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The pandemic is not primarily a supply shock. It is primarily a demand shock. People aren't going outside.

by ouid 6y ago

danans 6y ago
> The pandemic is not primarily a supply shock. It is primarily a demand shock. People aren't going outside. That it's not primarily a supply shock (all kinds of products and raw materials are just as available as they were before the pandemic) is yet another indicator of the impact increased automation and labor efficiency in manufacturing has had. It's remarkable - and a bit frightening - how little human labor is required to provide a sufficient supply of goods to a huge number of people.
- _jal 6y ago
  > It's remarkable - and a bit frightening - how little human labor is required A huge number of jobs are engaged in verification/audit/fraud detection/related activities. "Paper pushers", the cliche goes. An OK book that looks at this (and goes farther than I do, I think making some eventually unsupported claims) is _Bullshit Jobs_ by David Graeber. Worth a read - some of it is quite good. Audit functions will always be needed. That said, I'm pretty sure there will be a lot of job functions that looked "normal" pre-C19, that people will decide no longer need doing, or will be done substantially differently after.
  - danans 6y ago
    > A huge number of jobs are engaged in verification/audit/fraud detection/related activities. "Paper pushers", the cliche goes. Agreed, and a lot of the rote work of auditing and fraud detection has been automated. But at some point, this devolves into the problem staying ahead of human adversaries, and that is hard to fully automate. Also, sometimes the slowness and inconsistency of human labor in these situations is itself a barrier to fraud.
    - _jal 6y ago
      Of course, humanity didn't get C19 and suddenly become honest. I'm thinking of it more as a reset - there are a lot of job functions where things are done the way they are because that's how we do things. After pauses like this, people look at those with fresh eyes.
- erik_seaberg 6y ago
  We aren't providing sufficient goods. We're consuming a backlog that was already produced and waiting, and that won't last.
  - pmiller2 6y ago
    [Citation needed]
  - JshWright 6y ago
    If you're suggesting there were several months worth of backlog prior to COVID-19, that would imply pretty massive inefficiencies...
    - TeMPOraL 6y ago
      There weren't; if there were, we wouldn't be in half as much of a bad shape as we're now. "Inefficiencies" is just a greedy optimizer's word for "safety margins", "redundancies" and "buffers". But we're living in a word run by greedy optimization. We're not consuming buffers (those were all cut long ago as "fat"), we're just lucky that the people responsible for logistics - who are right now forced to fly by the seat of their pants - are still managing to route goods around well enough for us to not notice, beyond an occasional shortage or price hike.
- pmiller2 6y ago
  > It's remarkable - and a bit frightening - how little human labor is required to provide a sufficient supply of goods to a huge number of people. And, yet, we still insist that a "full time" employee has to work 40 hours a week, typically in the form of "butt in seat" time.
TeMPOraL 6y ago
It is an oscillation between a supply shock and a demand shock, and back again. Multiple so-called "bullwhip effects" stacked on top of each other, all across the various sectors in the economy. It's worth remembering that from the Western POV, the pandemic absolutely started with a supply shock - a big chunk of Chinese manufacturing essentially shut down for two months, and a lot of the usual cargo thus never sailed. This not only caused raising prices on all sorts of imported goods two months down the line (it takes as long for the container ships to reach Europe and the US), but also caused export problems - less incoming containers = less containers available to ship things back out. This coincided with the western governments instituting lockdowns and stay-at-home orders, resulting in reduced demand, which further forced the shippers to park their containers, cancel sailings, or even consider scrapping some capacity. Ocean shipping will take years to recover. Supply and demand shocks are essentially two sides of the same coin, each 180 degrees in front of the other. They're oscillations in the system. We'll be facing repeated demand and supply shocks in the future, hopefully each with smaller magnitude than the previous one, until the whole system stabilizes again.
nostrademons 6y ago
It's both, but operating on different timescales. Friends of mine who operate in old-line businesses (packaging and hot tubs) tell me that supply chains are in shambles right now. They can sell things, but there's nothing to sell, because critical parts or ingredients just aren't available. This is all masked right now because few people are buying anything. We saw the demand shock first, and because there's a demand shock, we don't see the supply shock. But if the reopening goes well, we're going to see massive shortages and inflation as all that pent-up demand chases goods that are sitting offshore on container ships or were never produced at all.
- ouid 6y ago
  It's pretty hard to establish causality, but there is one way I know of establishing that A did not cause B. In particular, if A came after B, then A did not cause B. If sending signals back in time was possible, the hedge funds would have figured it out. If the demand shock happened first, then it wasn't caused by the supply shock.

