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What if we've entered an era where this is the new normal? Where the kind of growth we've seen in the past isn't something we can expect anymore? I'm asking be

by rpeden 8y ago

What if we've entered an era where this is the new normal? Where the kind of growth we've seen in the past isn't something we can expect anymore? I'm asking because I'm genuinely curious and I have no idea whether this is a reasonable hypothesis or not. I'm hoping others here can point me toward what I should be reading to learn more.

harimau777 8y ago
It seems to me that the primary way that average people can get ahead (at least in America, I'm less familiar with other countries) is by investing; which requires growth. If that went away, I'd be afraid that new generations or people who aren't from rich families would be stuck. I wonder if there are any thinkers that have developed a plan for prosperity without growth that doesn't rely on utopianism?
moduspol 8y ago
It's not an unreasonable hypothesis, but it's certainly not new, either. The same hypothesis was made five, ten, twenty, and more years ago. And it was wrong every time. That doesn't mean it's wrong now, but it does invite further retrospection why people thought it might be the case then, why they ended up being wrong, and what potential blind spots might lead to this perspective today.
Can_Not 8y ago
We're leaving capitalism to enter into a new type of society. Rentierism. Everything is already owned. Even things you currently own, or don't even exist, are being taken back from you so you can be charged rent for it. It's like feudalism, but you can have as many feudal lords as you want to live under--as a service.
coldtea 8y ago
>What if we've entered an era where this is the new normal? Where the kind of growth we've seen in the past isn't something we can expect anymore? You're not allowed to ever think that. Growth will keep on forever, boosted by magic yet uninvented technology if it ever stalls, bypassing all physical resource limits, and at an exponential rate preferably. /s If you really want to learn more, though, avoid all mainstream economists and pundits paid to promote state and business interests.
AlanSE 8y ago
It's not only reasonable, but is becoming increasingly accepted. I finished this book a little while ago: https://www.amazon.com/Rise-Fall-American-Growth-Princeton/dp/153661825X https://www.amazon.com/Rise-Fall-American-Growth-Princeton/d... But it really said the same thing that many other economics books said. If you read Thomas Piketty, you know that inequality basically comes down to the end of growth. He starts with the mostly-factual premises that growth will remain stalled while capital returns will continue at their historical rates. I'm still unsure about the latter premise myself, but the former is undeniable. But we also need to distinguish economic growth from quality of life improvements. Quality of life, necessarily, has to come from productivity improvements (not in the dictionary sense of those words, but in the macro economic sense). The US GDP could be partially buoyant due to immigration, and partially due to demographics. To some of the points of the article - companies would invest more if there was an expectation that new technologies were fundamentally transformative. I don't get that sense.
- zone411 8y ago
  Have you also read the criticisms of Pikkety's book? I would find it hard to recommend this book. https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century#Criticism https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
  - xyzzy123 8y ago
    Without speaking for the validity of it, there’s a lot of material in the book, which provides lots to “shoot at”. I’d expect anything which presents an ideological challenge like this book to draw a high volume of criticism from multiple angles. The only way to sort it out (if you happen to care) is to actually wade through the various arguments.
  - AlanSE 8y ago
    I didn't really recommend it, and the reason I borrowed from it in my comment was for an economic point which was not its main focus. To borrow from your own link: > Lawrence Summers criticizes Piketty for underestimating the diminishing returns on capital, which he believes will offset the return on capital and hence set an upper limit to inequality. We are moving further away from the original point, but this is very close to what I said. Sometimes a complex topic doesn't need to be complex. What Pikkety argued was simple math - almost high school level math. He still spent decades doing the research groundwork (very very complex), but the take-away for the rest of us is very simple. If we return to a low-growth world, then it's very very hard for me to accept that returns on capital will remain high. From where will these returns come from? Pikkety only has 1 real reference point for the high-inequality world, and that was the 1800s. One very very major unanswered question for Pikkety is this - if capital returns hold strong indefinitely, where will the negative feedback come from? I could never tell if the book was literally apocalyptic. If you mathematically describe something which multiplies infinitely, then either you're making the point that some negative feedback is missing, or you're predicting collapse for any real world system where that model applies (also a negative feedback, just a very jerky one). I think he thought that in the 1800s, the rich found a way to balance their expenses with their income. This is silly. Perhaps there was no means of re-investment due to the illiquidity of land. This is also silly. Anyway, I can still accept that some negative feedback from people's behavior existed in the 1800s, but even if I do, I don't accept that such a feedback would exist today. Rich people today have no natural limit to how rich they want to be, and no neo-feudalistic system that prevents further expansion. This all argues for the apocalyptic interpretation. My take - I don't think we can be at low growth for long. If we are, things will start to change Perhaps climate change, perhaps war. We're not going to just hang out in that state. Maybe we can then stay at low-growth, but low-growth with capital destruction. However, the more disruptive historical events tend to bring back growth. I think potential for technological productivity growth is still very very possible, but with a restructured way of life. Right now, the incentives just don't work. That's all.
jeroenhd 8y ago
Actually, there's still massive growth in countries like India, China, but also Ethiopia. As other countries start improving their economy, the economic boom of post WW2 America seems to finally wear off while at the same time the computer revolution is making short work of old-fashioned manual labor. That's great for humanity in general, as more people can have better lives, but it comes at the cost of luxuries to the already rich countries. I expect the economy in the west to decline in the next 20 or 30 years as more developing countries are getting their economies in line. With China investing massively in the African continent and with the enormous natural wealth Africa possesses, we can probably expect Africa to turn into a major economic power somewhere in the next 50-100 years.
chibg10 8y ago
It's reasonable (at least in the US and most other developed countries). Economic output is the product of the number of workers and their productivity. The US population is aging (so Baby Boomers are retiring) and its fertility is low relative to previous generations (though higher than other developed countries). This means there US won't get the GDP tailwind from population growth that it used to. The other place to look is productivity. This is, in large part, a function of technology innovation (and adoption) though there are over ways to make the workforce more efficient as well. Productivity growth has been below historical norms since 2008 and nobody really knows why. Whether this is a anomaly or a trend is an open question, and makes up most the game of predicting long-term economic growth. Personally, I suspect overall technological progress follows an S-curve and will slow at some point. I can't claim to know where we are on the S-curve, but I'm skeptical that Big Data and AI will lead to the same productivity gains as computers, electricity, etc (I'm an ML engineer fwiw). I wouldn't be surprised if US growth stays is low relative to historical standards for the foreseeable future.

