Who Will Pay for the Future?

I recently read The Coming Generational Storm.  It’s an alarming book, and well worth reading.  Of particular note is the method of generational accounting.  It seems to take a page from formalism in treating all promises equivalently (whether that promise is that benefits will be delivered, that bonds will be paid off, or that taxes will not be raised) and treating the status quo as an implicit promise.  Looking at the possibility of implicit and explicit default is also key:  Benefits delivered worthless are the same as benefits not delivered at all, and inflation functions as a tax on financial assets even if taxes aren’t raised.

Of course, the question isn’t just whether promises will be broken or renegotiated, but whose promises will be subject to adjustment.  The youngest generation had little say in the current political order, so to what extent will they be willing to foot the bill?

If there’s a generational conflict, the young don’t seem to be winning, as noted in the Esquire article, “The War Against Youth”:

In 1984, American breadwinners who were sixty-five and over made ten times as much as those under thirty-five. The year Obama took office, older Americans made almost forty-seven times as much as the younger generation.

This bleeding up of the national wealth is no accounting glitch, no anomalous negative bounce from the recent unemployment and mortgage crises, but rather the predictable outcome of thirty years of economic and social policy that has been rigged to serve the comfort and largesse of the old at the expense of the young.


Nobody ever talks about generational conflict. […] Even the Occupy Wall Street crowd, while rejecting the modes and rhetoric and institutional support of Boomer progressives, shied away from articulating the fundamental distinction that fills their spaces with crowds: young against old.

The gerontocracy begins at the top. The 111th Congress was the oldest since the end of the Second World War, and the average age of its members has been rising steadily since 1981.

And it’s not just congress (and other formal, governmental politics), but academia:

From 1980 on, the price of attending a four-year college has risen by 128 percent. While the price has spiked, the quality has tanked. […] In a survey published in 2011, 45 percent of students showed no improvement in “critical thinking, complex reasoning and writing” after two years of college. […] And how could the results be any different? Three decades ago, 43 percent of professors were adjuncts. Now, with colleges bloated by older, tenured professors who take up huge slices of academic budgets while teaching crumbs of courses, the vast majority of classes are taught by adjunct.


But maybe […] you want to get a master’s or a professional degree. With entry to the professions comes another opportunity to be taken advantage of, and it’s not just the inherently ridiculous price of a creative-writing M.F.A. or journalism school, where on some level, everybody understands the students are being played for suckers. The cost of medical school has spiked over the past three decades. In 1981, average medical-school debt was less than $20,000. Today it is $158,000. Law-school tuition rose 317 percent between 1989 and 2009 while American laws schools wildly increased the number of lawyers they graduate. Naturally, a glut of lawyers decreases their value. So kids pay more for a worse education that leads to lesser prospects in order for the schools to prosper temporarily. […]

And unions:

New workers will earn a “globally competitive wage.” […] Newer workers at unions across the country earn ten to fifteen dollars an hour less than established workers, and the unspoken but widely reported understanding with the AFL-CIO is that the wage of these workers will not increase. In other words, Boomer workers make almost double what their young counterparts do […]

To the extent that the recent economic crisis hurt retirees as well, it’s not clear that this doesn’t exacerbate the transfer of wealth and opportunity away from the younger generation, as would-be retirees delay retirement.  This MarketWatch commentator notes that the BLS statistics on that point may be exaggerated if compared with statistics from different samples at face value, but concludes the trend is still there:

Part of this story is a real phenomenon: More baby boomers are staying on the job because they are healthy enough to keep working. They like working. Further, many of them desperately need the money: They lost their retirement nest egg when the housing market collapsed and the stock market stalled. Fewer of them can rely on a defined benefit pension, and more of them must rely on their own savings to fund their retirement.


The good news is that employment has been growing faster than the population in every major demographic group. In other words, the employment-population ratios have been rising since the depths of the recession. But, except for the oldest age group, the employment-population ratio is far below pre-recession levels.


