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What you have discovered is known as the 'paradox of productivity'. Productivity improvements are essentially running up the down escalator. The returns go to

What you have discovered is known as the 'paradox of productivity'. Productivity improvements are essentially running up the down escalator. The returns go to cheaper items, because there is less labour time going into each item as productivity improves. If you redenominate in the 'labour hour' currency, then it all starts to make sense. As does the apparent increase in pay of a concert violin player. Ultimately a concert level violin player doing their thing still takes the same amount of time top produce as it always did, society still likes concerts, and they haven't yet become fond of AI violin players. They exchange those hours for products with less hours in them. So they appear to get a wage increase. Classically this is known as the Baumol effect. This goes beyond 'real wages', to 'real stuff'. People are definitely getting more stuff than they did 40 years ago. My iPhone is testament to that. As is the lack of power cuts. Underlying everything is essentially an exchange of labour hours. As to returns to IP holders, those are often the pension fund, who then pay the pensions to pensioners who then spend it on stuff. Since we have an ageing population there will definitely be an increase in the transfer to the elderly. It can't be any other way. Is that a fair transfer? Well that's the debate.

tlocke 5y ago
> As to returns to IP holders, those are often the pension fund, who then pay the pensions to pensioners who then spend it on stuff. Pensions aren't distributed evenly across the population, it tends to be that the richer you are, the bigger the pension. That means that IP has the effect of making the rich richer, increasing inequality.
ChuckNorris89 5y ago
>People are definitely getting more stuff than they did 40 years ago. My iPhone is testament to that. As is the lack of power cuts. Yeah, we can get much more and much cheaper stuff than before thanks to the 'Made in China' boom, but what we can't get now is affordable real-estate. Too bad we can't go live inside our iPhones. /s
- MichaelRazum 5y ago
  Good comment. To be honest I got puzzled by this as well. My explanation is that it is just artificial based on low interest rates and high competition for real estate. So basically the cost of build stuff maybe remained kind of the same but people have more money and can get higher credits so the prices are dictated by this competition instead of real build costs + it is not always possible to build a lot of new houses in nyc for example.
  - RhodesianHunter 5y ago
    It's simple really, the things that can't be offshored have gotten more expensive. Real estate, education, healthcare...
    - StillBored 5y ago
      Its not that they have necessarily gotten more expensive, its just that there is a global rate of inflation and a local one, which results in higher cost/standard of living countries being crushed because their local inflation rate will exceed the global one until the country is pulled to the average. So its just as valid to say that the global products continue to get cheaper. And that was entirely predictable, when a country allows the free flow of capital, and goods but not people then it becomes a race to the bottom in sectors which can move to lower cost areas. There is a certain amount of price suppression for some local goods and the demand dries up, but for things which aren't optional the price will continue to inflate until the system breaks. Infant child care is in this position, the workers competing internationally can't afford to pay for the care of their infants because its local labor intensive. Basically its broken economic policy and its just a matter of time before it explodes. And its probably not fixable because if the cost of labor ever gets equal, then capital is just going to move to the country that say has the smallest carbon tax/whatever. Basically a prereq for free trade should be a common government, and free movement of people.
  - neilwilson 5y ago
    It's not that deep. During the pandemic the price of used cars started to rise. Did we attribute that to people with more money who can then get higher credit on the now more expensive cars? No, we attributed it to a lack of supply of cars, and worked to free up the blockages so that the market would return to its correct state where cars depreciated. It's the same problem with housing. We need to build an awful lot more, and we need to move the work to where we build the houses. Once we cross the rubicon and house prices start to depreciate, as they should because they wear out, then we'll see a phase shift in the market and vastly more supply. It'll be like the latent heat of condensation.
tsimionescu 5y ago
Interestingly, this is basically the marxist analysis of the economy, in terms of surplus value. The rosy side of the equation happens when we look at the price of useful products that can be automated, like fridges or computers, where labourers are much richer in such products than they were 100 years ago. However, the ugly side is visible when looking at the price of products that can't be automated, like land, where labourers are much poorer then they were 100 years ago. The difference is often made up of useless products that could be automated, like cheap fashion or fast food, which marketing keeps pushing as hard as possible.
- neilwilson 5y ago
  Not quite. It avoids the thorny question of "what is value" that Marxists disappear up their own fundament with. Here the Labour hour is valued only in terms of its exchange rate to the denomination that the area pays tax in.

tlocke 5y ago

> As to returns to IP holders, those are often the pension fund, who then pay the pensions to pensioners who then spend it on stuff. Pensions aren't distributed evenly across the population, it tends to be that the richer you are, the bigger the pension. That means that IP has the effect of making the rich richer, increasing inequality.

ChuckNorris89 5y ago

>People are definitely getting more stuff than they did 40 years ago. My iPhone is testament to that. As is the lack of power cuts. Yeah, we can get much more and much cheaper stuff than before thanks to the 'Made in China' boom, but what we can't get now is affordable real-estate. Too bad we can't go live inside our iPhones. /s

MichaelRazum 5y ago
Good comment. To be honest I got puzzled by this as well. My explanation is that it is just artificial based on low interest rates and high competition for real estate. So basically the cost of build stuff maybe remained kind of the same but people have more money and can get higher credits so the prices are dictated by this competition instead of real build costs + it is not always possible to build a lot of new houses in nyc for example.
- RhodesianHunter 5y ago
  It's simple really, the things that can't be offshored have gotten more expensive. Real estate, education, healthcare...
  - StillBored 5y ago
    Its not that they have necessarily gotten more expensive, its just that there is a global rate of inflation and a local one, which results in higher cost/standard of living countries being crushed because their local inflation rate will exceed the global one until the country is pulled to the average. So its just as valid to say that the global products continue to get cheaper. And that was entirely predictable, when a country allows the free flow of capital, and goods but not people then it becomes a race to the bottom in sectors which can move to lower cost areas. There is a certain amount of price suppression for some local goods and the demand dries up, but for things which aren't optional the price will continue to inflate until the system breaks. Infant child care is in this position, the workers competing internationally can't afford to pay for the care of their infants because its local labor intensive. Basically its broken economic policy and its just a matter of time before it explodes. And its probably not fixable because if the cost of labor ever gets equal, then capital is just going to move to the country that say has the smallest carbon tax/whatever. Basically a prereq for free trade should be a common government, and free movement of people.
- neilwilson 5y ago
  It's not that deep. During the pandemic the price of used cars started to rise. Did we attribute that to people with more money who can then get higher credit on the now more expensive cars? No, we attributed it to a lack of supply of cars, and worked to free up the blockages so that the market would return to its correct state where cars depreciated. It's the same problem with housing. We need to build an awful lot more, and we need to move the work to where we build the houses. Once we cross the rubicon and house prices start to depreciate, as they should because they wear out, then we'll see a phase shift in the market and vastly more supply. It'll be like the latent heat of condensation.

tsimionescu 5y ago

Interestingly, this is basically the marxist analysis of the economy, in terms of surplus value. The rosy side of the equation happens when we look at the price of useful products that can be automated, like fridges or computers, where labourers are much richer in such products than they were 100 years ago. However, the ugly side is visible when looking at the price of products that can't be automated, like land, where labourers are much poorer then they were 100 years ago. The difference is often made up of useless products that could be automated, like cheap fashion or fast food, which marketing keeps pushing as hard as possible.

neilwilson 5y ago
Not quite. It avoids the thorny question of "what is value" that Marxists disappear up their own fundament with. Here the Labour hour is valued only in terms of its exchange rate to the denomination that the area pays tax in.