I ended my last essay with a cliffhanger question: is capitalist dynamism doomed? To answer the question, I think we need to distinguish between economic stagnation and an outright end to technological progress. Absent a cataclysm that wrecks civilization, the latter seems far from imminent. (The odds of such a cataclysm, however, are not nearly as long as we’d like.) The pipeline of technological wonders in the works remains far from empty, and I expect at least a trickle of new goodies to continue issuing from it. And, on the upside, the chances for transformative breakthroughs that lift the human condition to new heights seem to be roughly equivalent to those for catastrophe and regress.
Technological progress can be compared to scientific progress as seen by Thomas Kuhn.
Most “normal” scientific work consists in the filling of gaps and exploring edge cases at the intersection of theory and fact. Eventually, the contradictions between theory and expanding understanding of reality forces a replacement theory—a paradigm shift that resolves the contradictions and starts a new cycle of discovery of new conflicts.
In 1968, the introductory textbook for historical geology I read as an undergrad had it the the movement of continents up and down explained all of what we can see by way of the arrangement of igneous, sedimentary and metamorphic rocks. The competing theory that continents moved laterally was rejected not only because there was no apparent mechanism to drive it, but because it was unnecessary to account for observations.
In 1972, I taught undergraduates from the next edition of the same text. Paradigm shift. Now, the notion that vertical movement of continents had explanatory power was restricted to a relatively minor role. The real action came from the lateral movement of continents and the larger plates beneath them. Surface and sea floor geology was now part of the same framework. Plate tectonics blew away the accumulated encrusting descriptions based on the old paradigm just as the Copernican Revolution blew away the circles-within-circles of the Ptolemaic elaborations necessary to reconcile astronomical observation in accordance with the geocentric view.
Most of what we think of as technological progress is the “D” in R&D. Exhausting the implications of an idea is necessarily a diminishing returns proposition. And, as a variations on a theme process is amenable to benefiting from systematic organization, it is a good candidate for AI augmentation. Perhaps there is even an iron law of conservation of required effort. As the human input per unit of improvement decreases with AI, that savings is shifted to productivity demand for human effort per unit of meta-structure.
The “R” arm is less amenable to AI augmentation. It requires recognition not only of the unsolved problems but identifying which of those are unsolvable under an existing framework and then imagining a framework under which they would be. in other words a paradigm shift. The work of that thinking cannot be outsourced to chips and code and management consists primarily of introducing smart people to the environment in the tradition of Bell Labs. Rather than being subject to a law of diminishing returns research in this sense is subject to a law of uncertain returns.
This process is what Alan Altshuler described as “disjoint incrementalism.” History proceeds in jumps and starts rather than monotonically or along any pre-specified curve. If so, it is cause for neither pessimism or optimism, only close observation.
"The Niskanen Center is a Washington, D.C.-based think tank that advocates environmentalism, immigration reform, civil liberties, and strengthening social insurance around market-oriented principles"
But not, as far as this post is concerned, by allowing demographic forces to exert their natural effects in reducing world population from 8B to some more manageable, reduced number.
Why more economic growth, when 90% of the economic surplus is creamed off by the 1%?
One big reason innovation has been stifled is that all the Anglo economies have been taken over by rentiers. Didn't even earn a mention.
Last, I thought Say's Law has been discredited.
ps I spent a lot of time in Japan in the early 2000's. Far from a 'Lost Decade', it was a delightful place to live and work, on a trend line of shrinking population.
It's a political problem. The economy is most dynamic when the government takes on debt, raises taxes and gets money to the population at large as it did during and for a period after the Civil War and the two world wars. This requires an acceptance of government debt, high taxes and inflation, all of which are signs of a dynamic economy if you believe any of the supply and demand stuff they teach in Econ 101.
Unfortunately, the wealthy are powerful and the things they loathe are government debt, high taxes and inflation which imperil their position and power. Worse still, is money going directly to the citizenry directly. That means they have to work to get that money by providing innovative goods and services rather than simply taking a cut and trickling down the rest.
That era of the Apollo moon mission was the era of the 90% marginal tax rate on the wealthy. Post World War II policy continued into the 1970s. The roaring 20s were fed by the massive spending and its overshoot of the Great War. The boom of the 1860s and into the 1870s that created modern America was built on Civil War spending and regulation.
