Technology Is Deflationary and This Shouldn't Be Controversial | Hacker News Reader

Technology Is Deflationary and This Shouldn't Be Controversial

ericbutton.substack.com

3 pointssberens10 comments

In any free market, at equilibrium, all prices for any good decreases to the absolute minimum required to produce that good. There is no profit--it is all competed away.

If you want profit, you can't be in a free market at equilibrium. You can either attack the "free" part (create an aristocracy or oligarchy) or the "equilibrium" part by introducing disruptive innovations, which will lower the cost of producing something, allowing you to extract some profit.

But eventually, a free market will return to equilibrium, by lowering all the prices to reflect the reduced costs of production, and profits will be competed away again.

All innovation is therefore deflationary, and happens in the context of a market which is not in equilibrium, i.e. is unstable, and therefore will crash from time to time.

Surviving these crashes is easier if you are an aristocrat or oligarch, so....we get what we have today, a mixed market, free enough to allow for innovation, but which most of the profits go to oligarchs.

Unfortunately, just because the market has to still be free enough to allow for innovation, it is still unstable, which is why it crashes every 10 years or so, and all the governments of the earth (controlled by the oligarchs) have to bail it out. Since the whole point is that the oligarchs don't have to use their own money to do this, the governments use money which is essentially just printed. This creates inflation. Balance is restored to the force.

For the past 40, 50 years or so policymakers have been remarkably able to maintain this balance to avoid both inflation and deflation, but its a very tight rope to walk, and currently we are on the inflation side of it.

Minor nitpick: there won't be economic profit but there will be accounting profit.

Can you clarify? Seems like if a company is making accounting profit, that would ipso facto, in a free market, represent an opportunity for another company to come in, under bid them, and take some of that profit for themselves....and so on until there's none left to take.

There are implicit costs that aren't included when calculating accounting profit. See also https://en.wikipedia.org/wiki/Profit_(economics) and https://en.wikipedia.org/wiki/Implicit_cost

> Sure, Marc added some bite to the piece — he called it a manifesto, after all — but most of it was grounded in economics: if you can do more with less, you get more for less. Sadly, in the dozen responses from outlets like the New York Times and Gizmodo, that got zero airtime.

Both the economic and editorial observations are true, and miss the points by a wide margin. Without rehashing all of them here, it's simply that this wasn't the point of the manifesto. It was that everything only gets super better for everyone with no social or ecological downsides, and it's wrong to question what gets created how for whom, and everyone should just get out of his way and let him run everything.

The manifesto had many disjointed themes, and some of the arguments Marc made seem intentionally inflammatory or oversimplified (and it has to be intentional polemicism, he's too smart -- and it's too on the nose -- for it to be an accident). (And if his goal was to create a stir, well, mission accomplished...the NYT ran two op-eds reacting to it.)

I was galvanized to focus on the deflationary part after reading an opinion piece that suggested that government price controls were more effective...

Hey, thank you for responding, it's cool to find the author here. Fundamentally, I mostly don't disagree with you. (I do wonder at his purpose.) I didn't read that piece, was it from one of the credentialed elite? There are 8 billion people in the world, if you read enough of their writing you'll see lots of bad ideas. Tuning out the noise is work.

The fact that better tech to do something drives down the cost of it is, to me anyway, almost tautological, that's part of the definition of better tech. There a 0-to-1 inflection point where something wasn't possible at all before, therefore the price was effectively infinite, but after that it's by definition better if it lowers all the costs that matter. Debates ensue when the financial cost is lower and the other costs get raised, which is usually the case. No one argues when the financial cost is same or lower, the pollution is demonstrably lower, and the performance is the same or better. Iphone assembly workers don't commit suicide as much as they once did, that's progress. For some miltech, it functions similarly to consumer tech but doesn't break as easily, that's why it's better tech at 10x the financial cost of consumer tech.

Tech is tech. It doesn't solve people. If you wear eyeglasses, they are expensive because of people (monopolies, Luxxotica). Fundamentally, he was writing about people.

The first words of his are in a section titled "Lies". And one such "lie" is that technology threatens the environment. Yeah, show me miltech that doesn't?

So this is the motte to Marc Andreessen's bailey?

"Why are you upset about me namechecking fascists and anonymous twitter shitposters in an unhinged and uninformed rant calling for me and my friends to be unchecked by democratic oversight? I was just saying that iPhones have gotten better and books cost a lot more to produce in previous centuries!? Who can argue with that? Why do you hate progress?"

Ironically, I don't think tech leaders have forbidden their kids to have books because they might get addicted to reading paper. Adolescent self-image hasn't been challenged by print magazines like it has by social media. Etc.

Wonder if people will see giving a kid an ipad the same as we see giving a kid a book in a few years with advancements in VR/AR

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