Comment by thedevil | Hacker News Reader

Comment by thedevil | Hacker News Reader

A few rants (mixed in with a few half-baked ideas):

1) Economic progress from the industrial revolution is about quantity. We learned to make a lot more stuff. The industrial revolution is not quite done, but the impact is less and less every decade. We may never match that quantity growth of stuff because we don't even want more stuff, we only want better stuff. And we're getting better stuff and more variety.

2) Info. tech. IS being mismeasured and it's huge. We're not all imagining it. The economics of info tech are REALLY good except in the official GDP numbers. And arguing that it's not counted in economic measurements doesn't debunk the mismeasurement claim, it supports/explains it. What's more, info tech decimates a lot of industries - music, GPS, newspapers, travel agents, etc. And self-driving cars are probably going to decimate the auto industry and wipe out a lot of logistics related jobs. Everyone(A) will be better off but official GDP will fall.

3) Wages aren't growing largely because the economy needs more skilled and more managerial workers, but we don't seem to be producing a lot of them(B). It's an awesome time to be a skilled worker. Good and growing pay and billboard signs desperately seeking talent. There's no end to work that needs to be done with the right skills. Meanwhile, unskilled workers aren't so useful anymore. They were well off when anybody could sit in an assembly line and produce a lot of stuff. But now unskilled workers don't really produce, they mostly trade their time for other people's time (e.g. by cooking their food) and they do so from a weak negotiating position. I don't see any of this changing anytime soon.

(A) Everyone = the vast majority of people

(B) Anecdotal, I could be wrong

You're wrong about one thing... The low skill jobs didn't vanish. They moved to places where wages and regulation (safety, environmental, etc) are less.

The people who made Fisher Price toys in East Aurora, NY were made redundant by equally low/moderate skill workers in Mexico and later China. Your undershirt was made in North Carolina until the late 80s, and shifted to a variety of places until it hit the bottom -- Bangladesh.

The IBM people who assembled Power servers in Minnesota were replaced by Mexicans. The Dell folks in North Carolina and Texas were replaced by Mexicans, Taiwanese and Chinese.

What you characterize as low skill work and workers still exists and isn't being automated away to the extent that the average HN commenter would suggest.

I question the value to the consumer as well. The shoes on my feet are made in some mega-factory in Guangdong. They cost more than the shoes I bought a decade ago that were made in Maine, and are of similar quality. IMO there's a lot of middlemen or some sort of self dealing going on -- producing shoes in massive bulk should push prices down, not up.

Are they the same price in 2006's dollars?

Outsourcing is the last step before automation.

You have to follow your own rationale here trough.

What happens when mexicans become richer and also concerned about safety at workplace because now they can afford to worry about it?

This is why even china is outsourcing to even cheaper places, robotics or why when production sometimes comes back it's in fully automated factories.

> What happens when mexicans become richer and also concerned about safety at workplace because now they can afford to worry about it?

They get canned and the work gets shipped out to China.

People are only winning over robots because machines are currently more expensive. Labor tends to get more expensive as economies mature, whereas robots keep getting cheaper.

I haven't paid above 12 euros for a good quality pair of everyday use shoes for many years. Buy your shoes from army surplus. They are comfortable and I think they are mandated to last 5k miles. This would be the runners they use for physical exercises.

> The economics of info tech are REALLY good except in the official GDP numbers.

Take Google, for example. The (economic) value that Google provides to me is far more than I pay for, which is zero. It's even far more than what Google makes from the ads it serves me. Google is capturing as revenue only a small fraction of the value it creates. That (and similar cases) are why much of the info tech economic/productivity gain doesn't show up in the official GDP numbers.

Well, the official GDP numbers also don't count the value of sunshine and rainbows -- because that's not what they're created to measure.

If you get a lot of value from something you pay nothing for, and it doesn't increase your job output in dollars and cents, then there's no reason it should increase GDP.

and to that extent we should reduce the importance we place on policies that increase GDP.

GDP increases are nice, but they are by no means the only important thing to consider. many other considerations must be made when creating or changing public policy.

By that logic, stuff I buy that doesn't increase my job output (like movies, music, and ice cream) also shouldn't be in GDP. Stuff I consume belongs in GDP, even if it doesn't turn into stuff I produce.

You missed where I said:

> something you pay nothing for

So, obviously, yes, if you buy ice cream GDP will go up.

OK, now I see how to parse what you said. If I pay nothing, and I produce nothing, than it doesn't add to GDP. True, as GDP is constituted. But what if it is free and still makes me better off?