by rpeden 8y ago

harimau777 8y ago

It seems to me that the primary way that average people can get ahead (at least in America, I'm less familiar with other countries) is by investing; which requires growth. If that went away, I'd be afraid that new generations or people who aren't from rich families would be stuck. I wonder if there are any thinkers that have developed a plan for prosperity without growth that doesn't rely on utopianism?

moduspol 8y ago

It's not an unreasonable hypothesis, but it's certainly not new, either. The same hypothesis was made five, ten, twenty, and more years ago. And it was wrong every time. That doesn't mean it's wrong now, but it does invite further retrospection why people thought it might be the case then, why they ended up being wrong, and what potential blind spots might lead to this perspective today.

Can_Not 8y ago

We're leaving capitalism to enter into a new type of society. Rentierism. Everything is already owned. Even things you currently own, or don't even exist, are being taken back from you so you can be charged rent for it. It's like feudalism, but you can have as many feudal lords as you want to live under--as a service.

coldtea 8y ago

>What if we've entered an era where this is the new normal? Where the kind of growth we've seen in the past isn't something we can expect anymore? You're not allowed to ever think that. Growth will keep on forever, boosted by magic yet uninvented technology if it ever stalls, bypassing all physical resource limits, and at an exponential rate preferably. /s If you really want to learn more, though, avoid all mainstream economists and pundits paid to promote state and business interests.

