Report Card for Donald Trump

[SomeGuy]

Quote:A big reason the Rust Belt is hurting so much is that the good-paying jobs are simply no longer there for folks who are on the shorter end of the stick intellectually, and one of the big issues with the Obama Recovery is that most of the new jobs were lower-pay service industry jobs that did not not pay as much as the old jobs. We are already seeing the process I'm talking about beginning to unfold now, this is WHY it's getting talked about in progressive circles. Hell, even some on the Right like the idea of a Universal Basic Income, because they see what's coming.

I am aware that the Rust Belt is hurting (hence the name), indeed, most of the country outside a few metro areas is in a slow-motion state of collapse.  It does not follow from there that automation is the sole cause of this, and that this automation will inevitably eliminate all jobs in the near future, and that therefore there is no reason to rethink past policies or make the least effort to accommodate the concerns raised so prominently in the past election.

I do understand why it is comfortable for shocked yuppies to think so, though.

[Eric the Green]

(12-30-2016, 05:44 PM)SomeGuy Wrote:

Quote:A big reason the Rust Belt is hurting so much is that the good-paying jobs are simply no longer there for folks who are on the shorter end of the stick intellectually, and one of the big issues with the Obama Recovery is that most of the new jobs were lower-pay service industry jobs that did not not pay as much as the old jobs. We are already seeing the process I'm talking about beginning to unfold now, this is WHY it's getting talked about in progressive circles. Hell, even some on the Right like the idea of a Universal Basic Income, because they see what's coming.

I am aware that the Rust Belt is hurting (hence the name), indeed, most of the country outside a few metro areas is in a slow-motion state of collapse.  It does not follow from there that automation is the sole cause of this, and that this automation will inevitably eliminate all jobs in the near future, and that therefore there is no reason to rethink past policies or make the least effort to accommodate the concerns raised so prominently in the past election.

I do understand why it is comfortable for shocked yuppies to think so, though.

If one of the "concerns raised so prominently in the past election" is immigration, then the proper concern is that the issue was raised at all (so prominently), and not the concern itself. If the concern is trade, then yes both Sanders and Trump raised the issue, and it should be accommodated in a sensible way. The TPP's defeat has been a good start.

The "past policies" in place today are based on the trickle-down/neo-liberal theory, and therefore THAT's what needs to be changed. And that includes more income support for those unemployed by automation as well as by outsourcing, AND better trade policies, instead of knocking public support by claiming it is theft from taxpayers (neo-liberal dogma).

[SomeGuy]

Quote:It all comes down to the end consumer.  GDP is essentially net sales of the economy. It is a small share of total sales, because much of a firms revenues comes from other firms and so serves and inputs into other company's cost structure. You entire firm is such an input, it is a cost entry in another company's books.  You exist because they got ride of some other cost element.

Oh, absolutely.  The rabbit hole goes even deeper.  My firm is indeed essentially a replacement for work company's used to do themselves, but my firm in turn contracted out a lot of its work to other vendors, and I was hired to a newly created position precisely to bring some of that work back in house (I've reduced the main vendor's invoices by 40%, another 20% and I've justified my salary on a continuing basis.  In your face, <vendor name withheld for legal reasons>!), as well as free up time that my coworker used to spend doing things "by hand" in Excel.  It's classic Ronald Coase stuff.

Quote:A big chunk of tech is supported by advertising.  As long as advertising remains a fixed percentage of GDP all this sort of tech is a zero sum game, jobs gains by tech workers are offset by job losses elsewhere.  The only way that advertising-linked tech would be a growth center would be in advertising grew as a % of GDP.  But in this case you would have the cost of the stuff being marketed go up with not actual increase in quality or utility.  It would be artificial.

This is true, but only partially so.  While those tech companies made their money by cannibalizing old media, they did so because they provided more value to the people paying than their competitors, and they do so because they provide more value to the consumers.  Benefits can be externalized just as easily as costs.

The same can be said of the education industry, although in my wholly unbiased opinion the whole industry is ripe for disruption.

Quote:A similar thing has happened with finance. A certain amount of financial services are need to serve consumers.  Most of it is for business and so in a cost input, as is what you and I do and the rest of the burden.  Some of this is necessary and serves to enhance output, like the work of process improvement specialists (inventors, product/process entrepreneurs, scientists, engineers, designers etc) have done over the last century.  Others are not. A level comes where further effort in finance is counterproductive as described here. 