The same thing happened to the generation that came of age in the 1930s. They put their lives on hold for years, and we are still living with their legacy: the baby boomers who are now clinging to their jobs. [emphasis mine]

American politics in particular is hooked on wishful thinking about the future.  If the future is one of unmitigated economic growth, increase productivity might pay all bills and pave over the entire problem.  Admitting that this is not to be is politically untenable.  It is tempting (and reasonably so) for middle-class children to view their parents as excessively optimistic, as opposed to viewing them as short-sighted cowards who sold their children’s birthright to the ultra-rich in order to secure their own retirement.

And it will be hard to renegotiate the social safety net in the face of a retiree voting bloc convinced on the one hand that the whole thing was a bad idea after all and should be scrapped, but on the other hand it’s good that we can just barely afford to keep it around for those who are really counting on it.

As the Esquire piece concludes:

Youth should be the only issue of the 2012 election, because all the subsidiary issues — inequality, the rising class system in America, the specter of decline, mass unemployment, the growing debt — are all fundamentally about the war against young Americans. But the choice young Americans face is between a party that claims to represent their interests but fails to and a party that explicitly opposes their interests and actively works to disenfranchise them.


By bus and train and car pool, they will follow the gerontocracy to Tampa and Charlotte, the cities with the utter misfortune of hosting the presidential nominating conventions. Then we’ll see if the people inside the convention centers can find the youth anything better to do.

We’ll see then how the flowers of rage, planted and nurtured so carelessly for three decades, have sprung up and who will harvest them.


Trayvon Martin and the State of Discourse

I’ve been following the case of Trayvon Martin’s shooting at the hands of neighborhood watchman George Zimmerman.  On the left, there was a rush to accuse Zimmerman of cold-blooded murder.  On the right, there was a rush to paint Martin as a thug and double down on the racialized paranoia.  But the facts that really make or break the case (specifically, who started the fight) are currently unknown.  The unusual bits of Florida’s laws on self-defense don’t really apply to this case, they don’t excuse murder if you provoke someone into attacking you and then resort to lethal force, or if you attack first and later fear for your life when the fight doesn’t go your way.

There’s some interesting discussion to be had on the role of guns in self-defense and aggressive violence, guns win fights but also escalate the stakes awfully quick:

Statistically, incidents of guns being used successfully in self-defense are extremely rare. The following events are a lot more likely:

• Criminal gets hold of your gun and uses it against you.
• The gun gives you a psychological feeling of self-confidence that will cause you to get into bad situations you otherwise would have avoided if you did not have the gun.
• Use of a gun in an ambiguous situation will get you in prison for murder, which is worse than getting beaten up.
• Being prosecuted for murder will ruin your life even if the jury finds you not guilty.

The Zimmerman incident is a good example of the truth of the above. The video showed that Zimmerman wasn’t beaten up that bad. Without the gun, Trayvon probably would have run away after giving him a good but not life-threatening beating. And according to Zimmerman’s father, Trayvon saw the gun, which caused an escalation in the altercation.

There’s something to be said about race relations in this country, something to be said about violence, about respect and community, about culture, about the standards of criminal evidence.  But most of what I hear about this case depresses me because it seems to be overwhelmingly characterized by those that no longer hope for productive dialog on this sort of issue, from one side:

“An eye for an eye, a tooth for a tooth,” Mikhail Muhammad said at a Saturday press conference in Sanford, Fla., in which he also called on 10,000 black men to “capture” Zimmerman. “He should be fearful for his life”…

Or the other:

In the last few days I’ve repeatedly discussed blacks’ common attitude that their response to any white authority figure who asks them anything is to resist, fight, ignore, or run away. But the commenter at Half-Sigma puts it better: Non-blacks may not talk to blacks, period. To say anything to a black is to step into his territory, it is to dis him, and thus to provoke his righteous vengeance…

Seems like on some issues the state of discourse in this country is only slightly better off than Trayvon Martin.


Murray and Meritocracy

I’m going to write a bit more about Murray, in response to an op-ed follow-up to his recent book.  The op-ed responds to the accurate criticism that his book describes a problem but doesn’t lay out policy suggestions or responses.  In the article, he makes several suggestions:

  1. Eliminate unpaid internships
  2. Replace the SAT with subject-specific tests
  3. Replace ethnic or racial affirmative action with socioeconomic affirmative action
  4. Eliminate bachelor’s degrees as a job requirement

All of those sound reasonable to me, though I don’t think those would make that much of a difference.  Neither does Murray, he thinks it would be more symbolic.

