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Comment by analog31 | Hacker News Reader

Just reading the headline, what this means to me is that the "world economy" is doing a lot better than most of us are doing as individuals. I'm on a 25% furlough. Sales from my side business have dropped to zero. My other side job has dropped to zero. Among working people, I'm one of the lucky. My family actually has a little bit of money in the kitty.

"The economy" refers to a system that's primarily designed to concentrate and protect private wealth, and a 3% loss of private wealth isn't all that bad at all. The people who are really hurting have no wealth to lose.

I hope an outcome of this crisis is that we start to think about "the economy" in more humane terms.

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But when we're measuring the "world economy" it's not like we're measuring the heights of the stacks of gold behind scrooge mcduck's coffers, right? These numbers represent things like society's ability to make products people want, and peoples' willingness to spend their savings on things that are useful (instead of stuffing it in their mattress). The effects on labor are terrible, and your furlough reflects that. I personally was recently laid off, and likewise many individuals are hit much harder than 3%. But it's not like we should wish that other parts of the economy were hit as badly. None of it is good.

Indeed. I don't want anybody's money to just vanish. And while as others have pointed out, the numbers are a measure of productivity for somebody, the ability of workers to capture their own productivity in wages is not guaranteed.

The ability of workers to capture their own productivity gains is a lower than it's been in a century. This crisis will push the second derivative lower.

But we don't like talking about M2V[0] anymore because it didn't jibe with the daily propaganda for years that all is well

[0] https://fred.stlouisfed.org/series/M2V

People, especially the press, don't talk about M2V because they don't understand it. No one does outside finance or econ classrooms, and most of them don't either. BTW, jibe, not jive.

Maybe productivity gains are vastly overstated? Or more specifically, productivity numbers are distorted by a few industries that have had extreme productivity gains, while most have stagnated.

You are offering an explanation for a situation in which everything is fine. Unfortunately we already know that this is not the case.

> spend their savings on things that are useful (instead of stuffing it in their mattress)

People are literally spending all their money on food and rent, not stuffing it in their mattress. The only ones doing that are the ones on top, hoarding wealth and exploiting their underlings.

> ability to make products people want

Wealthy investors have decided this isn't important, all that's important is cutting costs so they can hoard more wealth, which usually means exporting production out of the country so they can exploit laborers in other countries where they don't have protection through the law. This is why we currently don't have enough masks and rely on foreign countries to produce them for us.

The "world economy" only seems to measure things that make rich people richer, and how effective these things are at doing so.

They are not actually hoarding “wealth”. No one is sitting on a pile of apartments, or ventilators, or college spots, or food distribution capacity. There is fixed amount of that stuff out there right now.

If it was possible to produce apartments for you for half the price, or deliver food, or an fda approved ventilator, and still have a profit investors would be jumping over themselves to do so.

Businesses are hoarding cash because they predict a drop in revenue and want to save as much as they can so they can continue operations and realign for the new economy.

> No one is sitting on a pile of apartments

They most certainly are. Vast amounts of private real estate in the most prime locations are sitting empty. See the Royal Family's property in Mayfair London for example.

It's actually quite profitable to hoard apartments [1] and ventilators [2].

[1]: https://www.nytimes.com/2017/07/21/upshot/when-the-empty-apa...

[2]: https://www.nytimes.com/2020/03/29/business/coronavirus-us-v...

> No one is sitting on a pile of apartments, or ventilators, or college spots, or food distribution capacity.

The large number of empty apartments being rented 3-4 nights a month on AirBnb in most large cities seems to indicate otherwise.

The CPAP machine "jailbreak" posted here yesterday seems to indicate otherwise.

The large quantity of food going to the trash every day seems to indicate otherwise.

I agree that there is a "fixed" amount of stuff out there, but it's far from allocated efficiently. I think it's time we recognized that.

How is a CPAP machine hack an indication that there are excess ventilators? I don’t think you thought that through.

> but it's far from allocated efficiently. I think it's time we recognized that.

Who hasn’t recognized there can be inefficiency in the current system? The argument is that a central planning committee is going to do much worse.

The gist of the article was that a CPAP machine was basically a ventilator with some features disabled in software. Given that there are many of these around, with a 3G internet connection and OTA updates, and that the manufacturer could easily turn a CPAP machine into a ventilator by "flicking a switch", yeah, I consider that an indication that they're "sitting on it". They'd rather sell you a new machine at over-inflated prices than enable existing machines to be repurposed.