This only works if the money gets into the pockets of the lower classes. It doesn't trickle down from the wealthy who pass down only the bare minimum. We've seen how the COVID spending juiced the economy, and we've seen how the post-2008 crash austerity squelched it. Now we're seeing the Federal Reserve do what it can to provide us with another wasted decade or two, at least until the next plague or war. It's simple class warfare.
“With a static or falling population, then, eventually innovative labor hours per capita will stop growing, at which point technological advances will slow till eventually they peter out.” - I am unclear why this is necessarily the case? Are technological advances really that linear?
To the degree that you think AI may come along and solve all of our problems in the next few decades, you should be concerned with AI alignment and the possibility that it will "solve all of our problems" in a permanent and catastrophic way.
I tend to be dismissive of AI alignment concerns, but that's because I'm also pretty skeptical that we're on the verge of anything even remotely like general intelligence or massive economic value being unlocked in the next say 20-30 years (much less then next 10-20). If the AI progress optimists are right that all you fundamentally need to get to something power is an achievable amount of scale and our current techniques, then it's certainly true that our current techniques are not great at producing AI that consistently does what we want it to do. (This doesn't have to mean fully general/agent-like AI. If we get AI that can complement a human to make the the human capable of vastly increased productivity in a wide range of activities, we still should be worried about what that means for various Bad Humans).
Global fertility seems to me to obviously exist in a buffered equilibrium situation. If the fertility crisis gets bad enough, there will be clear benefits to those who do have more children that will raise their status and prominence and wealth.
Policies – if we knew what the were –to close the gap between the number of children people say they want to have and actually do have would be a good thing. A paid fore with consumption taxes (so it does not add to the deficit) child tax credit is worth trying.
Low population growth rete need not mean low productivity growth and low increases of income per capita. That population aging caused deficits in pension funding systems is fixable with higher consumption taxes
Closing pension funding gaps with immigration is silly. Attracting skilled/educated/entrepreneurial immigrants is a good thing for incomes of existing residents (and the immigrants) is and of itself
Reducing fiscal deficit would shift resources from consumption to investment and facilitate the employment of new technologies.
R&D funding? Shifting from taxing business to personal income would make firms more willing to invest. Pending that, just make all business investment deductible from income.
Land use reform, yes. These, like all other regulations, should have to pass cost benefit analysis. Special callout against regulations that attempt to reduce CO2 emissions by restricting production and transportation of fossil fuels, especially natural gas, especially fracking.
Insure that “industrial policy” is not just protectionism by another name. Be especially suspicious of obstacles to international trade and investment.
Environmental harms need not slow economic and technical progress. The require investment to avoid and mitigate, but if those investment do not come at the expense of other investment, growth need not suffer. The value of a tax on net CO2 emissions is the ideal policy in this regard.
The “competition” of non-liberal regimes – mainly China – OUGHT to be a spur to growth promoting policies in the West.
1. No new global baby boom will happen anytime soon, especially as being "childfree" has become socially accepted. In long term it may happen as result of natural and cultural selection.
2. There is no evidence subsidizing childbearing and childrearing works even in medium term. Just a short lived bump caused by people who wanted children anyway deciding to take advantage of a subsidy.
3. Increasing levels of immigration doesn't necessary work, at least in Europe. The average non-EU immigrant is a net economic loss because the low productivity of uneducated migrants doesn't cover the high welfare consumption and other social costs.
4. Build more housing — lots of it. I agree.
5. Investing much more heavily in R&D relies on the capacity of U.S. federal institutions to spend the money on promising and useful projects which is dubious. I also feel that there are not many promising research avenues that are unfunded. Lots of money have been thrown on graphene, nanotech and 3d printing without much to show for.
6. Launch a full-scale assault on the NIMBY vetocracy - yes
7. Plausible artificial intelligence will have an impact similar to productivity software in the 70's and 80's as it will assist specialized workers, not replace them. Still a huge productivity boom is likely.
