19 ms·

The American Economy Is in a Funk, But Not for the Reasons We Think

75 points by Teckla 11y ago

sien 11y ago
I've just started the book this guy wrote. It's really good so far and is very readable. It's not like the epic and unreadable Picketty. Note that he is saying that the growth were getting will be the same as levels from 1820 to 1870, just not the same as it was from 1870 to 1970. The book is worth reading because he has loads of data, not just Internet comment opinions about how things are going. Even if he is wrong and productivity shoots up again he's shown fairly strongly that between 1970 and 2016 growth has slowed. The consequences are pretty serious for the welfare state. Either benefits cannot continue to grow or taxation must increase.
- iandanforth 11y ago
  Perhaps you can answer a question I would ask him. My quality of life is hugely improved by things for which I pay nothing, e.g. the information freely available online. Do his calculations take into account things which don't register as standard economic activity? I would guess that if you looked at the time it takes someone to learn a new skill you'd have a metric showing an even faster improvement than the total productivity gains of the baby boom generation.
  - sien 11y ago
    Yes. He talks about some remarkable things about GDP and how the economic numbers don't capture improvements early on. For instance cars were not looked at in terms of inflation in the US until 1935. Total Factor Productivity is looked at extensively.
- Retric 11y ago
  Per capita GDP has been going up far faster than entitlement spending per capita. The top have been getting most economic gains and fewer taxes which is the core problem. We could talk about long term demographics, but GDP growth is loosely tied with workforce size. PS: A lot of systemic corruption is also going on. Almost half of the lifetime gains from a 401K ends up as management and other fees, that was clearly designed to make someone money, but not working class Americans.
  - sien 11y ago
    Hauser's law, that states that federal tax revenues since World War II have always been approximately equal to 19.5% of GDP, would suggest that tax levels are similar as a percent of per capita GDP. https://en.wikipedia.org/wiki/Hauser%27s_law https://en.wikipedia.org/wiki/Hauser%27s_law
    - Retric 11y ago
      U.S. gov spending is 20,000$ per person which takes vastly more than 19% GDP. http://www.usgovernmentspending.com/per_capita http://www.usgovernmentspending.com/per_capita Local, State, and Federal = ~32 to 42% GDP over last 30 years. http://www.usgovernmentspending.com/spending_brief.php?brief=recent http://www.usgovernmentspending.com/spending_brief.php?brief.... Defense for example is all over the map, 7% under Reagan down to 3.45% with Clintion then bumped under Bush to amost 6% and then back down under Obama. PS: US tax code is designed around talking points so people can support all sorts of things. But at the end of the day Total government spending is what's important not what you call it.
      - zaroth 11y ago
        Thanks for editing to point out that is Local+State+Federal. sien's point and "Hauser's law" is about Federal revenue and specifically how Federal tax revenue doesn't seem to respond to policy changes in the marginal Federal income tax rates as you might expect. They are both good metrics to consider at different times, for example sometimes you ignore certain classes of taxes and spending (like local/property taxes which are largely for K-12 education) when you want to focus on welfare spending, which is 95%+ Federal.
        Retric 11y ago
        https://research.stlouisfed.org/fred2/series/FYONGDA188S https://research.stlouisfed.org/fred2/series/FYONGDA188S Even then federal outlays go from 10 to 25% post WW2. There is little support for a law. People love to pretend marginal rates are the hole story while ignoring tax breaks, social security, gas taxes, etc. it's a political tug of war and positions hate to make things clear cut. Ex: hand outs in the form of very targeted tax breaks are rarely considered spending even as they subsidize industries.
- deleted 11y ago
  [deleted]
- zaroth 11y ago
  Check out historical Federal tax receipts as a percent of GDP [1]. It looks like median is around 18% of GDP and it's been that way pretty much since the 50s. For recent history, Bush years ranged 15.6% - 20%, Obama years it started at 14.6% but is estimated to be coming back to around 18% by this year. In the last 16 years, we saw both the highest collections as a percentage of GDP (20% in 2000), and the lowest since 1950 at 14.6% from 2009-2010. Also from a 2.3% surplus in 2000, to incredible deficits from 2009 - 2012. Looking at the total amount collected, combining the policy shifts (the % of GDP collected) and economic growth (the actual GDP) -- total receipts in 2009 was $2.1 trillion, but 2016 is projected to be $3.1 trillion -- almost a 50% increase! So what this tells me is policy and growth together can have a tremendous impact even in a relatively short time window, and taxation has also increased already very significantly as of late. Of course, even with a cool extra Trillion dollars coming in, we still manage to spend it all and more. (What the heck are we spending an extra trillion dollars on anyway?!) The only way benefits can continue to grow without taxation increasing is if we can get more value for the same dollars. That's why I think the "solution" if there can be one, must come in the form of a radical reduction in cost somewhere. For example, total spending (not just government) on healthcare is about 18% of GDP now. When we talk about welfare, healthcare is a huge component of overall welfare spending, and if you can decrease not just Medicare/Medicaid but overall healthcare cost (better results for less dollars) you provide a lot of value to everyone. I think more effective than trying to figure out how to tax at 20%+ of GDP (and to sien's point about Hauser's law, is probably not even possible without a fundamentally different mode of taxation like VAT), we need to figure out how to achieve massive productivity gains in healthcare. An easy place to start is always to blame someone else... Well, the rest of the world is certainly reaping huge savings off the largess of American healthcare spending. And to some extent I'd say that's a very good thing, new life-saving medicines is one of the best ways that American prosperity can positively impact the rest of the world. Probably it's not sustainable at current levels (as assessed by American %GDP healthcare spending vs. other developed nation averages). And some savings could be gleaned from figuring out better ways to cost-share with the rest of the world better, but the gains from that alone wouldn't be nearly big enough. We need to find