No argument here.

Quote:A similar effect (but to a lesser extent) is present in healthcare.

Still no argument.  You covered this ably above.

Quote:Now, this is not some sort of conspiracy.  It is not intentional, nor some sort of welfare for highly educated people.  The same is true of the platform company.  It is simply something that has happened.  But the soaring costs of higher education and healthcare have been revealed as problems.  The costs of excess financialization have become clear. Is further burden expansion is these areas going to be feasible? How long can this continue.  This is what Dave is noticing.  He's not completely right.  You made an excellent point on how burden expansion has prevented much of the job loss so far.  But he's not completely wrong either.

Sorry, had to fix that one bit.  That's what that word is for.

I still find your use of the word "burden" to describe all of those activities as tedious.  You've already addressed it, and I understand the reasoning then for using it up to a point, but you're missing the bit where these sorts of services (at least most of them, there is indeed a great deal of rent seeking going on as well) are meeting a demand for <what have you>.  I do have a fair amount of bias towards goods-producing industries, but services are still perfectly normal economic transactions.

And no, Dave does not have a point, because he has been arguing for the inevitable replacement of ALL jobs within 30 years by machines and clever software programs.  This claim has not been proven here, and I have very little faith that it will be, judging on what I've seen thus far.

[Warren Dew]

(12-29-2016, 06:50 AM)Mikebert Wrote:

(12-28-2016, 10:36 PM)Warren Dew Wrote: The primary reason health care is a growth industry is because of the preferential status given it by tax law, in a way that encourages inefficient use of resources by tying health care costs to employers rather than to the individuals that benefit.

No.  At your age I am surprised you don't know this.  Health care has gone up for two reasons.  Increases in price and volume.  I will address the later in this post.  Physicians can do more today than in the past.  Since there is more to do, more is done (i.e.  volume rises).  

Back in the 1970's there was little that could be done when someone had a heart attack. They either lived or died. Afterward you could they could try to improve their diet and exercise, but there was nothing medical science to do and so if you had bad genes you'd be a goner in short order.

Today we have an array of well-tolerated medications that can address many of the factors leading to heart attack so if you have bad genes you aren't necessarily a goner. If you get a heart attack, a cardiac catheterization can often stop it in its tracks.  This happened to my wife in 2010, I watched on the video how they just stopped the heart attack in its tracks not 40 minutes after the onset of serious symptoms.  She got out with zero damage, lost weight, and pulled herself out of nascent diabetes, and now is likely to have decades more to live.  The medications she takes control her hereditary blood chemistry issues, just as the ones I take control my hereditary high BP.  None of this existed forty years ago so the drugs we take and the treatments she got (that are part of this increased volume) were not things available to her father (who died of a heart attack at 55).  Had we been living in the 1970's she would have died from that 2010 heart attack--at 55, just like her father.

Same thing is true for cancer. When I was a kid, cancer was a death sentence.  You got cancer, you died, unless you got lucky.  Now lots of people get cancer and get cured of it (my wife is one).  Others don't but manage to live on for a decade or more with the cancer before it finally gets them. In this sense, if you develop cancer at 69, and die of a stroke at 75, you can say you survived cancer.  We all are going to die of something.  The opportunity to die 6  years later of something other than cancer is surely worth something, right?  How much is that worth to you?

Certainly there have been technological improvements in a lot of areas, health care included.  But here's the thing:  it was calculated in the 1970s that even complete elimination of cancer would only increase life expectancy by 3 years, and that's consistent with what has happened.  I'd argue that's a lot less of an improvement in health care than the improvements in information technology or even automobile technology.

So why is health care a growth industry when information technology and automobiles are not?  As I said, it's because tax law makes health care inefficient, such that improvements in treatment cost much more than they would in any normal industry.

Edit:  As for me, I'm taking an over the counter supplement that reduces cancer incidence by 77% at a cost of about $15/year.  That's the kind of efficiency that we would see if it weren't for the economic distortions imposed on the health care system by our tax regulations.  Unfortunately, because of the tax regulations, no one can make money preventing cancer, so solutions like that are reserved for the favored few that spend hours investigating things like that for ourselves.

[SomeGuy]

Quote:Absolutely, all this is true.  Automation will make all sorts of things possible.  But are the worthwhile? How does universal recycling gain the consumer who pays for it a benefit to compensate for the increase cost?  And if there is not increased cost, then it CANNOT grow the economy. Same thing is true for distributed power.  I already HAVE power.  What benefit will distributed power grant me that will compensate me for the greater costs/hassle.  And recall if costs are down then it doesn't grow the economy.

