Europe is already half-way there, america is stalling it due to immigration, China is going to be there once it hits the demographic cliff.
America can thank its dollar as world reserve currency. Billions it spends on military bases around the world and foreign aids is part of its effort to keep its reserve currency status. But at some point, the party is going to be over. American labor force is already very uncompetitive and overpaid compared to its European and Asian counterparts. Yet we enjoy one of the highest standards of living. That gravy train won't last forever.
The only thing that will get the developed countries out of their impending doldrums is 10/100x energy and technological breakthrough.
Until then, we'll get our own version of 60 yen Garagari-kun.
And don't think deflation hasn't been happening already in the U.S. The only difference is, unlike Japan, unscrupulous U.S. food companies have been cutting ingredient quality and content size, rather than raising price for the past 10 years.
Check out Breyer's fake ice cream, Haagen Daaz, McCormick pepper content size, Mars shrinking chocolate bar sizes.
https://consumerist.com/category/grocery-shrink-ray/
http://www.dailymail.co.uk/femail/article-3037688/Shrinkflat...
There are two other major problems in parts of the U.S. and Europe (in particular) that're underrated: 1. insane land-use control laws that make it illegal to build reasonably price housing (see Matt Yglesias's The Rent is Too Damn High for more: http://www.amazon.com/TheRent-Too-Damn-High-Matters-ebook/dp...) and 2. transfer payments to older people that were originally conceived and executed when the number of workers to retirees was much different than it is now.
The first is important because it impedes family formation and innovation. The second is important because it makes not having children easier, because other people's children will be forced to support you through their contribution to transfer payment programs. Yet neither issue gets much play in the press.
Land value tax would also allows us to untax labour and capital, thus reducing deadweight losses in the economy.
See http://masongaffney.org/blog/index.php/2012/08/the-hidden-ta...
Houston has no zoning regulations, and its one of the fastest growing metros in the US.
Seriously, get rid of the sweets (<3) and sweet-like items from the store. What's left? It's usually about 1/4 of the store or less.
Food inflation in quality and quantity is a serious problem and it's damaging our health and wallets.
Relatedly; freddo frogs are becoming an extravagance.
https://www.reddit.com/r/britishproblems/comments/18yx14/the...
At least British and Irish schoolchildren will have no trouble comprehending the idea of inflation in economics and accounting classes.
You seem to have gotten confused between inflation and deflation. With deflation, prices decrease, not increase.
25 year of unchanged nominal price is symptom of deflationary environment. The reluctance by the Japanese company to raise price even when costs were going up speaks volume about the strong downward pricing pressure in the Japanese market.
Though not to the same degree, similar environment has been brewing here in the U.S. for awhile. Companies don't want to raise prices, and only do so as a last resort.
If economy was better, they would do so without fear that their competitors would not follow suit.
Downward pricing is what one would expect in any stable market, given that price optimization is the primary market mechanic. Technology is getting ever-better, so it takes ever-larger efforts to erase its gains and create the artificial inflation prescribed by the central banksters.
The US ranks 16th on the Where-to-be-born Index.[1]
https://en.wikipedia.org/wiki/List_of_countries_by_Human_Dev...
They then tried to make it more relevant in 2010 and also created an income inequality-adjusted version. This new index uses GNI instead of GDP and uses years of schooling rather than literacy rate (which is basically 99-100% for all developed countries) which makes it bit better, but it still doesn't figure in life satisfaction or other relevant measures into standard of living which is why it's still mainly a way to rank developing countries. The income inequality-adjusted version is slightly better, but still doesn't measure any psychological well-being.
You can also chose to have one child or 4 children. Just depends: do you get more happiness from 1 pampered child, or 4 modestly raised children.
People will blame other things of course. Things like MENA immigration, climate patterns, crop failures, these are second order affects of stagnation.
The peripheral fails before the center. Never forget that.
I have to congratulate Peter Thiel. He has managed to see a lot of this ahead of almost anybody else I can think of and this is despite being at the heart of the cozy bubble that is Silicon Valley. One of his expressions is that you can have instances of success in an ocean of general failure or something to that effect.
Even on HN a few hours ago I saw a WSJ article proclaiming that everything is smashingly good these days, that three/four decade wage stagnation is a mere blip on the radar. Though I agreed with the substance of the historical facts she stated I also think this is an utterly clueless point of view on human nature that is shared by huge swathes of the middle class. I didn't live in 1850 and I cannot be expected to appreciate the good fortune of the years since then! If you live in a downcycle then that's all you know.