The big about degree requirements is interesting, in part because there’s been some action on a similar legal front with regard to high school diplomas.  The Equal Employment Opportunity Commission has at least raised the issue of whether high-school diploma requirements could be discriminatory when that credential is not well-connected to actual job requirements.  There are probably quite a few jobs where the credential of a college degree (especially if not requiring any particular subject) is also not well-connected to the job requirements, and may have an adverse effect on protected groups.

Murray really does have a lot in common with meritocratic liberals.  A common mis-characterization of the liberal position on group differences among alt-righters seems to paint liberals as radical “blank-slate” believers, who either think there are no identifiable groups (plainly wrong), there are no differences between identifiable groups (plainly wrong), or that there are differences between groups but by really lucky coincidences none of those differences are morally significant (plainly wrong and incredibly implausible (unless you think no differences are morally significant, I guess)).  Rather, liberals mainly disagree with Murray on whether wandering into the rhetorical minefield of biological group differences is net-beneficial.

Murray himself notes in an essay summarizing his previous book:

In all cases, the variation within groups is greater than the variation between groups. On psychological and cognitive dimensions, some members of both sexes and all races fall everywhere along the range. One implication of this is that genius does not come in one color or sex, and neither does any other human ability. Another is that a few minutes of conversation with individuals you meet will tell you much more about them than their group membership does.

Which makes me wonder why he can’t avoid those minefields entirely instead of merely tiptoeing.

(There’s some further fascinating discussion of the op-ed here.  The comments are really worthwhile, in particular the comment (left March 8, 2012 at 10:19 am, sadly no comment permalinks on that site) by Albatross on meritocracy.)


The Fall of "Fishtown"

A while ago, I picked the January 2012 issue of conservative journal The New Criterion (Volume 30, Number 5) from a local newsstand.  The issue caught my eye because it had a symposium on the question “Is America in decline?”, a topic I find fascinating as a futurist and someone interested in Peak Oil and similar phenomena.

One of the essays on the purported decline of America was “Belmont & Fishtown” by Charles Murray, summarizing Murray’s book Coming Apart, which discusses “The State of White America”.  (Presumably “white America” specifically for rhetorical reasons, given the fate of Murray’s most famous work.)  Murray discusses the richest and poorest of whites, using Belmont and “Fishtown” as emblematic labels for these groups.  Murray’s conclusion is that since the 1960s, “Fishtown” has gone into deep decline in terms of American core values (Murray refers to such as “Founding virtues”).  “Belmont” has avoided such decline, but become isolated (geographically (for more on that topic, see Bill Bishop’s The Big Sort) and in terms of tastes and preferences (becoming David Brooks’s bourgeois bohemians)).

Murray talks about four values in his study:  Marriage (and single vs. married birth and parenting), industriousness (Murray just looks at hours worked and participation in work force), honesty (Murray just looks at crime rates), and religiosity (which Murray posits causes increased civic engagement, but I’d say that it’s just correlated to civic engagement in general; church attendance is just a civic engagement thing religious people do).

Why did this happen?  Murray goes into little detail (at least in the short essay version of his work, I have not read the book).  One reason cited is the sorting effect of elite universities, coupled with financial aid.  This is an unintended consequence of meritocracy, the best and brightest, no matter how poor, are able to escape from troubled “Fishtown” (and, presumably, ensconce themselves in isolated “Belmont”), leaving “Fishtown” with even less social, cultural, human, and financial capital to deal with its escalating problems.  (Affirmative action would presumably bring the same effect to a broader cross-section of de-facto-segregated communities, but Murray doesn’t discuss this because he’s focusing on whites.)  As the problems get worse, the best and brightest of “Fishtown” have fewer opportunities where they grew up and more incentive to leave.

There’s one big thing missing from Murray’s explanation, though, perhaps best explained by a graphic like this:

(Excerpt from a graphic by the New York Times, from this opinion piece, HT Nick Huber.)