Take Linux + Apache, for example. I can create a business for very little money because those are available to me for free. But are they only economically valuable when they cost money? If I used Windows to create my business instead, that would contribute to GDP, even if my business failed. Two (not perfectly) equivalent products, but one counts as GDP, and the other doesn't. Once you see that "economics" can contain more than dollars, then you see that GDP isn't the correct measure of economic activity.

> Take Linux + Apache, for example. I can create a business for very little money because those are available to me for free.

And if you do, that business shows up in the GDP.

And if you don't turn it into a business, it doesn't, even though a lot of people may find your hobby project interesting/useful.

What's the commercial value of a free live streaming app that captures evidence of a (say, for the sake of argument) a police assault, which eventually leads to a riot?

GDP is like a summary of all relevant execution paths through code. But it's really a list of paths that are considered relevant for traditional reasons.

It's not a complete picture, and in many ways it isn't even a useful one - because there's a huge implicit social morality tied up in econometrics that makes assumptions about social value.

Those assumptions are becoming less and less relevant for all kinds of technological, political, and even economic reasons.

Indeed, and the problem here is that GDP gives you a nice-looking metric to drive your thinking. Except that the conclusions and strategies you make based on that number will be only as good as the limits of meaning of that number[0]. It's a proxy for some aspects of economic activity, and yet it seems to be treated by many as country's "hit points".

[0] - a thing that nicely differentiates those who understand math fundamentals from those who don't - realizing that all theorems have a set of assumptions behind them, and are not valid outside that assumptions

A similar argument applies to traditional economic tasks.

Clean your own house - no GDP.

Pay someone to clean your house - GDP.

Same amount of work is being done, but GDP only counts what is paid for.

Sunshine and rainbows aren't produced by the economy. Google searches are, even though they are free.

If we're talking about how good the economy is, I'd argue that we should count all the good (and bad) that the economy is doing, not just the GDP.

Google searches are in no way free. Businesses pay for them in ad spend. Governments pay for them in lost tax revenue and opportunity costs lost through decisions influenced by Google's lobbying.

These are indirect costs, but they still have an overall economic effect.

You could argue - perhaps with some justification - that the net value generated by Google search is more than the net economic costs. That would be an interesting thing to try to estimate, and so far as I know no one has attempted it.

But that just highlights the underlying problem, which is that most mainstream economic models are completely unfit for purpose.

We're trying to run a 21st century economy using banking systems that haven't changed in principle since the 15th century, and econometrics that have barely evolved since the 19th century.

And all of that happens with a huge political bias that overestimates the value of some activities - including speculation, and other forms of wealth capture - and underestimates the value of authentic wealth generation.

In fact no one knows how well the economy is doing, because we barely have any idea what an economy is - certainly not in 21st century terms, where "the economy" is clearly a global pattern of resource flows, innovation, and future potential, not just an epiphenomenon of national or corporate accounting.

Not calculating GDP correctly is a tiny symptom of that. A full solution is probably going to need a complete reinvention of the entire field.

Which is why what we really care about is changes in GDP not levels of GDP

The point, I think, is that GDP isn't capturing everything that matters in understanding this paradox, regardless of whether that is accidental or by design.

> If you get a lot of value from something you pay nothing for, and it doesn't increase your job output in dollars and cents, then there's no reason it should increase GDP.

The funny thing is, Google basically enables my job. Good luck searching even on StackOverflow without it. Of course I could program without it, but it wouldn't be the same kind of programming, the projects wouldn't be the same, they wouldn't move that fast. Google is an excellent engine for browsing distributed documentation (i.e. all those random webpages detailing how to use the thing XYZ you need).

> We may never match that quantity growth of stuff because we don't even want more stuff, we only want better stuff.

This was my thought. This kind of measurement of the economy conflates maximum potential productivity with market demand, in essence assuming a supply-limited scenario. We've reached the point now where most people in first-world countries have as much as they want of most things that aren't super new, super expensive or super high tech. Production is now demand-limited.

In Robert Gordon's book he points out that GDP growth was not well measured in the industrial revolution either until things had stabilized and after a lot of the big improvements in life had happened.

Look at infant mortality and mortality to 5 years old in 1800 vs 1850 vs 1900 vs 1950 or so. How much is it worth not watching your children die?

The addition of water and sewage into housing had a huge impact. Dramatically reducing the labor required to live and dramatically reducing disease.

Look at life in 1800 vs 1900 and the percentage working on a farm. It was probably an improvement to live in a town or city and not have to get up at dawn and work in a low productivity farm.

Look at how life expectancy shot up. How much is it worth looking at your grandchildren grow up?

Sure, since 2000 we have vastly better internet connected phones and social networks and it isn't well measured. But what wasn't well measured in the past was probably worth more and was more important for people's lives.

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