Things that went whizzing by that I want to remember... First: Best Recent SubStack Post I Have Read: Nicole Barbaro: EdTech Can’t Forget That Humans Evolved to be Social: ‘A fundamental limitation to online and remote learning: students are missing the social experience….
John Stoehr's piece is really important. What he doesn't go on to say is that if and when we use the word "fascist" in print or conversation, we need to define it, just as he does so succinctly, to make clear it's not just a nasty label for the folks you don't like. We probably need to add "fascist sympathizer" as a commonly-used term for those who, at least publicly, denounce violence and repression, but who go out of their way to support or abet those who are obviously fascists. This would include Mitch McConnell, Kevin McCarthy, and that weird guy who painted himself blue to join the Jan. 6 insurrection.
The problem is defining the term "fascist". I have a 1948 US Congress report on Fascism, presumably while it was fresh in the US mind. The approach they take is to make extensive comparisons between fascism in Italy, Germany, Spain, and Japan. It is quite extensive and shows common features and MOs. What is interesting is that one can find many similarities between the GOP and Trump, which supports calling them fascists, IMO.
Politics as friends vs. enemies largely independent of policy issues and any rational evaluation of policy outcomes is, I think, core—Trump's repeated reversals on Republican issues, Hitler's alliance with Stalin, etc....
"‘The data bear out the general sense that the real-world utility of new technology has fallen far short of the hype. Labor… has risen only about half as fast since 2007 as it did in the generation after World War II. "
I think it depends on what you are measuring. GDP was good when it measured commodities output, like wheat and coal. It gets much more complex when it applies to technology. One thing that should be obvious to anyone who works in any tech capacity is that there are a lot more people doing quantitative analysis and testing using IT than there use to be. Quality has not only improved in making cars work better and parts fit better, but in design, making sure there are no likely failures, etc, etc. All this has been aided by technology that does not necessarily go into the price. If ICT also helps to reduce externality costs, isn't that a good, but unmeasured, thing?
Another thing is that technology also reduced GDP. Word processors remove the typing pool, ATMs remove the need for bank tellers. Most of us old fogies can recall a living when trying to do much-required lots of specialist employment. ICT has reduced that. Sitting at my desk I can do a lot of things that once took time and the employment of people and the manufacture of stuff. I would argue that technology has proven to have huge utility, but it doesn't show up in crude GDP figures.
Worrying about GDP seems increasingly like wealthy people worrying about their wealth compared to other people, rather than those people trying to enjoy a better life. Perhaps it is time to retire the focus on this measure and focus on other measures of wellbeing?
I do recall that the British commentator Brian Walden (https://en.wikipedia.org/wiki/Brian_Walden) once saying near the beginning of the Thatcher period that the Tory party had abandoned "happiness" as the criterion for economic success in favor of wealth. If it is true that happiness maximizes or levels off at some wealth level, then perhaps GDP is not a good measure, or if we do use it, it should be median GDP for the population to offset the increasing Gini coeff. Walden did seem to suggest that the UK has abandoned the Bentham philosophy, which I suppose the popular understanding could be Spock's Vulcan saying: "The needs of the many, outweigh the needs of the few".
It is a pity that the clear air photographed in an Indian city in 2020 was due to Covid-19 impact on the economy because it would have been interesting to determine the health costs of the horribly polluted air. Do increased wellness and reduced medical intervention reduce the GDP?
Lastly, isn't there an index that offsets GDP with the extractive losses to the environment? IIRC, GDP is now -ve. It may be nonsensical or propaganda, but I don't see any such accounting in GDP measures, nor the costs of climate heating being accounted for.
As in the interesting line from Stigler that, in his view, the point of an economy is not to create wealth or make people happy but, rather, to "build character"?
Depends on what one means by "build character". That can be anything. DId going to Gordonstoun "build character" in Prince Charles? Should we reinstitute mandatory military service to build character? When I hear the phrase "build character" I hear "make life hard to toughen up the individual", which is but a short hop from Social Darwinism, and not to mention increasing many of society's ills.
Yes. "Build character" usually means "replicate the classical Spartan agog, as it existed in the imagination of Athenian aristocrats in the early -300s who set out, elaborated, and weaponized it in their internal Athenian political debates"
One additional related point. It is not just that improvement in processes via improvement in ICT "does not necessarily go into the price" - but that, due to the "commodification" of ICT systems and processes, such improvement generally -cannot- show up in the price.
