…and change:
The U.S. standard of living, says superstar Northwestern University economist Robert Gordon in a new paper, is about to experience its slowest growth “over any two-decade interval recorded since the inauguration of George Washington.” That’s right, get ready for twenty years of major-league economic suckage. It is an event that would change America’s material expectations, self-identity and political landscape. Change in the worst way.
…America faced a similar turning point a generation ago. During the Jimmy Carter years, the Malthusian, Limits to Growth crowd argued that natural-resource constraints meant Americans would have to lower their economic expectations and accept economic stagnation — or worse. Carter more or less accepted an end to American Exceptionalism, but the 1980 presidential election showed few of his countrymen did. They chose growth economics and the economy grew.
Now they face another choice. Preserve wealth, redistribute wealth or create wealth. Hopefully, President Barack Obama will choose door #3. Investing more in basic research (not just healthcare) would be a start, as would slashing the corporate tax rate. A new consumption tax would be better for growth, but only if it replaced the current wage and investment income taxes. Real entitlement reform would help avoid the Reinhart-Rogoff scenario. The choices made during the next few years could the difference between America in Decline or the American (21st) Century.
Unfortunately, we have to wait at least two and a half more years to get rid of Jimmy Carter II.
I don’t understand the point of the conclusion. Obama clearly isn’t going for option #3. Otherwise, he wouldn’t have passed health care “reform”, be pushing cap and trade, or pay off the labor unions with hundreds of billions in TARP and ARRA money.
Karl, sarcasm?
Create wealth? I was told that it can’t be done by a liberal friend. In order for Person A to get rich, he has to TAKE wealth from Person(s) B (C, D, E,…) according to her.
I told her the cavemen must have had some exceptional furs, rocks and shells then.
All I got was a blank look from the liberal friend.
(not to mention the RCA Dog head tilt)
I said that if wealth cannot be created, then ALL commerce must be based on the original bartering transactions from man’s prehistoric past.
(another head tilt)
Says I, if you cannot create wealth, then the TRILLIONS and TRILLIONS of Dollars, Rupees, Euros, Yen, etc, that we use daily must be based on that original caveman barter, ergo, it must have been some seriously expensive beads, feathers and furs that Og traded to Ug.
Her answer was something about my analogy being wrong, and how we can’t create new wealth NOW. Hmmm, said I, when did we lose that ability?
No answer.
I pointed out to her that we dig gold, diamonds, silver, tin, bauxite, etc every day. We also mine salt, coal, pump oil and natural gas out of the earth that were NOT above ground yesterday. All of that has an intrinsic value and DOES create wealth when it is mined, shipped, bought and sold. I then pointed out that farmers take “X” number of $$$ worth of seed and grow crops, which are worth more than he originally invested for seed, eqpt, fertilizer, etc, again, CREATING wealth.
She said, “…but not everybody benefits from that, just the people that OWN the companies or farms or mines!”
She had thus proven me wrong, cut me down with airtight facts and wouldn’t talk about the subject any more. In retrospect, I guess she’s right, as we all know mining companies, farms, stores, shippers, employers in general all use slave labor to get those commodities, made, dug, mined, shipped, grown bought and sold.
Wealth gets created, but it doesn’t get spread around much. So I now see my mistake.
I wish I had some furs and shells in the bank now though after that conversation. All the years I worked, I foolishly took dollars as pay!!
Oh, and Obama is one of those Zero Sum goons. He’s never created any wealth, and thinks it’s a shell game run by corporations and the Freemasons, and the Tri-Lateral Commission. He’s just transferred money through his hands in ever increasing amounts.
All the years I worked, I foolishly took dollars as pay!!
Well, there’s your problem. You’re familiar with the concept of working for a living. That’s an alien concept to many on the Left.
I have little doubt we are experiencing an energy crisis. This is magnifying all the other maladies in the economy. Thankfully the invisible hand of the market is already doing its job. This economic stagnation is IMO a natural consolidation step that needs to happen given the current environment. Just like it is easy to speak poorly of the economy during Carter’s term while forgetting the root cause of it all: the Arab oil embargo. I read somewhere, for example, that Japanese steel companies agreed to pay 55% more for coal this year. Is it any wonder we are in a recession with energy prices like this?
There have been some silent technological improvements in the last decades a lot of people have not noticed, but have significantly transformed the electrical power industry. Check out the efficiency in a current combined cycle power plant, or thyristors for HVDC lines sometime, even the accursed windmills are economic now. The next obvious improvements are HVDC continental power backbones, and the Enernet.
