11 ms·

Economic Possibilities for our Grandchildren (1930) [pdf]

80 points by jseip 10y ago

neaden 10y ago
I think the two big problem with Keynes analysis are 1. He underestimated how much we wanted stuff vs leisure. We have much bigger homes now, eat more meat, have computers and television etc. 2. He underestimated how much work had to get done that he didn't count. He was from a class that had servants and of course all the invisible work done by women. Raising a child doesn't take substantially less person hours today then it did when Keynes wrote this. Neither does cleaning, since we now expect everything to be cleaner.
- kybernetikos 10y ago
  In the essay, he says that he's explicitly talking about desires that are absolute rather than positional (beginning of section II). He even accepts that desire for positional goods may in fact be insatiable, so I don't think your first point is a fair representation of his argument. I think there's a lot of truth to your second argument which comes down to the fact that there are quite a few absolute needs that are resistant to improvement through technological progress, that tend to scale with the population and that because of privilege Keynes probably underestimated. Personally, I think that he's too optimistic because he thinks that the rewards of progress will end up shared rather than concentrated in the hands of a small number of people (like e.g. the Walton family who own assets equivalent to the bottom third of the entire population of the US).
  - neaden 10y ago
    With Positional Goods I believe he's strictly talking about keeping up with the Jones type things. So I get a fancy car just so everyone knows I'm fancy, but I don't really care about it. While to some extent I think that's true with larger housing sizes for instance, I don't think that's the main reason why houses have gotten larger. Let alone computers and other inventions that we have now. In terms of concentrated wealth I do think that's an issue, but once again it isn't the whole story. The average person is richer then they were 20 years ago, and the person 20 years ago is richer then the person 40 years ago. This is true if you look at middle class, but also if you look at people making minimum wage.
- treehau5 10y ago
  > Neither does cleaning, since we now expect everything to be cleaner. Modern vacuums, cleaning products, washer and dryer systems, modern storage containers, the refridgerator, dusting products and filtration air condition systems all have made cleaning your house substantially easier.
  - neaden 10y ago
    The problem is before vacuums people didn't spend an hour a week cleaning their rugs by hand, they took them out a couple times a year to beat clean. People used to wear clothes more often between cleanings when it was more laborious to launder them. We began to shower every day. You can say these are Positional Goods and all about status, but unlike having a fancy car these are things you can't really opt out of. If you smell like the average person smelt in the 1930s you'll have a hard time fitting in at an office now.
    - oli5679 10y ago
      The fall in time spent doing cleaning, cooking and household chores since Keynes' death is well documented. http://research.sabanciuniv.edu/277/1/3011800000841.pdf http://research.sabanciuniv.edu/277/1/3011800000841.pdf "It took her 4 h to do a 38 lb load of laundry by hand, and then about 4·5 h to iron it using old-fashioned irons. By comparison it took 41 min to do a load of the laundry using electrical appliances and 1·75 h to iron it. The woman walked 3181 feet to do the laundry by hand, and only 332 feet with electrical equipment. She walked 3122 feet when ironing the old way, and 333 the new way"
      - dasmoth 10y ago
        How often did people do 38lb loads of laundry? The argument here is that we wear clothes fewer times between washing now, so laundry has dramatically increased.
        oli5679 10y ago
        I can't find good data on the topic but I'm sure it exists somewhere and would be confident that the the overall trend is a large reduction. Have a look at the female labour force participation rates in America and USA between 1900 and 2000. How are they compatible with households spending more time cleaning and cooking now than in 1900? As an alternative, ask old family members about the amount of time their mothers spent cooking, shopping and cleaning when they were growing up. Finally, look at time spent on Household chores in Mexico/Kenya vs USA.
- philipkglass 10y ago
