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I call bullshit. Tax rates and interest rates certainly help spur investment and expansion of production but it’s hard to look at the world we live in today, wi

I call bullshit. Tax rates and interest rates certainly help spur investment and expansion of production but it’s hard to look at the world we live in today, with electric cars that can self drive and hand held devices connected to natural language comprehending oracles of knowledge, JIT industries end to end, starships to mars for colonization in mid to late stages, etc, and think “yep the only value is the value the federal reserve has created” as a federal reserve economist posits.

crystalmeph 2y ago
https://en.wikipedia.org/wiki/Productivity_paradox https://en.wikipedia.org/wiki/Productivity_paradox. "You can see the computer age everywhere but in the productivity statistics." There are definitely companies that are winning from the tech you pointed out, sure. The companies that make robotaxis and the companies that sell AI subscriptions are going to make bank. But at an aggregate level, that robotaxi means a human tax driver is no longer working, and if every sales person has their own personal robot translator for talking to foreign clients, then none of them has a competitive edge over the others, they've just had to invest that money in order to avoid giving up a competitive edge. That OP paper's argument is basically that the only rising tide that truly lifts all economic boats is being able to keep more of the money you make instead of having to spend it on interest or taxes. So the age-old wisdom of "just buy an index fund" may have run its course, and you will actually have to pay attention to valuations instead of just blindly buying the market going forward.
- ryandrake 2y ago
  > So the age-old wisdom of "just buy an index fund" may have run its course, and you will actually have to pay attention to valuations instead of just blindly buying the market going forward. The efficient-market hypothesis would probably disagree. If "paying attention to valuations" ever consistently produces greater returns, then index funds will start weighting their holdings in such a way to capture that value. If it produces greater returns, but not consistently, then we're back to gambling and things like technical analysis and trying to time the market.
- fnordpiglet 2y ago
  I’d argue productivity measured in economic activity is measuring the wrong thing. Looking at my personal life I have paid about the same amount for an iPhone since they came out, and probably less on computing hardware YoY over my life time. However it’s impossible to say my iPhone today is equivalent to the iPhone I bought 15 years ago, even though the nominal price is the same. What these nominal values fail to price is the “quality” of stuff improving while prices and demand for “more shit” doesn’t keep up. At some level we have enough shit, and we expect things to be about the same price year over year for something that has improved materially over that time. Where does this get valued? I also think a goal of full employment naturally leads to a flattening of productivity. We hire a lot of people to do work that isn’t super productive because we consider employment more important than raw numerical superiority. We probably could let go many people and improve productivity at a great expense to social cohesion. This doesn’t seem like progress to most people if we had 30% unemployment. To the papers point low interest rates and reducing taxes creates a lot of space for inefficient employment. There even might, if you get particularly breathless, be a time post scarcity when employment itself is anachronistic. But as we have no method of social or communal distribution today in capitalists societies, we would need to find a way to keep people pecking for food pellets. Productivity would fall off a cliff at that point. I thing what this paper illustrates more than anything is that productivity as a measure of value is pre-automation industrial thinking that we largely stick with because it’s really a lot harder to measure anything else. Valuations in the stock market IMO have decoupled from traditional economic measures because those measures are flawed and don’t explain how we value things in modernity.
darby_nine 2y ago
> it’s hard to look at the world we live in today, with electric cars that can self drive and hand held devices connected to natural language comprehending oracles of knowledge, JIT industries end to end, starships to mars for colonization in mid to late stages, etc, and think “yep the only value is the value the federal reserve has created” as a federal reserve economist posits. I agree that we're still producing new technology, but just because a certain technology is impressive doesn't mean it's going to yield a lot of value to investors or yield a lot of marginal improvement to productivity. Perhaps I'll be demonstrated wrong when we start mining asteroids and flooding the market with massive productivity shifts again, but there's not exactly any sign this is right around the corner. There's certainly no reason to assume growth as a market invariant just because of technological development has led to growth in the past.
tway_GdBRwW 2y ago
> starships to mars for colonization in mid to late stages ?? Did I miss a news article?? I know we've successfully landed on the moon, but we don't have reliable ways of commuting there let alone setting up a colony. I even hear about astronauts stuck in orbit for months at a time. mars is just a little bit further away and has similar atmosphere problems as the moon.
denizener 2y ago
The best writing on economics I have ever read is in the book Chance and Chaos by David Ruelle. Ruelle gives some thoughts on economics but ultimately concludes something like "we don't currently have the tools needed to properly study this subject".
AnimalMuppet 2y ago
I don't think that's the claim. The claim is that the stock market outperforming the historical trend is due to declining interest rates. I mean, there was value created in the 1960s and 1970s, too - computers! Minicomputers! Microcomputers! Transistor radios! Walking on the moon! 747s! Much better railroad engines! The start of the internet! The interstate highway system! And on and on. But it wasn't showing up in the stock market. Why not? Because the interest rates were rising, and almost all of the gains were disappearing into that headwind.

