Saturday, October 2, 2010

The Technology-Driven Consumption Trap

This reflects my personal opinion, not the views of the SEC or its staff.
I just finished reading Robert Reich’s new book, Aftershock. The critical points of the book are well presented in his pre-publication New York Times op-ed piece. I will not be able to do justice to his work in a few sentences, but for those who don’t want to buy the book or click on the link, here goes:

The root of our economic problems is the ever widening income gap. The rich, who are laying claim to a higher and higher percentage of income, don’t spend as much of their income as do those down the income ladder, so demand for goods and services is dropping. The solution is to move income toward those who will spend more of what they earn, namely the workers who are producing all the goods. Put another way, we need to redistribute income so that those who produce can afford to buy what they are producing.

This is one of those “gee, I should have thought of that” sorts of arguments, a reasoned argument for income redistribution based not on some notion of fairness, but on economic results. Rather than the government priming the pump through fiscal measures, which is obviously a short-term solution, he argues that we need to change the structure of the system to shift income toward those who will consume.

But I would like to sketch a path for technology that makes this approach, income redistribution as a Keynesian solution of sorts, unsustainable, indeed a path that leads us to a land where no magic can return us to the economy we have enjoyed in the past. This path is one that takes two of the very problems Reich pinpoints and assumes they deepen. These two problems are, first, that the marginal propensity to consume drops with an increase in income, and second, that the contribution of labor to production declines over time.

Trend 1: Diminishing Consumption
Reich makes the point that someone whose income is hundreds of millions a year is not going to be able to spend more than a small fraction of it on consumption. If that money were instead given to, say, ten thousand middle-income families in chunks of $10,000 each, much more of it would go into the economy, spurring demand for production.

But what if the portion of income that goes toward consumption starts to go lower even as we move down the income ladder. That is, what if those at lower and lower income levels find they don’t need to spend as much of their income on consumption as they have in the past? I think this is what could happen if the current technology-driven trend of how people spend their time continues.

I wrote a post a few months ago, The Accidental Egalitarian, which made the point that with the increased focus on technology – where we spend more and more of our time on our cell phone, doing emails, watching DVDs and generally surfing the web – there is less of a difference between how the super rich and the reasonably well off spend their time hour by hour during their typical days. The point of that post was that in practical term the income gap is not as large as it might seem; that several orders of magnitude differences in income don’t make all that much difference in what these people do with their time. The point here is the corollary: those activities do not require much income.

If this trend continues, a redistribution of income will not spur the increase in spending that Reich suggests.

Trend 2: Diminishing Labor in Production
Let’s also say that the production to feed our demand can be developed with little labor input. This is already happening, not only because of improvements in production efficiency, but also because the sorts of things we want to consume are particularly well suited to capital-intensive production.

Suppose most of what we want to buy ends up being produced in factories run with robots, and maintained and operated by five or six engineers. (That doesn’t really have to be what is going on. It could be that the factory owner just says it is using robots, and is really employing five hundred workers in some third world country each making a few dollars a day. It will still seem to be the same, domestic labor demand will be lower even if we manage to push consumption up).

As this trend progresses, income redistribution will have a limited effect on increased employment because there will not be that many more jobs to be had.

In the Year 2025
Take these two trends to their extreme. We are in the year 2025. Because of advances in production technology, much of the path from extracting the required renewable resources through to the production and distribution of most of the items we demand can be accomplished with automated methods overseen by a small cadre of engineers. (At least that is what we are being told. But some blog posts are claiming that all we are doing is exporting wheat to pay for labor-intensive production in Africa. Africa, The New Asia®. It is hard to know who to believe anymore).

The main items we demand, beyond food, clothing and shelter, are the nth generation game systems. Computer games have progressed to the point where they are approaching the level of Nozick’s experience machine. They allow us to be anyone we want in whatever world we want, accompanied by whomever we want, all with full sensory feedback. If you think you used to burn a lot of your free waking hours with your jumping between email, video games, Facebook, and HBO back in 2010….