  I think that his argument works in the limit case. Above a certain square footage the work of keeping a larger dwelling outweighs the benefit of having more space. (I've avoided buying a larger house that I could easily afford because I didn't want another 1000 square feet to clean and maintain.) Above a certain consumption level you get uncomfortable and ill from eating more food instead of additional nutrition/pleasure. Nobody can watch television more than 24 hours per day. Or to put it in more concrete terms, look at five different 40 year old males all living in Los Angeles. One has $100,000 in net worth, the next has $1 million, the next $10 million, the next $100 million, and the last has $1 billion. That's spanning 5 orders of magnitude, but personal consumption goes up very sub-linearly with increasing wealth. When people near the top of the wealth pyramid spend a lot they're typically bidding up positional goods to insane levels (how much for the penthouse with the very best location in Manhattan?) or spending for control (e.g. as a shareholder in a corporation) instead of for personal consumption. You can't take a typical middle class family and scale up all the financial numbers by 100x to get a realistic picture of how today's wealthy (or the future middle class after a long period of compounded economic growth) will consume.
  - tetraodonpuffer 10y ago
    personal consumption in terms of durable goods probably, but what about in terms of services / experiences? those seem to be more and more the things that high net worth individuals go after, and as many religions will tell you there is really no limit to human desire (and consequently to the money you are willing to spend to fulfill those desires) This is how you go from "I'd like to see Europe some day" to "I am going to have a week to go to Europe once every few years" to "I am flying business class to Europe for tourism every year" to much later "I own a private jet and I feel like having those baguettes from that shop for breakfast tomorrow so I am going to get my personal assistant to fly there and get them for me" There are always goods available no matter how much money you have, as much as the quantity of the food you eat is limited by your physiology, the amount of money it costs is only limited by your imagination.
    - philipkglass 10y ago
- digi_owl 10y ago
  Nah, what he underestimated was how much his colleagues would bastardize and twist his words to double down on the status quo. Post-war Keynesianism would better be labeled Samuelsonianism, because Samuelson did the bulk work of "rewriting" Keynes into a form that fit with existing (classic) economic thinking.
- ZenoArrow 10y ago
  > "He underestimated how much we wanted stuff vs leisure." I'd argue this isn't necessarily a reflection on our personal desires. Whilst I'm sure there are plenty of people who want 'stuff' over leisure, I think there are plenty of other people who would choose a different balance to the one they have now. I'd say the biggest issue blocking this second group is our current work arrangements. If I could I'd choose to work part time or on some form of flexitime (assuming I could earn enough to live on), instead I need to work full time because that's what is on offer and I'm not in a position to push for changes just yet. If people could choose their work hours based on what they needed/wanted, and could afford to work less, I think you'd see a many more people expanding their leisure time than you do now.
  - Chinjut 10y ago
    Yes. I would desperately prefer to take on a job with more leisure time, even with a harsh paycut, and yet, there is almost no way to express that desire within the market as it stands. So I take on a job with far more hours than I'd like, since the alternative is destitution, and then get taken as implicitly supporting the opposite trade-off to what I really want.
  - grecy 10y ago
    If I could I'd choose to work part time or on some form of flexitime (assuming I could earn enough to live on), instead I need to work full time because that's what is on offer and I'm not in a position to push for changes just yet. If you want it badly enough, you will find a way. Make it your top priority. Start applying for other jobs now, and when they make an offer discuss working 4 or 3 days a week for 4/5th or 3/5th of a paycheck. Suggest to your boss you take some unpaid leave (maybe only a week a year to start) and that will help him cut his costs. Take a leave of absence. Find someone to job share with so you both work 1/2 time to get the same job done - make sure you convince your boss it will have no impact on him, and in fact it will be better in case one of you gets seriously ill or something he has backup. There are a thousand ways to achieve your goal. I choose time over stuff, so in the last ~10 years, I've worked about 5. I also spent 2 years driving AK->Argentina, and now I'm doing 2 years around Africa.
- rumcajz 10y ago
  What was not accounted for was that working hours will not be shortened and thus lot of people would have to invent ridiculous, mostly paper-pushing, occupations to be able to survive.
- norea-armozel 10y ago