> The large quantity of food going to the trash every day seems to indicate otherwise.

These are all kind of bad examples, but I'll go with this one. Food takes time to grow or produce, so you have to accurately predict months out how much food you can sell. So, who is to blame for imperfect predictions of future demand? We could donate all this food instead of just binning it, so then who's to blame for not building the mass infrastructure required to coordinate such distribution, and then running it all for free? And then if such an individual did do this, why didn't they spend their considerable resources instead on a project that could have benefited humanity way more?

I mean, you realize this is a catch-22 argument right?

We don't want the government doing anything in our lives, so we don't expect any sort of mass infrastructure to be built to support for food distribution. We expect the wealthy and corporations to be philanthropists.

But being a philanthropist costs money. So instead we have a bunch of farms and food producers instead tossing out food because it's cheaper to throw it away than it is to donate it.

So how can you claim it's a bad example when people would rather throw food away for profit?

Your expectation is that farms should operate at a loss such that no food goes to waste? Businesses that don't make money very quickly will get shut down. Or they could just always underproduce what the market needs in order to ensure that there is no waste.

Nice try, but when states and municipalities have made anti-food-waste laws, this hasn't happened.

In fact, with a little tweaking, most food businesses can profit from throwing away less food: garbage disposal isn't free, and food donations are a tax writeoff.

Someone I knew in Philadelphia used to trash pick food from the Trader Joe's dumpster. But they caught him on camera and then put up signs, and eventually put a lock on the dumpster. They literally spent money to buy signs and a lock, and pay people to put up the signs and lock the dumpster every night.

Oh, for sure, if the government is fronting the cost of donations via tax incentives, then we just need to keep on increasing those incentives until it's worth it for the farms to implement this for whatever we consider a "required" percentage of their waste. Farms are already heavily incentivized to minimize their waste in the first place, since that's a ton of labor costs going down the drain, in a business with relatively low margins, but missing out on the sale is still more important for staying in business.

Then maybe we need to re-evaluate the idea that farms need to be making profit over distributing food. I mean, farms already receive massive subsidies from the government in order to operate. We just had a round of farm bailouts because they couldn’t sell their food to international markets. Now they are throwing food away because they can’t sell it locally. Meanwhile there are lines stretching miles long with people waiting for food. Perhaps for-profit food production should not be a goal for a society.

> The large number of empty apartments being rented 3-4 nights a month on AirBnb in most large cities seems to indicate otherwise.

High rent for shitty apartments has been part of SF and NYC life for 30 years before Airbnb. This is more of a NIMBY problem. It’s politically easier to blame Airbnb then to build high rises with affordable rent and change the “culture” of the neighborhood /barf

They are not actually hoarding “wealth”. No one is sitting on a pile of apartments...

They literally are actually. Buying expensive houses and leaving them empty is an incredibly common way of hoarding wealth. https://londonist.com/london/housing/how-many-vacant-empty-h...

> No one is sitting on a pile of apartments, or ventilators, or college spots, or food distribution capacity. There is fixed amount of that stuff out there right now.

Well actually, at least two of your examples are clearly wrong. In NYC, one of the most competitive housing markets in the world, one in four luxury apartments is vacant[1] while the homeless freeze to death outside each winter. Any shortage of food is hard to argue when we're turning corn into fuel instead of food[2]. The only reason people aren't sitting on piles of ventilators yet is that the high demand is new enough that a way of making money by letting people die of suffocation hasn't yet emerged.

[1] https://www.nytimes.com/2019/09/13/realestate/new-developmen...

[2] https://www.forbes.com/sites/stevensalzberg/2016/04/25/why-a...

Shutting down to save money isn’t hoarding wealth, it’s trying to save a business FFS. Paying employees for 4 weeks of doing nothing and bankrupting the business over it is much worse in the long term.

I think you're crossing separate points. Ordinary people are doing worse than a 3 percent drop, so this "world economy" is about something very different from how ordinary people are doing, and this is a problem.

Getting laid off isn't wealth hoarding, but does that mean there isn't wealth hoarding?

The GDP (i.e. “the economy”) is a measure of all goods & services produced and consumed. Even if someone is paycheck to paycheck or hand to mouth, this means less goods and services they can make and consume.

If this response was about crashing financial markets the blasé tone would be OK (ignoring that many retirees rely on pensions or bank accounts tied to financial markets). But this is about the entire economy.