Speaking of HBO, movie-making software now allows us to make TV shows, even full-length movies at home that rival those that used to require live actors and teams of hundreds. The deflated profitability of journalism and then the music industry earlier in the century has now enveloped all forms of media. The entertainment industry has disappeared; it is all free, operated with the same open-source ethos that spelled doom for most commercial software enterprises over the past decade. Which also means no more advertising. We pretty much know what we want to buy, and depend on those in our FriendWeb™ (version 4.6) to guide us.

If you look hour by hour at what anyone is doing, it is hard to differentiate the super rich from those a few rungs above subsistence level. Given our evolved interests, most of us are spending a fraction of our income on consumption. There just isn’t a lot that we demand. What we do demand is cheap, and doesn’t require much of any labor to produce.

Or, doesn’t require production at all. For those who have the money to burn, demand is moving increasingly toward things that cannot be produced. Land, art, rare wines and Super Bowl tickets are being bid up to unthinkable levels. The major economic pastime that remains to differentiate the rich from the rest of us is picking new stuff to throw into the fray. The latest one is scholar stones from the Sung Dynasty. All that money has to go somewhere. But that only leads to a transfer of income from one well-to-do pocket to another without generating any production. Sadly for those grounded in the middle class, this means more of these things are moving out of reach. But no matter. It all seems silly and abstract to most of us, like the amusing eccentricities of the English upper class a century or two before. Maybe that is because we are no longer taunted by magazine covers and ads (because there are no magazines or ads), maybe it is because the demise of the entertainment industry has also led to the demise of the iconic celebrity, or maybe it is just that we don’t really care what those outside our circle of gamers are doing.

We are a society that basically eats, sleeps, works and then veges out. Not surprising, I guess, given that the tip of the spear of the economy, such as it is, are those same kids who a decade or two earlier were living at home with their parents after college, after graduate school – well, some still are. Though many of us now have our own prefabricated SmallHouse® (McMansions are a thing of the past; no one needs all that space, and, like mink stoles post-Mad Men, social norms regard these as the extravagances of a bygone era). That plus a car, food (the former rarely used, and both produced very inexpensively), our two-hundred dollar experience machine games, and we are happy as a clam.

I don’t know exactly how this economy works, but I can tell you that it is not working well. What are all of Reich’s workers doing for jobs now? Where is the money coming from for even this minimally consumptive society? What levers can we pull to get ourselves out of this stagnant economy, to reduce unemployment? We are approaching our second lost decade, and nothing seems to work. Not that most people care.

There used to be a lot written about the liquidity trap, where monetary policy can no longer function as a spur to economic recovery. Now it is all about the consumption trap creating similar limits on the ability of fiscal measures to push up employment and production.

29 comments:

  1. Rick,

    I think the two trends you describe are well-in-place. I also think that they don’t necessarily negate Reich’s idea, as you describe it.

    A large portion of the population (15-25%?) is at or near the poverty line. Consistent access to food, shelter, and a relatively crime-free environment are not givens. People need income sufficiently consistent to pay for these basics, with something left over for things like advancement in personal capital via education and training. Even those employed find this kind of security hard to find, due to the stagnant and declining real wages of the past 30-40 years.

    Now, I would imagine that a lot of these people do enjoy the cheap thrills also enjoyed the better-off, and that self-directed development of personal capital is not a given. Nevertheless, I’d think that income redistribution that enables reliable access to the basics of life would create a net increase in economic activity, for the simple reason these basics are not consistently obtained.

    btw, I’ve really enjoyed reading you’re “Demon” book.

    Regards,
    aka_ces

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  2. Expect to see an economy that revolves not around dollars, which can be (and are being) created in infinite amount electronically, but rather around the one remaining commodity that has finite capacity: the human attention necessary to digest all the information being generated by the new technologies.
    It makes sense now to say "I'm starting a blog so I can gather readers and sell advertising to make money." Someday, that statement will seem like nonsense compared to the statement "I am spending money to start a blog so that I can develop a large group of regular readers (which is how I measure my wealth)."