  I don't think that's entirely true. I love to poke fun at Keynes but on this projection of his he's not far off. The idea that we have to work 40 hours a day to get work done seems naive since most of the "work" is just getting another human to check off on an action that's already correct for the given job. And I'm not talking about federal or state regulators, I'm talking about middle managers, marketing, HR, and other such nonsense jobs which only exist to audit the process of doing business for it's own sake. At this point, I think we should be creating less jobs or at least reducing hours across the board where it makes sense (i.e. how much marketing staff do you really need?).
justinlardinois 10y ago
On Hacker News it's usually courtesy to put the year in the title for older works.
HarveyW26 10y ago
Wow...some glaring typos in this !
HarveyW26 10y ago
Wow...some glaring OCR glitches in this !
Falkon1313 10y ago
1. It's not about luxury stuff. Our homes aren't bigger because we want bigger homes (except for those wealthy enough to hire architects and design their own homes). We have to pay for whatever the developers have built in the area we need at the time we need it. Smaller homes are less available, older, less efficient, and often need a lot of work. Things like computers and televisions aren't expensive luxuries, they are durable commodities with negligible and decreasing costs. You can get a decent computer that will last for years at an average cost of $75 per year (less if you don't need a high-end one). That's a fraction of one workweek per year, even at minimum wage. The real issue is that the cost of living hasn't scaled with those occasional consumer goods purchases. Housing, healthcare, utilities, transportation, food, education, etc. are constant necessity expenses, and costs are increasing in those areas. 2. This is somewhat true, but primarily in light of the fact that we see it as a tradeoff - that more time at home / with family hurts our careers/earning; or more extreme, we're too busy working so we have to hire people to raise our kids and clean our houses. If we didn't see it in terms of costs (or opportunity costs), then spending time with family and tidying up our homes would just be things that we did, rather than work. If anything, he was overly optimistic in thinking that we could go 100 years without wars or civil dissensions, and without the powerful few increasing the cost of living and draining wealth from the masses.
- Kenji 10y ago
  The real issue is that the cost of living hasn't scaled with those occasional consumer goods purchases. Housing, healthcare, utilities, transportation, food, education, etc. are constant necessity expenses, and costs are increasing in those areas. How peculiar, where is the state most involved?? Is it a coincidence?
  - pixl97 10y ago
    Well, the state is simply involved in those because they are life and death matters. If there were suddenly not utilities tomorrow the modern way of life would disappear. Food, for example, is one that rapidly decreased in the 1900s due to automation and rapid advances in farming. This lead to a drastic decrease in the number of farmers, making all of us more dependent on those few. If floods, famines, or rapid price swings occurred farmers could easily go out of business in such numbers that it could lead to food shortages the next year. This lead to government insurance of crops and price protection on many commodities. It has been said that food security is national security, and it's not wrong. If you want people angry, get them hungry. Separate from that, the listed 'needs' you stated above can be automated in production, but they aren't easily optimized for use. For example, you can make a computer that's half the size, use half the materials, runs twice as fast for half the cost if you keep investing in R&D. But you cannot cut a humans caloric intake and half and make them more efficient. Education too, is one of the things that is difficult to measure what 'enough' is. In theory the more education you get the better. We could probably give out 1930s levels of education pretty easily, and much less expensive than we do it now. But you don't need a 30's education, you need to compete in the world of 7 billion people and computerized everything.
sien 10y ago
The NPR Podcast Planet Money did a really good episode on this: http://www.npr.org/sections/money/2015/07/24/426017148/episode-641-why-we-work-so-much http://www.npr.org/sections/money/2015/07/24/426017148/episo... Fun points - Keynes was a rich man who didn't have to work but who effectively worked himself to death. The descendants of his siblings work heaps despite also being fairly well off as well.
norea-armozel 10y ago
Considering how many modern jobs aren't about productive work but busy work I have to wonder if capitalism dies under an endless stream of meetings and marketing/financing positions.
- eli_gottlieb 10y ago
  http://strikemag.org/bullshit-jobs/ http://strikemag.org/bullshit-jobs/

