I sooooooooooo love your philosophy. I wish you were gay so I could ask you out

Check out my post:
http://www.antishay.com/?p=33

I’m trying! But it’ll be a while before I’m there.

Metaphysically time is linear. I did not mean that things move in cycles in some kind of hocus pocus sense. What I meant is that few societies are sustainable. You can liken it the life cycle of a human being. The US is young, less than 200 years old. It is at its peak health (so far) and it has never been ridden by war. Thus it has much the same attitude as a 19 year old teenager e.g. knowing everything, bent on changing the world, ideas of immortality. Endless growth (hey, a 19 year old has been getting taller and stronger all his life so why should that change?) helped by immigration and a low population density. We’ve all been there. Consider the previous reigning power on the planet. Great Britain. Their empire lasted a little more than a hundred years. If you want to know how the US will look in 50 years, look at GB. The dominant empire before GB was France.
Going back further, the roman empire had indoor plumbing and their Rome reached a population that was not matched until the mid 18th century. The Greeks were one iota from inventing the steam engine 2000 years ago. What happened? Progress stopped and what we consider civilization went backwards for 1000 years.
Maybe that’s a two steps forward and one back, but it’s a huge one.
[One can argue that it’s a step side wards: While people exchanged democracy for monarchies and indoor plumbing for cob houses, there was a surge in smaller businesses and small scale technology. Not aqueducts but wheelbarrows and water mills.

Knowing that you’re an engineer gives me an idea of where you’re coming from. I’ll venture that you’re not a power plant, nuclear, oil, environmental engineer or in other words directly responsible for providing a resource base. Just guessing here. I don’t want to make it personal so let me instead talk about computer scientists. CSs deeply believe that human ingenuity is the sole limiting resource. This is because that is their strongest limit. Their other limits are simply not seen and thus ignored and forgotten. The computer lab is always on. They never have to go outside and pedal for 60 minutes to power a computer for 30 minutes. Software developers never worry were the electricity comes from, how tantalum is mined, or the level of industrial expertise required to cut silicon wafers. This is similar to how economist think that we will never run out of oil. This is true economically speaking, but physically we would be paying $5000 or a month’s labor for a gallon - similar to gold. In the same vein politicians think they can fix problems by making laws. And so on. Specialists are deeply formed by their culture. The world is a nail to their hammer.

Life as a hunter / gatherer is hard. Frankly, it flat out sucks. I’m not about to live like that, are you? We built this system because it is better. This is such a “no duh” type issue that I’m having trouble coming up with a good analogy. Sorry but it just is.

I’m with Thrifty Canadian that time is indeed linear and I ascribe to that metaphysical reality. We want to get the most out of our ONE shot. Living is fun. I want to see every continent. I want to eat all types of food. I want to drink and be merry. When I run out of time I want to know I did everything the world had to offer a person in my era. Not everyone is so ambitious but nearly everyone has the same basic motivation. This may be more prevalent in Western cultures but it isn’t only limited to the West. India, China, and the developing world are starting to sit up and take notice as well.

When you talk about exponential growth you seem to be be the type of person calling for the end of Moore’s law in 1989 with the Intel 80486, where I am the type of person who thinks we will engineer our way through the challenges. I can see our economic system adapt to anything and continue to grow for far longer than you seem to imagine. I see us mastering space travel and importing resources well before I see us going back to being hunter gatherers.

Progress may not be perfectly linear because of booms and busts, two steps forward and one back, but it sure is not cyclical. Our society will not one day wake up and have forgotten all of our progress (and yes it is progress). Nor will we simply choke ourselves out in short order. We will invent, adapt, and innovate!

Again quickly about Social Security, it is an insurance program that is backed by the full credit and power of taxation of the US government. The defined benefits are indexed to inflation and will represent a fixed portion of our GDP. Your inflation worries are solved by realizing that tax power is supported by a growing, prosperous population which stretches beyond temporary hiccups in the economic system for which SS is designed to protect against. Anyway, if the government can not meet the claims to provide for more than a subsistence existence of our elderly then we all have much bigger problems to worry about. I know we will continue to consume (and create) with linear progress and exponential growth for long into the future so I’m not about to loose any sleep or live a cloistered lifestyle over it.

In some ancient eastern culture, time is a cyclical and renewable resource. The world simply rolls back in a much slower pace than human beings could notice. If you get so many life to live, there doesn’t seem to be a reason to hurry down the path. If I know 9 months later I’ll have another winter, it probably doesn’t make sense to sacrifice everything in order to enjoy my last ski trip, ever.

Laws are a necessary consequence of agriculture. If you need to depend land for your food source, you need to organize. Agriculture is a more intensive food source. This means more people and more people means specialization. Eventually you have an economic system.

Agriculture is based on consumption of soil into food. At some point the soil is depleted and people have to move on. The Sahara desert was once agricultural land. Now it isn’t. This method of slash and burn is 10,000 years old. Soil richness peaked long ago but we have been able to boost agricultural production by mining phosphates and converting natural gas into fertilizer. This is the basis for the 6.5 billion people currently living. This green revolution is less than a century old.