I’d say that’s the real power behind the wedge that’s driving “Fishtown” and “Belmont” apart.  I’d guess that the decline in the top marginal tax rate has something to do with that phenomena, though that came too late to be the primary cause.  Once you have the wedge of economic inequality (that is, declining economic opportunity that disproportionatly affects those already worse off (and pretty much anything will disproportionately affect those already worse off)), all sorts of feedback loops start up related to Murray’s metrics:

  1. Marriage: Less economic opportunity means fewer people can find a match who will make them better off. Job-related stresses also take a toll on relationships.
  2. Honesty: Less economic opportunity means more desperate people on the fringes.
  3. Industriousness: Murray asserts that divergence on this metric began when demand for labor was still high, but work that pays less (relative to national standards of living) is still less motivating.
  4. Civic Engagement: Less economic opportunity means less funds for church dues and other activities.  Increased job stress may mean less time/energy for other activities.
  5. Honesty + Marriage: Harder to get married if you’re a criminal.
  6. Honesty + Industriousness: Ditto for finding employment, even if it’s available.
  7. Honesty + Civic Engagement: Why participate in your community if you don’t like/trust your neighbors?
  8. Civic Engagement + Marriage: A good context to meet people, and in terms of child rearing in or out of wedlock, you’re more likely to care about social censure if you’re a member of a social group in the first place.
  9. Civic Engagement + Honesty: Building the sort of trust and norms that discourage crime.
  10. Any one of those four + itself: Norms change, it’s a vicious cycle.  The sorts of capital that keep these metrics high is also driven out when they decline.  Successful people leave, organizations move or cease to exist, webs of trust break down.

The above isn’t an inclusive list, and that’s not all that’s going on.  Technology has a role to play, too, and given my earlier points about the Robot Revolution (related), I expect the trend in the graph above to get worse.

I think both liberals and conservatives are aware of the decline Murray discusses, though I’ve seen rhetoric from both sides accusing the other of being in denial.  The underlying problem is largely untargeted by either side.  Liberals only have the political power to defend stop-gap measures that help the poorest of the poor.  Conservatives deny that a gap between productivity and wage growth is a problem, or suggest that the poor will pull themselves up by their own bootstraps if only liberals stopped “helping”.  That line misses two things:  First, the “rising tides lift all boats bit” doesn’t really fit with the psychological reality of the situation, which is that people judge how well off they are relative to others in their society, so economic inequality means social breakdown even if standard of living continues to rise.  Second, there seem to be some implicit and very rosy assumptions about the form such bootstrap-pulling would take, especially if the “social safety net” really is removed (or overwhelmed).

(There’s been about Murray going around the blogosphere (especially among alt-righters), some posts to start on include this speculation about Charles Murray and the Future and this review of the book.  I’d be curious to see more left-wing reactions to the book, too, if there are good ones to read.)


Inflation, Hyperinflation, and Gold

Here are two interesting pieces that address the same issue.

First, a great bit of explanation from this alarmist essay:

[…] hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same—because in both cases, the currency loses its purchasing power—but they are not the same.

Inflation is when the economy overheats: It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena.

Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money—they want less of the currency: So they will pay anything for a good which is not the currency.

In other words, in inflationary conditions, everyone is pulling the currency.  They want (and need) more of it because everyone who they buy goods and services from wants (and needs) more of it.  On the other hand, in hyperinflationary conditions, everyone is pushing the currency, they want anything but currency and require more currency as a sort of bribe to except currency at all.  In either case, the currency flows more rapidly, the pushing and pulling happen in the same direction.  The symptom in terms of on-the-shelf prices is similar, but the effect on everything else in the economy is quite different.

One significant difference is what happens relative to alternate currencies, which brings me to the other piece:

I can guarantee that the majority of people who make the claim that gold is an inflation hedge have never looked at the data. Imagine you were a retiree in 1980 looking to protect yourself against inflation. If you were to accept conventional wisdom and bought gold to hedge against inflation, your retirement would have been a nightmare. […]

The reason I am very bullish on gold is because of the obvious debt problems we face. The truly monster spikes in gold are going to come because of sovereign debt defaults.