80 points by jseip 10y ago

I think the two big problem with Keynes analysis are 1. He underestimated how much we wanted stuff vs leisure. We have much bigger homes now, eat more meat, have computers and television etc. 2. He underestimated how much work had to get done that he didn't count. He was from a class that had servants and of course all the invisible work done by women. Raising a child doesn't take substantially less person hours today then it did when Keynes wrote this. Neither does cleaning, since we now expect everything to be cleaner.

kybernetikos 10y ago
In the essay, he says that he's explicitly talking about desires that are absolute rather than positional (beginning of section II). He even accepts that desire for positional goods may in fact be insatiable, so I don't think your first point is a fair representation of his argument. I think there's a lot of truth to your second argument which comes down to the fact that there are quite a few absolute needs that are resistant to improvement through technological progress, that tend to scale with the population and that because of privilege Keynes probably underestimated. Personally, I think that he's too optimistic because he thinks that the rewards of progress will end up shared rather than concentrated in the hands of a small number of people (like e.g. the Walton family who own assets equivalent to the bottom third of the entire population of the US).
- neaden 10y ago
  With Positional Goods I believe he's strictly talking about keeping up with the Jones type things. So I get a fancy car just so everyone knows I'm fancy, but I don't really care about it. While to some extent I think that's true with larger housing sizes for instance, I don't think that's the main reason why houses have gotten larger. Let alone computers and other inventions that we have now. In terms of concentrated wealth I do think that's an issue, but once again it isn't the whole story. The average person is richer then they were 20 years ago, and the person 20 years ago is richer then the person 40 years ago. This is true if you look at middle class, but also if you look at people making minimum wage.
treehau5 10y ago
> Neither does cleaning, since we now expect everything to be cleaner. Modern vacuums, cleaning products, washer and dryer systems, modern storage containers, the refridgerator, dusting products and filtration air condition systems all have made cleaning your house substantially easier.
- neaden 10y ago
  The problem is before vacuums people didn't spend an hour a week cleaning their rugs by hand, they took them out a couple times a year to beat clean. People used to wear clothes more often between cleanings when it was more laborious to launder them. We began to shower every day. You can say these are Positional Goods and all about status, but unlike having a fancy car these are things you can't really opt out of. If you smell like the average person smelt in the 1930s you'll have a hard time fitting in at an office now.
  - oli5679 10y ago
    The fall in time spent doing cleaning, cooking and household chores since Keynes' death is well documented. http://research.sabanciuniv.edu/277/1/3011800000841.pdf http://research.sabanciuniv.edu/277/1/3011800000841.pdf "It took her 4 h to do a 38 lb load of laundry by hand, and then about 4·5 h to iron it using old-fashioned irons. By comparison it took 41 min to do a load of the laundry using electrical appliances and 1·75 h to iron it. The woman walked 3181 feet to do the laundry by hand, and only 332 feet with electrical equipment. She walked 3122 feet when ironing the old way, and 333 the new way"
    - dasmoth 10y ago
      How often did people do 38lb loads of laundry? The argument here is that we wear clothes fewer times between washing now, so laundry has dramatically increased.
      - oli5679 10y ago
        I can't find good data on the topic but I'm sure it exists somewhere and would be confident that the the overall trend is a large reduction. Have a look at the female labour force participation rates in America and USA between 1900 and 2000. How are they compatible with households spending more time cleaning and cooking now than in 1900? As an alternative, ask old family members about the amount of time their mothers spent cooking, shopping and cleaning when they were growing up. Finally, look at time spent on Household chores in Mexico/Kenya vs USA.
philipkglass 10y ago
I think that his argument works in the limit case. Above a certain square footage the work of keeping a larger dwelling outweighs the benefit of having more space. (I've avoided buying a larger house that I could easily afford because I didn't want another 1000 square feet to clean and maintain.) Above a certain consumption level you get uncomfortable and ill from eating more food instead of additional nutrition/pleasure. Nobody can watch television more than 24 hours per day. Or to put it in more concrete terms, look at five different 40 year old males all living in Los Angeles. One has $100,000 in net worth, the next has $1 million, the next $10 million, the next $100 million, and the last has $1 billion. That's spanning 5 orders of magnitude, but personal consumption goes up very sub-linearly with increasing wealth. When people near the top of the wealth pyramid spend a lot they're typically bidding up positional goods to insane levels (how much for the penthouse with the very best location in Manhattan?) or spending for control (e.g. as a shareholder in a corporation) instead of for personal consumption. You can't take a typical middle class family and scale up all the financial numbers by 100x to get a realistic picture of how today's wealthy (or the future middle class after a long period of compounded economic growth) will consume.
