8 ms·
Shrinking economies don't innovate
- FreshStart 3y agoSymmetric Wars innovate. Nothing like actual fear to remove all those obstacles.
- toomuchtodo 3y agoI argue most growth we’ve seen has been from cheap developing world labor that is evaporating as Asia gets old fast.
- detourdog 3y agoThe biggest question to me is how much labor is only driven by business model not actual needs.
- toomuchtodo 3y agoLuckily we get to find out through a natural experiment as structural demographics and globally declining fertility rates compress the working age labor force cohort. We should be judicious about where this aggregate effort gets spent before terminal decline in labor output (leaving potential future productivity gains as out of scope due to them being in the “hope” bucket).
- Supermancho 3y ago> Most economic growth comes from innovation, not the accumulation of capital or labor. So which is it? Either economies don't innovate because they are shrinking (shortage of capital/labor) or economies innovate to grow and it's an ephemeral state that has nothing to do with the economics. eyeroll
- readthenotes1 3y agoIt is almost as if innovation happens in a vacuum and not from the pull of demand that happens in a economy with too much capital and too little labor.
- Nasrudith 3y ago"Too much capital and too little labor" are ideal conditions for improving the efficiency of production, even if it is just through professionalization. (Which is itself a form of social innovation, albeit a lower level one.) If innovation can be said to happen in a vacuum it is a spark which needs the proper societal kindling to light a fire.
- myshpa 3y agoWe're in the overshoot, and that will inevitably bring stagnation and decline, as the carrying capacity of the environment starts to decline. The Club of Rome predicted this in 1972. Recent reviews of their work have confirmed the 'business as usual' trend, suggesting it's about to play out in the next few decades.
- deleted 3y ago[deleted]
- goatlover 3y agoThe carrying capacity of the environment isn't fixed, or this would have happened in the 60s and 70s as originally predicted. Technology and policies change the carrying capacity. We don't have to have decline with the right approach. The sun provides more than enough energy, fusion and superconductivity breakthroughs would be huge as well.
- myshpa 3y ago> The carrying capacity of the environment isn't fixed True, it's being degraded. > or this would have happened in the 60s and 70s as originally predicted We've entered the overshoot in the 1980s (+-), as predicted. What's on the horizon is the collapse of the carrying capacity. https://www.resilience.org/stories/2021-08-16/revisiting-the-limits-to-growth/ https://www.resilience.org/stories/2021-08-16/revisiting-the... https://advisory.kpmg.us/content/dam/advisory/en/pdfs/2021/yale-publication.pdf https://advisory.kpmg.us/content/dam/advisory/en/pdfs/2021/y... "I conducted a data update to Limits to Growth (LtG), best known from the 1972 bestseller that forecasted a scenario of global societal collapse occurring around the present time if humanity did not alter its priorities. Empirical data comparisons since then indicated that the world was still heading for collapse. ... I found that the scenarios aligned closely with observed global data, which is a testament to the LtG work done decades ago. The two scenarios aligning most closely indicate a halt in growth over the next decade or so, which puts into question the usability of continuous growth as humanity’s goal in the 21st century. Both scenarios also indicate subsequent declines, but only one—the scenario in which declines are caused by pollution, including greenhouse gas pollution—depicts a collapse pattern. The scenario with the smallest declines aligned least with empirical data, however, absolute differences were rarely big and sometimes insignificant. This suggests that it’s almost, but not yet, too late for society to change course." https://www.researchgate.net/publication/332655753_Limits_Revisited-A_review_of_the_limits_to_growth_debate_A_report_to_the_All-Party_Parliamentary_Group_on_LImits_to_Growth https://www.researchgate.net/publication/332655753_Limits_Re... "We unravel the arguments that have raged for forty years in its aftermath and explore more recent findings which relate to the original hypothesis. There is unsettling evidence that society is still following the ‘standard run’ of the original study – in which overshoot leads to an eventual collapse of production and living standards. Detailed recent studies suggests that production of some key