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  3. If you're unemployed, not spending enough on consumption is hardly a concern, a reality of so many today. Rent is artificially propped up by Fannie/Freddie, food is propped up by agricultural subsidies, and of course, you need gas and insurance and maintenance with a car... 1 day, being homeless or jobless will not be so bad. These days, you can even surf for free at the local library, but that lifestyle is hardly comfortable yet.

    In my future, we may reach an energy revolution where it costs very little to build much of anything. Nations with weak factors of productions may gain in quality of life, but industrial nations will gain more. Oil nations like Iran will get irate, but we don't need their oil anymore, so we can just wipe them out. Likewise, Afghanistan will bow down to our unlimited energy weapons...

    Hey, if none of that pans out, we'll still have LED bulbs in the future, 3D TVs and game consoles, cheap genome mapping, even bigger flat screens. Fannie/Freddie can't hold on to their overinflated assets for too long, another housing boom (albeit from a lower base) will emerge, maybe we'll even have Canadians coming here to escape their high housing prices.

    If technology ever does get extremely capable, we may see nations getting influence over countries, with a few rich folks, and the rest of us as their toys. It will be cheap enough then to provide decently for us, as they plot a way to escape before the sun explodes...

    What say you?

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  4. I seldom agree with Reich (whose penchant for data mining and other less than honest uses of "statistics" is almost unrivaled), but almost similarly, your dystopian future seems to ignore mankind's unwaivering need for vice. I predict bars and brothels will be around for quite some time to come.

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  5. The plutocracy is getting ever more imaginative , and shameless , in constructing counterarguments to calls for some semblance of economic justice regarding incomes. Reich must be particularly threatening , since he argues that redistribution will benefit the wider economy , and thus all the actors within it. That makes it hard to use the old class warfare or "envy" comebacks against Reich's thesis , so you reach way up that unlit crevice and pull out this smelly fantasy about a year 2025 labor-free , robot-full , couch potato dystopia , in which , surprise-surprise , redistribution is ineffective. My , my , who would have guessed !

    This has got be be the all-time record for scraping the bottom of the barrel. You should tell your servant to fetch the champagne so you can celebrate.

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  6. "If that money were instead given to, say, ten thousand middle-income families in chunks of $10,000 each, much more of it would go into the economy, spurring demand for production."

    Three words: Global Labor Arbitrage

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  7. Marie Antoinette would say "Let them play videogames"

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  8. Interesting to consider that all of the commenters who say this is wrong are examples of Bookstaber's thesis. They can all afford an internet connection, choose to use it reading blogs that don't directly contribute to their material well-being, and participate in the peer production of free online content (in this case a comment stream).

    If they disagreed in practice with Bookstaber's point they'd be spending their time earning more money to spend on goods that are vitally important to their well being.

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  9. Fair enough, but extend your trends with another layer. Picture the future rich enjoying real experiences (real beach houses, real travel, real natural foods, in-person instruction, etc.) while the less well off enjoy the virtual equivalents (simulated vacations, simulated travel, simulated artificial foods, virtual instruction, etc.). I don't see a static situation there. People will continue to desire what they can almost have. Technology won't change that, it will just make what they don't have more apparent.

    Consider taking your wife and kids on a simulated vacation, do you think they would then desire the real thing? Authenticity is a growing trend as well for a good reason I think.

