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My talk at Jane St. Capital
For this splendid audience, I considered six scenarios for how the long-run might drastically differ from the world we see before our eyes:
1. A return to Malthus, noting that wages cannot forever exceed the marginal cost of producing labor. Perhaps we are in for a massive population increase, if only of robots.
2. Robin Hanson's exponential growth, which means a huge burst of growth sometime "soon" -- maybe really good drugs, uploads, or nanotechnology?
3. Most of the economy becomes health care costs.
4. Energy becomes very cheap, destruction is easy, deterrence is difficult, power decentralizes, and we retreat to medieval-style fortresses.
5. People become more and more interested in "vivid" experiences, such as they obtain in museums, going to date movies, or spending lots on higher education. This sounds so lame, but it's pretty close to reality now.
6. Wealthier economies boost human optimism and thus asset markets become increasingly vulnerable to bubbles.
#4 is pessimistic, I am not sure the others are, at least not in the proper "all things considered" sense. If #1 is on its way, make sure you own some capital (as Robin Hanson points out), you will be very wealthy then. Your evaluation of #1 may depend on your view of Derek Parfit's population conundrums. There will be lots of rich people and also lots of poor people.
Over dinner I pressed the claim that very few people or organizations are capable of stating what they are actually good at.
Posted by Tyler Cowen on July 23, 2008 at 07:49 AM in Economics | Permalink
Comments
7. Nuclear Annihilation
Posted by: Michael Foody at Jul 23, 2008 8:46:22 AM
I am very interested on the last sentence. I would like to hear more. Is that related to your view that people are less special than they think they are?
Posted by: londenio at Jul 23, 2008 9:20:22 AM
Just an observation - You are not very interested in or affected by Nature. The natural world doesn't show up often in your posts. You don't mention climate change and its gigantic long run effects in this list. Or maybe it's included in "energy is cheap"? Solar and wind power make everything feasible, and do so soon enough that the world doesn't turn dry and blow away?
Posted by: John H at Jul 23, 2008 9:30:11 AM
Just an observation - You are not very interested in or affected by Nature. The natural world doesn't show up often in your posts. You don't mention climate change and its gigantic long run effects in this list. Or maybe it's included in "energy is cheap"? Solar and wind power make everything feasible, and do so soon enough that the world doesn't turn dry and blow away?
Posted by: John H at Jul 23, 2008 9:30:31 AM
"I pressed the claim that very few people or organizations are capable of stating what they are actually good at."
To know thyself is particularly hard, especially when "what we're good at" depends on how we interact with others. With constant, unbiased and evenly weighted feedback, we may get a clue -- but that requires that we can perceive what others are saying and apply it to ourselves. So yeah, hard.
Competition does a good job of sorting us out -- even if we don't know what we are good at.
Posted by: David Zetland at Jul 23, 2008 9:58:23 AM
I don't get 4 -- do you mean energy becomes very expensive?
Posted by: Stuart Buck at Jul 23, 2008 10:00:44 AM
#7. Things pretty much muddle along like they always have.
Posted by: Peter at Jul 23, 2008 10:29:16 AM
I don't understand the statement, "wages cannot forever exceed the marginal cost of producing labor."
I'm thinking by "producing labor" we mean childbirth and childrearing? It's hard to think of many people in the developed world who can actually make a living by having children and having those children work for them. Such a system hasn't really worked since the days of household agriculture.
Surely you mean something else?
Posted by: David at Jul 23, 2008 10:42:53 AM
"I pressed the claim that very few people or organizations are capable of stating what they are actually good at."
This is in line with a well established idea in the field of management that "causal ambiguity"-not knowing the causal links between resources and organizational performance-can be important in preventing imitation and sustaining competitive advantage.
Posted by: YSK at Jul 23, 2008 10:56:39 AM
I don't understand why you think that number 3 is going to wait til "the long run" to happen. Surely as more and more baby boomers retire, and as the truly fabulous medical revolution continues (and gets paid for via user revenues for its humongous upfront costs) healthcare is going to dominate in the medium term.
The good(?) news though is that eventually everything starts going off patent at a faster rate than new fabulous things go on patent, and thus new health care "things" (e.g. drugs, medical implants) get cheaper rather than more expensive overall.
The bad news is that when this (i.e. last paragraph) happens is that it implies the medical revolution is in the latter stages and we won't have much new health gains to look forward to. This decreasing of costs is the true long run.
Posted by: happyjuggler0 at Jul 23, 2008 11:03:06 AM
happyjuggler,
I think you should consider increasing life expectancy and life quality alongside the cost of those things.
My dad used credit for Korean War service (snuck into the Marines age 17) plus 25 years on a suburban police department to retire at age 50 with lifetime inflation-indexed benefits.