You see the contradictions at their most dire with the pension funds. They require either massive hikes in funding or 6-7 real percent per year. Wages will have to rise suddenly and dramatically and/or else we need massive massive technological changes.
Somehow I see Larry Summers getting called back into Court. Whether monetary policy is enough, that is another question.
[1]: http://www.tradingeconomics.com/united-states/wage-growth
[2]: https://www.researchgate.net/profile/Melissa_Kearney2/public...
World becomes more zero sum when growth plateaus. Only now it is proposed that everybody and their dog get PhDs in god only knows what.
Diminishing returns are exactly stagnation. I know blue collar workers making more money than people who took extensive study and got 'good' jobs. This is despite the fact those workers haven't actually had wage increases themselves! They're just working long hours for more pay. We're stuck in a rut. It could be the case that technological stagnation is created by technology itself. A hairy subject!
If I remember rightly wage increases for the higher percentile aren't that great either. I mean they are better than zero but not as great as they used to be. Makes sense since their market of consumers is drying up as everybody becomes cash poor except for those making toys for the actual rich.
(I know you can come up with some relation, of course everything is related, but again, it is not straightforward, and you shouldn't just assume that saying a bunch of buzzywords and stating some facts stands out as an explanation)
When you have more people wanting stuff, prices rise and jobs create themselves to meet this need. With a declining population, you have fewer people wanting stuff, so prices go down.
Certainly I would buy a house if I know that next year it will be cheaper. I need somewhere to live and don't want to have to move over and over again. Nothing about a deflationary environment would prevent lenders from providing mortgage financing. Mortgages were obviously still available to qualified borrowers during the worst of the housing market crash.
Interest rates can adapt to pricing variations expectations, you know that because it works in inflationary environments.
That's the thought experiment, but it doesn't pan out in reality. The US economy experienced long stretches of high growth and low deflation in the 19th century. People still have physical needs even if the currency is deflating.
We'd be better off if houses weren't treated as investments but rather as shelter; see eg SF/peninsula for what happens when people start winning the housing lottery. ie everyone who owns a home is a millionaire.
Back on planet earth, a smaller population is almost always better than a larger one. The only real difference is that a smaller population has more natural resources per person.
I'm not going to pretend to know what the future will look like, but presumably some political change involving multiple planetary systems will succeed the US and do something with the debt.
In any case, human population will peak and then start reducing at some point in the not too distant future (unless we expand to other planets). I wonder what happens if the holders of the debt themselves were to perish.
Pairing population to production optimally is a synchronization problem. Cybernetics I suppose, not usually how economists think.
Economic growth and recession could be modulated if there were enough people when we needed them, and there were not, when we did not. Recessions won't go away but they wouldn't be compounded by demographic issues.
Currently this is solved in a haphazard way e.g. using illegal immigration of people like fruit pickers (deporting them when inconvenient) or by green belt zoning and class siloing. That can't be efficient. It couldn't possibly make humans happier. Most actually adopted solutions appear to be quite damaging to humans. How much of this is consciously orchestrated is also hard to ascertain. I suspect it is mostly Scott Alexander's Moloch at work. Every central banker ought to read that poetry because it's quite recognizable.
Since it is unethical to force children to exist (Ceausescu) and also wrong to murder people or prevent them having offspring when demographic issues arise, we need a plausible solution to allow for a world in which people have a realistic chance of having sustenance and purpose in their lives.
Most people really don't like this topic! It is understandable. We prefer not to think of ourselves as elements of production and supply. Of course we are, we're just a special case of it.
All of the problems are ultimately rectified by markets, or failing them, mother Nature. You know what they say about Nature being a mother. My point is that we don't necessarily need to let it get to market corrections if we think ahead.
Suppose you were a Communist official in charge of the One Child policy who anticipated the female infanticide rate. You'd have solved for a good deal of human suffering decades later on with perhaps an afternoon's work. Right place, right time.
Monetary policy tools work on a similar lever principal to this which is a large part of the reason I'm talking about them in the same vein. I'm not confident I know what to do, only that it is a factor. And now; tell me how I'm wrong!
My hypothesis is that in the economy the growth rate in humans does not relate directly to economic growth. There could exist a religion that promotes large families for example; that's why I said mother nature would ultimately take care of business if things got out of hand.