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  10. Might I point you towards David Harvey, who (imho) has more to say, and says it better? You can find a 30min lecture he gave at the RSA here, and a review of his book The Enigma of Capital here.
    Harvey is quite fair in his diagnosis of the problems the world is facing at the moment, and (because of his Marxist background) one of the things he emphasizes most is the importance of labor-backed (income) spending as the source for healthy, ‘organic’ growth. He suggests that we have been moving away from this healthy situation since roughly the seventies (and more importantly since reagan/thatcher), and that this has lead to an aggregate (world-wide) decrease in the amount of money consumers have been able to spend on consuming, to the (short-term) advantage of the owner-class, which has been able to save more. And while these factory and capital owners have been able to reinvest some of their money into means-of-production upgrades (thus ensuring that compound growth remains at what Harvey calls the ‘necessary’ 3% YoY increase necessary for capitalism to remain healthy), this has been becoming ever harder, as the total amount of money that has to be reinvested (last year’s profits, as it were) has become such an enormous absolute amount (more than 1 trillion US$ a year currently) that the only place these capital owners have left where they might obtain their desired growth is in stock markets and asset bubbles.
    Harvey (110-112): “But for all of the conspicuousness of its consumption habits, there is still a physical limit to the number of yachts, MacMansions or/pairs of shoes that the billionaire class can consume. Capitalist personal consumption, it turns out, is a very weak source of effective demand. The more that the centralisation of capital concentrates wealth in the hands of a very small group in the population (such as the 300 or so families that the UN development report of 1996 showed controlled 40 per cent of the world’s wealth) the less effective is their consumption in bolstering demand. … What this story line misses is that capitalists, as we earlier saw, have a choice as to what they reinvest in: they can reinvest in the expansion of production or they can use their wealth to buy up assets, such as stocks and shares, property, art objects or shares in some speculative enterprise such as a private equity company, a hedge fund or some other financial instrument from which they can realise capital gains. In this case their reinvestments pIay no role in bolstering effective demand. If we conclude that it is the further expansion of production that creates the demand for yesterday’s surplus product and that credit is needed to bridge the temporal gap, then it also follows that credit-fuelled capital accumulation at a compound rate is also a condition of capitalism’s survival. Only then can the expansion of today mop up yesterday’s surplus. Capitalism, in effect, must generate and internalise its own effective demand if it is to survive under conditions where external possibilities are exhausted. If it fails to do so, as is currently the case, because of barriers to the continued expansion of production, a crisis ensues.”
    Harvey suggests that capitalism requires (3%) compound growth in order to keep functioning, and that the absolute amounts of money held by the speculating/investor class ultimately becomes too large to be usefully reinvested in optimizing/modernizing the means of production, at which time the only places left that can still produce these kinds of yields are the stock (and commodity) markets. And because consumers have had ever less money consume with, because of wage stagnation, this end of ‘organic growth’ via increases in consumer demand has been approaching every more quickly because it went hand in hand with an increase in the amount of capital that had to be reinvested every year (even if the extension of credit to citizens in the US/UK slowed the drop in demand somewhat).

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  11. Your post reminds me of this... at the edge. org website

    Runaway consumerism explains the Fermi Paradox

    I suggest a different, even darker solution to Fermi's Paradox. Basically, I think the aliens don't blow themselves up; they just get addicted to computer games. They forget to send radio signals or colonize space because they're too busy with runaway consumerism and virtual-reality narcissism. They don't need Sentinels to enslave them in a Matrix; they do it to themselves, just as we are doing today.

    The fundamental problem is that any evolved mind must pay attention to indirect cues of biological fitness, rather than tracking fitness itself. We don't seek reproductive success directly; we seek tasty foods that tended to promote survival and luscious mates who tended to produce bright, healthy babies. Modern results: fast food and pornography. Technology is fairly good at controlling external reality to promote our real biological fitness, but it's even better at delivering fake fitness — subjective cues of survival and reproduction, without the real-world effects. Fresh organic fruit juice costs so much more than nutrition-free soda. Having real friends is so much more effort than watching Friends on TV. Actually colonizing the galaxy would be so much harder than pretending to have done it when filming Star Wars or Serenity.

    Fitness-faking technology tends to evolve much faster than our psychological resistance to it. The printing press is invented; people read more novels and have fewer kids; only a few curmudgeons lament this. The Xbox 360 is invented; people would rather play a high-resolution virtual ape in Peter Jackson's King Kong than be a perfect-resolution real human. Teens today must find their way through a carnival of addictively fitness-faking entertainment products: MP3, DVD, TiVo, XM radio, Verizon cellphones, Spice cable, EverQuest online, instant messaging, Ecstasy, BC Bud. The traditional staples of physical, mental, and social development (athletics, homework, dating) are neglected. The few young people with the self-control to pursue the meritocratic path often get distracted at the last minute — the MIT graduates apply to do computer game design for Electronics Arts, rather than rocket science for NASA.