Is it "worthwhile"?  The answer to that question is are people willing to pay for it?  People's tastes and preferences change.  Regulatory shifts make externalizing environmental costs less feasible, and this may increase in the future (probably not during the Trump administration).  Resources may (will) become more scarce, and recycling technology cheaper, changing the incentive structure further.  People may be willing to pay a premium for "green" stuff (see organic foods).  And this is just an example of something 
And I think your economics is a little off.  People aren't going to pay more for the same thing.  It needs to be cheaper, or it needs to be "better".  Better of course is in the eye of the beholder, and can include intangible, top of the Maslow-hierarchy-of-needs type stuff.  Cheaper is easier to quantify, and frees up money to spend on other things and/or spurs increased usage of the resource/good/service in question by decreasing the marginal cost of its use (see Jevon's Paradox for an explanation of how this works.)

Quote:Most people do not understand how the economy grows.  Economic growth over the long term comes from the creation of new categories of demand.  The classic example is personal transportation.  In 1895 very few households budgets had a personal transportation entry. Personal transportation was free, provided by your own two legs.  Sixty years later, most households had such an entry consisting of car payments and insurance, gas, oil and repair expenditures. And then their were the secondary effects, new spending catalyzed by personal transportation.  Having the ability to commute from farther away meant longer commutes were possible allowing people more room to live allowed for bigger houses. As George Carlin noted, a house is a place to store your stuff, and so that meant more stuff and a bigger budget item for furniture, appliance, household goods and other stuff.  All these are the creation of new kinds of demand for things.  

Yes, but demand is not sufficient in itself.  Effective demand requires production, too.  The things that made effective demand in previous k-waves (don't think I didn't recognize the Thompson & Modelski stuff ) were new technologies, organizations, or territories that made provisioning those desires feasible. 

Quote:In my own life I say how the information economy created the need for a IT assets and services in consumer households.  In 1980 my dad and I looked as PCs and couldn't find anything with remotely the capability of the dial-up time sharing system we were using then.  In Jan 1983 my dad bought a Commodore 64.  At home one weekend I implemented a stochastic model for the level distribution of retired NPCs in my D&D world I was running then. It worked an I thought I need a PC.  So I got one and have had one ever since although I haven't written a program in more than 25 years.  I strictly use software now and know zero about computers today. By the early 1990's there was a compelling reason to have computing power at your disposal.  GAMES.  There was nothing like it.  These games had long existed in standalone devices but now even non-gamer PC owners could get incredible games.  And the MUDs and their descendents, all of which have huge potential for addiction.  All of this is creation of new demand, leading sectors I call them and also of an unsually old fashioned type.  Just like the tobacco, rum, tea and coffee leading sectors of centuries ago (all of which are recreational drugs and so addictive) the new video game products were too.  And these were new, they did not take away from some former business that did the same thing, so they were like persona; transportation.  But as the IT economy unfolded, too much of it was offered for free, to be supported by advertising and so IT ceased to function as a growth sector.  And this is more or less where we are today.

My problem with this argument is that it ignores that all of those gizmos, server farms, fiber optic lines, and the like had to be built, installed, and maintained.  And paid for upfront.

[Warren Dew]

(12-30-2016, 05:33 PM)Mikebert Wrote: And recall if costs are down then it doesn't grow the economy.

If costs are down for the same products and services, that does grow the real, inflation adjusted, economy, because you still get the same thing and also have money left over to buy more.

[Mikebert]

Some Guy Wrote:This is true, but only partially so.  While those tech companies made their money by cannibalizing old media, they did so because they provided more value to the people paying than their competitors, and they do so because they provide more value to the consumers.

Did they?  How successful have new media been in getting consumers to pay for their product?  Facebook, Twitter, Youtube etc. are all free to the user. By definition, their product has no value to consumers, since consumers pay nothing for it.

[Mikebert]

(12-30-2016, 07:13 PM)Warren Dew Wrote:

(12-30-2016, 05:33 PM)Mikebert Wrote: And recall if costs are down then it doesn't grow the economy.

If costs are down for the same products and services, that does grow the real, inflation adjusted, economy, because you still get the same thing and also have money left over to buy more.