much more cost effective ways to research, develop, and practice medicine. So then you turn to how can we achieve savings through medical technology... But it seems like medical technology over the last decades just drives increasing costs (is there good data on this?). Certainly spending overall has increased quite consistently, but I assume much of that is increased utilization as much as increased per-patient cost. The big question in my mind is will we see a "4th revolution" specifically in the case of medicine which could drive costs down 50-90% from current levels. Perhaps this is "slaying the dragon" [2] thinking and, in the context of the article is one of those "50+ years out" unpredictable events. In the shorter-term, maybe we could start to see more robotics/automation in the long-term/elderly care segments, that type of thing... Or as our ability to sequence and customize medicine based on genetics continues to develop, I hear that could also serve as the foundation for large-scale increases in cost efficiency. Some argue there is a structural problem, like evergreen patents, that prevent technology from ever bending the cost curve, and that's probably true to some extent, but I feel like that's still just a peripheral issue which is easier to attack but not the root of solving the problem. Perhaps the fundamental problem is the significant negative reinforcement as better medicine extends lives of retirees driving up both 'lifetime medical costs' per capita as well as 'years of received welfare benefits' per capita -- doing "better" just drives up costs even more! [1] - http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200 http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc... [2] - http://www.nickbostrom.com/fable/dragon.html http://www.nickbostrom.com/fable/dragon.html P.S. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361028/ http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361028/ The Lifetime Distribution of Health Care Costs - Principal Findings Per capita lifetime expenditure is $316,600, a third higher for females ($361,200) than males ($268,700). Two-fifths of this difference owes to women's longer life expectancy. Nearly one-third of lifetime expenditures is incurred during middle age, and nearly half during the senior years. For survivors to age 85, more than one-third of their lifetime expenditures will accrue in their remaining years. Conclusions Given the essential demographic phenomenon of our time, the rapid aging of the population, our findings lend increased urgency to understanding and addressing the interaction between aging and health care spending.
- epicureanideal 11y ago
  For the benefit of those who haven't tried to read Piketty, I highly encourage you to do so. I don't agree with all his proposed causes or solutions, but the data is very interesting. And I didn't find him unreadable at all, in fact highly enjoyable, if you're the kind of person who likes to read serious non-fiction.
  - sien 11y ago
    Yeah. It's worth a go. Kudos to anyone who can get through it. I read a fair bit of non-fiction but found that book terrible to read. It's not his fault. It's an academic book written in French that just happened to take off. It's also clearly an important book. There's data around that it is very often unread. http://www.wsj.com/articles/the-summers-most-unread-book-is-1404417569 http://www.wsj.com/articles/the-summers-most-unread-book-is-...
- tostitos1979 11y ago
  Curious what this slow-growth world does to housing prices. Our governments seem to be fueling epic housing bubbles by having low interest rates. I've heard two arguments: buy now or never be able to afford (since increasing rates will affect monthly payments), and the crash is just around the corner .. as soon as rates rise. Which is it? As a joke ... I wonder if we have zero innovation if all the scientists, PhDs and many other smart people spend all their time trying to deal with property prices and less on coming up with actual invention. But seriously ... I hate my life. If I buy now, I'll be paying a mortgage till the day I die. Any misfortune will destroy us. Taxes keep increasing, job stability keeps decreasing. Wonder if I am the only one who feels this way.
  - AnimalMuppet 11y ago
    Houses are a bit of a weird market. There's supply and demand, but the market isn't driven by the purchase price of the house. It's driven by the monthly payment (because most people buying houses are getting mortgages, not paying cash). So when interest rates rise, house prices decrease, and the monthly payments to buy the same house stay almost exactly the same.
caf 11y ago
Before the telegraph, which was invented in 1844, the fastest that news could travel was by the speed of a horse or a sailing ship. Not strictly true, the semaphore telegraph predated the electric telegraph by about 50 years.
- pbhjpbhj 11y ago
  And very rudimentary message passing was made using signal fires. There's smoke signals and messenger birds (eg pigeons) but I don't know whether/when/how they were used historically. Edit: Just thought, maybe signal mirrors too?
  - nommm-nommm 11y ago
    Pigeons were used to carry important military messages during war up until 1957. https://en.wikipedia.org/wiki/War_pigeon https://en.wikipedia.org/wiki/War_pigeon https://en.wikipedia.org/wiki/United_States_Army_Pigeon_Service https://en.wikipedia.org/wiki/United_States_Army_Pigeon_Serv...
    - yanekm 11y ago
      Let's not forget RFC 1149 specifying "IP over Avian Carriers" https://www.ietf.org/rfc/rfc1149.txt https://www.ietf.org/rfc/rfc1149.txt
      - stankyhanglow 11y ago
        This thread is what's wrong with HN.
  - vacri 11y ago
    Pigeons were once used to cheat in the lottery in England. I don't know the year, but I'd imagine it was before the telegraph. But it used to be that you could still buy tickets after the draw had been made in London - the results would travel by horse, but you could use a carrier pigeon with the lotto results to outrace the news.
- 11y ago
Moshe_Silnorin 11y ago
I suspect we're on the verge of pretty big advances in genetic engineering, robotics and other physical technologies, including technologies that are likely to spur the development of other technologies. Genetic engineering of embryos for increased IQ is looking very feasible, for example. This is likely to increase the pace of innovation drastically in those countries that allow it.
- Mikeb85 11y ago
  > This is likely to increase the pace of innovation drastically in those countries that allow it. And create a divide between the rich who can afford it for their children, and the poor who can't.
  - ElysianEagle 11y ago
    Not sure why you're being downvoted but this is a perfectly valid concern.
    - Mikeb85 11y ago