resources may only be decades away. Certain other limits to growth – less visible in the 1972 report – present equally pressing challenges to modern society. We highlight, in particular, recent work on our proximity to ‘planetary boundaries’ and illustrate this through the challenge of meeting the Paris Agreement on climate change. We also explore the economic challenge of a ‘secular stagnation’. If the Club of Rome is right, the next few decades are decisive." > Technology and policies change the carrying capacity Do you mean the 'green revolution' which resulted in biodiversity loss, soil degradation and erosion, eutrophication, oceanic dead zones, and deforestation? That's not an increase in carrying capacity; rather, it's a temporary extension beyond all safe boundaries leading to a much larger catastrophe. > We don't have to have decline with the right approach Do you see anything that would suggest we're on the right track? > The sun .... fusion and superconductivity ... You seem to think it's only about fossil fuels / energy. It's not... In my view, tipping points, deforestation (== droughts) and dwindling biodiversity are the main problems ahead. https://en.wikipedia.org/wiki/Planetary_boundaries#Nine_boundaries https://en.wikipedia.org/wiki/Planetary_boundaries#Nine_boun... https://dothemath.ucsd.edu/2023/08/ecological-cliff-edge/ https://dothemath.ucsd.edu/2023/08/ecological-cliff-edge/
- JieJie 3y agoDon't innovate what? Maybe this is our opportunity to innovate what's referred to as the "care economy"?
- konschubert 3y agoInnovate on a cure for childhood cancers, for example. Don’t pretend that we have all we need.
- JieJie 3y agoThe article talks about scale economies, "a shrinking economy would achieve fewer scale economies", of which "a cure for childhood cancers" surely is not a representative example. Don't pretend you understand what my comment meant, so you can abuse me.
- konschubert 3y agoA bigger economy will allow us to invest more time and resources into research.
- JieJie 3y agoIs this the 5-minute argument, or did you pay for the full half-hour?
- pierat 3y agoTo be fair, our current capitalist country isn't really innovating much. Most of our products are getting worse due to de-featurization, engineering-obselescence, anti-repair, throw away culture, and the like. Like vehicles, the new feature is monthly charge for heated seats, or 'enable the whole battery pack to be used'. Cell phones are battery-sealed for 'reasons', along with easy rapid charging (read: battery destroying charge). I know plastics are used EVERYWHERE, including things like gears and structural members that will guaranteedly break. And where old electronics had schematics and repair diagrams, now "just throw it away" cause there are no replacement parts to buy. Or worse yet, theres the expensive gadgets that have required cloud tie-in. Cloud changes/goes away? Hello garbage bin. I get tired of all this.
- FredPret 3y agoYou are right that there is a lot of plastic crap out there leading to physical waste. But remember that capitalism doesn’t optimize for minimal physical waste - it optimizes for minimal waste overall. This includes cost of capital, human brainpower, opportunity cost, taxes, input material, and of course, physical waste. So the optimal product doesn’t necessarily last forever - that would involve an unaccetable amount of investment in material and labor. One must also take tech progress into account - consumers may not want a product that lasts forever, since they might want version 2.0 some years down the line, and throw away a perfectly functional version 1.0.
- kerkeslager 3y ago> But remember that capitalism doesn’t optimize for minimal physical waste - it optimizes for minimal waste overall. No, at best it optimizes for minimal waste of capital. If you can't find a way to use it for marketing or to receive subsidies, giving food to people who can't afford to pay for it is the same as throwing away food within capitalism: both are waste in a capitalist sense. Material waste is only relevant within capitalism inasmuch as the material in question is valuable.
- surgical_fire 3y ago> But remember that capitalism doesn’t optimize for minimal physical waste - it optimizes for minimal waste overall. Such a weird take. Capitalism only optimizes to increase profit. If waste is profitable, it will be very wasteful, especially if the downsides of this waste can be externalized. This is obvious in terms of pollution and physical waste, but given the perfect perverse incentives, it will also waste human brainpower, opportunity cost, et cetera and so forth.