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  12. I still contend that there is not a liquidity trap (Keynes), a debt trap (United States) but a simple overproduction crisis (Marx).
    http://mgiannini.blogspot.com/2008/12/liquidity-trap-debt-trap-or.html
    It's not even a "consumption trap" but a model of society based on "consumption crap". For years we have been buying things we do not need (that's the consumption crap) with money we do not have. And yes, the people producing and selling us the things we do not need depend on the money we do not have.
    To give you an exemple of "consumption crap" take smart and cell phones: do people really need them? No, apart from few exceptions most people just waste time with it. So should we redistribute income to let poor people to buy them? I am not sure about that. The same happened with cars in the past. We wanted to sell a car to every single inhabitant to discover afterward that we have traffic jams and polluted cities...
    As long as we are convinced of, and by, a society that basically eats, sleeps, works and then veges out (in front of a display either of PC, TV or smart phones) there is future and alternative to the consumption crap or trap.

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    Replies
    1. chuckle at "most people just waste time with [smartphones, cellphones]" so true. :)

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  13. Interesting thoughts.

    The late, great Dr. Isaac Asimov posited more or less the same thing, in his "robot" novels, wherein he described the "Spacer" worlds quite like you describe the possible world of 2025 -- there, sophisticated robots take away the need for humans to perform any/all undesirable forms of labor, causing human society to become dull, flabby, stagnant, self-indulgent, etc

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  14. I mostly agree, however, I think you are misdirecting that hypothetical $10,000 to 10,000 families. Distributing it to the middle class likely would have diminishing returns. You need to focus on the lower income.

    In the U.S. there were 43.6 million people in poverty in 2009. This is the highest number since 1951 when stats were started. The poverty threshold is $21,954 for a family of four.

    http://www.census.gov/hhes/www/poverty/data/incpovhlth/2009/highlights.html

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  15. Yes Rick, I had an epiphany in my shower. Back in my mother's country, it's common these days for family to not work much since opportunities aren't there. However, money from American relatives is enough to live ok, because of the cheap cost of living there...

    Nations always require military. One day, when there just aren't enough jobs, yet the quality of life is ok, we'll have soldiers living the great life, sending money back home, where their dependents live ok lives, as they go to schools where the teachers are supported by the military industrial complex.

    How does my thesis sound?

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  16. There has indeed been much ado about liquidity traps, slowing GDP growth of the developed nations, and so forth. But until this article, there has not been much discussion on the utility function that we are trying to optimize. Is it really GDP growth, higher real disposable income, or more shoes?

    If the subjective sense of well-being (a technical measure of "happiness") is plotted against personal income - the result is that it asymptotes to a roughly constant level after first 10 to 15k per year in most countries. Perhaps this is not surprising since this is about how much is needed to cover one’s basic necessities. In other words, even if we did plunge into another "Great Depression," would we really be “depressed” to the same degree that we were in the 1930's?

    So if maximizing sustainable GDP growth is of questionable utility, then existential questions begin to rear their heads...

    Of course there are still "real" problems out there and technological solutions to develop for them - e.g. extending life expectancy, keeping the inexorable Malthusian threat at bay, and so on.

    But beyond that - perhaps we will have to learn to become more European - to learn "to work to live" rather than the other way around.

    The other possibility is to begin to remove the evolutionary constraints on our "subjective sense of well being" via biotechnological tinkering. Psychopharmaceuticals, virally injected genetic material that would shift CNS functioning, etc might only be the beginning. E.g. perhaps if "aggressive drives" are not as "adaptive" to modern life as they were to our pre-historic and primitive functioning – then, someday, those drives could be rechanneled or reduced.

    What ethical guidelines should be followed in the course of such an undertaking is a complex issue - especially since such guidelines depend at least in part on what utilities have previously been hard-wired into our minds. But for now, I'd vote for a shorter work-week and a greater emphasis on R&D of technologies that better human biopsychology, among other ventures. Cheers!

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  17. Good point that whatever our personal consumption "there are still "real" problems out there and technological solutions to develop for them - e.g. extending life expectancy, keeping the inexorable Malthusian threat at bay, and so on."

