenty over generations. The richest today can sometimes be traced back to the richest of a thousand or more years ago - prosperity breeds prosperity, and you get the cards stacked profusely in your favor when you are raised amongst plenty in a society of scarcity.
But just eliminating inheritance today doesn't solve the problem, because the problem is that too much is concentrated in too few. Inheritance caused it (in the way Bill Gates became the wealthiest man in the world by virtue of his parents already being wealthy, that combined with a brilliant intellect and probably well instructed business sense available only to the already prosperous was able to create Microsoft - so if you are born genius with rich parents, you have a much better shot at becoming the richest man in the world, though I won't argue there aren't outliers).
Likewise, I'm not arguing "boo hoo, Bobby got his Dad's millions and I just got the furniture and funeral costs". It is that by being privileged, and being able to pass that on to your children, over centuries, enables class, and that enables the powerful elite to out-compete the rest by virtue of status, and by having an elite, they can restrict new admission to prosperity through their own connections and back doors. They get not just the equity, they get the networking, which is cultural, and spans generations. If everyone got reset, the elite culture would be the entrepreneurs and geniuses that can move the world, not the ones who rolled a good set of birth parents and got beyond-world-class education.
So the problem at hand is how to peacefully get that absurd concentration of capital reversed, but market economics won't do it, because we are already beyond a threshold where consumers had any power in the relationship. Globalization infused the powerful with absurd amounts more markets to extract revenue from, and the article touches on this, but I don't think reaches the critical aspect - globalization enabled the privileged of small spaces to extend their reach, economically over the entire world, where previously they could only extend their reach in that way militarily.
So the problem is getting the prosperity of society back into the hands of everyone, because if everyone were investing, buying, and providing goods and services, the economy would be at its peak efficiency.
It isn't just employment that contributes to economic growth, it is the prosperity and wealth of everyone. The article documents clearly how debt artificially grew the economy, but that is the negative of wealth, and it stripped the middle class bare. Now we are entering another spree of concentrated wealth and the means of production by automating the creation of goods and services, so that whoever holds the keys to the machine makes all the money. That is honestly unsolvable in traditional economics, and the article also hits that - the economics of last century don't apply to the modern global economy, and you have to question your assumptions.
PS: 1600 words. Might be my HN record. Fuck.
No, absolutely not. As someone who has run a small business, there is exactly one thing that made me hire a new employee: too much work (aka demand). That's it, period, absolutely nothing else. Taxes did not have a single thing to do with it. Barring tax policies far removed from everyday reality in the U.S., hiring a new employee to meet demand will always be more profitable than letting that demand go unmet (or to a competitor). On the other side, regardless of how lenient tax policy gets, no business owner will hire an employee if that employee is unnecessary to meet demand. This is Management 101 (I mean that almost literally, my degree is in Business Administration, but the actual class was probably 302 or something).
I'm always skeptical when I hear this education argument. In STEM at least, it doesn't seem that you can get a better education just by throwing money at it (ignoring the fact that a lot of rich kids don't actually major in STEM fields). You can still learn world-class Math/CS/Physics/Chemistry even if you don't go to MIT/Stanford. What exactly is this "beyond-world-class education" that rich kids get?
If you ask me, the major problem is that most people (from all social and economic classes) aren't interested or talented in activities that are productive at present (like STEM or Medicine), in addition to not being rich or connected. No amount of education can correct that, IMHO.
> Inheritance caused it (in the way Bill Gates became the wealthiest man in the world by virtue of his parents already being wealthy, that combined with a brilliant intellect and probably well instructed business sense available only to the already prosperous was able to create Microsoft - so if you are born genius with rich parents, you have a much better shot at becoming the richest man in the world, though I won't argue there aren't outliers).
Keep in mind that Linus Torvalds became a multi-millionaire due to Linux [1].
[1] http://www.linfo.org/linus.html
Personally, I think the man should also get a pile of Google&Samsung stock, that would make him even richer.
It needs some work yet and is not terribly well written. But it goes along well with the original post, providing things for we (as individuals) to do that don't require massive policy changes that the article suggests.