In inflation, people want more of the inflating currency relative to other currencies (not to sit on, to spend).  In hyperinflation, people want any other currency (since they still need to buy day-to-day stuff).  In the former situation, gold will do poorly against things that are significantly more useful.  In the latter situation, gold will do well to the extent that it functions as a not-currency currency.  It’s not tightly-coupled to other currencies, and “you can’t print gold”, after all.

Disclosure: I’m long in gold and silver, for pretty much the reasons above.
Disclosure disclaimer: The above should not be construed as investment advice.  Any investment advice I do give may be terribly bad.


Internet Blackout

If you’ve been paying attention to the internet, you probably noticed that a wide swath of website users and owners were none-too-pleased at the proposal of the PROTECT IP Act (PIPA) and the Stop Online Piracy Act (SOPA) (from the US Senate and House of Representatives, respectively).  This led to a coordinated website strike and mobilization campaign last Wednesday.

There’s a great technical analysis of the problems with the bill on the Reddit blog here.  But I think the best analysis of the issue I’ve seen comes from this TED Talk given by Clay Shirky:

His central point is that SOPA and PIPA represent the latest in a trend in entertainment industry lobbying, away from getting Congress to define the distinction between legal and illegal copying (producing, for example, the Audio Home Recording Act of 1992), towards restricting copying through technical means and making it illegal to work around those “protections”.  The DMCA lets companies sell you “broken” (for the purpose of restricting copying) devices and makes it illegal for you to fix those devices.  PIPA and SOPA let the government (at the behest of the entertainment industry) break DNS to censor “pirate” sites, and would make it illegal to work around that (which requires search engines and the like to pay to police themselves so that they aren’t indiscriminately helping users find such things).

Cory Doctorow describes this trend towards technological control systems backed by force of law (and away from legislation about what sorts of things should or shouldn’t be legal, with restrictions on liberty sitting on the other side of due process) in a recent essay titled Lockdown: The Coming War on General Purpose Computing.

The bills have been defeated for now, and in the aftermath, many activists have pointed out that similar legislation will undoubtedly reemerge (under the same name, a new name, or grafted wholesale into something politically inconvenient for legislators to oppose).  But after watching Shirky and reading Doctorow, I’m convinced it’s not sufficient to oppose, whack-a-mole-style, the latest bit of oppressive-technology-backed-by-force-of-law that comes up.  It’s necessary to oppose the idea that companies should be allowed to sell computers that can work against their users in ways that the users are prohibited from fixing.  And it’s necessary to move the copyright debate back to what sorts of copying should or shouldn’t be allowed, regardless of what sorts of copyright law the entertainment industry might be willing to buy or sell.


Thoughts on Occupy Versus Police

(This post is way delayed and fairly disorganized, but I’m putting aside further editing in the interest of getting it out the digital door.)

Occupy is interesting, but it’s also interesting to consider the variety of tactics police have used in opposing the movement.  On the one hand, there’s the UC Davis incident, where the message of “if you are in the way, we will hose you down with military grade pepper spray at point-blank range” was communicated by actually doing just that.  That might be legal, even in the liberal 9th circuit, but doesn’t exactly defuse the situation, and it’s unclear whether it will prevent the protesters from achieving (some of) their goals.

On the other hand, there’s the aikido tactics of the St. Louis Police.  As related in this post by Brad Hicks, after a series of fake-out maneuvers, the police acted with a combination of power and restraint:

[…] [The police] didn’t show up in riot gear and helmets, they showed up in shirt sleeves with their faces showing. They not only didn’t show up with SWAT gear, they showed up with no unusual weapons at all, and what weapons they had all securely holstered. They politely woke everybody up. They politely helped everybody who was willing to remove their property from the park to do so. They then asked, out of the 75 to 100 people down there, how many people were volunteering for being-arrested duty? Given 33 hours to think about it, and 10 hours to sweat it over, only 27 volunteered. As the police already knew, those people’s legal advisers had advised them not to even passively resist, so those 27 people lined up to be peacefully arrested, and were escorted away by a handful of cops. The rest were advised to please continue to protest, over there on the sidewalk … and what happened next was the most absolutely brilliant piece of crowd control policing I have heard of in my entire lifetime.