In smaller electronics cellphones and laptops were made possible because of battery improvements. It is easy to discard iPhones and forget that such devices enable a whole new leap in capability. The ability to use the Internet (e.g. Web, E-mail) anywhere. This is a tremendous boon to productivity, IMO akin to the Internet explosion in the 90s. I find myself not taking my laptop with me nearly as much. If I could do a presentation using my cellphone I would not even need a laptop. This will be particularly noticeable once 4G wireless networking and flat rate plans are widely available. Another thing is books. I even use my smartphone for reading books now, something I would not consider doing a couple of years ago. I see a price for something, I take a snapshot using the phone camera, automagically look up the barcode over the Internet to see if the price is right. How is this not empowering?
All of that has an intrinsic value
You got it mostly right, except that there’s no such thing as “intrinsic value.”
You got it mostly right, except that there’s no such thing as “intrinsic value.”
Sure there is Rand. The value is set by the commissioners at Gosplan according to sound Marxist economic principles. 🙂
The value is set by the commissioners at Gosplan according to sound Marxist economic principles.
Actually, I think there’s an office in the Old Executive Office Building where that’s done now.
I keep being reminded of Heinlein’s old saw about the “inherent value” of a unit of labor as applied to a pile of apples…
I have little doubt we are experiencing an energy crisis.
What do you mean “energy crisis”? Is energy expensive? No. Is energy hard to come by? No. Is there any sort of energy related crisis in the world right now? No.
Karl: There is a lot of energy. The problem is we cannot get to energy sources cheaply enough. Energy has certainly been getting more expensive. I have tried tracing most price rises I have seen the last couple of years on the news and nearly invariably the cause is higher energy prices. There is a lot of technology that could do the job, but you cannot replace your entire infrastructure overnight. Why do you think France, of all places, has been one of the countries in Europe which is weathering the current crisis better?
Why do you think France, of all places, has been one of the countries in Europe which is weathering the current crisis better?
What crisis? If you’re speaking of the recent real estate induced crisis, they simply weren’t as involved. It has nothing to do with their energy use.
Jimmy Carter II? It’s more like Jimmy Carter2.
Funny, that looked like a superscript 2 in the preview.
I meant “Jimmy Carter squared”. Or even cubed, for that matter.
Energy has certainly been getting more expensive.
I doubt it. Even gasoline doesn’t look that bad once you take into account currency inflation. While wind and solar power have a host of drawbacks, they have been getting steadily cheaper.
Godzilla, I guess I’m a bit cranky tonight. But to be blunt, I don’t see an energy crisis. Period. A gradual increase in energy prices, which does seem to be occurring, doesn’t qualify IMHO.
So what do I think a crisis looks like? It should be a huge shock. Something like what happened after hurricane Katrina, but long lived. And it should be collectively energy, not just a few specialized energy sources like gasoline.
As to the Heinlein quote about apples, it’s decent so I’ll post it here.
“Preserve wealth, redistribute wealth or create wealth.”
Don’t forget option 4: conceal wealth.
There is a point here that is not going to go away. Resources are not inexhaustible. Sooner or later, oil is going to get to the point where it takes more energy to get it that it gives. Ditto coal and gas. Ditto numerous materials – various strategic metal ores are getting short already.
Of course, any renewable resource is inexhaustible – at least on a human timescale. Power ultimately derived from the Sun, or from the kinetic energy of the Earth’s rotation (tidal power) are two of these. Fusion power, if we can ever get it going, is not inexhaustible but might as well be.
So the original article is right – at least as far as it goes. Any growth of Earth’s economy has to stop, sooner or later.
Note that I said “Earth’s economy”.
Larry j,
and I’m still foolish too, I guess. Just last night I agreed to work P/T for a friend doing data mining and data research and server “clean up”. I’m asking for beads, shells and skins as payment though.
Fool me once…, right?
.
.
Rand,
OK, maybe intrinsic is the wrong word. I’d gladly take whatever word is right, so I can argue this with the Zero Sum people using correct verbiage.
But the concept holds. When those items are dug, harvested, etc. the “creators” get more money from the market place than they spent to create said commodity, MORE wealth is created.
Unless you consider Gaia as the loser.
Unfortunately, we have to wait at least two and a half more years to get rid of Jimmy Carter II.
Yeah, but we can effectively neuter him this fall… maybe we could even have a Repub majority in the House and a deadlocked Senate. I’ve long said that’s my favorite kind of federal government: the one that is hopelessly deadlocked and doesn’t get anything done.
People hoping for a Republican landslide are deluding themselves. Republicans will care very little about repealing this takeover bill when they get into power. And the whole NASA fiasco tells me that they don’t give a hoot about business and the economy either. The government which governs least…
Sooner or later, oil is going to get to the point where it takes more energy to get it that it gives.
Unless it too is renewable and continually being produced as some Russian scientists suggest. The methane in Titans atmosphere is not from old dinosaurs… or is it? Duh. Dunt. Daahhh.