    I don't see any reason to believe we need the current sort of economy to drive the resource allocation or incentives for solving these problems.

    There are already examples of good alternatives. One is the sort of resource allocation and incentive management that organize scientific activity. Science is not guided primarily by price signals, but it is pretty effective.

    Another sort of alternative organization is driven by donors to charities and political campaigns.

    Large scale coordination of complex work is done without "economics" in peer production (e.g. Wikipedia, Linux, etc.)

    So I think we'll meet these challenges whether or not the current economy gets stuck in a "technology-driven consumption trap".

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  18. "I mostly agree, however, I think you are misdirecting that hypothetical $10,000 to 10,000 families. Distributing it to the middle class likely would have diminishing returns. You need to focus on the lower income."

    Agreed. Rick, I think it's been too long since you've been poor. 10k is sooo much to someone of middle to lower income.

    Another problem comes from the fact that there is a lot of income bias on this blog, I presume. Most of us think we are middle class only because we work with people that make 1MM+/yr. I would venture to say that many of us are 6 figure earners. What is that? Top 5%? Just because 10k doesn't mean that much to some us doesn't mean it wouldn't mean a ton to the actual middle class. I don't understand how people raise a family of four on less than 100k/yr these days.

    Also, we are completely ignoring some social considerations. Americans are consumers. This is evidenced by the fact that I saw a woman working at a parking garage the other day with a Gucci purse. It doesn’t matter if it’s real. It just matters that she wanted it. It is beyond her income level and she still wanted it. Americans want lifestyles they can’t afford. The Escalade. The Navigator. The interest only negative amortizing ARM. I mean, it’s our nature. It is a byproduct of aggressive advertising and our tendency towards gluttony. We will not change. It is part of our national identity.

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  19. What do you think we should do about it?

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  20. I haven't read all the preceding comments, so my apologies if I make points that someone else has made.

    I don't think "Trend 1" will ever have any significant impact on consumption. Sure there is not much "of a difference between how the super rich and the reasonably well off spend their time hour by hour during their typical days." But that has been true all through history. Humans all do the same activities, its just that the rich do these activities in a nicer setting with nicer stuff. Consumers will not hesitate to spend large amounts of money to buy a nicer/cooler tool for the job even when the less expensive tool provides the same utility. Just look at the popularity of SUVs and super-sized pickup trucks in the last decade. These jumbo vehicles cost a lot more than a basic sedan while adding very little in terms of improved day-to-day functionality, yet lots of people chose to live paycheck-to-paycheck to buy them. Same thing with jumbo 2500 sq ft plus houses. All that space provides little additional utility (especially in an era of declining household size) but lots of people were willing to risk their financial futures to buy one. Humans will always want something fancier.

    Another weakness of Trend 1 is that a lot of consumption is driven by shopping as entertainment. A lot of what people buy is bought because it is fun to shop for and buy stuff, not because they really wanted to use it. Exhibit A for my point is the proliferation of self-storage units; the only explanation for self-storage units is that people buy stuff they don't need (and don't have room for) as recreation. I see no signs of recreational shopping diminishing.

    If my points are true, why do the rich consume less of their income than the poor and middle class? If I am right shouldn't they be spending every penny? One reason the rich don't spend every penny is that the habit that helped them get rich in the first place (investing instead of consuming). But another reason is that it takes a lot of time and energy to spend a lot of money, and deal with all the purchases stuff, and at some point its just too exhausting to find ways to spend all the money.

    Trend 2 has already happened but there has been no reduction in the middle class propensity to consume. All of the actual goods and services consumed by a middle class family of 150 years ago in one year could probably be purchased today for 20-50% of today's median household income because technological improvements have radically reduced the labor required to produce those goods and services. Yet the middle class has found a way to keep living paycheck to paycheck.

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  21. I have not had the time for replies during the week, so now will put them all in one place.