      Guess some don't like being reminded that the world isn't a meritocracy after all. The circumstances you're born into still correlate highly with life outcomes, no matter how much we try to convince ourselves otherwise.
      - Moshe_Silnorin 11y ago
        Yes. And your genetics is the most important circumstance you're born into to. If only we could seize the high IQ alleles and distribute them to the proletariat!
  - Moshe_Silnorin 11y ago
    There is already a huge wealth and status divide between those born with high IQs and those born with normal IQs. The incentives are such that it's going to happen. Also, it looks like very-large increases in IQ will be possible once we have millions of genomes tagged with their donor's IQ and a reliable means of editing thousands of alleles. More than a few standard deviations. I would certainly use this were it available today. If a rich person has to fly to Korea to do it, so what? Any country that bans it will fall behind. The gains from this may be such that governments will think it worth subsidizing it for the poor's children. High IQ people commit less crimes, pay more taxes, tend not to use welfare. Liberals and conservatives will likely both converge on such subsidization.
mchahn 11y ago
Most evolutionary experts, like the late Stephen Gould, espouse Punctuated Equilibrium. Basically the theory says that environments are stable for long periods of time and then there are bursts of changes in small periods of time. The Cambrian Explosion is a good example (read Gould's book on the Cambrian, it's awesome). If you consider technology to be like evolution, which it surely is, then infrequent advances in short periods is only natural.
- mmmBacon 11y ago
  >>If you consider technology to be like evolution, which it surely is, then infrequent advances in short periods is only natural. What you are describing is basically Thomas Kuhn's notion of the nature of scientific revolutions. https://en.m.wikipedia.org/wiki/The_Structure_of_Scientific_Revolutions https://en.m.wikipedia.org/wiki/The_Structure_of_Scientific_...
- maxwelljoslyn 11y ago
  For those interested in the "science/technology as evolution" perspective, have a read of Summa Technologiae, by renowned 20th-century science fiction author Stanislaw Lem. A bit dated but engrossing nonetheless; one part philosophy, one part technology, one part ... sociology? Quite interesting.
- AnimalMuppet 11y ago
  > Most evolutionary experts, like the late Stephen Gould, espouse Punctuated Equilibrium. I agree that PE seems to fit the fossil data better than "slow, steady, gradual". But I'm not sure that "most" evolutionary experts agree. (Or maybe I'm just 20 years behind the times?)
jqm 11y ago
This article may (or may not:) be a little short sighted. Basically it claims the inventions of what it terms "The third industrial revolution" (computers) affect a much narrower slice of life than the proceeding industrial revolutions. So they won't produce the growth the proceeding revolutions did and the rapid growth is over. But earlier in the article: "GORDON: When we had the invention of steam engines, steam ships, locomotives, factories making cotton fabrics, and then the telegraph. All of those things were invented in the century between 1770 and 1870. And they set the stage for the inventions that happened after 1870. " So there was a lag between the large number of invention and the true realization of potential in subsequent inventions and thus improvements in life. First of all I don't think digital technology does affect a narrower slice of life when looked at in broader terms. I think it affects an even greater slice of life. True we have a bunch of cat videos and Facebook but that's just the surface. But the main point, going back to the lag, I believe that is where we are now. We have the technology and are really just getting started with what it can do. Digital technology hasn't really infiltrated everywhere it can and many things are still being done in inefficient ways. When the subsequent set of innovations begin to appear I think we will see an even greater increase in standard of living than the previous industrial revolutions. More efficient distribution mechanisms. Better control over biology (including our own). Automation and robotics. Things like that. Social structures need to catch up though also... likely part of the reason for the lag.
- Malician 11y ago
  Yes! To a large extent the visible nature of digital technology is a reflection of the capability of people to take advantage of it. If we never progressed past the Commodore 64, we could still be discovering advantages and uses for it. As it is, new tech is coming our way far faster than we can effectively apply it. Or, to rephrase, a lot of office work could be completely replaced by a basic excel spreadsheet macro, let alone machine learning and the latest neural networks.
guelo 11y ago
US GDP per capita is larger then it has ever been. We are richer then we've ever been and this economist predicts we'll be richer still for the foreseeable future. The problem is that 30 years ago or so the middle and lower classes stopped receiving any of the gains.
- dangrossman 11y ago
  Healthcare providers and insurers have received much of the gains, it's not just a class issue. Since 2001, employers' benefit costs have risen 60%, which is almost twice the rate salary increased. Perhaps salary increases would've outpaced inflation, leading to the real wage gains everyone's missing, if that money weren't being diverted into the employer's share of health insurance premiums.
  - WalterBright 11y ago
    The government's share of GDP has increased substantially. http://www.usgovernmentspending.com/us_20th_century_chart.html http://www.usgovernmentspending.com/us_20th_century_chart.ht...
    - jjoonathan 11y ago
      And how much of that is due to increasing medicare costs?
      - zaroth 11y ago
        Looks like about 40% of the increase over the last 30 years can be attributed to increased "health" spending. Health as a percentage of total has gone from ~10% - 22%. Health Everything Else (Per Capita, 2009 dollars) 1986 1141 10243 2016 4111 14484 Inc 2970 4241 http://www.usgovernmentspending.com/spending_chart_1980_2021USd_17s2li111mcn_F0t10t http://www.usgovernmentspending.com/spending_chart_1980_2021...
    - fweespee_ch 11y ago
      In perspective its really not that odd. https://research.stlouisfed.org/fred2/series/FYONGDA188S https://research.stlouisfed.org/fred2/series/FYONGDA188S 1) 2015 is 20.55%. 1980 is 20.64%. 2) Recessions increase spikes as a share of GDP, really bad recessions have bigger spikes.
dotrat1989 11y ago
