Automation, inequality and geopolitics

by on November 25, 2013 at 7:39 am in Economics, History, Political Science, Uncategorized | Permalink

Joss Delage wrote me with a question, here is part of it:

Here’s what I’m curious about: assuming things turn out as described in your book, what do you think are the geopolitical ramifications?  More specifically, do you envision some countries specializing to attract the top earners, and if so which and how?

I don’t cover geopolitical questions in Average is Over, but here are a few observations:

1. I see elites, working in a coalition with elderly voters, as able to control the political agenda enough to prevent most developed economies from flipping into purely destructive economic policies.  So I expect the leading wealthy nations to maintain relatively strong positions in the world.  (The book by the way does explicitly predict that U.S. government will get bigger and that social welfare spending will rise, contrary to what some reviewers have suggested.)  This will be hardest, however, for the relatively pure democracies, such as the Westminster systems.

2. Some small nations, most notably Monaco and Luxembourg and Singapore, have the option of “specializing” in the higher earners and keeping in only a minimum of stagnant wage earners.  A mix of immigration policies and land prices will enforce this choice.  Commuting will rise in importance, where possible.  But such outcomes will not describe a very large share of the world.

3. One class of vulnerable nations will be current exporters who rely on low wages to be competitive.  Automation in the wealthy nations will disrupt their business models.  The current Indian model of “doing most things internally” — which is by no means ideal — will be relied on increasingly.  Export-led surpluses will not be available to drive growth, as the wealthier nations become the export leaders by increasingly wide margins.  Given the rise of smart software and robots too, labor costs will not hold them back.

4. African nations and other poor nations, such as those in southeast Asia, also will not have the option of “last generation” export-led growth, pockets of resource wealth aside.  Many of these nations will specialize in lower middle class earners.  Free-riding upon global technologies will be important, as with cell phones today.  Many more technologies will spread in this fashion, with the aid of price discrimination.  We might see billionaires adopting particular regions or groups and transferring technologies to them at relatively low cost.  “Wealth without wealth generation” will describe many locales.

5. One key question is whether software-led growth will lower or raise the relative price of most natural resources.  There will be much more production!  One possible scenario is that manufacturing growth will rise more rapidly than natural resource production will be eased.  Countries with the higher-priced natural resources will then be geopolitical winners.  And in that case high energy prices become quite a burden on lower middle income earners, who switch out of cars and into bicycles, mass transit, and the like.  Yet it remains possible that smart software will do more for energy production, or for copper production, than it will for manufacturing production.

6. In talks (but not in the book) I have suggested that food production is the best candidate for “what will be most difficult to augment” in an age of smart software.  Food production seems harder to “wall off” and it seems more embedded in local culture (for better or worse, usually for worse) than factory production.  See our MRU video on conditional convergence, which considers the work of Dani Rodrik in this regard.  It would mean that the price run-up for Midwestern farm land in the United States may not be a bubble.

Let’s say smart software, robots, and artificial intelligence really do pay off.  What other geopolitical predictions would this imply?

Steve Sailer November 25, 2013 at 8:00 am

In a Cowenian world, IQ and similar human traits are the factors in limited supply. Higher average IQ countries will tend to do better — of course, that’s not all that different from today.

dearieme November 25, 2013 at 8:49 am

But Steve, Japan and China did badly for centuries. Come to that, so did Britain for more than a thousand years after the legions left. Did those populations suddenly become stupid and then become clever again?

Marian Kechlibar November 25, 2013 at 9:12 am

Well, I am not Steve, but it does not seem to me much of a mystery.

Let’s first drop the hot potato of intelligence, and pick something completely different, such as singing ability.

It’s pretty clear (empirically) that people differ in their innate singing ability quite a lot. It can be seen even with small kids.

Now even a gifted singer will not be much of a singer if he is plagued with constant tonsillitis etc., and devotes no time to training. Even a mediocre singer will overtake him with some intense vocal training.

But ceteris paribus, the most gifted singers *will* be on the top, and no amount of vocal training will make a Caruso of someone who is tone-deaf and has no sense for rhythm.

Now come back to China. The period of Mongol rule was goddamn awful for their development. The same difference can be seen between North Korea and South Korea.

prior_approval November 25, 2013 at 9:28 am

‘and no amount of vocal training will make a Caruso of someone who is tone-deaf and has no sense for rhythm.’

To stay on the automation theme – Auto-tune is quite capable of making this blanket statement inaccurate.

Marian Kechlibar November 25, 2013 at 9:43 am

OK, let’s say, non-technologically-augmented Caruso.

Accidentally, I knew a tone-deaf rock guitarist*, who nevertheless had great sense for rhythm. But if his guitar went out of tune during performance, someone had to tell him discreetly.