Sometimes we need more humans but there is a lag time before they appear. Sometimes we need less humans but they stick around absorbing dwindling resources and leaving their children with higher prices later. Both of these outcomes sabotage future growth prospects.
How this relates to economics is that central bankers use interest rates changes in an attempt to produce stable growing economies. As I understand it the mechanism is a kind of lever, by modifying the trajectory of money supply you can slightly influence the larger flow. Central banks then spend their time compiling statistics to anticipate the future.
If one can do that with money then you can do it with humans too by finely tuning the probability of them being able to give birth. Then as long as you can anticipate the amount of workers required you can provide that many at the correct time. Demographic hiccups become a thing of the past.
I leave a lot unsaid here. Evidently controlling one part of the economy causes you to require as you say 'very exacting control' over other parts. As you can see there is nothing controversial here.
I want to point out that the actions of governments tend to support a belief (that they believe) in something of this sort and that changing human production rates is some kind of corollary to changing interest rates. After all the humans use the money. They're the ones incorporating information into prices with their decisions.
This whole topic has the feeling of an 'Ugh field' about it. I understand if I'm downvoted into oblivion but it's an important idea. If I'm totally wrong then great, tell me how.
Who is that `we' that needs more or fewer humans? Ie economists usually take the supply of humans as an exogenous variable, and try to figure out what they do to maximize their welfare. (And very often also: what they could be doing better.)
Taking humans as an endogenous variables is possible. (I've seen one analysis where they started talking about slaves as capital vs free workers. The reveal was that the author actually wanted to talk about the economics of robots (and other automation) as capital vs free workers---but without triggering people's preconceived notion of what automation can and cannot do to macroeconomics.)
I've always been fascinated by Malthus. Without Malthus I don't think you have a Darwin. I know he gets typed as the doomsayer but there has always been something very elemental about his idea. I think it was the first time I encountered a simple concept that explained deeper patterns and so it stuck with me.
> Who is that `we' that needs more or fewer humans?
I'm trying with some difficulty to avoid value judgments e.g. we should or should not interfere in human reproduction patterns so that's a reasonable question.
I think that 'We' is the information network. I don't mean the Internet or the price system. It's a broader idea that probably fits into ecology, something like the Noosphere. The premise is that there exists a lot of different states the network could be in. It could be in an optimal state or in a sub-optimal one. I'd guess that it's governed by something like Cybernetics but I'm confident we won't know most of the rules and certainly not the emergent consequences of the rules.
To be less handwavy - the 'We' can be the union of the Economy and Ecology sets. It would take humans as being endogenous variables. I'm sure other people have thought of all this before, but it seems difficult to avoid metaphors that could suggest latent policy prescriptions e.g. Spaceship Earth (limited resources) or World System (global government).
About your ethical problems: you could just go purely formal, and try to present your thoughts without any value judgement. Any prescription would be purely conditional like:
- if you want to maximize this variable, you should do that.
Lemin Wu has some great thoughts and simulations that round out Malthus. He's also interested in why ancient authors, especially Chinese, decry commerce and any economic activity that's not food producing:
> For example, during the Warring Period of China (476-221BC), restraint on luxury was the theme of a series of political and economic reforms. In the face of constant nomadic harassment, King Wu-Ling of Zhao (340-295 BC) commanded his subordinates to take off their wide sleeves and long robes and switch to nomadic uniform—pants, belts and boots— in order to fight as cavalry. Half a century before King Wu-Ling, Shang Yang’s reform swept another kingdom, Qin. The reformer punished commerce, rewarded cultivation, forbade migration and restricted entertainment. In a word, he cut down luxury and directed as many resources as possible to subsistence. The subjects were deprived, but the Qin kingdom defeated all of the six rival kingdoms and united China for the first time in history. A contemporary philosopher commented, “Qin is different from all the other kingdoms. The people are poor and the government is cruel. Whoever hopes for a better life can do nothing but fight hard. This makes the Qin army the strongest of all."
(from http://wulemin.weebly.com/uploads/1/4/6/2/14620598/jmp1110.p... available via http://wulemin.weebly.com/)
https://marketmonetarist.com/category/says-law/
Though, I think your time will be better spend reading https://en.wikipedia.org/wiki/Henry_George_theorem and especially http://www.masongaffney.org/publications/G2009-Hidden_Taxabl...
See nominal GDP level targeting: http://www.economist.com/blogs/freeexchange/2011/10/monetary...
This whole situation is completely avoidable if someone would just have the courage to stop coddling elites and big business.