I was referring to GDP.  It doesn't grow the GDP.  If a real reduction in cost is achieved for an economic sector, the size of the sector falls, and GDP with it.  If the extra money freed up by it is deployed into other existing sectors then GDP rises back up to where it was.

But you don't get growth unless there is some new category of demand that can serve as a leading sector.  Then those extra dollars will accelerate the growth of that new sector.  Its what Schumpeter called creative destruction.  For example as the size of the personal transportation sector rose in the 1920's, the mass-transportation sector (railroads) fell.  Spending that used to go to rails went to cars and trucks.  But also the income that was generated by workers in the personal transportation sector created more dollars to be spent so that all the other sectors were fully funded, with extra money to grow the leading sectors.  What makes Schumperterian growth work is the existence of leading sectors.

Today we have no big market-driven leading sectors.*  Education and healthcare are subsidized.  But so is a lot of tech, which is subsidized by advertising paid by old-economy businesses.  Tech is involved in a lot of cost-reduction stuff (the destructive side of the process) but its creative side (the exciting new stuff--and there's a lot of it--wikipedia, google, FB, communication apps, etc) is often free.  The natural economic growth process cannot happen as well as it once did when the biggest growth sectors are subsidized.

Eliminating the subsidy won't work since it will crash the economy and produce a permanent depression.  I believe there is a way around it (or at least I did in 2004)  but it is as pointless to discuss it now and then because the primary problem on of the political economy.

*operationally, leading sectors are collections of industries whose growth is faster than that of GDP.

[SomeGuy]

Quote:Did they?  How successful have new media been in getting consumers to pay for their product?  Facebook, Twitter, Youtube etc. are all free to the user. By definition, their product has no value to consumers, since consumers pay nothing for it.

Come on, Mike, now you're just being willfully obtuse.  GDP is just a metric, it's not the be-all and end-all of economic activity.  Eyeballs have migrated from old media (newspapers, the classified section thereof, etc.) to sites like Facebook and Google because people feel that they derive more benefit from these things.  These eyeballs (which can be more precisely measured, categorized, and targeted than was the case with the old media) are the real product, in turn giving more value to the advertisers who are the actual consumers.  This is a business decision, and is one of the many revenue streams the new media giants have captured.  If these companies follow the same progression as their old media counterparts, they will continue to find new revenue sources as these complete the transition from scrappy start-ups to mature businesses.  Plenty of websites that were free when I started reading them 10-15 years ago have switched to a subscriber basis, and some of them I have been willing to shell out money for since.

Of course, some of them won't.  We're in a bit of a bubble with tech companies now, and this bubble will eventually shake out in its turn.  Not everyone of the services available now will last the decade.  This is normal, and is not an indictment of the overall system.

You also ignore that all of these "free" sites require people to shell out for devices, internet service, data plans, electric bills, and the like, and the underlying infrastructure requires fiber optic cables, wireless networks, server farms, climate control for the same, switches and routers, the electricity to run these, all of which has to be manufactured, installed, and serviced.  Lotta money being spent keeping all of this up and running. And the reason businesses and consumers are able and willing to pay for these new things is because that the price of each of these new things comes down with improvements in technology and business structure (things like economies of scale, automation, etc.)

[SomeGuy]

Also, Mike, it got buried under a lot of ensuing nonsense vis a vis automation and the future of work, I did actually respond to the thread's original premise, if you're interested in it.

[Mikebert]

(01-01-2017, 04:32 PM)SomeGuy Wrote:

Quote:Did they?  How successful have new media been in getting consumers to pay for their product?  Facebook, Twitter, Youtube etc. are all free to the user. By definition, their product has no value to consumers, since consumers pay nothing for it.

Come on, Mike, now you're just being willfully obtuse.  GDP is just a metric, it's not the be-all and end-all of economic activity.  Eyeballs have migrated from old media (newspapers, the classified section thereof, etc.) to sites like Facebook and Google because people feel that they derive more benefit from these things.  These eyeballs (which can be more precisely measured, categorized, and targeted than was the case with the old media) are the real product, in turn giving more value to the advertisers who are the actual consumers.  This is a business decision, and is one of the many revenue streams the new media giants have captured.  If these companies follow the same progression as their old media counterparts, they will continue to find new revenue sources as these complete the transition from scrappy start-ups to mature businesses.  Plenty of websites that were free when I started reading them 10-15 years ago have switched to a subscriber basis, and some of them I have been willing to shell out money for since.