>As compared to me, where I think that new technologies are coming, but they’re occurring at an amazingly slow pace. This is problem with economists analyzing technological growth in the economy. They think there must a new google or iphone to come out every 10 years. 20 years ago very few people have ever sent an e-mail. Now I can send an e-mail/call anybody from any place on the earth. We are making significant technological progress and it's where the most growth is at the moment.
- maxerickson 11y ago
  The tempo of Google + iPhone would be ~7 years. We're due for another one!
- jmadsen 11y ago
  I don't think "Google or iphones" are the type of technology he is referring to. He's thinking more plows, or cotton gins, or fiber optics
  - mousa 11y ago
    Those kinds of technologies are coming at a faster pace too. But the fact you discount search engines and cell phones kind of shows how fast new technologies are moving. They're on the same scale as cotton gins but we don't have decades to marvel at how they were gamechangers because they seem like nothing a couple years after they are invented and there is so much more going on.
- nibs 11y ago
  If you have to call something technology or science, it probably isn't quite there yet. I don't call glass, agriculture or steel technology, but their price probably affects my personal economics a lot more than Google and cell phones. If we call it technology or science, it means it is that thing, but it is probably new within a generation. It isn't physics science but it is neuroscience, etc.
- beamatronic 11y ago
  >> 20 years ago very few people have ever sent an e-mail Hmmm. Everyone I knew 20 years ago was using email (edited for clarity)
swehner 11y ago
Who's reading freakonomics?? I don't think they (freakonomics) ever corrected their horrendous mistakes with respect to climate change. http://www.theguardian.com/environment/climate-consensus-97-per-cent/2013/jul/08/climate-change-superfreakonomics-superfreakingwrong http://www.theguardian.com/environment/climate-consensus-97-... http://scienceblogs.com/deltoid/2009/10/16/why-everything-in-superfreakon/ http://scienceblogs.com/deltoid/2009/10/16/why-everything-in... Embarrassing people! Here they serve up some more gossip ...
- Bromlife 11y ago
  I've always kinda hated "Freakonomics" - albeit irrationally. It just never felt like the author truly understood the difference between correlation & causation.
  - GSimon 11y ago
    I too grew a distaste for them, more accurately the Freakonomics Podcast. Steven Levitt comes across like a total snob and he has all these annoying quirks and preferences, I find his personality really irritating. He reminds me of someone who won't do manual labour and thinks it's funny and charming to be someone who sees anything physically strainful as being this horrendous undertaking. He really embodies so many detestable human qualities, and that's the thing, it's like his 'image', he's this weirdo guy who gets to be reprehensible because he's a notable economist. Also their Podcasts frequently air re-runs, and their shows consist of 1 revelatory finding (i.e. legalizing abortion reduces crime rate) that they drag out for 30 mins until you get to the 'gem' of their findings. That being said these are personal gripes from previously being an avid listener who got tired of their stuff.
  - swehner 11y ago
    Not sure it's about hating. I imagine they just personally got the wrong kind of encouragement and incentive.
- viraptor 11y ago
  If someone consistently misrepresents facts, that's one thing. If they constantly produce content and sometimes fail, that's another. Freakonomics is cool for new ideas, but if you really get excited by something they publish, it's worth doublechecking. I don't think discounting them as gossip based on one article is the right solution.
deleted 11y ago
[deleted]
jhallenworld 11y ago
Well power must have something to do with it. The 2nd industrial revolution made essentially unlimited chemical power available to many people. Next revolution? Unlimited nuclear power available to many people...
basicplus2 11y ago
There is the top 1% that own and control 90% of the worlds wealth, then the "upper" classes that are doing very well thankyou and think they are the normal "if everyone just worked hard like me", then there is the rest.. the slave class If the upper class (used to include an upper middle and middle class) was larger, and was the majority of the voting class and the top was no less than 2%, the balance of slavery can be contained and controlled and the fiction of a fair society can be perpetuated. The reality is the top 1% exist in their own economy and the rest of us exist in our own, so when one of us makes a bucket load we are really only ripping off our fellow man. When the super rich throw out more "free" cash eventually they reel it back in again to suck up more wealth from our economy. It is important to remember the US reserve is a private bank of the top 1% that is NOT controlled by elected officials, and debt is the trojan horse.
vlehto 11y ago
My personal bet for current 1st world lack of rapid economic growth is simply lack of demand. Not absolute lack, but people in the rich countries aren't hungry, cold, physically exhausted or sick. They aren't even close, most people have some money buffer between then and hunger, called "expendable income". At first you would think that the expendable income would breed economic growth like mad. But what exactly are you buying with your money if you are generally ~happy about your life and your stuff? Four wheeler? Snake oil? Snowboard? One off things that you know are overpriced, you won't buy another one soon, and you might indefinitely postpone that purchase if you don't feel like it. Your purchase decision is more and more likely to be based on advertising or status than price. So ROI of advertisement is better than ROI of improving the production lines. Especially when consumption of luxury goods is so fickle. This is not really a recipe for long term exponential growth. Compare this to Peru, Cambodia or Chad. Everybody lacks money, but everybody would have several dire needs for some capital. You have reliable demand and really top notch consumption efficiency from the customer side.
WalterSear 11y ago
>It sounds as though your argument is essentially that many of the inventions provided by the Digital Revolution, while exciting and appealing and sexy — and maybe, because they are so sexy, they gain more of our attention than they warrant — that as exciting and sexy, etc., as they are... they don’t stand at all in comparison to the breakthroughs of the earlier technological revolution. This is the perspective of an outsider looking into the world of tech. As someone on the inside, I would argue that those benefits simply haven't arrived yet. I just left a start up who business model was automating a large (Multi-billion $), ancient industrial vertical and who's only technological improvement since the invention of the telephone was using excel rather than paper ledgers.