"the system" isn't designed to protect wealth so much as encourage productivity. There is a direct correlation between increases in productivity and increases in wealth, but a system designed to protect existing wealth would look much different than ours. For instance, cartels would not be illegal.

What do you call it when real wages don’t go up in a system designed to “encourage productivity?” Since the gains aren’t going to workers at all, they must be going to those at the top, right? That sounds an awful lot like “protecting wealth” to me.

While I agree with your sentiment that the system is flawed and not serving much of the population, I think the parent's point still stands. If the system was designed solely for protecting wealth, it wouldn't be encouraging competition -- ie. cartels and monopolies would be permitted.

Make no mistake, whatever the goal is, the side-effects are unfortunate.

> cartels and monopolies would be permitted

Last time I checked both of these still exist and wield massive power globally. Just because something is “illegal” doesn’t mean that it isn’t part of the system. The system was “designed”, it’s behavior is emergent. States institute laws which have side effects and those side effects are part of the system.

Really? You’re gonna tell me cartels and monopolies don’t exist when 10 companies control nearly the entire food and beverage industry? [0] What good is it being able to choose among 195 brands of bottled water [1] when there’s not much of a difference among them? Is this what all our productivity is going towards? Or maybe it’s all that advertising they drown us in to convince us to buy this stuff?

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[0]: https://www.businessinsider.com/10-companies-control-the-foo...

[1]: https://en.wikipedia.org/wiki/Bottled_water

The prohibition of cartels and monopolies is an old law that has been allowed to be gradually weakened.

The difference between the median and the average strikes again! The popular comparison is that median real wages have only risen slightly from the 70s while average productivity (because by definition the labor productivity numbers are averages) has risen substantially. But much of that is due to the increases in productivity from high productivity individuals, say maybe those whose job it is to tell fancy electronic machines how to do low skill repetitive tasks. Some of those people might even browse this forum!

There is actually fairly weak data to support the popular theory of a decreasing labor share of income (and thus an increasing capital share) causing more inequality and to the extent such an effect could exist its size is only a few percent of GDP over the past few decades.

How does median vs mean matter here? Maybe only 50% of people are completely fucked? Big deal; I know the CEOs and software engineers are doing fine.

Because high skilled workers have seen both their productivity and income rise substantially. The median and other lower skilled workers have not. This will lead to an increasing average but a stagnant median, but it doesn’t mean that the idea people are mostly paid based on productivity is wrong.

I never claimed that. I claimed that workers generally are no longer reaping the benefits of increased productivity. If you want to offer income inequality as an explanation, then I'd be interested to hear how you work that all out, and if the math adds up. But, my contention that all the gains from increased productivity are going to those at the top seems to be exactly what you are espousing, yes? Are you agreeing with me in different words, or am I misunderstanding?

It doesn't matter if you compare incompatible measures. As long as past values are better than present values we are on a downwards trend.

Wages stopped increasing when human productivity peaked. The continued gains in productivity we have seen since that time have come by way of mechanization/automation. Given that the system encourages productivity, those who bring that automation to the economy reap the rewards. Those who only offer their labour to the economy are stuck since labour productivity has peaked. Humans simply cannot provide more productivity on their own.

As most people only offer labour and only a small group offer the more and more productivity gains of automation, it is true that the rewards end up being concentrated in that small group of productivity providing people. "The top" as you put it. That disparity is meant to incentivize you to develop your own technologies that increase productivity further instead of "wasting" your time selling productive-constrained labour, but in the real world it is unquestionably difficult to recognize where productivity can be gained.

The understanding of that was the basis for the idea behind pushing everyone into post-secondary schools, with a promise that higher learning would teach you how find solutions for increasing productivity, and thus increasing your reward for increasing overall productivity (a.k.a. providing you with a higher income). However, the real world is again messy and it hasn't really worked out. Despite a substantial increase in post-secondary attainment in recent times, the vast majority of graduates are making no more than they would have without having attended a post-secondary school (wages have been stagnant for decades upon decades) as they by and large end up only selling their productivity-limited labour.

> Humans simply cannot provide more productivity on their own.

Sure they can. Who is designing and building and installing all that automation?

I know that you recognize this since it's a key point of the rest of your post. But I don't think you've fully realized the implications. The problem is not just that post-secondary schools haven't lived up to their promise of teaching people how to increase overall productivity. The problem is that, fundamentally, increasing overall productivity is entrepreneurship, and entrepreneurship is not something that can be taught in schools. It's a fundamental change in viewpoint: you have to stop thinking of yourself as an employee, a wage earner, and start thinking of yourself as a business owner. But schools teach people to be wage earners, and as you quite correctly point out, there is no real growth to be had at this point in being a wage earner.