* Some will probably consider it a job requirement rather than disadvantage :-)

Marian Kechlibar November 25, 2013 at 10:06 am

BTW Your comment made me read up on Auto-Tune. I am quite surprised (though not at all shocked) how widespread is its use in the recording industry. Yuck. Not much better than the Milli Vanilli scandal, but these days everyone seems to be on board (well, probably not the heavy metal singers).

dearieme November 25, 2013 at 12:44 pm

The Mongols weren’t particularly stupid, were they? Were the Germans and Irish of the Dark Ages who barbarised Britain notably stupid? My point is that in reaction to the dim and dishonest who claim that IQ doesn’t matter in the least, some people tend to exaggerate its importance.

Brian Donohue November 25, 2013 at 1:49 pm

Amen.

Chip November 26, 2013 at 4:45 am

Actually, Kublai Khan was an enlightened despot who encouraged trade and learning.

The mongols in general prized techology and scholars, safe guarded trade networks from China to Baghdad, ensured a trusted currency and maintained a transportation service that whisked a representative of the Pope from Europe to Mongolia in less than two months after this sme man took a year to reach the edge of the mongol empire from Rome.

China’s decline really began when a subsequent emperor shut the country off from the world.

aaaaa November 25, 2013 at 9:18 am

I think Steve means better education system, then the countries that are relatively well-off should mantain their position, but that will only be valid for its best educated. The bad thing is it will become increasingly “winner takes all”. A key factor will also be competition for highly skilled immigrants. In that regard, US will still be the world leader… China maybe not so much (I think they will be like Japan…. big social problems derived by macho/ excess work culture, etc.)

dearieme November 25, 2013 at 12:41 pm

“competition for highly skilled immigrants. In that regard, US will still be the world leader…”: are you suggesting that the US is better at selectively admitting the highly skilled than, say, Canada or Australia? Or do you just mean that the more populous USA tends to admit more immigrants in total than the less populous Canada and Australias, and therefore may well admit more highly skilled immigrants, even if they are fewer as a proportion of the host population?

Finch November 25, 2013 at 1:22 pm

I don’t know much about Australia, but Canada tries to select highly skilled immigrants. aaaaa’s point might be that the US is a better draw for the best immigrants regardless of its immigration policies.

prior_approval November 25, 2013 at 9:23 am

Well, when you allow unrestricted immigration of uneducated blond and blue eyed Northern Europeans, it is obvious that one’s economy is going to fall apart.

I’m sure that is what Mr. Sailer would say – it isn’t as if he has anything but the highest respect for historical facts, such as what happens when a nation, which had previously demonstrated its ability to be prosperous and civilized following the highest southern European standards, is no longer able to withstand hordes of ignorant blond immigrants who have no interest in following any of the customs or traditions of the society they are wrecking. And as a real plus in this sort of discussion, one can easily tell the difference between those capable of benefitting from civilization and those, undoubtedly due to lower IQs, who aren’t – just by looking at the color of their pale hair.

dirk November 25, 2013 at 9:36 am

Why is it that Sailer gets all the grief about IQ and economic development whereas Garret Jones gets a free pass?

msgkings November 25, 2013 at 12:21 pm

If Garret Jones posted here every day with the same damn commentary on the same damn topic in threads often having nothing to do with it, we’d give him grief too.

dearieme November 25, 2013 at 12:46 pm

I think that Steve is by far one of the most interesting bloggers on the web, but I still reserve the right to disagree with him.

msgkings November 25, 2013 at 12:59 pm

I think we all have that right, dearieme

Brian Donohue November 25, 2013 at 1:51 pm

@’dearierme’. I agree, except for the “by far one of the” construction. Tut tut.

dearieme November 25, 2013 at 6:55 pm

@BD: Oh dear: you’re quite right.

Steve Sailer November 25, 2013 at 1:01 pm

“But Steve, Japan and China did badly for centuries.”

I referred to two time periods:

- “A Cowenian world” — the future
- “Today” — 2013

Japan and China are doing pretty good today and by our host’s logic, will be doing pretty tomorrow.

msgkings November 25, 2013 at 1:06 pm

His point was that Japan and China did very poorly for many years even with a high IQ population. Or did their IQ just skyrocket in the last 75 years?
Your contention about higher IQ countries tending to do better is contradicted by dearieme’s assertion. Please tell us you understood that.

Steve Sailer November 25, 2013 at 6:19 pm

China was one of the main centers of world civilization for the last 2000+ years. (see Polo, M., 1299). It tended to bump up against Malthusian limits, then suffer drastic population collapses when something went wrong, but the level of technology and organization repeatedly bounced back faster than in Europe after the fall of Rome.