- tetraodonpuffer 10y ago
  personal consumption in terms of durable goods probably, but what about in terms of services / experiences? those seem to be more and more the things that high net worth individuals go after, and as many religions will tell you there is really no limit to human desire (and consequently to the money you are willing to spend to fulfill those desires) This is how you go from "I'd like to see Europe some day" to "I am going to have a week to go to Europe once every few years" to "I am flying business class to Europe for tourism every year" to much later "I own a private jet and I feel like having those baguettes from that shop for breakfast tomorrow so I am going to get my personal assistant to fly there and get them for me" There are always goods available no matter how much money you have, as much as the quantity of the food you eat is limited by your physiology, the amount of money it costs is only limited by your imagination.
  - philipkglass 10y ago
digi_owl 10y ago
Nah, what he underestimated was how much his colleagues would bastardize and twist his words to double down on the status quo. Post-war Keynesianism would better be labeled Samuelsonianism, because Samuelson did the bulk work of "rewriting" Keynes into a form that fit with existing (classic) economic thinking.
ZenoArrow 10y ago
> "He underestimated how much we wanted stuff vs leisure." I'd argue this isn't necessarily a reflection on our personal desires. Whilst I'm sure there are plenty of people who want 'stuff' over leisure, I think there are plenty of other people who would choose a different balance to the one they have now. I'd say the biggest issue blocking this second group is our current work arrangements. If I could I'd choose to work part time or on some form of flexitime (assuming I could earn enough to live on), instead I need to work full time because that's what is on offer and I'm not in a position to push for changes just yet. If people could choose their work hours based on what they needed/wanted, and could afford to work less, I think you'd see a many more people expanding their leisure time than you do now.
- Chinjut 10y ago
  Yes. I would desperately prefer to take on a job with more leisure time, even with a harsh paycut, and yet, there is almost no way to express that desire within the market as it stands. So I take on a job with far more hours than I'd like, since the alternative is destitution, and then get taken as implicitly supporting the opposite trade-off to what I really want.
- grecy 10y ago
  If I could I'd choose to work part time or on some form of flexitime (assuming I could earn enough to live on), instead I need to work full time because that's what is on offer and I'm not in a position to push for changes just yet. If you want it badly enough, you will find a way. Make it your top priority. Start applying for other jobs now, and when they make an offer discuss working 4 or 3 days a week for 4/5th or 3/5th of a paycheck. Suggest to your boss you take some unpaid leave (maybe only a week a year to start) and that will help him cut his costs. Take a leave of absence. Find someone to job share with so you both work 1/2 time to get the same job done - make sure you convince your boss it will have no impact on him, and in fact it will be better in case one of you gets seriously ill or something he has backup. There are a thousand ways to achieve your goal. I choose time over stuff, so in the last ~10 years, I've worked about 5. I also spent 2 years driving AK->Argentina, and now I'm doing 2 years around Africa.
rumcajz 10y ago
What was not accounted for was that working hours will not be shortened and thus lot of people would have to invent ridiculous, mostly paper-pushing, occupations to be able to survive.
norea-armozel 10y ago
I don't think that's entirely true. I love to poke fun at Keynes but on this projection of his he's not far off. The idea that we have to work 40 hours a day to get work done seems naive since most of the "work" is just getting another human to check off on an action that's already correct for the given job. And I'm not talking about federal or state regulators, I'm talking about middle managers, marketing, HR, and other such nonsense jobs which only exist to audit the process of doing business for it's own sake. At this point, I think we should be creating less jobs or at least reducing hours across the board where it makes sense (i.e. how much marketing staff do you really need?).