75 points by Teckla 11y ago

sien 11y ago

I've just started the book this guy wrote. It's really good so far and is very readable. It's not like the epic and unreadable Picketty. Note that he is saying that the growth were getting will be the same as levels from 1820 to 1870, just not the same as it was from 1870 to 1970. The book is worth reading because he has loads of data, not just Internet comment opinions about how things are going. Even if he is wrong and productivity shoots up again he's shown fairly strongly that between 1970 and 2016 growth has slowed. The consequences are pretty serious for the welfare state. Either benefits cannot continue to grow or taxation must increase.

iandanforth 11y ago
Perhaps you can answer a question I would ask him. My quality of life is hugely improved by things for which I pay nothing, e.g. the information freely available online. Do his calculations take into account things which don't register as standard economic activity? I would guess that if you looked at the time it takes someone to learn a new skill you'd have a metric showing an even faster improvement than the total productivity gains of the baby boom generation.
- sien 11y ago
  Yes. He talks about some remarkable things about GDP and how the economic numbers don't capture improvements early on. For instance cars were not looked at in terms of inflation in the US until 1935. Total Factor Productivity is looked at extensively.
Retric 11y ago
Per capita GDP has been going up far faster than entitlement spending per capita. The top have been getting most economic gains and fewer taxes which is the core problem. We could talk about long term demographics, but GDP growth is loosely tied with workforce size. PS: A lot of systemic corruption is also going on. Almost half of the lifetime gains from a 401K ends up as management and other fees, that was clearly designed to make someone money, but not working class Americans.
- sien 11y ago
  Hauser's law, that states that federal tax revenues since World War II have always been approximately equal to 19.5% of GDP, would suggest that tax levels are similar as a percent of per capita GDP. https://en.wikipedia.org/wiki/Hauser%27s_law https://en.wikipedia.org/wiki/Hauser%27s_law
  - Retric 11y ago
    U.S. gov spending is 20,000$ per person which takes vastly more than 19% GDP. http://www.usgovernmentspending.com/per_capita http://www.usgovernmentspending.com/per_capita Local, State, and Federal = ~32 to 42% GDP over last 30 years. http://www.usgovernmentspending.com/spending_brief.php?brief=recent http://www.usgovernmentspending.com/spending_brief.php?brief.... Defense for example is all over the map, 7% under Reagan down to 3.45% with Clintion then bumped under Bush to amost 6% and then back down under Obama. PS: US tax code is designed around talking points so people can support all sorts of things. But at the end of the day Total government spending is what's important not what you call it.
    - zaroth 11y ago
      Thanks for editing to point out that is Local+State+Federal. sien's point and "Hauser's law" is about Federal revenue and specifically how Federal tax revenue doesn't seem to respond to policy changes in the marginal Federal income tax rates as you might expect. They are both good metrics to consider at different times, for example sometimes you ignore certain classes of taxes and spending (like local/property taxes which are largely for K-12 education) when you want to focus on welfare spending, which is 95%+ Federal.
      - Retric 11y ago
        https://research.stlouisfed.org/fred2/series/FYONGDA188S https://research.stlouisfed.org/fred2/series/FYONGDA188S Even then federal outlays go from 10 to 25% post WW2. There is little support for a law. People love to pretend marginal rates are the hole story while ignoring tax breaks, social security, gas taxes, etc. it's a political tug of war and positions hate to make things clear cut. Ex: hand outs in the form of very targeted tax breaks are rarely considered spending even as they subsidize industries.
deleted 11y ago
[deleted]
zaroth 11y ago
Check out historical Federal tax receipts as a percent of GDP [1]. It looks like median is around 18% of GDP and it's been that way pretty much since the 50s. For recent history, Bush years ranged 15.6% - 20%, Obama years it started at 14.6% but is estimated to be coming back to around 18% by this year. In the last 16 years, we saw both the highest collections as a percentage of GDP (20% in 2000), and the lowest since 1950 at 14.6% from 2009-2010. Also from a 2.3% surplus in 2000, to incredible deficits from 2009 - 2012. Looking at the total amount collected, combining the policy shifts (the % of GDP collected) and economic growth (the actual GDP) -- total receipts in 2009 was $2.1 trillion, but 2016 is projected to be $3.1 trillion -- almost a 50% increase! So what this tells me is policy and growth together can have a tremendous impact even in a relatively short time window, and taxation has also increased already very significantly as of late. Of course, even with a cool extra Trillion dollars coming in, we still manage to spend it all and more. (What the heck are we spending an extra trillion dollars on anyway?!) The only way benefits can continue to grow without taxation increasing is if we can get more value for the same dollars. That's why I think the "solution" if there can be one, must come in the form of a radical reduction in cost somewhere. For example, total spending (not just government) on healthcare is about 18% of GDP now. When we talk about welfare, healthcare is a huge component of overall welfare spending, and if you can decrease not just Medicare/Medicaid but overall healthcare cost (better results for less dollars) you provide a lot of value to everyone. I think more effective than trying to figure out how to tax at 20%+ of GDP (and to sien's point about Hauser's law, is probably not even possible without a fundamentally different mode of taxation like VAT), we need to figure out how to achieve massive productivity gains in healthcare. An easy place to start is always to blame someone else... Well, the rest of the world is certainly reaping huge savings off the largess of American healthcare spending. And to some extent I'd say that's a very good thing, new life-saving medicines is one of the best ways that American prosperity can positively impact the rest of the world. Probably it's not sustainable at current levels (as assessed by American %GDP healthcare spending vs. other developed nation averages). And some savings could be gleaned from figuring out better ways to cost-share with the rest of the world better, but the gains from that alone wouldn't be nearly big enough. We need to find much more cost effective ways to research, develop, and practice medicine. So then you turn to how can we achieve savings through medical technology... But it seems like medical technology over the last decades just drives increasing costs (is there good data on this?). Certainly spending overall has increased quite consistently, but I assume much of that is increased utilization as much as increased per-patient cost. The big question in my mind is will we see a "4th revolution" specifically in the case of medicine which could drive costs down 50-90% from current levels. Perhaps this is "slaying the dragon" [2] thinking and, in the context of the article is one of those "50+ years out" unpredictable events. In the shorter-term, maybe we could start to see more robotics/automation in the long-term/elderly care segments, that type of thing... Or as our ability to sequence and customize medicine based on genetics continues to develop, I hear that could also serve as the foundation for large-scale increases in cost efficiency. Some argue there is a structural problem, like evergreen patents, that prevent technology from ever bending the cost curve, and that's probably true to some extent, but I feel like that's still just a peripheral issue which is easier to attack but not the root of solving the problem. Perhaps the fundamental problem is the significant negative reinforcement as better medicine extends lives of retirees driving up both 'lifetime medical costs' per capita as well as 'years of received welfare benefits' per capita -- doing "better" just drives up costs even more! [1] - http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200 http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc... [2] - http://www.nickbostrom.com/fable/dragon.html http://www.nickbostrom.com/fable/dragon.html P.S. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361028/ http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361028/ The Lifetime Distribution of Health Care Costs - Principal Findings Per capita lifetime expenditure is $316,600, a third higher for females ($361,200) than males ($268,700). Two-fifths of this difference owes to women's longer life expectancy. Nearly one-third of lifetime expenditures is incurred during middle age, and nearly half during the senior years. For survivors to age 85, more than one-third of their lifetime expenditures will accrue in their remaining years. Conclusions Given the essential demographic phenomenon of our time, the rapid aging of the population, our findings lend increased urgency to understanding and addressing the interaction between aging and health care spending.
epicureanideal 11y ago
For the benefit of those who haven't tried to read Piketty, I highly encourage you to do so. I don't agree with all his proposed causes or solutions, but the data is very interesting. And I didn't find him unreadable at all, in fact highly enjoyable, if you're the kind of person who likes to read serious non-fiction.
- sien 11y ago
  Yeah. It's worth a go. Kudos to anyone who can get through it. I read a fair bit of non-fiction but found that book terrible to read. It's not his fault. It's an academic book written in French that just happened to take off. It's also clearly an important book. There's data around that it is very often unread. http://www.wsj.com/articles/the-summers-most-unread-book-is-1404417569 http://www.wsj.com/articles/the-summers-most-unread-book-is-...
tostitos1979 11y ago
Curious what this slow-growth world does to housing prices. Our governments seem to be fueling epic housing bubbles by having low interest rates. I've heard two arguments: buy now or never be able to afford (since increasing rates will affect monthly payments), and the crash is just around the corner .. as soon as rates rise. Which is it? As a joke ... I wonder if we have zero innovation if all the scientists, PhDs and many other smart people spend all their time trying to deal with property prices and less on coming up with actual invention. But seriously ... I hate my life. If I buy now, I'll be paying a mortgage till the day I die. Any misfortune will destroy us. Taxes keep increasing, job stability keeps decreasing. Wonder if I am the only one who feels this way.
- AnimalMuppet 11y ago
  Houses are a bit of a weird market. There's supply and demand, but the market isn't driven by the purchase price of the house. It's driven by the monthly payment (because most people buying houses are getting mortgages, not paying cash). So when interest rates rise, house prices decrease, and the monthly payments to buy the same house stay almost exactly the same.