In a competitive market, when everyone can use analytics, CRM, and so on, then these things are no longer monetizable for any given producer, and no given producer can realize extra profit by using them.
I agree, but what I would like to know is how this gets impounded in to the GDP figures. Hypothetically there are 2 firms (A & B), which make the same widget, produce the same output (at least initially) but employ very different personnel. Firm A uses little ICT, employs lots of production and sales and backoffice staff, and does business manufacturing and sales as though it was still in the 1970s. Firm B extensively uses ICT to manufacture the widgets, has fewer production staff and almost no sign of backoffice staff, but does employ data scientists and analysts using FOSS to do a lot of data analysis, with a resulting longer widget lifespan, fewer toxic additives in the manufacturing process, lower waste disposal volumes, etc, etc. Both company's widgets compete with each other and sell for the same price and look to the buyers as identical, resulting in equal sales. Each company's costs and profits probably differ,
Do these firms have differing impacts on GDP? If so, where do those differences reside?
If I understand correctly (correction welcome if I do not), the situation you describe (two firms both making the same product, one doing so in a "better" ('better' here loosely defined) way, but nothing else much changing), then there will be no impact on GDP. After all, the same number of widgets are being sold for the same price, so nothing changes.
I think this situation is unlikely, though. More likely is that the firm producing widgets in a "better" way will begin to take market share from the other, leading either to the eventual closing of the second firm, or the second firm adopting the same technologies as the first. And again, there will be no real impact on GDP.
A third possibility is that the first firm is able to use its technology to produce its widgets at a lower cost and sell them at a lower price. This might have an effect on GDP, but it would mean a reduction in GDP, as there is less (monetary) value produced in widgets.
"A third possibility is that the first firm is able to use its technology to produce its widgets at a lower cost and sell them at a lower price. This might have an effect on GDP, but it would mean a reduction in GDP, as there is less (monetary) value produced in widgets."
This 3rd example is one that I think is important as I mentioned that we do things today with software (often FOSS) that removes the need to pay a person to do something. For example, when I was doing my MBA back when we lived in caves, my reports had to be typed. There was a merry business submitting handwritten material to the secretaries who typed up the reports for a fee. If they had had to submit those monies for taxation, no doubt GDP would be increased. Today who even thinks like this? We have an abundance of word processors from the simple to the complex, often with spell and grammar checkers. Students all submit typed reports. So here we have a case of technology reducing GDP. Another example is ATMs reducing the need for bank tellers, although in this case, I see that more analogous to machine automation to increase the output of transactions. But pure intellectual production - free software, (and Andresen famously said "software is eating the world") allows us to produce quite a lot of things (where "produce things" = "reduced entropy in some domain"). The world thus increases the output of intellectual products - software, analyses, art, etc but much of this production is not measured or contributary to GDP. Imagine some Star Trek replicator that is basically a futuristic 3-D printer. Imagine almost everything you want is constructible from software designs and some cheap-ish raw material. GDP would presumably take a huge hit as the only transactions might be payments for the materials and possibly for the designs, but in too far less than manufactured goods do today. How would a government, seeing the world awash in physical and intangible goods (and services) be able to compute a GDP that makes any sense and be comparable to historic calculations? So GDP plunges, but human welfare may well be concomitantly increased.
Other thoughts. Rightly or wrongly, it seems to me that economists treat IT investment as the same as machinery. Both do automation. Machinery automates manual labor to produce widgets. IT automates cognitive output to produce what exactly? When computers were very expensive mainframes, their costs were justified by reducing other costs and increase profits using NPV or IRR calculations. But while factory machinery is still very expensive, computers and software are not. Indeed much software is free and operates almost like a gift economy.