justinlardinois 10y ago

On Hacker News it's usually courtesy to put the year in the title for older works.

HarveyW26 10y ago

Wow...some glaring typos in this !

HarveyW26 10y ago

Wow...some glaring OCR glitches in this !

Falkon1313 10y ago

1. It's not about luxury stuff. Our homes aren't bigger because we want bigger homes (except for those wealthy enough to hire architects and design their own homes). We have to pay for whatever the developers have built in the area we need at the time we need it. Smaller homes are less available, older, less efficient, and often need a lot of work. Things like computers and televisions aren't expensive luxuries, they are durable commodities with negligible and decreasing costs. You can get a decent computer that will last for years at an average cost of $75 per year (less if you don't need a high-end one). That's a fraction of one workweek per year, even at minimum wage. The real issue is that the cost of living hasn't scaled with those occasional consumer goods purchases. Housing, healthcare, utilities, transportation, food, education, etc. are constant necessity expenses, and costs are increasing in those areas. 2. This is somewhat true, but primarily in light of the fact that we see it as a tradeoff - that more time at home / with family hurts our careers/earning; or more extreme, we're too busy working so we have to hire people to raise our kids and clean our houses. If we didn't see it in terms of costs (or opportunity costs), then spending time with family and tidying up our homes would just be things that we did, rather than work. If anything, he was overly optimistic in thinking that we could go 100 years without wars or civil dissensions, and without the powerful few increasing the cost of living and draining wealth from the masses.

Kenji 10y ago
The real issue is that the cost of living hasn't scaled with those occasional consumer goods purchases. Housing, healthcare, utilities, transportation, food, education, etc. are constant necessity expenses, and costs are increasing in those areas. How peculiar, where is the state most involved?? Is it a coincidence?
- pixl97 10y ago
  Well, the state is simply involved in those because they are life and death matters. If there were suddenly not utilities tomorrow the modern way of life would disappear. Food, for example, is one that rapidly decreased in the 1900s due to automation and rapid advances in farming. This lead to a drastic decrease in the number of farmers, making all of us more dependent on those few. If floods, famines, or rapid price swings occurred farmers could easily go out of business in such numbers that it could lead to food shortages the next year. This lead to government insurance of crops and price protection on many commodities. It has been said that food security is national security, and it's not wrong. If you want people angry, get them hungry. Separate from that, the listed 'needs' you stated above can be automated in production, but they aren't easily optimized for use. For example, you can make a computer that's half the size, use half the materials, runs twice as fast for half the cost if you keep investing in R&D. But you cannot cut a humans caloric intake and half and make them more efficient. Education too, is one of the things that is difficult to measure what 'enough' is. In theory the more education you get the better. We could probably give out 1930s levels of education pretty easily, and much less expensive than we do it now. But you don't need a 30's education, you need to compete in the world of 7 billion people and computerized everything.

sien 10y ago

The NPR Podcast Planet Money did a really good episode on this: http://www.npr.org/sections/money/2015/07/24/426017148/episode-641-why-we-work-so-much http://www.npr.org/sections/money/2015/07/24/426017148/episo... Fun points - Keynes was a rich man who didn't have to work but who effectively worked himself to death. The descendants of his siblings work heaps despite also being fairly well off as well.

norea-armozel 10y ago

Considering how many modern jobs aren't about productive work but busy work I have to wonder if capitalism dies under an endless stream of meetings and marketing/financing positions.

eli_gottlieb 10y ago
http://strikemag.org/bullshit-jobs/ http://strikemag.org/bullshit-jobs/