Of course, some of them won't.  We're in a bit of a bubble with tech companies now, and this bubble will eventually shake out in its turn.  Not everyone of the services available now will last the decade.  This is normal, and is not an indictment of the overall system.

You also ignore that all of these "free" sites require people to shell out for devices, internet service, data plans, electric bills, and the like, and the underlying infrastructure requires fiber optic cables, wireless networks, server farms, climate control for the same, switches and routers, the electricity to run these, all of which has to be manufactured, installed, and serviced.  Lotta money being spent keeping all of this up and running.  And the reason businesses and consumers are able and willing to pay for these new things is because that the price of each of these new things comes down with improvements in technology and business structure (things like economies of scale, automation, etc.)

No I am not.  GDP is a measure of the economy. To really understand things you need measures. The final destination of economic output in the end consumer who pays for the economy through their purchases.  A firm that offers product for free produces no value direct to the consumer.  Of course they provide value to advertisers, but advertisers provide no value direct to the consumer, either.  They provide value to individual firms.  If a particular firm, using internet advertising (employing 10), gains business at the expense of competitors (who did not use digital advertising) so that they grow by 100 employees while the competitors shrink by 150 employees the internet firms have delivered real value to their advertising customers and they in turn have delivered real value to their customers, and the overall economy has lost  40 jobs.  How one evaluates this depends on perspective. From the perspective of the businessman or investor, its a huge gain.  But from the pov of the state, it's not.

As to you second point, I did not ignore that.  The hardware and infrastructure of the information economy constitute the fraction of this economic that functions as a leading sector.  In the late 1970's almost nobody had personal computing power at home (I did as early as 1977).  There was very little reason to had such a thing then.  The only folks were geeks like my dad who put in our system (using  home-built terminal, TV for video and a 1960;s teletype printer (110 baud) for hard copy).  When I finally got my own PC in 1983, I had tons of bootleg software, which I rarely used except for the word processor and some games.  I booted up VisiCalc, starred at the screen for five minutes, said what the fuck is this good for and went back to writing BASIC programs which is what I wanted the PC for.  My point is there was a wave of home hardware installation in the 1980's long before the internet.  This was a classic leading sector, like cars.  I shelled out $6000* for my first machine in 1983, $3500 for my second in 1987, and $1800 for my third in 1993.  Note all of there were purchased before the net. 

By the 1990's there was plenty of reason to have a PC, games first and foremost.  Over the first decade of the information revolution in my household we were shelling out about $1000 a year on hardware and a smaller amount on software.  The PC revolution was functioning a real leading sector. We were spending money on this new thing while at the same time we were spending the same on all the old stuff.  During the second decade, expenditures on hardware and software declined, but there was a new thing--internet.  So that means $350 a year for dial-up.  Internet was totally cool, got into MUDing, hosted a MUD for a while by renting space on a server in Grand Rapids for $50 a month.  In 1997 I finally put our my first webpage, which is still available on the wayback machine:
http://web.archive.org/web/2004020301504.../stock.htm.  I had gotten into financial commentary as a way to wean myself off MUDing.


By around 2000 everything was free.  I had all the space I wanted for nothing on the CSF server.  I could upload stuff for nothing.  Everything was cool.  The came the tech wreck.  The free stuff was withdrawn.  Then came cell phones and then smart phones.  These cost money, but they directly replace telephony and the old internet. The companies offering the new service grow the old ones go way.  On net no real change on a per capita basis.  And it shows up in the aggregate statistics, GDP growth has been subdued since 2000 and the wages of college-educated workers stopped rising around then too.

*all prices adjusted for inflation to todays values

[Warren Dew]

(01-01-2017, 08:31 AM)Mikebert Wrote:

Some Guy Wrote:This is true, but only partially so.  While those tech companies made their money by cannibalizing old media, they did so because they provided more value to the people paying than their competitors, and they do so because they provide more value to the consumers.

Did they?  How successful have new media been in getting consumers to pay for their product?  Facebook, Twitter, Youtube etc. are all free to the user. By definition, their product has no value to consumers, since consumers pay nothing for it.

Consumers pay plenty for it, in the form of that fraction of their spending that supports the advertising and marketing budgets on which new media survive.  Where did you think Facebook, Twitter, and Youtube got the money to pay their employees?

[Warren Dew]

(01-01-2017, 08:52 AM)Mikebert Wrote:

(12-30-2016, 07:13 PM)Warren Dew Wrote:

(12-30-2016, 05:33 PM)Mikebert Wrote: And recall if costs are down then it doesn't grow the economy.