The pandemic is not primarily a supply shock. It is primarily a demand shock. People aren't going outside.

by ouid 6y ago

The pandemic is not primarily a supply shock. It is primarily a demand shock. People aren't going outside.

> The pandemic is not primarily a supply shock. It is primarily a demand shock. People aren't going outside. That it's not primarily a supply shock (all kinds of products and raw materials are just as available as they were before the pandemic) is yet another indicator of the impact increased automation and labor efficiency in manufacturing has had. It's remarkable - and a bit frightening - how little human labor is required to provide a sufficient supply of goods to a huge number of people.

_jal 6y ago
> It's remarkable - and a bit frightening - how little human labor is required A huge number of jobs are engaged in verification/audit/fraud detection/related activities. "Paper pushers", the cliche goes. An OK book that looks at this (and goes farther than I do, I think making some eventually unsupported claims) is _Bullshit Jobs_ by David Graeber. Worth a read - some of it is quite good. Audit functions will always be needed. That said, I'm pretty sure there will be a lot of job functions that looked "normal" pre-C19, that people will decide no longer need doing, or will be done substantially differently after.
- danans 6y ago
  > A huge number of jobs are engaged in verification/audit/fraud detection/related activities. "Paper pushers", the cliche goes. Agreed, and a lot of the rote work of auditing and fraud detection has been automated. But at some point, this devolves into the problem staying ahead of human adversaries, and that is hard to fully automate. Also, sometimes the slowness and inconsistency of human labor in these situations is itself a barrier to fraud.
  - _jal 6y ago
    Of course, humanity didn't get C19 and suddenly become honest. I'm thinking of it more as a reset - there are a lot of job functions where things are done the way they are because that's how we do things. After pauses like this, people look at those with fresh eyes.
erik_seaberg 6y ago
We aren't providing sufficient goods. We're consuming a backlog that was already produced and waiting, and that won't last.
- pmiller2 6y ago
  [Citation needed]
- JshWright 6y ago
  If you're suggesting there were several months worth of backlog prior to COVID-19, that would imply pretty massive inefficiencies...
  - TeMPOraL 6y ago
    There weren't; if there were, we wouldn't be in half as much of a bad shape as we're now. "Inefficiencies" is just a greedy optimizer's word for "safety margins", "redundancies" and "buffers". But we're living in a word run by greedy optimization. We're not consuming buffers (those were all cut long ago as "fat"), we're just lucky that the people responsible for logistics - who are right now forced to fly by the seat of their pants - are still managing to route goods around well enough for us to not notice, beyond an occasional shortage or price hike.
pmiller2 6y ago
> It's remarkable - and a bit frightening - how little human labor is required to provide a sufficient supply of goods to a huge number of people. And, yet, we still insist that a "full time" employee has to work 40 hours a week, typically in the form of "butt in seat" time.

TeMPOraL 6y ago

It is an oscillation between a supply shock and a demand shock, and back again. Multiple so-called "bullwhip effects" stacked on top of each other, all across the various sectors in the economy. It's worth remembering that from the Western POV, the pandemic absolutely started with a supply shock - a big chunk of Chinese manufacturing essentially shut down for two months, and a lot of the usual cargo thus never sailed. This not only caused raising prices on all sorts of imported goods two months down the line (it takes as long for the container ships to reach Europe and the US), but also caused export problems - less incoming containers = less containers available to ship things back out. This coincided with the western governments instituting lockdowns and stay-at-home orders, resulting in reduced demand, which further forced the shippers to park their containers, cancel sailings, or even consider scrapping some capacity. Ocean shipping will take years to recover. Supply and demand shocks are essentially two sides of the same coin, each 180 degrees in front of the other. They're oscillations in the system. We'll be facing repeated demand and supply shocks in the future, hopefully each with smaller magnitude than the previous one, until the whole system stabilizes again.

nostrademons 6y ago

It's both, but operating on different timescales. Friends of mine who operate in old-line businesses (packaging and hot tubs) tell me that supply chains are in shambles right now. They can sell things, but there's nothing to sell, because critical parts or ingredients just aren't available. This is all masked right now because few people are buying anything. We saw the demand shock first, and because there's a demand shock, we don't see the supply shock. But if the reopening goes well, we're going to see massive shortages and inflation as all that pent-up demand chases goods that are sitting offshore on container ships or were never produced at all.

ouid 6y ago
It's pretty hard to establish causality, but there is one way I know of establishing that A did not cause B. In particular, if A came after B, then A did not cause B. If sending signals back in time was possible, the hedge funds would have figured it out. If the demand shock happened first, then it wasn't caused by the supply shock.