AlanSE 8y ago

It's not only reasonable, but is becoming increasingly accepted. I finished this book a little while ago: https://www.amazon.com/Rise-Fall-American-Growth-Princeton/dp/153661825X https://www.amazon.com/Rise-Fall-American-Growth-Princeton/d... But it really said the same thing that many other economics books said. If you read Thomas Piketty, you know that inequality basically comes down to the end of growth. He starts with the mostly-factual premises that growth will remain stalled while capital returns will continue at their historical rates. I'm still unsure about the latter premise myself, but the former is undeniable. But we also need to distinguish economic growth from quality of life improvements. Quality of life, necessarily, has to come from productivity improvements (not in the dictionary sense of those words, but in the macro economic sense). The US GDP could be partially buoyant due to immigration, and partially due to demographics. To some of the points of the article - companies would invest more if there was an expectation that new technologies were fundamentally transformative. I don't get that sense.

zone411 8y ago
Have you also read the criticisms of Pikkety's book? I would find it hard to recommend this book. https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century#Criticism https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
- xyzzy123 8y ago
  Without speaking for the validity of it, there’s a lot of material in the book, which provides lots to “shoot at”. I’d expect anything which presents an ideological challenge like this book to draw a high volume of criticism from multiple angles. The only way to sort it out (if you happen to care) is to actually wade through the various arguments.
- AlanSE 8y ago
  I didn't really recommend it, and the reason I borrowed from it in my comment was for an economic point which was not its main focus. To borrow from your own link: > Lawrence Summers criticizes Piketty for underestimating the diminishing returns on capital, which he believes will offset the return on capital and hence set an upper limit to inequality. We are moving further away from the original point, but this is very close to what I said. Sometimes a complex topic doesn't need to be complex. What Pikkety argued was simple math - almost high school level math. He still spent decades doing the research groundwork (very very complex), but the take-away for the rest of us is very simple. If we return to a low-growth world, then it's very very hard for me to accept that returns on capital will remain high. From where will these returns come from? Pikkety only has 1 real reference point for the high-inequality world, and that was the 1800s. One very very major unanswered question for Pikkety is this - if capital returns hold strong indefinitely, where will the negative feedback come from? I could never tell if the book was literally apocalyptic. If you mathematically describe something which multiplies infinitely, then either you're making the point that some negative feedback is missing, or you're predicting collapse for any real world system where that model applies (also a negative feedback, just a very jerky one). I think he thought that in the 1800s, the rich found a way to balance their expenses with their income. This is silly. Perhaps there was no means of re-investment due to the illiquidity of land. This is also silly. Anyway, I can still accept that some negative feedback from people's behavior existed in the 1800s, but even if I do, I don't accept that such a feedback would exist today. Rich people today have no natural limit to how rich they want to be, and no neo-feudalistic system that prevents further expansion. This all argues for the apocalyptic interpretation. My take - I don't think we can be at low growth for long. If we are, things will start to change Perhaps climate change, perhaps war. We're not going to just hang out in that state. Maybe we can then stay at low-growth, but low-growth with capital destruction. However, the more disruptive historical events tend to bring back growth. I think potential for technological productivity growth is still very very possible, but with a restructured way of life. Right now, the incentives just don't work. That's all.

jeroenhd 8y ago

Actually, there's still massive growth in countries like India, China, but also Ethiopia. As other countries start improving their economy, the economic boom of post WW2 America seems to finally wear off while at the same time the computer revolution is making short work of old-fashioned manual labor. That's great for humanity in general, as more people can have better lives, but it comes at the cost of luxuries to the already rich countries. I expect the economy in the west to decline in the next 20 or 30 years as more developing countries are getting their economies in line. With China investing massively in the African continent and with the enormous natural wealth Africa possesses, we can probably expect Africa to turn into a major economic power somewhere in the next 50-100 years.

chibg10 8y ago

It's reasonable (at least in the US and most other developed countries). Economic output is the product of the number of workers and their productivity. The US population is aging (so Baby Boomers are retiring) and its fertility is low relative to previous generations (though higher than other developed countries). This means there US won't get the GDP tailwind from population growth that it used to. The other place to look is productivity. This is, in large part, a function of technology innovation (and adoption) though there are over ways to make the workforce more efficient as well. Productivity growth has been below historical norms since 2008 and nobody really knows why. Whether this is a anomaly or a trend is an open question, and makes up most the game of predicting long-term economic growth. Personally, I suspect overall technological progress follows an S-curve and will slow at some point. I can't claim to know where we are on the S-curve, but I'm skeptical that Big Data and AI will lead to the same productivity gains as computers, electricity, etc (I'm an ML engineer fwiw). I wouldn't be surprised if US growth stays is low relative to historical standards for the foreseeable future.