If costs are down for the same products and services, that does grow the real, inflation adjusted, economy, because you still get the same thing and also have money left over to buy more.

I was referring to GDP.  It doesn't grow the GDP.  If a real reduction in cost is achieved for an economic sector, the size of the sector falls, and GDP with it.  If the extra money freed up by it is deployed into other existing sectors then GDP rises back up to where it was.

If a real reduction in cost is achieved with the same production, then the nominal GDP may fall but the real, inflation adjusted, GDP remains constant, since production remains the same.  If the extra money is spent - "deployed into other existing sectors" as you put it - then the nominal GDP may only rise back to where it was, but the real, inflation adjusted, GDP goes up, because everything that was being produced before is still being produced, plus some more.  The average person ends up better off.

Quote:But you don't get growth unless there is some new category of demand that can serve as a leading sector.  Then those extra dollars will accelerate the growth of that new sector.  Its what Schumpeter called creative destruction.  For example as the size of the personal transportation sector rose in the 1920's, the mass-transportation sector (railroads) fell.  Spending that used to go to rails went to cars and trucks.  But also the income that was generated by workers in the personal transportation sector created more dollars to be spent so that all the other sectors were fully funded, with extra money to grow the leading sectors.  What makes Schumperterian growth work is the existence of leading sectors.

Today we have no big market-driven leading sectors.*  Education and healthcare are subsidized.  But so is a lot of tech, which is subsidized by advertising paid by old-economy businesses.  Tech is involved in a lot of cost-reduction stuff (the destructive side of the process) but its creative side (the exciting new stuff--and there's a lot of it--wikipedia, google, FB, communication apps, etc) is often free.  The natural economic growth process cannot happen as well as it once did when the biggest growth sectors are subsidized.

Eliminating the subsidy won't work since it will crash the economy and produce a permanent depression.  I believe there is a way around it (or at least I did in 2004)  but it is as pointless to discuss it now and then because the primary problem on of the political economy.

*operationally, leading sectors are collections of industries whose growth is faster than that of GDP.

You're essentially arguing that for the cost savings to be spent, there have to be new categories in the economy for it to be spent on.  That's not necessarily true; people could just spend it in existing categories, buying BMWs instead of Toyotas for example.

The real problem is that much of the money isn't being spent at all.  It's just sitting around on balance sheets doing nothing.

[Mikebert]

(01-01-2017, 07:21 PM)Warren Dew Wrote: If a real reduction in cost is achieved with the same production,  real, inflation adjusted, GDP goes up, because everything that was being produced before is still being produced, plus some more.  The average person ends up better off.

A real reduction ins cost means a firm is producing the same output while using less inputs.  Those inputs are someone else's output, which necessarily is lower by the amount of cost saved. This loss would be recovered, by the additional  spending freed up by the cost savings.  

Quote:You're essentially arguing that for the cost savings to be spent, there have to be new categories in the economy for it to be spent on.  That's not necessarily true; people could just spend it in existing categories, buying BMWs instead of Toyotas for example.

No.  The savings spent makes up for the inputs not purchased.  I am arguing for costs savings to be accompanied by growth for the economy as a whole there must be some economic sectors whose markets have not yet reached saturation.

Are you familiar with the S-curve for product introduction?  Harry Dent applies this concept to the economy that explains the mechanism I am referring to.  I give a summary in this 2001 article:
http://www.safehaven.com/article/71/the-...ket-trends

Here's long defunct page where I go though this idea in more detail, its a pretty messy page. I think I did it in 1999.  It has been retained by the internet archive:

http://web.archive.org/web/2004021500171...ngwav2.htm.  I applied it to economies further back in time for my K-cycle book.  Here's a graph I made I found in a article by Chris Chase Dunn.  You can see the information economy at the extreme right.

[Mikebert]

(01-01-2017, 07:02 PM)Warren Dew Wrote: Consumers pay plenty for it, in the form of that fraction of their spending that supports the advertising and marketing budgets on which new media survive.  Where did you think Facebook, Twitter, and Youtube got the money to pay their employees?

The advertising dollars going to Facebook, etc. used to go to someone else.  That is, consumers were paying for Facebook in this way before Facebook was invented the money just went to other firms. The flow of advertising dollars simply was diverted from some other media to FB.  Advertising-supported media is not a source of growth.