- charles_f 3y agoThis is an opinion, it's based on the author's appreciation rather than analyzing data. It's also dropping ideas as if they were solid facts. E.g the precept: > Most economic growth comes from innovation, not the accumulation of capital or labor. ... triggers a big "citation needed" to me. For a blog called "overcoming bias", I find that a bit ironic. Also, as usual, what's the definition of economy being used there? Money? Production? It's even dropping fertility and population in the mix so it's hard to tell. I'm almost sure you can find innovations happening during recessions where both economy and production go down(1). On the opinion itself, I could see that it as a theory worth pursuing, but I'm almost certain this is very "within system". We're on a finite planet, we don't have a choice but to continue innovating while limiting population growth and production. That's where the definition of economy matters, because if you consider production, I don't believe it. If you're talking about money, I'm gonna say, sure, but it's anecdotal. 1: not gonna provide an example since the source material didn't bother to.
- notahacker 3y agobf, in one sense "growth comes from innovation" is [trivially] true inasmuch as you can't accumulate an Industrial Revolution's worth of capital without it being invented first, but yeah, no quantitative data for anything more substantial there The bigger question is whether he's mixing cause and effect, and it's actually "innovating economies don't shrink [at least not in the medium term]"
- onlyrealcuzzo 3y ago> Most economic growth comes from innovation, not the accumulation of capital or labor. Economic growth is subjective in ways, but over previous long horizons, this is obviously true. If you took 10B pre-industrial humans and had them work 24 hours a day 365 days a year - their production would be pale in comparison to what we currently produce. At some point, when you get close to physical limits, and you start having vastly diminished returns on technological improvement, or when most innovation is not going to the benefit of most people - it would be debatable. Maybe you want to argue we're headed into that future.
- nosefurhairdo 3y ago
- yedava 3y agoThere still are plenty of low hanging fruit to accelerate innovation like breaking up monopolies, tackling inefficiencies in healthcare and reforming patent and copyright laws. I wish economists step outside of their academic bubbles and realize that some problems need political/social action, not more economic theory.
- RandomLensman 3y agoYou think economists don't study policies and their effects on innovation from monopolies and intellectual property rights?
- yedava 3y agoI'm sure they do, but the solutions they've proposed (let the markets decide) haven't worked. Hence the assertion that these economists are arguing from academic theories and not from real world data. Not to mention that those theories hide ugly premises like "older people are worthless".
- RandomLensman 3y agoI don't think that "let the market decide" is reflective of the current discussion, nor would research be just based on theories instead of data. Just as one example look at the work of Daron Acemoglu.
- janalsncm 3y agoI don’t think the uptake of innovation is that simple. Our economy goes through boom and bust cycles. Growth and pruning. Sometimes innovations are great but they can’t survive pruning because they’re too new. Or sometimes entrenched industries are too powerful for innovation to take hold. One example is in payments. Credit card payments are horrible. I have to carry a physical card which has minimal security features and can be lost or stolen. We are also regularly expected to lose sight of these cards at restaurants. Cards can be skimmed. It’s old tech. What is much better? Paying by QR code. It’s much faster, doesn’t require any hardware we don’t already have, and is far more secure. Countries which never had credit cards pay by QR code because it’s better. Countries (like the US) which use credit cards because they are entrenched both economically (big companies don’t want to switch) and socially (very few places support it because very few people use it).
- RandomLensman 3y agoYou still need a physical credit card?
- janalsncm 3y agoYes. Many restaurants in the United States do not accept Apple Pay, Android Pay, Venmo or Zelle. Every restaurant accepts a credit card, which makes that the option with the least friction.
- RandomLensman 3y agoAh, the crummy US retail banking and payment system strikes again.
- janalsncm 3y agoWell that’s precisely my point. Whether or not an innovation sticks isn’t just a function of how innovative it is. The entrenchment of personal habits and the entrenchment of industry mean that there is a threshold which needs to be cleared. In the case of banking and payments, that threshold is pretty high.
- nathell 3y agoWhy should we even care about „growth”, instead of things that actually matter, like gross global wellbeing and preventing climate catastrophe?