Nuclear fusion doesn't even make sense as the most promising projects like ITER will produce vast amounts of radioactive waste, shorter lived than fission waste, but still a problem to safely store thousands of tones of radioactive waste for 100 years. And without no 6 fusion will probably be regulated to death anyway like fission was.
Technological progress can be compared to scientific progress as seen by Thomas Kuhn.
Most “normal” scientific work consists in the filling of gaps and exploring edge cases at the intersection of theory and fact. Eventually, the contradictions between theory and expanding understanding of reality forces a replacement theory—a paradigm shift that resolves the contradictions and starts a new cycle of discovery of new conflicts.
In 1968, the introductory textbook for historical geology I read as an undergrad had it the the movement of continents up and down explained all of what we can see by way of the arrangement of igneous, sedimentary and metamorphic rocks. The competing theory that continents moved laterally was rejected not only because there was no apparent mechanism to drive it, but because it was unnecessary to account for observations.
In 1972, I taught undergraduates from the next edition of the same text. Paradigm shift. Now, the notion that vertical movement of continents had explanatory power was restricted to a relatively minor role. The real action came from the lateral movement of continents and the larger plates beneath them. Surface and sea floor geology was now part of the same framework. Plate tectonics blew away the accumulated encrusting descriptions based on the old paradigm just as the Copernican Revolution blew away the circles-within-circles of the Ptolemaic elaborations necessary to reconcile astronomical observation in accordance with the geocentric view.
Most of what we think of as technological progress is the “D” in R&D. Exhausting the implications of an idea is necessarily a diminishing returns proposition. And, as a variations on a theme process is amenable to benefiting from systematic organization, it is a good candidate for AI augmentation. Perhaps there is even an iron law of conservation of required effort. As the human input per unit of improvement decreases with AI, that savings is shifted to productivity demand for human effort per unit of meta-structure.
The “R” arm is less amenable to AI augmentation. It requires recognition not only of the unsolved problems but identifying which of those are unsolvable under an existing framework and then imagining a framework under which they would be. in other words a paradigm shift. The work of that thinking cannot be outsourced to chips and code and management consists primarily of introducing smart people to the environment in the tradition of Bell Labs. Rather than being subject to a law of diminishing returns research in this sense is subject to a law of uncertain returns.
This process is what Alan Altshuler described as “disjoint incrementalism.” History proceeds in jumps and starts rather than monotonically or along any pre-specified curve. If so, it is cause for neither pessimism or optimism, only close observation.
Worth discussing the financial sector and austerity, I think
"The Niskanen Center is a Washington, D.C.-based think tank that advocates environmentalism, immigration reform, civil liberties, and strengthening social insurance around market-oriented principles"
But not, as far as this post is concerned, by allowing demographic forces to exert their natural effects in reducing world population from 8B to some more manageable, reduced number.
Why more economic growth, when 90% of the economic surplus is creamed off by the 1%?
One big reason innovation has been stifled is that all the Anglo economies have been taken over by rentiers. Didn't even earn a mention.
Last, I thought Say's Law has been discredited.
ps I spent a lot of time in Japan in the early 2000's. Far from a 'Lost Decade', it was a delightful place to live and work, on a trend line of shrinking population.
It's a political problem. The economy is most dynamic when the government takes on debt, raises taxes and gets money to the population at large as it did during and for a period after the Civil War and the two world wars. This requires an acceptance of government debt, high taxes and inflation, all of which are signs of a dynamic economy if you believe any of the supply and demand stuff they teach in Econ 101.
Unfortunately, the wealthy are powerful and the things they loathe are government debt, high taxes and inflation which imperil their position and power. Worse still, is money going directly to the citizenry directly. That means they have to work to get that money by providing innovative goods and services rather than simply taking a cut and trickling down the rest.
That era of the Apollo moon mission was the era of the 90% marginal tax rate on the wealthy. Post World War II policy continued into the 1970s. The roaring 20s were fed by the massive spending and its overshoot of the Great War. The boom of the 1860s and into the 1870s that created modern America was built on Civil War spending and regulation.
This only works if the money gets into the pockets of the lower classes. It doesn't trickle down from the wealthy who pass down only the bare minimum. We've seen how the COVID spending juiced the economy, and we've seen how the post-2008 crash austerity squelched it. Now we're seeing the Federal Reserve do what it can to provide us with another wasted decade or two, at least until the next plague or war. It's simple class warfare.