All of the cops who weren’t busy transporting and processing the voluntary arrestees lined up, blocking the stairs down into the plaza. They stood shoulder to shoulder. They kept calm and silent. They positioned the weapons on their belts out of sight. They crossed their hands low in front of them, in exactly the least provocative posture known to man. And they peacefully, silently, respectfully occupied the plaza, using exactly the same non-violent resistance techniques that the protesters themselves had been trained in. […]

By dawn, the protesters were licked.

(Again, read the whole thing.)

The clearing of Occupy Boston used some of the St. Louis tactics, so maybe those are catching on.  More brutal tactics may or may not be self-defeating, but I suppose that depends on exactly how far police are willing to go, as Brad points out, addressed towards police:

In case you haven’t noticed, you are not the only police officers who have been asked to use as much force as necessary, in order to crack down on trivial ordinance violations, as an excuse to shut those citizens up. Your fellow police have been asked to shut down those protests in every country in Latin America, in every country in the Middle East, in every country in North Africa, and in almost every country in Europe. In country after country, one of three things has happened: the cops obeyed orders and the kleptocrats are getting away with imposing austerity, or else the cops obeyed orders but foreign governments stepped in, citing actual or impending police atrocities, and overthrew the kleptocrats, or else they did something that you chose not to do, this last week or two.

In a few countries, the cops saw that they didn’t have the choice of defending the perfectly law abiding, saw that they were being asked to defend criminals, concluded that they could not morally justify obeying the order to shut down the protests, and went home. Few if any of the protesters even asked the police to switch sides and join the protests against kleptocracy. Most of us know that that’s an unreasonable request, we know that most of you feel that you owe it to the uniform you wear, and to the oath you took, and to your fellow officers, not to join the protesters. But in the countries where the police, asked to use force to shut down peaceful protests against kleptocracy, took off their uniforms and went home until it was all over? Not just in the Arab (Spring) world, but in places like Iceland? Freedom is on the march. Nor have those countries slid into poverty because they refused to cover the debts that the thieves owed to the dishonest bankers; those countries are recovering from the global recession faster than we are.

Charles Stross has some interesting thoughts on how the police crackdown fits into the larger economic/political situation:

Public austerity is a great cover for the expropriation of wealth by the rich (by using their accumulated capital to go on acquisition sprees for assets being sold off for cents on the dollar by the near-bankrupt state). But public austerity is a huge brake on economic growth because it undermines demand by impoverishing consumers. Consequently, we’re in for another long depression. […]

Starving poor people with guns and nothing to lose scare the rich; their presence in large numbers is one major component of a pre-revolutionary situation. […] Worse, the poor have smartphones. […]

The oligarchs are therefore pre-empting the pre-revolutionary situation by militarizing the police (as guard labour).

The rest is interesting, too, including the comments.


Digital Generation

Kevin Kelly shares some anecdotes about the subset of the latest generation raised with cutting-edge technology from an early age.  Here’s one:

Another friend had a barely-speaking toddler take over his iPad. She could paint and handle complicated tasks on apps with ease and grace almost before she could walk. It is now sort of her iPad. One day he printed out a high resolution image on photo paper and left it on the coffee table. He noticed his toddler come up to up and try to unpinch the photo to make it larger, like you do on an iPad. She tried it a few times, without success, and looked over to him and said “broken.”]


Another reader had this story. Her son had access to a computer starting at the age of 2. Once while they were shopping in a grocery store, she paused to find a label on a product. “Just click on it,” her son suggested.

The comments are good, too.

The real question is whether this will have transient or lasting effects on how the children in question learn and think.  And will those effects be comparable to previous technological “generation gaps”, or qualitatively different?


The Robot Revolution


Idea #6: The history of the 21st century will be one of technological singularity and collapse.

More accurate:

The history of the 21st century will be shaped by, on the one hand, labor-saving technologies (with vast and unpredictable effects on society), and on the other hand, peaks in resource production and attendent problems in maintaining complex systems in the face of random disasters, demographic shifts, increasing population, and so on.

For now, let’s focus on the former.