> Sure they can. Who is designing and building and installing all that automation?

The work of designing, building, and installing remains constrained to the limits of human productivity. The only way to make those jobs more productive is to use tools, and, like always, those who control the tools are those who reap the additional spoils.

> The continued gains in productivity we have seen since that time have come by way of mechanization/automation.

but that has been true since the first chimp figured out how to shove a stick into an anthill and get more tasty bugs than just picking off the ants on the surface. We use tools, better tools are how productivity advances.

Yes, yes, we have better tools than ever before, to the point where they don't look like tools. We can build a machine to do a thing and then leave, and only come back and tinker with it when it breaks.

Some time in the previous century basically everything switched over to assembly-line type production, where nobody built the whole widget themselves. the current switchover is to, uh, I guess you would call them robots. Tools that do the thing with one time input to guide them (and, of course, lots of ongoing maintenance)

But make no mistake, these "robots" we have are still just tools; tools that give massive leverage to the labor that programs those robots and that maintains those robots.

I think a lot of it is politics and labor leverage and education. after the new deal and the second world war and the GI bill, a lot of our workers had free education. We had a serious safety net for the time and a very progressive tax system with very high top marginal rates to pay for it. and lots of unions. All things that give workers more negotiation power.

Time goes on, machines get cheaper, the surplus doesn't go to the inventor but to the people buying the machines. So wealth turns into more wealth.

Even if a person can't provide productivity "on their own", productivity per person increases, and it's bad for that to be tied to an increase of wealth inequality.

And trying to have everyone invent solutions sounds like a weak justification for a broken system to me, along the lines of the temporarily embarrassed millionaire.

The benefits of increased productivity go to the people who made the changes that increase productivity, which is basically the managers who made the investment and the people who implemented the solutions using that investment, such as software engineers. Why should it accrue to those simply using the new better solutions when they are not responsible for the productivity gains provided by those solutions. If anything, their jobs usually become easier than it was previously with the advances.

This idea that only management making the investment and shareholders benefit from productivity gains is wrong. People like myself and many others on HN that are engineers are major beneficiaries of the productivity gains because we’re the ones actually building the solutions responsible for those gains.

Because those “investments” don’t matter if there are no workers using the tools. Look around you. How is the economy doing with everyone staying at home due to the pandemic?

Last I checked, I and many other people are still working from home. Just because our jobs don't have to occur outside the home doesn't mean that we're not still making improvements that lead to greater productivity.

There is no issue with people using the tools. The issue is with workplaces where multiple people need to work together. People with jobs where they use the tools but don't need to be around others or very many others are generally still working.

Also, not all productivity improvements are from tools that still need to be used by workers. A lot is from automation.

Anyways, my point is that tons of people who are not at the top of the businesses experiencing increased productivity are reaping the rewards of productivity improvements. It's a falsehood to think that only those making the investments are reaping the benefits. It only looks that way if you myopically don't look beyond the firm whose productivity improved.

> Anyways, my point is that tons of people who are not at the top of the businesses experiencing increased productivity are reaping the rewards of productivity improvements. It's a falsehood to think that only those making the investments are reaping the benefits. It only looks that way if you myopically don't look beyond the firm whose productivity improved.

Your point literally misses the point. From the perspective of improving the lot of ordinary workers, "beyond the firm whose productivity improved" doesn't matter. What matters is peoples' paychecks.

Before the mid 70's, when overall productivity went up, wages went up. That is no longer the case. It wouldn't be a problem if things like housing (both home prices and rents), education, medical insurance, and healthcare services (which is still important even for those with health insurance due to out of pocket maximums and deductibles). Notice how all of these are basic essentials of life, some of which are essential enough to form the base of Maslow's hierarchy of needs? I also want to stress that people today have to fund their own retirement, because there are no more company pensions.

Things that have gone up at or below the rate of inflation since the mid 70s are, by and large, not essentials: cars, computers, airline tickets, phone service, TVs, and clothes. [0] Granted, clothes, and sometimes cars are essential, but the savings there don't come close to making up the shortfall in the other things.

> Also, not all productivity improvements are from tools that still need to be used by workers. A lot is from automation.

If anything, I would guess that automation has harmed workers by eliminating good jobs, rather than benefiting people overall. Yeah, we have free stock trades now, but who cares?