I would say that if you take a larger perspective it could be said that this is not natural. It is more like burning the house to keep warm.

I don’t really see it as a ladder that we climb up. I know that during the past 500 years it has been normal to see everything in the form of progress. It is so deeply embedded in our culture that we are blind to anything else. I posit that this is because people have short memories (live to less than a 100 rather than live to a 1000). You even see this in the stock market where people’s memories are even shorter. Every time there is a boom people take about a new era. The world is cyclical. There is no going back. There is a moving forward into something else and I’m not talking about the next step up the ladder - more like getting off of the ladder and onto a new one. We will never see a 1930s style world or a 1680s style world again.

The efficiency in mass production is achieved by production of an massive amount of units. The reason is that while variable costs are lower, fixed costs are higher. The only way to make total costs low is by increasing unit production.

The idea of striving for improvement in particular when it comes to being busy is uniquely western. It is manifested the hardest in the US. Here is where people push the hardest for the smallest marginal rates of return.

I think we disagree on whether things are demand driven due to semantics. Can we agree that you’re not going to work for me unless I offer something in return which at least comprise enough raw material either directly or indirectly for you to work on after which you’ll probably want some extra compensation unless you work for free? E.g. my demands alone are not going to make things happen. That is all I’m saying.

About SS: Who pays the insurance. The payouts are merely claims on goods. Similar to how shares in the defined contribution plans would be claims on production factors. The latter would be more likely to match up. With defined benefits we would just have massive inflation.

I am not entirely convinced that I am bad at economics nor that my reasoning is flawed. I think that the controversy is that I am questioning some fundamental assumptions about “our way of life”, namely a) that progress is linear b) exponential growth is natural. Mathematically you will notice that such solutions generally come about due to simplified assumptions about the system when you remove boundary conditions and feedbacks. These models are not applicable for the long run (higher orders) although they work fine for the short run (first order effects). I submit that a) progress is cyclical and b) nothing grows exponentially for very long.

Great comment!

Creating takes resources too. To play music you need to first cut down trees to make a musical instrument. To write poetry or fiction you need paper and pens. To paint you need canvas, paint, or charcoal. To sculpt you need marble or granite slabs. If you want to do these activities after dark you need light from electricity or candles.

If you wish to share your creation with others you need theaters with seats and a stage or museums or libraries. Cars, planes, and boats allow us to share our culture with those beyond walking distance. Printing presses, radio, television, and DVD’s allow us to find a wide audience for our creations.

I’m sure you can follow where all of this is going. Creation is just another kind of consumption! It may be less rough around the edges but it is a consumption wrapped up in a pretty bow.

@ Jacob

I’ve been outside the US and yes other countries have a slower pace. Sure their culture is different but they still consume. You will never find any culture in the world that has a completely neutral impact on the environment. People just aren’t low impact, it isn’t a generalization of human values to say we consume; it is a fact!

In order to live each of us must put forth the effort to provide food, drink, and shelter. Why then did we all go beyond that subsistence to create the complex economic and cultural behemoth we are today?

How far back down the ladder of progress do you want to fall? Back to the Amish, the Sub-Saharan Africans, the rural Indians, or the Eastern Europeans, the Amazonian tribes? No society has gotten it right yet have they?

Now to mass production. The thread that ties together specialization, commerce, trade, and mass production can not really be undone. Quantity and economies of scale may not always yield the perfect result. Even you must admit the mass produced goods today are of far better quality in nearly every way than the mass produced goods from 25 years ago. Mass production is not really about quantity, it is about efficiency! Bigger, better, faster, stronger, is in fact a pleasant side effect. If we were not hardwired to strive for incremental improvements in ourselves, our tools, and our environments why is it that it seems to be so universal?

I and nearly any economist worth anything would strongly disagree that demand (aka consumption) does not drive anything! Give a large enough demand someone always steps in to offer a product. Tyranny of the market is a real problem (buyers in the minority are left unserved by the marketplace) but it is improving by using technologies such as the internet and rapid prototype manufacturing.

It is also true that marketing is used to drive demand for products and their consumption. However, I dare you to make a product that consumers do not want and try to sell it. Even with a massive marketing budget the venture would ultimately fail. To to sum it up, demand and supply go to equilibrium, neither exists in an economy without the other.

You talk about the poverty line. It is a rather arbitrary number derived from the U.S. Department of Agriculture in 1963. It was set to be three times the average food budget for a family of four based on a study in 1955 that determined that food was roughly 1/3 of a family’s budget (or 3 x $1033 = $3100). This value was then indexed to inflation and otherwise largely unchanged over the years.

Now with that background, consumption patterns have changed. Food is no longer 1/3 of consumption but more like 1/6 due to technological innovation (like pesticides, fertilizers, petroleum fueled machinery, etc). For you to be truly living in poverty, try living on 3x your bare essential food budget. That would be a taste of what it would be like to go back only 45 years in our economic history.