caf 11y ago

Before the telegraph, which was invented in 1844, the fastest that news could travel was by the speed of a horse or a sailing ship. Not strictly true, the semaphore telegraph predated the electric telegraph by about 50 years.

pbhjpbhj 11y ago
And very rudimentary message passing was made using signal fires. There's smoke signals and messenger birds (eg pigeons) but I don't know whether/when/how they were used historically. Edit: Just thought, maybe signal mirrors too?
- nommm-nommm 11y ago
  Pigeons were used to carry important military messages during war up until 1957. https://en.wikipedia.org/wiki/War_pigeon https://en.wikipedia.org/wiki/War_pigeon https://en.wikipedia.org/wiki/United_States_Army_Pigeon_Service https://en.wikipedia.org/wiki/United_States_Army_Pigeon_Serv...
  - yanekm 11y ago
    Let's not forget RFC 1149 specifying "IP over Avian Carriers" https://www.ietf.org/rfc/rfc1149.txt https://www.ietf.org/rfc/rfc1149.txt
    - stankyhanglow 11y ago
      This thread is what's wrong with HN.
- vacri 11y ago
  Pigeons were once used to cheat in the lottery in England. I don't know the year, but I'd imagine it was before the telegraph. But it used to be that you could still buy tickets after the draw had been made in London - the results would travel by horse, but you could use a carrier pigeon with the lotto results to outrace the news.
11y ago

Moshe_Silnorin 11y ago

I suspect we're on the verge of pretty big advances in genetic engineering, robotics and other physical technologies, including technologies that are likely to spur the development of other technologies. Genetic engineering of embryos for increased IQ is looking very feasible, for example. This is likely to increase the pace of innovation drastically in those countries that allow it.