Japan was one of the few non-Western countries in the world making steady technological and social progress in 1600-1850, despite severe limits on contact with the West.

Doug November 25, 2013 at 1:34 pm

The biggest problem with Japan and China in a Cowen world is that the high IQ demand stems mostly from software demand. Japan doesn’t do great in software today, they’re much better at physical production and engineering. Of the major software developed in the past 30 years only one (the Ruby language) has come out of Japan. The main problem being is their very low level of English literacy, and the fact that they don’t even use the Latin alphabet. China too, though to a lesser extent.

For better or worse software communities see high return to scales. Languages and environments with more libraries, support and developers offer orders of magnitude more productivity. And every major software community and platform is English based today. So the Japanese will never be competitive in this field until they push English literacy heavily, which seems unlikely given their insularity.

Kabal November 25, 2013 at 2:47 pm

As per Clark, yes it’s very possible for nations to get materially smarter or dumber in a few generations–an effect that would be magnified when it comes to “smart fractions.”

dearieme November 25, 2013 at 7:02 pm

It’s possible, but did it happen to happen at the times of China and Japan becoming poor?

I wouldn’t be surprised if the hugely enriching effect of the Industrial Revolution, followed by the social insurance aspect of the welfare state, have driven down average intellectual ability levels in many of the advanced western countries. But I can see that such a proposition would be very tricky to test. Heavens, it’s apparently hard even to make sense of the Flynn effect (which happens to point the other way, anyway). It’s difficult to give “evidence-based” answers to questions when the evidence is so often very ropey.

ChrisA November 25, 2013 at 7:38 pm

Dearieme – maybe high IQ is a necessary but not sufficient condition for a world leading economy? I don’t think it is controversial to say that China recently went from being a very poor country to a not so poor country by changing from communism to capitalism. I am willing to bet that even very poor countries with low average IQ could become significantly richer if they adapted so called good institutions, and stopped demonizing wealth creating. I am also willing to bet that a country with a high average IQ and good institutions would be better off than a country with the same institutions but lower IQ (channeling Runyon).

Doug November 25, 2013 at 8:48 pm

“. I am also willing to bet that a country with a high average IQ and good institutions would be better off than a country with the same institutions but lower IQ (channeling Runyon).”

The two aren’t orthogonal though. High IQ populaces tend to show more political support for good institutions than low IQ populaces. In an essentially democratic world that means that you still get stuck in a trap where low IQ countries tend to lag behind (although low IQ people in high IQ countries can do quite well).

The insidiousness of Marxism is that its an ideology that both promotes awful institutions and seems to appeal to high IQ people. That’s why its by far the most dangerous and destructive system of though ever created by man.

ChrisA November 25, 2013 at 11:43 pm

Doug – I agree that low IQ countries would tend to have less optimum political institutions. But even if they didn’t, a lower IQ country would still be expected to be less well off than a higher IQ one.

B.B. November 25, 2013 at 9:03 am

The combination of (1) large and growing concentrations of wealth, and (2) ever-cheaper advanced technology and software mean that the production of weapons of mass destruction will get steadily cheaper over time. Such weapons used to be the province of large rich countries. No longer. Pretty much any country will have a variety of them, including bioweapons. Also, assorted private billionaires will be able to fund their own weapons systems.

The brave new world need not be safer.

aaaaa November 25, 2013 at 9:11 am

Ever heard of mutually assured destruction?

Z November 25, 2013 at 9:18 am

That relies on a definition of “rational” that has rarely been accepted.

Dan S November 25, 2013 at 9:36 am

I think this (specifically the bio-weapons) is an under-appreciated threat in the 21st century. MAD can keep the world safe when the nukes are something only a sufficiently advanced economy’s government can build. On top of that, a rogue group would at most be able to use one or two, still not a civilization-ending event.

But with cheap bio-weapons, a radical group or small rogue nation could inflict orders of magnitude more harm on the human race, and the use of ethnically targeted bio-weapons would even allow their creators to spare themselves in the process. I’d be surprised if the world’s major powers weren’t at least looking into this (hush hush of course).

Z November 25, 2013 at 10:15 am

That and history provides plenty of examples of “irrational” actors causing all sorts of mischief. Suicide cults are nothing new. Messianic cults are certainly not unusual, even today, maybe especially today. The reason history is not a simple straight line of technological progress as Tyler imagines is that someone or some group always comes along to blow things up. In 1900, no one alive in Germany, for example, could imagine Hitler and the Nazis. At the coronation of Queen Victoria, no Englishman could imagine that their grand children would see London reduced to rubble and the Empire wiped out.

The only things we can be sure about the future is it will look nothing like we imagine.