The history of capitalism is one of labor displacement and capital accumulation.  Really expensive tools make increased productivity possible.  Only the rich can afford really expensive tools.  The way to get guaranteed access to work is to sell most of the product of your labor in exchange for access to such tools.  Those that don’t make the trade are out-competed.  The rich get richer.  The new unemployed (since productivity increases exceed demand increases (which are at least somewhat constrained by population increases, but that’s a whole other post)) end up in newer, cooler jobs made possible by the same sort of technological development.  Or so the story goes.

The question is what happens when the newly-created labor demand from technological development is less than the labor-displacement from technological development.  A related question:  What happens when labor saving technology just creates demand elsewhere for not labor but more labor saving technology?

Or: What happens when having your job outsourced to Chinese robots just creates jobs for more Chinese robots?  (The robots are also built by Chinese robots.  In China.)

I’d argue that the marginal cost of adding production through labor-saving technology has probably been lower than the marginal cost of labor in many areas of production for a while.  However, there were a few mitigating factors delaying the robot revolution.  Both have to do with “developing markets”.  First, there was the desire to expand quickly into new markets.  If hiring people is quicker than building more-automated factories, it might be better to do the former than let your competitors beat you to the punch.  Second, there was a desire to produce stuff in areas that didn’t have the infrastructure to support highly-automated production (especially since many of those areas have fewer regulations and lower labor costs).

I think that’s no longer the case.  The most promising developing markets are developed, first-to-market incentives are diminished (i.e. the resource grab is over).  Infrastructure development has also come a long way.  Hence stories like this.

I’m not the only one who’s noticed this trend:

A faltering economy explains much of the job shortage in America, but advancing technology has sharply magnified the effect, more so than is generally understood, according to two researchers at the Massachusetts Institute of Technology.


During the last recession, the authors write, one in 12 people in sales lost their jobs, for example. And the downturn prompted many businesses to look harder at substituting technology for people, if possible. Since the end of the recession in June 2009, they note, corporate spending on equipment and software has increased by 26 percent, while payrolls have been flat.

Corporations are doing fine. The companies in the Standard & Poor’s 500-stock index are expected to report record profits this year, a total $927 billion, estimates FactSet Research. And the authors point out that corporate profit as a share of the economy is at a 50-year high.

Productivity growth in the last decade, at more than 2.5 percent, they observe, is higher than the 1970s, 1980s and even edges out the 1990s. Still the economy, they write, did not add to its total job count, the first time that has happened over a decade since the Depression.

They concluded on an optimistic note:

Yet computers, the authors say, tend to be narrow and literal-minded, good at assigned tasks but at a loss when a solution requires intuition and creativity — human traits. A partnership, they assert, is the path to job creation in the future.

But that misses both that many people are not capable of “intuition and creativity” jobs (at a high enough level to make a living at it) and, at any rate, that the demand for such jobs will never equal the previous demand for industrial-labor jobs.  Intuition and creativity don’t scale.

I expect this effect will also have a way of trickling up from industrial workers.  As everyone tries to avoid the industrial-work class if at all possible, the struggle for those “creative” jobs becomes more intense.  This analysis from Robert Cringley is telling:

In the near term how do we creatively respond to jobs going overseas? In the longer term what happens if Ray Kurzweil is correct and the Singularity rolls along in 2029 or so and humans suddenly become little more than parasites on a digital Earth?

The easy answer to this problem has been the same since the 1960s — become Paul McCartney. But how many Beatles can the world sustain?


Where you live counts as much as anything else, too, so position yourself in a city that has high serendipity.  Any kid living with his parents in Palo Alto can get a job today simply because he already has a place to live. No skills required.


Live in the coolest place, I tell Cole and his brothers. Have the coolest friends. Do the coolest things. Learn from everything you do. Be open to new opportunities. And do something your father hasn’t yet figured how to do, which is every few years take off 138 days and just walk the Earth. [emphasis mine]

Cringley takes an optimistic tone, but I find the content of his post rather grim.  He’s right.  Sure, there are some high-paying jobs that the robots can’t do for now, assuming that not too many others are trying to do the same thing.

But if you want to get into / stay in the middle class after the start of the robot revolution, you’d better be cool.  Have the right connections, be in the right place.  Hopefully have parents wealthy enough to facilitate that and smart enough to realize that it’s not about “job skills” anymore. Social skills are the new middle class job skills.  It’s hard to evaluate those “intuitive” and “creative” jobs, so appearances matter.  As the job search becomes more competitive, attributes not related to job performance matter more.