Mikeb85 11y ago
> This is likely to increase the pace of innovation drastically in those countries that allow it. And create a divide between the rich who can afford it for their children, and the poor who can't.
- ElysianEagle 11y ago
  Not sure why you're being downvoted but this is a perfectly valid concern.
  - Mikeb85 11y ago
    Guess some don't like being reminded that the world isn't a meritocracy after all. The circumstances you're born into still correlate highly with life outcomes, no matter how much we try to convince ourselves otherwise.
    - Moshe_Silnorin 11y ago
      Yes. And your genetics is the most important circumstance you're born into to. If only we could seize the high IQ alleles and distribute them to the proletariat!
- Moshe_Silnorin 11y ago
  There is already a huge wealth and status divide between those born with high IQs and those born with normal IQs. The incentives are such that it's going to happen. Also, it looks like very-large increases in IQ will be possible once we have millions of genomes tagged with their donor's IQ and a reliable means of editing thousands of alleles. More than a few standard deviations. I would certainly use this were it available today. If a rich person has to fly to Korea to do it, so what? Any country that bans it will fall behind. The gains from this may be such that governments will think it worth subsidizing it for the poor's children. High IQ people commit less crimes, pay more taxes, tend not to use welfare. Liberals and conservatives will likely both converge on such subsidization.

mchahn 11y ago

Most evolutionary experts, like the late Stephen Gould, espouse Punctuated Equilibrium. Basically the theory says that environments are stable for long periods of time and then there are bursts of changes in small periods of time. The Cambrian Explosion is a good example (read Gould's book on the Cambrian, it's awesome). If you consider technology to be like evolution, which it surely is, then infrequent advances in short periods is only natural.

mmmBacon 11y ago
>>If you consider technology to be like evolution, which it surely is, then infrequent advances in short periods is only natural. What you are describing is basically Thomas Kuhn's notion of the nature of scientific revolutions. https://en.m.wikipedia.org/wiki/The_Structure_of_Scientific_Revolutions https://en.m.wikipedia.org/wiki/The_Structure_of_Scientific_...
maxwelljoslyn 11y ago
For those interested in the "science/technology as evolution" perspective, have a read of Summa Technologiae, by renowned 20th-century science fiction author Stanislaw Lem. A bit dated but engrossing nonetheless; one part philosophy, one part technology, one part ... sociology? Quite interesting.
AnimalMuppet 11y ago
> Most evolutionary experts, like the late Stephen Gould, espouse Punctuated Equilibrium. I agree that PE seems to fit the fossil data better than "slow, steady, gradual". But I'm not sure that "most" evolutionary experts agree. (Or maybe I'm just 20 years behind the times?)

jqm 11y ago

This article may (or may not:) be a little short sighted. Basically it claims the inventions of what it terms "The third industrial revolution" (computers) affect a much narrower slice of life than the proceeding industrial revolutions. So they won't produce the growth the proceeding revolutions did and the rapid growth is over. But earlier in the article: "GORDON: When we had the invention of steam engines, steam ships, locomotives, factories making cotton fabrics, and then the telegraph. All of those things were invented in the century between 1770 and 1870. And they set the stage for the inventions that happened after 1870. " So there was a lag between the large number of invention and the true realization of potential in subsequent inventions and thus improvements in life. First of all I don't think digital technology does affect a narrower slice of life when looked at in broader terms. I think it affects an even greater slice of life. True we have a bunch of cat videos and Facebook but that's just the surface. But the main point, going back to the lag, I believe that is where we are now. We have the technology and are really just getting started with what it can do. Digital technology hasn't really infiltrated everywhere it can and many things are still being done in inefficient ways. When the subsequent set of innovations begin to appear I think we will see an even greater increase in standard of living than the previous industrial revolutions. More efficient distribution mechanisms. Better control over biology (including our own). Automation and robotics. Things like that. Social structures need to catch up though also... likely part of the reason for the lag.

Malician 11y ago
Yes! To a large extent the visible nature of digital technology is a reflection of the capability of people to take advantage of it. If we never progressed past the Commodore 64, we could still be discovering advantages and uses for it. As it is, new tech is coming our way far faster than we can effectively apply it. Or, to rephrase, a lot of office work could be completely replaced by a basic excel spreadsheet macro, let alone machine learning and the latest neural networks.

guelo 11y ago

US GDP per capita is larger then it has ever been. We are richer then we've ever been and this economist predicts we'll be richer still for the foreseeable future. The problem is that 30 years ago or so the middle and lower classes stopped receiving any of the gains.

dangrossman 11y ago
Healthcare providers and insurers have received much of the gains, it's not just a class issue. Since 2001, employers' benefit costs have risen 60%, which is almost twice the rate salary increased. Perhaps salary increases would've outpaced inflation, leading to the real wage gains everyone's missing, if that money weren't being diverted into the employer's share of health insurance premiums.
- WalterBright 11y ago
  The government's share of GDP has increased substantially. http://www.usgovernmentspending.com/us_20th_century_chart.html http://www.usgovernmentspending.com/us_20th_century_chart.ht...
  - jjoonathan 11y ago
    And how much of that is due to increasing medicare costs?
    - zaroth 11y ago
      Looks like about 40% of the increase over the last 30 years can be attributed to increased "health" spending. Health as a percentage of total has gone from ~10% - 22%. Health Everything Else (Per Capita, 2009 dollars) 1986 1141 10243 2016 4111 14484 Inc 2970 4241 http://www.usgovernmentspending.com/spending_chart_1980_2021USd_17s2li111mcn_F0t10t http://www.usgovernmentspending.com/spending_chart_1980_2021...
  - fweespee_ch 11y ago
    In perspective its really not that odd. https://research.stlouisfed.org/fred2/series/FYONGDA188S https://research.stlouisfed.org/fred2/series/FYONGDA188S 1) 2015 is 20.55%. 1980 is 20.64%. 2) Recessions increase spikes as a share of GDP, really bad recessions have bigger spikes.

