Continuations

We have had all these innovations and have always found new things for people to work on. This is the Lump of Labor fallacy all over again. You are a Luddite! What makes you think this time is different?This is the rhetoric aimed at people like myself who argue that we need to fundamentally rethink how the economy and society work because digital technologies changing the world. I have taken to replying “you are correct, but you are looking at the wrong time frame.” What all of the above obje...

Having examined the impact of computers on wages the logical next question to ask is what this means for the returns on capital. Here is the TL;DR version: higher returns in the short run and lower returns in the long run. We are already well into this short run period and we are beginning to see the forces that will shape the long run. Let’s start with the short run. As we are substituting computers (which I mean broadly here including robots) for labor we are increasing the importance of ca...

Just as a quick recap. I have argued in Computers and the Return on Capital that having cheaper information flows will in the long run drive the risk free rate of return to the time preference. I then examined how technology is likely reducing time preference for individuals through a variety of different mechanisms. In reply to that post Marc tweeted And yet tech companies keep raising giant rounds of funding and spitting off huge gushers of cash :-).That would suggest tech companies need mo...

Had a great discussion at dinner last night about the future of publishing and the role of authors and agents. My believe is that agents have to start providing content capital. The idea behind content capital is pretty much the same as that behind venture capital. Content capital puts up the money, the author creates the work(s) and all proceeds are shared. These would be what the music world has started calling “360 deals,” where many different revenue streams are generated. In publishing, ...

In 1994 I was a student in Thomas Piketty’s first theory class at MIT. He was a young hotshot professor and I was a not so young student (in fact about 4 years older than Piketty). I still vividly remember the horror that was the first exam in this class. Piketty had vastly overestimated how well we understood the material and the English in his questions was ever so slightly off. There was groaning all around the room, myself included, and I was pretty sure I had failed the test (I didn’t – ...

At the moment I am writing about why I think the industrial system is breaking down as its main components are no longer functioning properly and sustaining each other. In particular I wrote about the growth and increased concentration of wealth and its relationship to our present day democracy. Today I want to suggest another aspect of the changes in wealth and how it relates to the allocation of capital. Let us start with a look at what the components of the financial asset side of private ...

Tonight I will be participating in a panel discussion about Universal Basic Income. One of the key arguments for UBI is that we need to decouple people’s ability to meet their basic needs from traditional work because of the rise of automation. This is the case I make in my TEDx talk. But there is another way of framing the problem that has been on my mind. It starts with my contention that the current transition is as profound as the ones from the forager age to the agrarian age and from the...

I am still not finished reading “Capital in the 21st Century” but the following introduction to Chapter 11 really got me thinking:The overall importance of capital today […] is not very different from what it was in the eighteenth century. Only its form has changed: capital was once mainly land but is now industrial, financial and real estate.One of my main intuitions about the coming changes is that “information” will become more important than industrial, financial and real estate assets. O...

In my post on Computers and the Return on Capital I made the point that cheaper and more ubiquitous flows of information will drive the risk free return on capital towards the time preference (assuming that capital can also flow freely). But I didn’t really explain what that meant or how it was determined. Let’s start with an extreme case to illustrate the basic idea. Suppose that everyone everywhere was happy with how much they can spend out of their current income (that includes individuals...

Yesterday’s post on the impact of computers on the return of capital didn’t mention the shift from producer to consumer surplus. Tren Griffin rightly called this out on Twitter. I have written a lot about the rising importance of consumer surplus and should have mentioned it in this context as well. This shift will definitely reduce the return on capital in the long run as we move more information into the commons and as information becomes more important than physical capital or output. It i...