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well, to be clear, I'm saying it is only true that efficiency gains don't cause higher GDP under very stringent scenarios that broadly have not happened. while

well, to be clear, I'm saying it is only true that efficiency gains don't cause higher GDP under very stringent scenarios that broadly have not happened. while GDP and efficiency aren't the same thing, they are extremely highly correlated with a bit of a lag. The situations where people thought GDP will fall and stay down with a technological change have so far been completely wrong because the calamity comes from assuming something is instantaneous that can't be instantaneous and it is a very common thought process error these days.

danielmarkbruce 4y ago
I don't think this is knowable. Efficiency can result in various things - less labor required, higher quality goods and services for the same cost, more convenience, less uncertainty (and probably others i can't think of off hand). Your claim has been true for labor to this point. Not sure it's a given going forward. Goods and services have gotten better in a way which isn't captured by GDP because the price for the good/service hasn't gone up.
- snapplebobapple 4y ago
  efficiency results in one thing: more stuff for the same cost as before (or put another way the same stuff as before for less money). And yes, this is definitely knowable because the one thing efficiency results in causes a wealth effect for all consumers (and/or a wealth effect for capital owners to the extent they can capture the gains from efficiency vs having them competed away causing lower prices and a wealth effect for consumers) and a negative income effect on the subset of workers no longer needed because of the efficiency gain. For an efficiency gain to not cause a GDP increase eventually the income effect has to swamp the wealth effect for all time, which has never happened and is unlikely to happen any time soon, as there are no signs of any abatement in consumption demand that would cause a wealth effect to not cause a consumption increase (this is especially true given the incremental nature of efficiency improvement implementation over time primarily because of various productive limitations on adopting new tech. The more time people have to grow into a higher consumption state the more likely and easier it happens.)
  - danielmarkbruce 4y ago
    This is a repeat of the same claim regarding labor. And even then there are holes in this position. Efficiency often won't lead to a wealth effect. In many industries (Buffett highlights textiles frequently, but it's also true of agriculture, many consumer electronics, cars) the competitive dynamic is such that increasing efficiency just lets the company stand still. Cars and TVs for example have become significantly better over 40 years(not all due to efficiency, but a good amount) and the prices haven't much changed, due to competition. The companies in question are still earning low returns on capital despite their efforts. I don't feel richer because my $600 TV is 60 inches v 30 inches, and I don't go spend more money because of it. GDP has holes like this. It's literally just measuring end user transactions.

danielmarkbruce 4y ago

I don't think this is knowable. Efficiency can result in various things - less labor required, higher quality goods and services for the same cost, more convenience, less uncertainty (and probably others i can't think of off hand). Your claim has been true for labor to this point. Not sure it's a given going forward. Goods and services have gotten better in a way which isn't captured by GDP because the price for the good/service hasn't gone up.

snapplebobapple 4y ago
efficiency results in one thing: more stuff for the same cost as before (or put another way the same stuff as before for less money). And yes, this is definitely knowable because the one thing efficiency results in causes a wealth effect for all consumers (and/or a wealth effect for capital owners to the extent they can capture the gains from efficiency vs having them competed away causing lower prices and a wealth effect for consumers) and a negative income effect on the subset of workers no longer needed because of the efficiency gain. For an efficiency gain to not cause a GDP increase eventually the income effect has to swamp the wealth effect for all time, which has never happened and is unlikely to happen any time soon, as there are no signs of any abatement in consumption demand that would cause a wealth effect to not cause a consumption increase (this is especially true given the incremental nature of efficiency improvement implementation over time primarily because of various productive limitations on adopting new tech. The more time people have to grow into a higher consumption state the more likely and easier it happens.)
- danielmarkbruce 4y ago
  This is a repeat of the same claim regarding labor. And even then there are holes in this position. Efficiency often won't lead to a wealth effect. In many industries (Buffett highlights textiles frequently, but it's also true of agriculture, many consumer electronics, cars) the competitive dynamic is such that increasing efficiency just lets the company stand still. Cars and TVs for example have become significantly better over 40 years(not all due to efficiency, but a good amount) and the prices haven't much changed, due to competition. The companies in question are still earning low returns on capital despite their efforts. I don't feel richer because my $600 TV is 60 inches v 30 inches, and I don't go spend more money because of it. GDP has holes like this. It's literally just measuring end user transactions.