GDP was good at measuring commodities and has been made more sophisticated to measure diverse things, and even to use hedonic measures to adjust for quality. But what does the automation of cognitive functions produce? I certainly produce a lot more verbiage than when I hand-wrote materials and even used a typewriter. I can do computations that would take lifetimes to achieve manually to test ideas. I can produce electronic output for free that once would have required $$$ and a local printer. All this cognitive surplus as Clay Shirky would say is being used to produce ideas, facilitated by cheap IT. I don't even need paper, an envelope, and a stamp to send this comment. Even if IT just changes the BS jobs, aren't jobs in offices and at home preferable to working in factories and down mines? (I hated manual labor summer jobs to earn extra money when I was young. Doing them for life just to survive - ugh!) One benefit is relatively easy to access to scientific journal papers, a task that back in the 1970s required using citation indexes, using the journal stacks, and extracting the relevant information by hand or *gasp* with a photocopier. Now I have the world of information at my fingertips. Maybe most of what I do doesn't lead to any net benefit to the economy, but it benefits me personally with mental activity, and I all the happier for it. Which gets us back to Bentham, I think. ;)
Is making us happier a bad outcome? I think I would prefer leisure and creative activities rather than mining minerals in poor conditions. Economics was based on efficiency of resource utilization - good for improving crop production, mining minerals, even building construction, and capturing what was perceived as progress by rising GDP numbers. But how do you measure intellectual output - science, art, enjoyment of life? Simply imputing value to currently unpaid work would increase GDP, would it not, yet with no net benefit. Conversely, if we stopped measuring GDP would that cause any net reduction in social welfare? GDP growth creates some poor incentives - mine more coal, burn it, but wreck the climate. GDP increases, but net welfare dimishes, especially as those losses are rarely captured because they cannot be measured.
Has GDP become a obsolete relic, measured because the data can be collected. Should the progress or regress of social welfare perhaps be given to other disciplines like psychology or social sciences, with macroeconomics sidelined from its long major role in government policy? Or perhaps economists should just focus more on measures of general human welfare as the main goal, with output as a supporting measure.
I am not advocating that we become Lotus eaters, or that economics doesn't have a role in making sure that we don't get depressions, or if we start to, how best to put the economy back on track. What I am saying is that now that the post-industrial economy employs ever fewer people in production (and robots and automation should drive that down to near zero) and far more in diverse services including caring for others, entertaining us, etc., that we should be using tools to increase the general welfare as a key measure, rather than assuming GDP is a good proxy for that.
Your Marco Rubio/GOP fundraising analysis is 🔥
Why, thank you very much...
John Stoehr's piece is really important. What he doesn't go on to say is that if and when we use the word "fascist" in print or conversation, we need to define it, just as he does so succinctly, to make clear it's not just a nasty label for the folks you don't like. We probably need to add "fascist sympathizer" as a commonly-used term for those who, at least publicly, denounce violence and repression, but who go out of their way to support or abet those who are obviously fascists. This would include Mitch McConnell, Kevin McCarthy, and that weird guy who painted himself blue to join the Jan. 6 insurrection.
The problem is defining the term "fascist". I have a 1948 US Congress report on Fascism, presumably while it was fresh in the US mind. The approach they take is to make extensive comparisons between fascism in Italy, Germany, Spain, and Japan. It is quite extensive and shows common features and MOs. What is interesting is that one can find many similarities between the GOP and Trump, which supports calling them fascists, IMO.
Politics as friends vs. enemies largely independent of policy issues and any rational evaluation of policy outcomes is, I think, core—Trump's repeated reversals on Republican issues, Hitler's alliance with Stalin, etc....
"‘The data bear out the general sense that the real-world utility of new technology has fallen far short of the hype. Labor… has risen only about half as fast since 2007 as it did in the generation after World War II. "
I think it depends on what you are measuring. GDP was good when it measured commodities output, like wheat and coal. It gets much more complex when it applies to technology. One thing that should be obvious to anyone who works in any tech capacity is that there are a lot more people doing quantitative analysis and testing using IT than there use to be. Quality has not only improved in making cars work better and parts fit better, but in design, making sure there are no likely failures, etc, etc. All this has been aided by technology that does not necessarily go into the price. If ICT also helps to reduce externality costs, isn't that a good, but unmeasured, thing?
Another thing is that technology also reduced GDP. Word processors remove the typing pool, ATMs remove the need for bank tellers. Most of us old fogies can recall a living when trying to do much-required lots of specialist employment. ICT has reduced that. Sitting at my desk I can do a lot of things that once took time and the employment of people and the manufacture of stuff. I would argue that technology has proven to have huge utility, but it doesn't show up in crude GDP figures.