“With a static or falling population, then, eventually innovative labor hours per capita will stop growing, at which point technological advances will slow till eventually they peter out.” - I am unclear why this is necessarily the case? Are technological advances really that linear?
WFH might really help if it allows more workers to work in cheaper places.
Also electric self-flying aircraft that can fly 200km and self-driving cars could help reduce the pressure on very successful cities.
Fusion would also be really useful for reliable power. Or a return to nuclear power.
To the degree that you think AI may come along and solve all of our problems in the next few decades, you should be concerned with AI alignment and the possibility that it will "solve all of our problems" in a permanent and catastrophic way.
I tend to be dismissive of AI alignment concerns, but that's because I'm also pretty skeptical that we're on the verge of anything even remotely like general intelligence or massive economic value being unlocked in the next say 20-30 years (much less then next 10-20). If the AI progress optimists are right that all you fundamentally need to get to something power is an achievable amount of scale and our current techniques, then it's certainly true that our current techniques are not great at producing AI that consistently does what we want it to do. (This doesn't have to mean fully general/agent-like AI. If we get AI that can complement a human to make the the human capable of vastly increased productivity in a wide range of activities, we still should be worried about what that means for various Bad Humans).
Global fertility seems to me to obviously exist in a buffered equilibrium situation. If the fertility crisis gets bad enough, there will be clear benefits to those who do have more children that will raise their status and prominence and wealth.
Policies – if we knew what the were –to close the gap between the number of children people say they want to have and actually do have would be a good thing. A paid fore with consumption taxes (so it does not add to the deficit) child tax credit is worth trying.
Low population growth rete need not mean low productivity growth and low increases of income per capita. That population aging caused deficits in pension funding systems is fixable with higher consumption taxes
Closing pension funding gaps with immigration is silly. Attracting skilled/educated/entrepreneurial immigrants is a good thing for incomes of existing residents (and the immigrants) is and of itself
Reducing fiscal deficit would shift resources from consumption to investment and facilitate the employment of new technologies.
R&D funding? Shifting from taxing business to personal income would make firms more willing to invest. Pending that, just make all business investment deductible from income.
Land use reform, yes. These, like all other regulations, should have to pass cost benefit analysis. Special callout against regulations that attempt to reduce CO2 emissions by restricting production and transportation of fossil fuels, especially natural gas, especially fracking.
Insure that “industrial policy” is not just protectionism by another name. Be especially suspicious of obstacles to international trade and investment.
Environmental harms need not slow economic and technical progress. The require investment to avoid and mitigate, but if those investment do not come at the expense of other investment, growth need not suffer. The value of a tax on net CO2 emissions is the ideal policy in this regard.
The “competition” of non-liberal regimes – mainly China – OUGHT to be a spur to growth promoting policies in the West.
1. No new global baby boom will happen anytime soon, especially as being "childfree" has become socially accepted. In long term it may happen as result of natural and cultural selection.
2. There is no evidence subsidizing childbearing and childrearing works even in medium term. Just a short lived bump caused by people who wanted children anyway deciding to take advantage of a subsidy.
3. Increasing levels of immigration doesn't necessary work, at least in Europe. The average non-EU immigrant is a net economic loss because the low productivity of uneducated migrants doesn't cover the high welfare consumption and other social costs.
4. Build more housing — lots of it. I agree.
5. Investing much more heavily in R&D relies on the capacity of U.S. federal institutions to spend the money on promising and useful projects which is dubious. I also feel that there are not many promising research avenues that are unfunded. Lots of money have been thrown on graphene, nanotech and 3d printing without much to show for.
6. Launch a full-scale assault on the NIMBY vetocracy - yes
7. Plausible artificial intelligence will have an impact similar to productivity software in the 70's and 80's as it will assist specialized workers, not replace them. Still a huge productivity boom is likely.
Nuclear fusion doesn't even make sense as the most promising projects like ITER will produce vast amounts of radioactive waste, shorter lived than fission waste, but still a problem to safely store thousands of tones of radioactive waste for 100 years. And without no 6 fusion will probably be regulated to death anyway like fission was.