crystalmeph 2y ago

https://en.wikipedia.org/wiki/Productivity_paradox https://en.wikipedia.org/wiki/Productivity_paradox. "You can see the computer age everywhere but in the productivity statistics." There are definitely companies that are winning from the tech you pointed out, sure. The companies that make robotaxis and the companies that sell AI subscriptions are going to make bank. But at an aggregate level, that robotaxi means a human tax driver is no longer working, and if every sales person has their own personal robot translator for talking to foreign clients, then none of them has a competitive edge over the others, they've just had to invest that money in order to avoid giving up a competitive edge. That OP paper's argument is basically that the only rising tide that truly lifts all economic boats is being able to keep more of the money you make instead of having to spend it on interest or taxes. So the age-old wisdom of "just buy an index fund" may have run its course, and you will actually have to pay attention to valuations instead of just blindly buying the market going forward.

ryandrake 2y ago
> So the age-old wisdom of "just buy an index fund" may have run its course, and you will actually have to pay attention to valuations instead of just blindly buying the market going forward. The efficient-market hypothesis would probably disagree. If "paying attention to valuations" ever consistently produces greater returns, then index funds will start weighting their holdings in such a way to capture that value. If it produces greater returns, but not consistently, then we're back to gambling and things like technical analysis and trying to time the market.
fnordpiglet 2y ago
I’d argue productivity measured in economic activity is measuring the wrong thing. Looking at my personal life I have paid about the same amount for an iPhone since they came out, and probably less on computing hardware YoY over my life time. However it’s impossible to say my iPhone today is equivalent to the iPhone I bought 15 years ago, even though the nominal price is the same. What these nominal values fail to price is the “quality” of stuff improving while prices and demand for “more shit” doesn’t keep up. At some level we have enough shit, and we expect things to be about the same price year over year for something that has improved materially over that time. Where does this get valued? I also think a goal of full employment naturally leads to a flattening of productivity. We hire a lot of people to do work that isn’t super productive because we consider employment more important than raw numerical superiority. We probably could let go many people and improve productivity at a great expense to social cohesion. This doesn’t seem like progress to most people if we had 30% unemployment. To the papers point low interest rates and reducing taxes creates a lot of space for inefficient employment. There even might, if you get particularly breathless, be a time post scarcity when employment itself is anachronistic. But as we have no method of social or communal distribution today in capitalists societies, we would need to find a way to keep people pecking for food pellets. Productivity would fall off a cliff at that point. I thing what this paper illustrates more than anything is that productivity as a measure of value is pre-automation industrial thinking that we largely stick with because it’s really a lot harder to measure anything else. Valuations in the stock market IMO have decoupled from traditional economic measures because those measures are flawed and don’t explain how we value things in modernity.

darby_nine 2y ago

> it’s hard to look at the world we live in today, with electric cars that can self drive and hand held devices connected to natural language comprehending oracles of knowledge, JIT industries end to end, starships to mars for colonization in mid to late stages, etc, and think “yep the only value is the value the federal reserve has created” as a federal reserve economist posits. I agree that we're still producing new technology, but just because a certain technology is impressive doesn't mean it's going to yield a lot of value to investors or yield a lot of marginal improvement to productivity. Perhaps I'll be demonstrated wrong when we start mining asteroids and flooding the market with massive productivity shifts again, but there's not exactly any sign this is right around the corner. There's certainly no reason to assume growth as a market invariant just because of technological development has led to growth in the past.

tway_GdBRwW 2y ago

> starships to mars for colonization in mid to late stages ?? Did I miss a news article?? I know we've successfully landed on the moon, but we don't have reliable ways of commuting there let alone setting up a colony. I even hear about astronauts stuck in orbit for months at a time. mars is just a little bit further away and has similar atmosphere problems as the moon.

denizener 2y ago

The best writing on economics I have ever read is in the book Chance and Chaos by David Ruelle. Ruelle gives some thoughts on economics but ultimately concludes something like "we don't currently have the tools needed to properly study this subject".

AnimalMuppet 2y ago

I don't think that's the claim. The claim is that the stock market outperforming the historical trend is due to declining interest rates. I mean, there was value created in the 1960s and 1970s, too - computers! Minicomputers! Microcomputers! Transistor radios! Walking on the moon! 747s! Much better railroad engines! The start of the internet! The interstate highway system! And on and on. But it wasn't showing up in the stock market. Why not? Because the interest rates were rising, and almost all of the gains were disappearing into that headwind.