    I think a key point in this version of 2025 is what Anonymous said: It makes sense now to say "I'm starting a blog so I can gather readers and sell advertising to make money." Someday, that statement will seem like nonsense compared to the statement "I am spending money to start a blog so that I can develop a large group of regular readers (which is how I measure my wealth)."
    Many of those who go into fields of journalism, media and entertainment do not do it for the money, but to communicate their ideas, to be expressive.

    Another Anonymous said: Marie Antoinette would say "Let them play video games".
    I think "opiate of the masses" is a better starting point. Ignored in the vitriol against The Bell Curve was a theme that as income levels become more bi-modal, the masses will find their opiates in surrogate lives through spectator sports and celebrities. We already see this -- augmented by reality TV, something that did not exist when the book came out. The computer games of the future will provide more of the same.

    Another Anonymous said: The other possibility is to begin to remove the evolutionary constraints on our "subjective sense of well being" via biotechnological tinkering. Psychopharmaceuticals, virally injected genetic material that would shift CNS functioning, etc.... What ethical guidelines should be followed in the course of such an undertaking.
    This is an interesting point. We look at bioethics in terms of sustaining or ending life on the one hand, and on creating new life-forms on the other. Doesn't it make sense if this version of the future moves even further along, to make decisions on how we spend our lives, on what technology is permissible to enhance our lives?
    This point echos that of another Anonymous, who mentions the Fermi Paradox (and who mentions a web site but didn't provide that link -- if you happen to read this, could you?), that this path will reduce our fitness. Perhaps that would be the argument for ethical constraints; there is a negative externality not just for society, but for our species.

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  22. I'm glad I started reading this blog, because this is an excellent post with insightful commentary.


    I kind of disagree with your conclusions though. The number of jobs is diminishing. And I'm seeing a pretty bleak future. But I don't see human imagination ever becoming obsolete. We will never produce an algorithm that will generate efficient drama. Maybe we won't need as many people to hold the cameras and build the stages, but someone will still have to create.

    Unskilled labor is pretty much going to vanish for the most part. Robots building robots and all that jazz. There's only so much that can be automated. And there's a limit to the degree software can develop software.

    Expect a lot of self destructive behavior as people increasingly hate themselves.

    And while those video games will be extremely disturbing, especially the pornographic ones, they'll still be pretty boring.

    Some independent games will be big though.

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  23. Both of these trends were identified in Keynes' short essay Economic Possibilities for our Grandchildren in 1930. He predicted society will shun those who hoard money for no good reason because of the hardship it will cause others who can't win enough in this zero-sum game. Furthermore he predicted the start of a leisure society, where one doesn't have to work much to make ends meet. The biggest problems for that future person is what to do with their free time.

    I think it is the people who can't be replaced by robots that will be the richest in the future. Like artists and plumbers.

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  24. Invoking Nozick is a nice touch. Michael Lewis wrote an article a couple years ago which adds some more interesting ideas that support the theory.

    http://www.nytimes.com/1996/09/29/magazine/future-stock.html?pagewanted=all

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  25. To Rick & Co.

    Why the singular focus on consumption? Why forget the Investment function that all that "idle" capital provides?

    I believe you all "suffer" (et tu Rick?!) from a rather Keynesian circular flow structure of the economy.

    A Hayekian perspective could help in this discussion. Please read:

    "Overconsumption and Forced Saving
    in the Mises-Hayek Theory of the Business Cycle"

    http://www.auburn.edu/~garriro/strigl.htm

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  26. One glaring problem:

    "...someone whose income is hundreds of millions a year... If that money were instead given to, say, ten thousand middle-income families in chunks of $10,000 each"

    Given? GIVEN?

    Voluntarily? I don't think you meant that.

    By force?

    You just exposed yourself as a Marxist/Communist.

    Good luck with getting any traction there, that is proven to always fail when you run out of other peoples' money.

    Not to mention the death toll from forcing people to give up what is theirs.

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  27. How about we all just have a shorter work week because we have robots doing everything for us and this provides plenty of income ebcause we need so little to pay for our new lifestyle. We spend our leisure time educating ourselves, or gaining skills and technology once again becomes the great equalizer just as every form becomes once it is disseminated among the masses

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