The family of four making $20,444 can not meet their basic needs because of poor money skills; on that you are right. Same goes for a single making $10,488 (federal poverty line). This is only case because of the degree of specialization, mass production, and economies of scale that have been achieved from 1963 to the present. Without all of these things that you seem so opposed to, your quality of life would be at least 50% below what it is at present. You would have an outhouse instead of running water. You would have a fireplace instead of a gas furnace. You would have a donkey instead of a bicycle. I think you get my drift.

Very quickly about Social Security. It can never be a defined contribution plan because its purpose is to serve as an insurance plan in the case of market collapse. Insurance must be defined benefit.

Again I’ll say Jacob that it is great for you to live such a low impact life, but you need to realize that your grand philosophy is flawed. You have an interesting voice and ideas that inspire me to debate, but you are bad at economics and flawed in your reasoning. If everyone, or even a sizable number of people, followed your life philosophy it would drag down the standard of living for all of us. I hope that does not happen. Ever.

Humans are not intended to be idle creatures, we create! We create gardens, we create art, we create literature, etc. I think this phenomena is deeper than a need to buy things, instead is it a natural drive to CREATE! The switch to a society where we create more is great in practice and our leisure would still be based around creativity. It is a natural compulsion that can not be easily explained away.

Investing is simply a method that works for me. Another method is job hopping or temp work where a person spends a few months working and then slacks or volunteers for the rest of the year. Obviously we can’t all invest in each other and proceed not to work just as we can’t all get rich by cutting each others hair. Only a few can do any one specialized thing. I realize that.

Much of our technology and machinery has been built for mass production. Its purposes is to churn out as many products as fast as possible. It would be possible to design a knitting machine (to stay with the topic) that only required 10 minutes of human interaction but ran to slow that it took a day or more to complete the job (a water powered loom?). If knitting is too arcane, consider the solar oven. It may take 3 hours to cook a meal but it requires little interaction and it is not necessary to build a propane stove along with LNG tankers and 4D seismic methods that brings forth the gas to run it. What’s the rush? Indeed some machines would not be made. For instance, if everybody lived next to their jobs and supermarkets like they used to, many cars would simply not be made. One pertinent question is why, despite all our technological advances, have no one come up with a car that is easier to maintain and require fewer and more standardized parts than the previous generation. Okay, there’s the Toyota Corolla, but it’s more the exception than the rule.

The problem with SS is that it’s a defined benefit program. Make it a defined contribution program and it would solve the demographic problem.

What would be lost? Many things would be lost. For one it would no longer be possible to choose between 2000 slightly different window air conditioners. Standard of living as measured by expenses or GDP would certainly collapse. However, comparing our household to a household that runs at 5 or even 10 times our expense level, I frankly do not see much difference other than “inventory turnover”. It’s our “10 year old top of the line stuff” against their “latest and greatest”. Another difference is size, but how many bathrooms can two people really fully utilize use before the law of diminishing returns set in? 1? 2? 3? 4? Does food taste better if it was made on a granite counter top rather than an aluminum countertop?

Would science be lost? That really depends on whether people are ready to devote resources to it. Currently research is a small part of practically any budget, so even halving the size of operations would not make it unaffordable. It is like the question of alternative energy research? Such research would be fairly cheap. The reason it is not being done very much is because people fundamentally prefer to use cheap oil and gas (even though they say they don’t).

Production drives either the creation of consumables or productive assets. I don’t believe consumption drives anything other than creating demand that will motivate some people to step up and deliver (or unleash pent up inventory from misaligned investments as would be the case for the upcoming stimulus package). Stepping up is not a given though, so it’s not a chicken and egg equilibrium.

The question of subsistence existence/footprint is a funny one. I live at the poverty level, something which I find greatly curious. People think poverty level and think of people that can’t afford to eat and go hungry and people that run their electric stoves to heat their apartment because the gas was turned off, etc. However, I also know that many poor people (not all but many) are greatly ineffective when it comes to handling their money. Enter their homes and you see new and huge (albeit poor quality) TV with a big stack of DVDs that mostly cost $19.95 and full cable subscription. The kitchen holds a stock of brand name cereal that was bought at 7-11, various brand name snacks, the weirdest plastic gadgets and various juice makers from TV Shop. Their car may barely run but it has a fancy stereo that goes with the fancy hub caps. This suggest to me that poverty in many cases is not measured by expense level but by budgeting and a failure in priorities.

@ dna - plugs are being pulled on individual companies all the time. I do not think it will be a big problem unless for instance people currently save up expecting to continue a high consumption lifestyle and producers suddenly switch to a low consumption lifestyle. What ultimately counts in the equity markets is not the size of the pie but the size of your slice (above a certain minimum level).

I think this might be among the reasons that Joe Dominguez and Vicki Robin recommended investing only in U.S. treasury bonds in “Your Money or Your Life”. As well as a simpler strategy than the work involved in equity investment research, it, perhaps, presents less of a conflict of interest. Not that I follow their advice with my own investments!