dotrat1989 11y ago

>As compared to me, where I think that new technologies are coming, but they’re occurring at an amazingly slow pace. This is problem with economists analyzing technological growth in the economy. They think there must a new google or iphone to come out every 10 years. 20 years ago very few people have ever sent an e-mail. Now I can send an e-mail/call anybody from any place on the earth. We are making significant technological progress and it's where the most growth is at the moment.

maxerickson 11y ago
The tempo of Google + iPhone would be ~7 years. We're due for another one!
jmadsen 11y ago
I don't think "Google or iphones" are the type of technology he is referring to. He's thinking more plows, or cotton gins, or fiber optics
- mousa 11y ago
  Those kinds of technologies are coming at a faster pace too. But the fact you discount search engines and cell phones kind of shows how fast new technologies are moving. They're on the same scale as cotton gins but we don't have decades to marvel at how they were gamechangers because they seem like nothing a couple years after they are invented and there is so much more going on.
nibs 11y ago
If you have to call something technology or science, it probably isn't quite there yet. I don't call glass, agriculture or steel technology, but their price probably affects my personal economics a lot more than Google and cell phones. If we call it technology or science, it means it is that thing, but it is probably new within a generation. It isn't physics science but it is neuroscience, etc.
beamatronic 11y ago
>> 20 years ago very few people have ever sent an e-mail Hmmm. Everyone I knew 20 years ago was using email (edited for clarity)

swehner 11y ago

Who's reading freakonomics?? I don't think they (freakonomics) ever corrected their horrendous mistakes with respect to climate change. http://www.theguardian.com/environment/climate-consensus-97-per-cent/2013/jul/08/climate-change-superfreakonomics-superfreakingwrong http://www.theguardian.com/environment/climate-consensus-97-... http://scienceblogs.com/deltoid/2009/10/16/why-everything-in-superfreakon/ http://scienceblogs.com/deltoid/2009/10/16/why-everything-in... Embarrassing people! Here they serve up some more gossip ...

Bromlife 11y ago
I've always kinda hated "Freakonomics" - albeit irrationally. It just never felt like the author truly understood the difference between correlation & causation.
- GSimon 11y ago
  I too grew a distaste for them, more accurately the Freakonomics Podcast. Steven Levitt comes across like a total snob and he has all these annoying quirks and preferences, I find his personality really irritating. He reminds me of someone who won't do manual labour and thinks it's funny and charming to be someone who sees anything physically strainful as being this horrendous undertaking. He really embodies so many detestable human qualities, and that's the thing, it's like his 'image', he's this weirdo guy who gets to be reprehensible because he's a notable economist. Also their Podcasts frequently air re-runs, and their shows consist of 1 revelatory finding (i.e. legalizing abortion reduces crime rate) that they drag out for 30 mins until you get to the 'gem' of their findings. That being said these are personal gripes from previously being an avid listener who got tired of their stuff.
- swehner 11y ago
  Not sure it's about hating. I imagine they just personally got the wrong kind of encouragement and incentive.
viraptor 11y ago
If someone consistently misrepresents facts, that's one thing. If they constantly produce content and sometimes fail, that's another. Freakonomics is cool for new ideas, but if you really get excited by something they publish, it's worth doublechecking. I don't think discounting them as gossip based on one article is the right solution.

deleted 11y ago

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jhallenworld 11y ago

Well power must have something to do with it. The 2nd industrial revolution made essentially unlimited chemical power available to many people. Next revolution? Unlimited nuclear power available to many people...

basicplus2 11y ago

There is the top 1% that own and control 90% of the worlds wealth, then the "upper" classes that are doing very well thankyou and think they are the normal "if everyone just worked hard like me", then there is the rest.. the slave class If the upper class (used to include an upper middle and middle class) was larger, and was the majority of the voting class and the top was no less than 2%, the balance of slavery can be contained and controlled and the fiction of a fair society can be perpetuated. The reality is the top 1% exist in their own economy and the rest of us exist in our own, so when one of us makes a bucket load we are really only ripping off our fellow man. When the super rich throw out more "free" cash eventually they reel it back in again to suck up more wealth from our economy. It is important to remember the US reserve is a private bank of the top 1% that is NOT controlled by elected officials, and debt is the trojan horse.

vlehto 11y ago

My personal bet for current 1st world lack of rapid economic growth is simply lack of demand. Not absolute lack, but people in the rich countries aren't hungry, cold, physically exhausted or sick. They aren't even close, most people have some money buffer between then and hunger, called "expendable income". At first you would think that the expendable income would breed economic growth like mad. But what exactly are you buying with your money if you are generally ~happy about your life and your stuff? Four wheeler? Snake oil? Snowboard? One off things that you know are overpriced, you won't buy another one soon, and you might indefinitely postpone that purchase if you don't feel like it. Your purchase decision is more and more likely to be based on advertising or status than price. So ROI of advertisement is better than ROI of improving the production lines. Especially when consumption of luxury goods is so fickle. This is not really a recipe for long term exponential growth. Compare this to Peru, Cambodia or Chad. Everybody lacks money, but everybody would have several dire needs for some capital. You have reliable demand and really top notch consumption efficiency from the customer side.

WalterSear 11y ago

>It sounds as though your argument is essentially that many of the inventions provided by the Digital Revolution, while exciting and appealing and sexy — and maybe, because they are so sexy, they gain more of our attention than they warrant — that as exciting and sexy, etc., as they are... they don’t stand at all in comparison to the breakthroughs of the earlier technological revolution. This is the perspective of an outsider looking into the world of tech. As someone on the inside, I would argue that those benefits simply haven't arrived yet. I just left a start up who business model was automating a large (Multi-billion $), ancient industrial vertical and who's only technological improvement since the invention of the telephone was using excel rather than paper ledgers.