Sunday, October 6, 2013

It's Different This Time

October 6, 2013
Mish: Reader Question on Robots: What are People Supposed To Do For Their Livelihoods?

One could have asked the same question right before the railroad boom-bust, right before the great depression, right before the internet boom-bust, and right before the housing boom-bust.

As seen in the following chart, those who asked right before the internet boom-bust are still asking the same question, and rightly so.

Click to enlarge.

So here we are. Unless it's different this time, there will be another advance of some kind that is highly likely to create jobs. I cannot say what or when.

What if it is different this time? I'm certainly a believer that it is. Then what? I was hoping Mish would have an answer for that. No such luck. I therefore offer the following answer to fill in the gap.

1. God will provide.
2. Free markets will provide.
3. Got cardboard box?

Source Data:
St. Louis Fed: All Employees: Total nonfarm


mab said...

I was hoping Mish would have an answer for that.

Mish does the answer (at least in a macro sense). And it's always the same answer or a variation of it - "free markets"!

The guy is a blockhead. He'll never change. He read a few articles along with a book or two and found his religion.

China's growing at 9% for decades on end! Did we ever grow that fast? Did we grow faster or slower while on a gold standard? Religion allows one to ignore the inCONvenient facts!

Don't even get me started on Mish's never ending diatribes about a non-existent system of "fractional reserve" banking.

Stagflationary Mark said...


He read a few articles along with a book or two and found his religion.

As a heretic, you absolutely nailed the underlying theme of my post.

[blank] will provide.

What goes in the blank? Faith-based things!

God! Free markets! Gold! Buried cash! Jeremy Siegel!

Why Jeremy Siegel? You've got to have balls of faith-based hubris to believe that we can predict 200 years of future prosperity by extrapolating 200 years of past prosperity.

Paraphrased from Diablo 3:

If you don't have faith as a shield, then an actual shield makes a pretty good substitute.

For what it is worth, I do not have faith as a shield, lol. Sigh.

mab said...

Debt! Debt will provide!

Sustainable Gains said...

We've been through this before. Prior to the 1930s, the workweek was six days long and 10-12 hours each day, children started working full time in their teens, and retirement was something you did only for a short time when your body was too broken to work any longer.

The economy only has so many options available, so the solutions this time around will be the same as then: shorten the workweek (28 hours emerging as new standard -- check), keep kids in school longer (college emerging as new standard -- check), and help older folks retire for longer (hold the line on retirement ages while lifespans increase -- check).

Not to say the rebalancing will be easy, but at least it's not impossible.

Stagflationary Mark said...

Sustainable Gains,

Shorten the workweek also means that there will be less $ per week in income.

Keep kids in school longer means more $ in student debt.

That's not a recipe for long-term sustainability in my opinion.

That said, it does seem to be the plan and it's not like I have a solution for our problems.

Stagflationary Mark said...

I would also point out how much, in hindsight, World War II helped our country (after the 1930s).

It's not like our industrial capacity was bombed.

That dynamic is no longer in play. It is different this time. Now we're competing in a corporate dog eat dog world.

Stagflationary Mark said...

I'm not trying to imply that war is a good thing by the way.

I'm simply saying that to the victor, go the spoils.

We've been very spoiled I'd say.

Sustainable Gains said...

"Shorten the workweek also means that there will be less $ per week in income."

Well, not necessarily, and certainly not over the long term. If the workweek shortens as productivity increases, income could remain constant or even rise (just more slowly). For instance, people are making more per week now than people did in the early 1900s, even with shorter workweeks. Productivity went way up and labor has not totally lost it's share of the pie. (However, looking at just the last few decades, the fact that official productivity has risen by 2-3%/year and median real incomes have not, says that either the productivity data is bad or workers have been robbed...)

"Keep kids in school longer means more $ in student debt."

Again, not necessarily. If productivity has really gone up, then we should be able to provide enough resources to take care of the children and the elderly.

The fact that college tuition increases have vastly outpaced general inflation in recent decades suggests that colleges may have become "bloated", economically inefficient. College could cost a lot less, especially since information - the root of education - is practically free on the internet now.

Maybe part of the high cost of college is due in part to all the government subsidies. Price controls and subsidies generally produce perverse long-term outcomes. Government support of demand for college, together with constraints on supply, raises prices. Government support includes, in addition to the student grants and tuition loan subsidies, also the large amounts of research funding with overhead funds included.

But college education doesn't have to be financed by student debt, any more than elementary and high school education needs to be funded by local property taxes. If workers were able to keep as much of their output as they used to, and college costs were trimmed back to historic norms, then college would be much more affordable.

Stagflationary Mark said...

Sustainable Gains,

Well, not necessarily...

Again, not necessarily.

I'm a believer that it isn't necessary. I'm just not sure I see a path that makes it not happen. As you say, the last few decades of data doesn't look all that well. Labor is definitely losing the race, and it doesn't help that the planet has billions of workers who want what the same things we all want.

My personal take on education costs is that there are fewer high quality jobs being made (per capita), so colleges have some pricing power on the diplomas that should help distinguish one student from the next.

It doesn't seem right to me at all. As you also say, the information itself should be coming down in price. People either know it or they don't. Don't really see how a particular piece of paper with an elegant font adds much to that.

In a sense, the same thing can be said of healthcare to some degree. It's hard to say no to a procedure based on price if that procedure saves one's life. It doesn't help that the price is rarely discussed until after the procedure is done.

I've spent a great many dollars on healthcare for our dog over the past year. Knowing the price up front probably didn't lower the cost all that much though. She's our dog. You know? Just spent $4k to have a liver tumor removed. Unfortunately, they found another growth while they were doing that. Sigh.

Stagflationary Mark said...

Please forgive the grammar. I'm running on low sleep today. Was up late babysitting our recovering dog. She managed to work her way out of the makeshift hospital gown my girlfriend made while I dozed off.