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Comment by pzo | Hacker News Reader

> Higher wages in theory should be linked in higher productivity and output per worker in the US due to deep skillsets

I don't think this always have to be true, e.g. I'm polish and used work in uk and by crossing border to uk overnight I increased my salary 2-3x but that doesn't mean my productivity increased 2x.

You want to google concept called "Dutch Disease", an economic phenomenon where a resource boom (like oil) causes currency appreciation and decline in other sectors. Norway and the Netherlands faced this issue.

Lyn Alden’s Broken Money argues that modern financial systems fail to protect savings. For high-income countries like the U.S., the issues include:

- Currency devaluation: Persistent inflation undermines wage growth.

- Debt reliance: Governments and households depend on borrowing, creating fragility

- Technological gaps: Financial infrastructure lags behind energy/tech advancements, exacerbating inequality.

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> You want to google concept called "Dutch Disease", an economic phenomenon where a resource boom (like oil) causes currency appreciation and decline in other sectors. Norway and the Netherlands faced this issue.

Isn't this just the downside of comparative advantage?

Like you have the classic example of island 1 can make 5 apples or 15 oranges and island 2 can make 15 apples or 5 oranges so island 1 makes 15 oranges and island 2 makes 15 apples. What happens to the apple industry of island 1? It gets destroyed as they only focus on making oranges.

The only way you avoid dutch disease (Natural Resource Curse nowendays) is to intentionally have an inefficient economy.

I think that that’s the crux of the issue—efficiency is very often in tension with resilience. In an economic system that optimizes for efficiency above all, you end up with fragility. Not only do you have fragility, but because the system is complex, the fragility shows up in unpredictable places.

Red Queen races are also terribly inefficient and that's a big part of our economy today. Unfortunately Red Queen races are net positive on GDP.

>intentionally have an inefficient economy

Yes, but the economy should serve the people. The people do not serve the economy. Or at least that's the way it should work. Wall Street tends to disagree with this sentiment.

You've not fully comprehended the nature of productivity. If a doctor saves the life of a lazy labourer then they've created a certain amount of economic value. If they save the life of a very hard working labourer they created more economic value with the same actions [0]. Your productivity isn't just you, it is the entire system your work take place in and what capital it interacts with. Otherwise engineers would be worthless, we barely do more than mumble and wiggle our fingers.

It is entirely possible that moving from Poland to the UK doubled the amount of wealth you were generating. Dutch disease is an expression of that - if all your customers are wealthy then the economy signals that you are more productive than if all your customers are poor. Because you are.

Although I'm all aboard with Lyn Alden’s complaints. The US keeps disabling economic feedback mechanisms rather than reform failures and it is starting to catch up with them since the Chinese just work harder than they do.

EDIT And I think you might want to talk about the Baumol effect, not Dutch disease. Dutch Disease is typically invoked for countries that find high mineral wealth and then experience problems but Baumol effect is more relevant to productivity increases.

[0] We make no moral judgement, but economics is a harsh accountant.

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