[Mikebert]

(01-01-2017, 04:43 PM)SomeGuy Wrote: Also, Mike, it got buried under a lot of ensuing nonsense vis a vis automation and the future of work, I did actually respond to the thread's original premise, if you're interested in it.

I took a look. You wrote:

The United States is number 7 on the list, and the top three countries all have manufacturing work forces that make up over 20% of their labor force, roughly double the United States' 12%.

The same source you used for these three countries also has the US with more than 20%.  But it is true than these these other countries all have large shares than the US.  Then again, they industrialized later and I believe all three run trade surpluses, which we do not as a matter of policy.

[Warren Dew]

(01-02-2017, 08:22 AM)Mikebert Wrote:

(01-01-2017, 07:21 PM)Warren Dew Wrote: If a real reduction in cost is achieved with the same production,  real, inflation adjusted, GDP goes up, because everything that was being produced before is still being produced, plus some more.  The average person ends up better off.

A real reduction ins cost means a firm is producing the same output while using less inputs.  Those inputs are someone else's output, which necessarily is lower by the amount of cost saved. This loss would be recovered, by the additional  spending freed up by the cost savings. 

That's not how GDP works.  GDP is a measure of final goods and services; intermediate goods and services used to produce those final goods and services aren't counted.  When technological advances mean some of those intermediate goods and services are no longer needed and their cost can be saved, that in itself doesn't change GDP at all.

It might be worth rereading the last page or two of posts with that in mind.

[Warren Dew]

(01-02-2017, 09:06 AM)Mikebert Wrote:

(01-01-2017, 07:02 PM)Warren Dew Wrote: Consumers pay plenty for it, in the form of that fraction of their spending that supports the advertising and marketing budgets on which new media survive.  Where did you think Facebook, Twitter, and Youtube got the money to pay their employees?

The advertising dollars going to Facebook, etc. used to go to someone else.  That is, consumers were paying for Facebook in this way before Facebook was invented the money just went to other firms. The flow of advertising dollars simply was diverted from some other media to FB.  Advertising-supported media is not a source of growth.

I agree with that part.  The shift is neither increasing nor decreasing GDP.

[SomeGuy]

Quote:No I am not.

Yes, you really are.

Quote:GDP is a measure of the economy. To really understand things you need measures.

Not a perfect one, like many measures.  Come on, Mike, I know you've worked with bioreactors and the like before, you always have to be aware of what you're actually measuring and how that measure is being derived, and consequently how it can mislead.  GDP has long been known to omit black market and home production, to count disaster relief and the like as growth (the classic broken window fallacy), to aggregate away distribution issues, to omit externalities (both positive and negative) if they do not have explicit price tags, etc.  It's not a perfect snapshot of all economic activity, it's just a measure of the market value of final goods and services produced.  To really understand things, you do need measures, but you also need to understand that those measures are just abstractions that necessarily simplify and distort the full picture, and you need to take that into account.  You gotta be smarter than your tools, Mike.

Besides...

Quote:A firm that offers product for free produces no value direct to the consumer.

That is one of the stupidest things I have ever read here, and I have nothing but contempt for most of the people who still post here.  The subjective theory of value has been well-established for well over a hundred years.  No one would ever exchange anything if they did not value what they were getting more than what they actually had, which means both parties must value the commodities being exchanged as being worth either less or more than the actual price, with the parties having differing opinions on which is which.

The value to each party of the good or service in question is derived from the perceived benefit that that thing would provide to them, nothing more.  This value need not be expressed in monetary terms, and your blinkered insistence otherwise is one of the more egregious examples of the reification fallacy I have seen recently.  The money (time, effort, etc.) spent to acquire something is a cost (in most cases, there are instances wherein the expense paid above and beyond that of an equivalent is countered by the perceived status benefit accruing from paying more.  See fashion, etc.) to the consumer, which is weighed against the value that that thing provides. 

Quote:A firm that offers product for free produces no value direct to the consumer.  Of course they provide value to advertisers, but advertisers provide no value direct to the consumer, either.  They provide value to individual firms.  If a particular firm, using internet advertising (employing 10), gains business at the expense of competitors (who did not use digital advertising) so that they grow by 100 employees while the competitors shrink by 150 employees the internet firms have delivered real value to their advertising customers and they in turn have delivered real value to their customers, and the overall economy has lost  40 jobs.  How one evaluates this depends on perspective. From the perspective of the businessman or investor, its a huge gain.  But from the pov of the state, it's not.

