Comment by jinfiesto | Hacker News Reader

Comment by jinfiesto | Hacker News Reader

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Completely agree with the last paragraph. The economy is tilted way too far towards incentivizing value extraction instead of incentivizing value creation.

Don't know that I agree with some of the previous stuff though. Even if we assume a steady state population, if the economy doesn't grow every year, we're playing a zero or negative sum game literally by definition.

RE your second paragraph, I both agree and disagree. As far as I can see (at least the US system) is predicated on ~4-7% economic growth being the way that people systematically grow relatively small savings into a large nest egg for retirement (not that this appears to be working particularly well, see your comments on pie stealing.) If we assumed a steady state for the population and economy, I don't see how people working for average salaries can set enough aside for retirement (without pushing themselves to a pretty low standard of living) without the benefit of ~4-7% compounding.

I have a developer's salary, so I could probably put away a couple million cash before my retirement even without the benefit of compound interest paid by economic growth. That's not the norm, or even the average though. Participating in society/the economy has to be an attractive enough proposition to incentivize people to do it, or bad social problems start popping up. In a steady state system, I don't see how we can make an offer more attractive than "Enjoy your subsistence lifestyle up to retirement, so you can have barely enough to have a subsistence level lifestyle in retirement."

> Even if we assume a steady state population, if the economy doesn't grow every year, we're playing a zero or negative sum game literally by definition.

It's really two independent games that just happen to have the same prize for winning. The people stealing the pie are the bums regardless of whether any other people are growing it.

And zero sum games aren't always the end of the world. If everybody is fine in year zero and then nothing changes, everybody is still fine. Not as good as things getting better, but stable. The problem is if things are getting worse -- increasing levels of consolidation over time. But you can have that even in the presence of growth. It's an independent problem.

> If we assumed a steady state for the population and economy, I don't see how people working for average salaries can set enough aside for retirement (without pushing themselves to a pretty low standard of living) without the benefit of ~4-7% compounding.

Interest rates and ROI are related to GDP growth, but they're not the same thing. Time value of money is a thing even in the absence of economic growth.

Suppose every year Farmer Joe has to borrow money to buy seeds and pay workers to plant, grow and harvest the crops. Then after harvest he sells the crops and uses the money to pay back the loan. Every year it's the same, every year he starts and ends the year with the same amount of money, there is no economic growth, but the lender is still earning interest on the loan every year.

Meanwhile the lender is your 401K, so it makes money over time which you then spend down in your retirement and die with the same amount of money in real terms as your parents did, and so on indefinitely.

And the interest rate has to do with supply and demand for currency, for which economic growth is a factor (affecting demand), but not the only one. The other obvious big one is that the Fed sets interest rates (supply) by fiat, as well as other things like bank reserve ratios.

I agree that in a vacuum, zero sum games aren't necessarily a bad thing. However, in our hypothetical economy, the actors obviously aren't at parity for their level of skill at playing the game. In a zero-sum economy, consolidation is inevitable. At least in the presence of growth, the avoidance of consolidation is a possibility.

> Suppose every year Farmer Joe has to borrow money to buy seeds and pay workers to plant, grow and harvest the crops. Then after harvest he sells the crops and uses the money to pay back the loan. Every year it's the same, every year he starts and ends the year with the same amount of money, there is no economic growth, but the lender is still earning interest on the loan every year.

> Meanwhile the lender is your 401K, so it makes money over time which you then spend down in your retirement and die with the same amount of money in real terms as your parents did, and so on indefinitely.

I feel like you're making the assumption that the agents in this system don't make an attempt to consolidate (and obviously if and when they do, they will have varying levels of skill at doing so.)

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