And be lucky (the repeated “serendipity”).  Maximize your opportunities to benefit from luck.  It’s all a gamble, victory goes to those who can roll (or rig) the most dice.

Hard enough for the middle class.  And for those not currently in the middle class, being either “cool” or “lucky” enough is going to be mighty tough.

Though angry may stil be an option.


How Can Occupy Wall Street Win?

Occupy Wall Street continues to be very interesting.  (On the economic side, see also.)

I previously mentioned that non-violent protests can only win by being economically or politically disruptive, but there are a few ways to achieve that goal:

Consumer Siege: Cut someone off from funding by refusing to do business with them (boycott) is the typical example.  Indirect boycotts can sometimes work (for example, see Color of Change’s successful campaign against the Glenn Beck Show, which worked by convincing advertisers that being associated with Glenn Beck was not a good idea for their brand (or at least that it would be better to spend their advertising budget’s elsewhere).  Divestment can also work, since the people running an institution tend to also be investors.  Of course, that only works if equity in the institution is publicly held and the protesters have a lot of it (not usually the case).

In the case of OWS, this is why I’m interested in this story in which a bunch of protesters who were Citi Bank customers tried to close their accounts, only to be locked in by guards and arrested by police.  Bizarre.  A question:  In the actual bank runs of the 1930s, did banks ever try to get police to arrest customers who were closing their accounts?

Disruption of Business: Protesters prevent the institution from doing business with anyone.  This either involves discouraging customers or actually preventing institutional activities from happening.  The strike is an obvious (and fairly mild) example of this type.  So is the picket line, in which customers and/or replacement workers are discouraged (but not actually prevented) from entering a place of business.

Given the name “Occupy Wall Street”, I’m surprised there isn’t more action of this type.  While seeing the protesters “occupy” Times Square was impressive, it’s a far cry from actually occupying, you know, Wall Street.  There’s no indication that OWS has been at all disruptive to the business activities of anyone working on Wall Street.

Petition: In general, just expressing one’s grievances, no matter how publicly is pretty useless unless you can effectively turn that to recruiting people for one of the activities listed in this post.  Getting arrested is only great if you emerge from jail with your numbers doubled.  (The IWW was great at this, Anonymous not so much.  (That topic might be worth its own post, but in the meanwhile, read this, which also includes some very good speculation about the possible outcomes of the protests.))

There’s one exception, though.  If your grievances are expressed directly, in person, to an institution itself, then the actions the institution takes against you can effect the institution’s reputation enough to be disruptive.  That only works if the institution is considered to be in control of the action taken against protesters and the institution is perceived to have some sort of obligation to listen to protesters.  Here, that’s likely to be just government, and maybe not even that.

That tactic can also work as the political equivalent of “disruption of business”.  If hundreds of people are showing up in person to present their grievances at each congressional office every day, it does give Congress a bit more personal motivation to resolve the situation.

Elections: In a democracy, if you can mobilize enough support to actually get incumbent legislators replaced with legislators loyal to your position, then that’s one way to change things.  To do this at a large scale, you really need to establish an effective political party.  Specifically, it must be able to do two things effectively: Get candidates elected, and ensure that candidates who don’t toe the party line on important issues (the platform) are not reelected (and preferably are left with their careers in total ruin, such that they actually fear defecting).

I’ve heard suggestions that OWS needs a “non-partisan political party”, which is nonsense.  To the extent that the concept is coherent, we already have a non-partisan political party, the Democrats, which is wildly ineffective at whipping their members into going along with even the core of the party platform.  The Republicans, on the other hand, are wildly effective whips, at least on the limited platform of opposing Obama (or whatever non-Republican is in power at the time).  (They’re less effectively partisan when actually in charge, but you don’t really have to coordinate much on how to burn the place down in order to do so effectively.)

You also need a lot of political power to push around the bureaucracy, but I don’t think that’s an intractable problem in the case of OWS.  (At least not compared to the difficulty of getting legislators elected in the first place.)