Worrying about GDP seems increasingly like wealthy people worrying about their wealth compared to other people, rather than those people trying to enjoy a better life. Perhaps it is time to retire the focus on this measure and focus on other measures of wellbeing?
So we should go full Benthamite utilitarian?
You are the expert.
I do recall that the British commentator Brian Walden (https://en.wikipedia.org/wiki/Brian_Walden) once saying near the beginning of the Thatcher period that the Tory party had abandoned "happiness" as the criterion for economic success in favor of wealth. If it is true that happiness maximizes or levels off at some wealth level, then perhaps GDP is not a good measure, or if we do use it, it should be median GDP for the population to offset the increasing Gini coeff. Walden did seem to suggest that the UK has abandoned the Bentham philosophy, which I suppose the popular understanding could be Spock's Vulcan saying: "The needs of the many, outweigh the needs of the few".
It is a pity that the clear air photographed in an Indian city in 2020 was due to Covid-19 impact on the economy because it would have been interesting to determine the health costs of the horribly polluted air. Do increased wellness and reduced medical intervention reduce the GDP?
Lastly, isn't there an index that offsets GDP with the extractive losses to the environment? IIRC, GDP is now -ve. It may be nonsensical or propaganda, but I don't see any such accounting in GDP measures, nor the costs of climate heating being accounted for.
As in the interesting line from Stigler that, in his view, the point of an economy is not to create wealth or make people happy but, rather, to "build character"?
Depends on what one means by "build character". That can be anything. DId going to Gordonstoun "build character" in Prince Charles? Should we reinstitute mandatory military service to build character? When I hear the phrase "build character" I hear "make life hard to toughen up the individual", which is but a short hop from Social Darwinism, and not to mention increasing many of society's ills.
Yes. "Build character" usually means "replicate the classical Spartan agog, as it existed in the imagination of Athenian aristocrats in the early -300s who set out, elaborated, and weaponized it in their internal Athenian political debates"
One additional related point. It is not just that improvement in processes via improvement in ICT "does not necessarily go into the price" - but that, due to the "commodification" of ICT systems and processes, such improvement generally -cannot- show up in the price.
In a competitive market, when everyone can use analytics, CRM, and so on, then these things are no longer monetizable for any given producer, and no given producer can realize extra profit by using them.
I agree, but what I would like to know is how this gets impounded in to the GDP figures. Hypothetically there are 2 firms (A & B), which make the same widget, produce the same output (at least initially) but employ very different personnel. Firm A uses little ICT, employs lots of production and sales and backoffice staff, and does business manufacturing and sales as though it was still in the 1970s. Firm B extensively uses ICT to manufacture the widgets, has fewer production staff and almost no sign of backoffice staff, but does employ data scientists and analysts using FOSS to do a lot of data analysis, with a resulting longer widget lifespan, fewer toxic additives in the manufacturing process, lower waste disposal volumes, etc, etc. Both company's widgets compete with each other and sell for the same price and look to the buyers as identical, resulting in equal sales. Each company's costs and profits probably differ,
Do these firms have differing impacts on GDP? If so, where do those differences reside?
If I understand correctly (correction welcome if I do not), the situation you describe (two firms both making the same product, one doing so in a "better" ('better' here loosely defined) way, but nothing else much changing), then there will be no impact on GDP. After all, the same number of widgets are being sold for the same price, so nothing changes.
I think this situation is unlikely, though. More likely is that the firm producing widgets in a "better" way will begin to take market share from the other, leading either to the eventual closing of the second firm, or the second firm adopting the same technologies as the first. And again, there will be no real impact on GDP.
A third possibility is that the first firm is able to use its technology to produce its widgets at a lower cost and sell them at a lower price. This might have an effect on GDP, but it would mean a reduction in GDP, as there is less (monetary) value produced in widgets.
You have understood my argument exactly.
"A third possibility is that the first firm is able to use its technology to produce its widgets at a lower cost and sell them at a lower price. This might have an effect on GDP, but it would mean a reduction in GDP, as there is less (monetary) value produced in widgets."