- RandomLensman 3y agoA lot of indicators of wellbeing at least correlate well with GDP and tackling climate change will need resources.
- actionfromafar 3y agoGDP isn't even measured the same across different economies. GDP does not include negative externalities, and GDP increases if a country goes full-on war economy. It's scary to see that number being used for things it doesn't even measure.
- RandomLensman 3y agoI have no idea how that relates to my empirical point (nor does it refute it, other than, yes, there are finer points about normalizing things across countries, per capita etc.).
- Nasrudith 3y agoTo put it perhaps oversimply: because growth isn't just more stuff produced the same exact way, it is also better stuff in new ways. Look at the GDP compared to a bronze age civilization to modern times. We didn't achieve that just by herding more goats and forging more bronze, although we have far more of both goats and bronze thousands of years later. Most of it is in things that money flat out couldn't buy in the past. Just antibiotics for one, let alone more complex medicine and services.
- em500 3y agoFor economists, growth is shorthand for growth in (inflation adjusted) GDP, which is the sum of all incomes. Most adults who pay their own bills find it rather obvious why we should care about income growth: it pays the bills, and hopefully leaves some extra to enjoy nice things and retire at some point.
- imtringued 3y agoI am pretty sure we stopped innovating at the things that matter a long time ago.
- tomjen3 3y agoEconomies that don't innovate shrink when they get eaten alive by regulation and administrators.
- dmn322 3y agoIMO, this could be discussed so much more rigorously... I think we have the framework for it. All work exploits some gradient of energy, i.e. a potential difference. Any "innovation" is a discovery of some such gradient. As the gradient is exploited, the difference in potential decreases. The innovation loses its potential return on investment. The most basic reason for this is that the simplest/least costly methods for exploiting the difference will be the most likely to be discovered. Our societies organize around these processes for exploiting gradients. Greater influence is given to those who can do the most work. That influence directs future collective investments. Those with the influence will use it to increase investment in the source of their profit... extraction of work from the same gradient which they've been exploiting. Eventually that gradient is exploited beyond an positive return on investment. All low-hanging fruit has been consumed. There is no longer investment available for finding other gradients along which work can be done and those with influence use that influence to extract resources from other members of the society since their external gradient no longer exists. Their influence increases in proportion to the other members' and the society eventually eats itself. IMO there's the basis for a quantitative model in there. The conclusions are total speculation, but the basic foundations I think are valid. (They mostly come from a combo of information theory, joseph tainter's collapse of complex society, as well as "incomplete nature" by terrence deacon). But of course we don't have the money available for investigation into such things :/ Funding seems to only be available for models that bolster existing sources of profit. https://spacechimplife.com/theories-of-historical-change/ https://spacechimplife.com/theories-of-historical-change/
- Gibbon1 3y agoOne of my points is invocation requires excess resources. If you poke around you see all sorts of under-capitalized industries.
- Animats 3y ago> IMO, this could be discussed so much more rigorously... I think we have the framework for it. Indeed. Very important subject, weak article. The best example is Japan. Japan was growing and innovating rapidly until 1989. Then there was a crash. The Nikkei index went down, and down, and down, until bottoming out in 2014 at about a quarter of the peak. Then recovery began, although the level of 1989 has never been exceeded.[1] In the 1970s and 1980s, Japan powered the world's consumer electronics industry. From ICs to VCRs to cars, it all came from Japan, with good quality at low prices. Then that ended. Not because the business sector was in decline. China wasn't a major competitor in the 1990s. But the growth in Japan had stopped. This used be called the "lost decade" in Japan. Then the "lost decades".[2] So Japan is where to look at this problem. Innovation in Japan declined despite massive government attempts to push it. Japan has "Tsukuba Science City", which has many government-funded labs but is not the home of major industries. So that didn't really work. What happened? [1] https://www.tradingview.com/symbols/TVC-NI225/ https://www.tradingview.com/symbols/TVC-NI225/ [2] https://en.wikipedia.org/wiki/Lost_Decades https://en.wikipedia.org/wiki/Lost_Decades
- Slava_Propanei 3y ago[dead]