Der Schtumpy,
You’re a better man than I am! (or at least a hell of a lot more tolerant). It just goes to show that some people just *don’t get it*. The ability to create wealth is essentially infinite because ‘wealth’ gets created from the ability of the human mind to bring forth concepts from within.
It’s a bit strange that the same people who prattle on about ‘non-commercial’ (ie removing money from the equation) ways of trading, don’t seem to see that they’re doing *the same thing* as those who explicitly make things like iPods, cars and vaccines. Very strange indeed.
Fletcher,
Fusion power (not Tokamaks – ITER and other variations are always going to be 50 years away) is likely sooner than we think (Bussard-IEC aka Polywell, Focus Fusion and others). This will change everything. That is unless molecular fabrication becomes viable, and then all bets are off.
Also, check out what we could *really* do with nuclear energy – Uranium from seawater, breeders, Thorium etc. We *could* generate enough power to have everybody in the world live at American levels for over a billion years.
But to get back on topic 😉 – that gives us a lot of time to move to an economy that doesn’t depend on ‘Earth’.
Hear that sound? That’s the sound of this country being flushed down the toilet. We need more Joe the Plumbers to roto-rooter these clowns out of Washington.
In my lifetime the number of predictions, especially economic predictions, about 20 years’ time, that actually occurred is zero.
there’s no such thing as “intrinsic value.”
I don’t understand. My understanding is a thing is worth what someone is willing to trade for it. But until traded a thing can still be regarded as an asset having value. You explain things so well I eagerly hope you will in this case do so. Thanks in advance.
My understanding is a thing is worth what someone is willing to trade for it. But until traded a thing can still be regarded as an asset having value.
Yes, but only the person holding knows its value to him. When it is traded, that puts both a floor and a ceiling on its value. The person to whom it is traded values it at least as much as the thing he’s trading it for, and the person who’s trading it values it no more than that. But value is completely subjective. There is no such thing as intrinsic value.
That makes perfect sense. My understanding of intrinsic value is that it has little practical use. The intrinsic value of a thing is the thing itself. The intrinsic value of an ounce of gold is an ounce of gold. You can’t define it in terms of silver or money since that involves trade. Also, the intrinsic value is static. A gold coin has the exact same intrinsic value as the same amount a mile below a mountain or dispersed in the plasma of a star a billion l.y. away. The intrinsic value of a dollar is the paper and ink it’s made of. None of which has anything useful to say about economics. So it really doesn’t exist for any practical purpose.
No, Ken. There is no such thing as “intrinsic value.” A gold coin in the hand has much more value than one buried deep underground, but neither value is intrinsic. It is a completely meaningless (and not coincidentally, Marxist) phrase. It’s like the labor theory of value.
Things have properties, but they do not have values. Values only exist within people. Their day-to-day activities is the expression of those values. The exchange of those values is what we call commerce (if material) or dialogue (if immaterial) or gifting (material in one direction, immaterial in the other). Absent people, things have zero value.
It’s going to be hard to shake the idea, but you’ve convinced me to some level. After I’ve slept on it I’ll probably come around (sometimes I’m a bit slow.) Thank you Titus for adding your thoughts. Value does not exist absent people to define/set it is a strong argument (only properties.) You can also say some of the properties of the coin and the nugget are static, but certainly if their is no such thing as intrinsic value, it’s value itself would differ.
OK, let’s put the final nail into this coffin. I googled the labor theory of value. In manufacturing I’m used to evaluating the cost of an item to include labor cost. Marx is talking about value of course, which is not defined in labor terms. Here’s a quote I found:
A worker in a factory is given $30 worth of material, and after working 3 hours producing a good, and using $10 worth of fuel to run a machine, he creates a product which is sold for $100. According the Marx, the labor and only the labor of the worker increased the value of the natural materials to $100. The worker is thus justly entitled to a $60 payment, or $20 per hour.
This is total hogwash. It’s makes you wonder what kind of idiots would believe this stuff. It’s makes me wonder about my education in America which left me accepting so much marxist bullcrap.
Well I’ve slept on it and woke up mad. There is no such thing as intrinsic value which makes me wonder what other things I’ve accepted as a noncontroversial fact that I’ve been duped into believing. I note there are a lot of proponents of marxism (even if they don’t admit or acknowledge it) on the web that use the term use-value to mean the same bullcrap. I hate misinformation and those that would spread it. It’s a cancer.
Gratz, Ken. You’ve taken your first step into a much greater world.
Why thank you. You just keep making your great posts and my world will get bigger all the time… plus I get to laugh more which always helps. I used to breath in books when I was a kid. Who knew they were the wrong books? Naw, you can never go wrong with Heinlein and Pournelle.