This 3rd example is one that I think is important as I mentioned that we do things today with software (often FOSS) that removes the need to pay a person to do something. For example, when I was doing my MBA back when we lived in caves, my reports had to be typed. There was a merry business submitting handwritten material to the secretaries who typed up the reports for a fee. If they had had to submit those monies for taxation, no doubt GDP would be increased. Today who even thinks like this? We have an abundance of word processors from the simple to the complex, often with spell and grammar checkers. Students all submit typed reports. So here we have a case of technology reducing GDP. Another example is ATMs reducing the need for bank tellers, although in this case, I see that more analogous to machine automation to increase the output of transactions. But pure intellectual production - free software, (and Andresen famously said "software is eating the world") allows us to produce quite a lot of things (where "produce things" = "reduced entropy in some domain"). The world thus increases the output of intellectual products - software, analyses, art, etc but much of this production is not measured or contributary to GDP. Imagine some Star Trek replicator that is basically a futuristic 3-D printer. Imagine almost everything you want is constructible from software designs and some cheap-ish raw material. GDP would presumably take a huge hit as the only transactions might be payments for the materials and possibly for the designs, but in too far less than manufactured goods do today. How would a government, seeing the world awash in physical and intangible goods (and services) be able to compute a GDP that makes any sense and be comparable to historic calculations? So GDP plunges, but human welfare may well be concomitantly increased.
Other thoughts. Rightly or wrongly, it seems to me that economists treat IT investment as the same as machinery. Both do automation. Machinery automates manual labor to produce widgets. IT automates cognitive output to produce what exactly? When computers were very expensive mainframes, their costs were justified by reducing other costs and increase profits using NPV or IRR calculations. But while factory machinery is still very expensive, computers and software are not. Indeed much software is free and operates almost like a gift economy.
GDP was good at measuring commodities and has been made more sophisticated to measure diverse things, and even to use hedonic measures to adjust for quality. But what does the automation of cognitive functions produce? I certainly produce a lot more verbiage than when I hand-wrote materials and even used a typewriter. I can do computations that would take lifetimes to achieve manually to test ideas. I can produce electronic output for free that once would have required $$$ and a local printer. All this cognitive surplus as Clay Shirky would say is being used to produce ideas, facilitated by cheap IT. I don't even need paper, an envelope, and a stamp to send this comment. Even if IT just changes the BS jobs, aren't jobs in offices and at home preferable to working in factories and down mines? (I hated manual labor summer jobs to earn extra money when I was young. Doing them for life just to survive - ugh!) One benefit is relatively easy to access to scientific journal papers, a task that back in the 1970s required using citation indexes, using the journal stacks, and extracting the relevant information by hand or *gasp* with a photocopier. Now I have the world of information at my fingertips. Maybe most of what I do doesn't lead to any net benefit to the economy, but it benefits me personally with mental activity, and I all the happier for it. Which gets us back to Bentham, I think. ;)
So what are we using this immense cognitive surplus for, or is it just making us happier?
Is making us happier a bad outcome? I think I would prefer leisure and creative activities rather than mining minerals in poor conditions. Economics was based on efficiency of resource utilization - good for improving crop production, mining minerals, even building construction, and capturing what was perceived as progress by rising GDP numbers. But how do you measure intellectual output - science, art, enjoyment of life? Simply imputing value to currently unpaid work would increase GDP, would it not, yet with no net benefit. Conversely, if we stopped measuring GDP would that cause any net reduction in social welfare? GDP growth creates some poor incentives - mine more coal, burn it, but wreck the climate. GDP increases, but net welfare dimishes, especially as those losses are rarely captured because they cannot be measured.
Has GDP become a obsolete relic, measured because the data can be collected. Should the progress or regress of social welfare perhaps be given to other disciplines like psychology or social sciences, with macroeconomics sidelined from its long major role in government policy? Or perhaps economists should just focus more on measures of general human welfare as the main goal, with output as a supporting measure.
I am not advocating that we become Lotus eaters, or that economics doesn't have a role in making sure that we don't get depressions, or if we start to, how best to put the economy back on track. What I am saying is that now that the post-industrial economy employs ever fewer people in production (and robots and automation should drive that down to near zero) and far more in diverse services including caring for others, entertaining us, etc., that we should be using tools to increase the general welfare as a key measure, rather than assuming GDP is a good proxy for that.
Oh, making us happy is a very good outcome..