How long can the foundation hold up when the pyramid inverts?
Posted by: KevinM at Jul 23, 2008 11:27:18 AM
Mass destruction weapons are a real threat, and likely an unavoidable one- in the long run. Will our capabilities to sustain blows increase at a greater rate than the weapons we make possible? I don't know.
Casting aside that pessimistic view, however, biotechnology and robotics will be a revolution to societies the world over. Eventually, robots will manufacture and produce almost all of the stuff human labor does today.
Posted by: Yancey Ward at Jul 23, 2008 11:50:06 AM
Add me to the list of those confused by this post, especially #5.
Is there something wrong with museums and higher education? Isn't the fact that we spend a lot of money on these things actually a good sign, because we've got resources left over after food and (sometimes) shelter are provided for? Are travel to foreign countries and the search for authentic ethnic cuisine also on your list of "lame" things people will want more of in the potentially lame future? What about books (in digital or non-digital format)? Those provide a vivid experience, too.
Posted by: d.cous. at Jul 23, 2008 11:50:55 AM
Answer number 1 appears to neglect the opportunity cost of the time spent raising children.
Posted by: Andrew S at Jul 23, 2008 11:51:58 AM
I also think that nuclear war and its consequences are a lot more likely than people fond of speculating about the future care to think about. With the end of the Cold War we may get lucky and avoid M.A.D., but I don't see the technology to make nuclear weapons getting much harder to master (India and Pakistan have them, after all), so we'll probably end up with more nukes in the hands of more people, some of whom might be crazy enough (or have little enough to lose) to use one.
Posted by: d.cous. at Jul 23, 2008 11:59:11 AM
I read Robin Hanson's paper from your link. Personal observation: I've spent 20+ years in international business, living in US (to 1986), Taiwan (late '80's), Czech Republic and Russia (early to mid 90's), California (last ten years), Hungary (last six months). If you told me the rate of improvement in all of these economies when I was starting out in '86, I would have laughed in your face. The growth has been truly breathtaking and unreservedly positive. Reviewing that growth fills me with joy and a boundless hope for humanity.
Posted by: Peripatetic Entrepreneur at Jul 23, 2008 12:02:10 PM
1. A return to Malthus, noting that wages cannot forever exceed the marginal cost of producing labor. Perhaps we are in for a massive population increase, if only of robots.
I can see that, if we stretch the definition of 'robot' to include 'automation'.
We're already doing that in the manufacturing environment I work in - any task that is repeatable can be done by a process better and cheaper than paying a fallible human.
Posted by: Brian Dunbar at Jul 23, 2008 1:57:52 PM
Like David, I'm confused about what number 1 is supposed to mean, especially what "producing labor" is supposed to mean.
Posted by: WillJ at Jul 23, 2008 4:06:32 PM
Who was Saint Capital?
Posted by: Chris Hartman at Jul 23, 2008 4:10:38 PM
I also would like to echo the undervaluing of total nuclear annihilation.
Also, where's the space flight? Perhaps that's included in Robin's piece, but I think opening up the final frontier to exploration and settlement would have dramatic social effects (though perhaps not as many as the Industrial Revolution did).
Posted by: Robert Olson at Jul 23, 2008 5:33:02 PM
All these projections of enormous percentages of future
GDP going to health care strike me as terribly unlikely,
more simple-mindedness that does not understand when one
is in the first part of a logistic curve.
The US already has the highest percentage of GDP being
spent on health care of any nation on earth, any nation
(#2 is not even properly a nation, the Occupied Palestinian
Territories). Arguably we are wildly out of equilibrium,
and something will occur, institutionally, pricewise,
technologically, or in some other way, to if not move
us to the rest of the world's ratios, then at least to
slow our rate of health care cost increase pretty soon.
Posted by: Barkley Rosser at Jul 23, 2008 6:25:34 PM
2. Robin Hanson's exponential growth...
Has Hanson been getting the lobster and butter for breakfast?
Posted by: Bob Murphy at Jul 23, 2008 7:18:24 PM
The young war against the old (80+)
Posted by: Eugene at Jul 23, 2008 10:35:25 PM
The young war against the old (80+)
Posted by: Eugene at Jul 23, 2008 10:35:40 PM
Tyler,
It is surpriing you do not mention the two most likely (and disturbing) scenarios.
1. We destroy ourselves either accidentally or through the insanity or one more people groups. Given its getting easier all the time. This is the most likely scenario.
2. We reach the singularity as AI becaomes a reality and humanity is voluntarily or compulsorily subsumed by a non-bilogical intelligence(s) that we really can't comprehend.
The fermi paradox and the extrapolotion of current trends make these two scenarios so likely its really a question of when not if.
Posted by: LocalHero at Jul 23, 2008 11:47:00 PM