Advertising can provide direct benefits to consumers by directing their attention to goods or services they would not otherwise know about, but yes, in general the benefits of advertising accrue to firms, not individual consumers.  And the situation given as an example above may or may not benefit the state, depending on how the freed up resources (people, money, etc.) are redeployed.  The original arguments for outsourcing industry (as told to the American people, there was a fair amount of geopolitical reasoning embedded as well) implied that giving up lower-value added activities like textile and furniture manufacturing would allow the US economy to be more productive by providing those things at lower cost, and reallocating t once devoted to the production and purchase of native equivalents to more valuable activities, in the same way that rising agricultural productivity freed people and resources to work in industry and services.  The discontent that bubbled up so memorably in 2016 stemmed from the fact that 40-50 years on, the benefits from this and other policy decisions were much more diffuse (or, conversely, concentrated in different segment of the population than the people losing out) than the costs.

Quote:As to you second point, I did not ignore that.  The hardware and infrastructure of the information economy constitute the fraction of this economic that functions as a leading sector.  In the late 1970's almost nobody had personal computing power at home (I did as early as 1977).  There was very little reason to had such a thing then.  The only folks were geeks like my dad who put in our system (using  home-built terminal, TV for video and a 1960;s teletype printer (110 baud) for hard copy).  When I finally got my own PC in 1983, I had tons of bootleg software, which I rarely used except for the word processor and some games.  I booted up VisiCalc, starred at the screen for five minutes, said what the fuck is this good for and went back to writing BASIC programs which is what I wanted the PC for.  My point is there was a wave of home hardware installation in the 1980's long before the internet.  This was a classic leading sector, like cars.  I shelled out $6000* for my first machine in 1983, $3500 for my second in 1987, and $1800 for my third in 1993.  Note all of there were purchased before the net. 

By the 1990's there was plenty of reason to have a PC, games first and foremost.  Over the first decade of the information revolution in my household we were shelling out about $1000 a year on hardware and a smaller amount on software.  The PC revolution was functioning a real leading sector. We were spending money on this new thing while at the same time we were spending the same on all the old stuff.  During the second decade, expenditures on hardware and software declined, but there was a new thing--internet.  So that means $350 a year for dial-up.  Internet was totally cool, got into MUDing, hosted a MUD for a while by renting space on a server in Grand Rapids for $50 a month.  In 1997 I finally put our my first webpage, which is still available on the wayback machine:
http://web.archive.org/web/2004020301504.../stock.htm.  I had gotten into financial commentary as a way to wean myself off MUDing.


By around 2000 everything was free.  I had all the space I wanted for nothing on the CSF server.  I could upload stuff for nothing.  Everything was cool.  The came the tech wreck.  The free stuff was withdrawn.  Then came cell phones and then smart phones.  These cost money, but they directly replace telephony and the old internet. The companies offering the new service grow the old ones go way.  On net no real change on a per capita basis.  And it shows up in the aggregate statistics, GDP growth has been subdued since 2000 and the wages of college-educated workers stopped rising around then too.

Part of the problem was the the total system participating in this K-wave was expanded by trade policy, which meant that much of the manufacturing income that would previously have gone to American laborers was instead sourced to factories overseas.  Consumers (and certain companies) benefited, but for many those benefits did not exceed the costs from lost income and investment.

[SomeGuy]

Quote:I took a look. You wrote:

The United States is number 7 on the list, and the top three countries all have manufacturing work forces that make up over 20% of their labor force, roughly double the United States' 12%.

The same source you used for these three countries also has the US with more than 20%.  But it is true than these these other countries all have large shares than the US.  Then again, they industrialized later and I believe all three run trade surpluses, which we do not as a matter of policy.

You're only interested in the automation bit?  Fair enough.

To that end, look at the sources most closely.  More specifically, make sure you are comparing labor force by occupation to labor force by occupation, and not confusing it with GDP by sector.  This is merely in the sidebar, if you choose to you can scroll down to the employment section, but the statistics used are not the same for each, but all of them imply larger shares in the manufacturing sector specifically (as compared to the broader secondary sector, which includes things like construction) as compared to the US, despite much higher rates of automation.  Glad to see you at least are acknowledging policy differences as being a factor, as opposed to some starry-eyed belief in the March of Progress leading inevitably to True Communism/Cyberpunk Dystopia (but definitely the End of Employment).