I'm open to being convinced otherwise on the automation point, but I have a hard time seeing how people like my mom and dad, neither of whom went to college, could make it into the middle class today if you waved a magic wand and made them 25 again.

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[0]: https://www.bizjournals.com/bizjournals/how-to/growth-strate...

Before the 1970s, when overall productivity went up, the individual contributors has a much bigger contribution to the productivity improvements. Even with the improved tooling, you still needed people with the skills to take advantage of the improved tooling, so workers back then still had the ability to claim a portion of the increased productivity.

As the tooling and automation got better, the skills contributed by the worker have been responsible for less and less of the productivity gains to the point where the worker is contributing almost none of the productivity gains.

From the perspective of improving the lot of ordinary workers, "beyond the firm whose productivity improved" does matter. You can still make it to the middle class life today, but you do so by taking those jobs that help improve productivity like being a software engineer. I'm middle class myself. I got there by contributing to productivity gains.

Make no mistake, even prior to the 1970s, there were plenty of jobs that would not have gotten someone into the middle class life. Those jobs that didn't get you a middle life back then have a lot in common with those that won't get you a middle class life today in terms of the amount of skills and effort required.

Real compensation has increased dramatically. It's a great mistake to assume that a wage is the only cost of employing someone. The cost of labour has gone up significantly over the past few decades.

Sure, workers are getting "paid" to "buy" health care that should be a public good, and is twice as expensive overall as anywhere else in the world.

That's a transference of wealth from the wealthy to the wealthy -- possibly to themselves.

Exactly. As I said in a comment that was inexplicably flagged, "compensation" doesn't pay my rent. My paycheck does. Not only that, but I have to pay more in real terms for things like housing and education than people in the 70's did, and I have to fund my own retirement.

> What do you call it when real wages don’t go up in a system designed to “encourage productivity?

Low skill immigration. Without them McDonalds workers would earn $25 an hour in San Francisco like they do in Zurich since otherwise nobody would want to work there.

"the system" is designed by people with wealth and is absolutely biased towards protecting it. Its just that encouraging productivity generates them more wealth.

Pretty much Rules for Rulers[1].

[1]https://www.youtube.com/watch?v=rStL7niR7gs

That don't negate the parent's argument, that many measures and structures for protecting wealth are outlawed/regulated agaisnt in our world including monopolies, rent seeking, cartels, etc. That seems to be an argument against the claim that the system is designed to protect wealth.

Our culture is riddled with legal cartels, see medical test production for a horrifyingly relevant example.

> a 3% loss of private wealth

GDP is a flow variable.

The 3% drop refers to productivity, not wealth. So it's like the average of 7.8 billion people is creating and consuming 3% less.

Given that the population growth is around 80,000,000 yearly, or 1 percent, we are looking at a world GDP per capita decline of 4 percent.

Since large parts of the world's population barely had enough for food as it were, and that even in the first world, a lot of the production goes to create wealth for the few rich, and most people don't save much or anything to begin with, it's going to be felt.

And do we really believe it stops there? Will people actually want to travel and dine out as much as they used to once the lockdowns are over? Or will they be careful for months or maybe years to come? What happens when the virus really spreads in Africa, India, South East Asia and South America? Will they barely care because they are so young it's not dangerous to them? And what about the second and third wave in the first world? What if the vaccine or cure is not that easy to make and distribute so we don't have any before mid or late 2021?

"The economy" refers to a system that's primarily designed to concentrate and protect private wealth, and a 3% loss of private wealth isn't all that bad at all

This isn't really true.

A 3% contraction in the world's economy is the sum of all countries GDPs. That's a measure of how much "stuff" (goods and services) is produced.

It's more closely correlated with unemployment than with the stock market (ie, with private wealth).

Except there is no concentration of private wealth in the long term, and income from capital plays an exceedingly small role in the overall economy. Even those in the top 0.1% mostly make their money from wages.

What you observe is that fact that a great majority of people live on fixed income which doesn't get hit (because these people are useless anyway, like most government employees), and many live off pensions, plus government boosts it's spending. So those who actually make their living, lose a lot more. But same is true about good times, when economy books it's not policemen or school teachers who get biggest raises. Those with capital are even further up the risk curve: when stock market drops, they directly lose money. And dividends on the stock can easily drop to almost zero.

Losses are only realized when you sell. A temporary drop only causes panic sellers to lose money.

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