8 November 25, 2013 at 10:17 am

There is no deterrent to the lone wolf who wants to see the world burn.

Cambias November 25, 2013 at 11:10 am

Bioweapons aren’t very useful. Think about how a “biowar” would play out: Al-Qaeda or whoever gets hold of some surplus Russian anthrax spores, and release them in O’Hare airport Thanksgiving weekend. Thousands get sick, half the infected die — mostly old people and children. No shocking news images, no glorious martyrdom, just a lot of sick people. And then a lot of angry people whose attitude has just ticked another notch toward the “nuke ‘em all” side of the dial.

The trouble with biowar as a terrorist tactic is that the juiciest terror targets (rich Western countries) are also the toughest nuts for biowar to crack. They’ve got the advanced healthcare systems, they’ve got the pharma and transport and bureaucratic infrastructure in place to distribute vaccines or antibiotics rapidly. And if they ever shed their own moral compunctions about using biowar, well, Mecca during pilgrimage season becomes a very tempting target for retaliation . . .

Abelard Lindsey November 25, 2013 at 12:54 pm

I don’t see bio-weapons as much of a threat as I used to. In designing a virus, there is a fundamental trade off between virulence and transmission. A virulent virus that is easily transmitted will kill its hosts (infected people) too quickly in order to effectively spread world-wide. The way around this trade-off is to design a virus with a long incubation period (the time between when the host is infected and when it dies). This is very difficult to engineer. The most effective virii for human infection are the influenza virii. However, these are difficult to engineer as they are already tightly optimized. They consist of 8 genes that code for 12 proteins. Changing any one of these genes cripples the virus. Think of the influenza virus as the Ferrari sports car of the virii world. Other human tranmission virii that can be engineered are adenovirus and coronavirus. These are easier to engineer because they have many more genes and proteins and, thus, more “slop” that allows for the insertion of foreign genes into the virus without compromising the functionality of the virus. However, these virii are quite benign. the worse you get from them is a head cold lasting a couple of days.

Making a virus that is HLA-specific (e.g. racially specific) is also a difficult thing to do. Also, consider that “whites” and Asians have essentially the same HLA’s whereas black Africans have many different HLA’s.

In short, we’re not going to see any bio terrorism in the foreseeable future.

Dan S November 25, 2013 at 12:56 pm

Well, I stand corrected, which I guess in this case is a good thing. This is the kind of topic where I hope I’m wrong.

A Definite Beta Guy November 25, 2013 at 4:14 pm

However, the reason that you would switch to bio-weapons is because of an inability to attack in a conventional fashion.
Current Western security is based, in large part, on Western wealth and monopoly of advanced weapons systems. For example, did you see the movie “Top Gun”? Very big deal back in the 1960s, when missiles were practically useless.
However, today, missiles account for most air-to-air kills.
This matters quite a bit when, say, Argentina attacks the Falklands, and they are using missiles equivelant to what we had in the 1950s, and the Brits use state of the art Sidewinders. For instance, all that maneuveuring Tom Cruise did to get on the enemy 6?
The Argentians had to do that.
The Brits didn’t.
Here is the Wikipedia of it
http://en.wikipedia.org/wiki/AIM-9_Sidewinder#AIM-9L
And summary:
“the “Lima” reportedly achieved a kill ratio of around 80%, a dramatic improvement over the 10-15% levels of earlier versions”

That monopoly will erode.

aaaaa November 25, 2013 at 9:10 am

Ever heard of mutually assured destruction?

Mark Thorson November 25, 2013 at 9:32 am

Let’s say that AI stagnates but global communication continues to become cheaper. Then, it may become economical to hire people in less developed countries to control the robots which clean my house. It could start with something simple, like helping the iRobot when it becomes stuck on the frilly edge of a rug. Eventually, they could be providing the intelligence that controls robots to scrub toilets and change the cat’s litter box.

In manufacturing, they could guide robots that do complex assembly jobs in the industrialized nations. In agriculture, they could pick tomatoes and grapes in California. By keeping the would-be immigrants in their home countries, their cost of living is kept low so they can keep more of their wages, and we don’t have to deal with an influx of swarthy people who don’t speak our language very well. It’s a win-win for everybody.

dan1111 November 25, 2013 at 9:51 am

Actually, this is a great idea. I could imagine robots that are automated most of the time, but ask a human operator for help when they face a situation they don’t understand. One human employee could then oversee many robots.

Mark Thorson November 25, 2013 at 11:20 am

Ironically, I got the idea from John McCarthy, considered the father of AI. I don’t know if the idea of using people in the Third World to control robots (teleoperators, actually) in the First World was original with him, but it probably was.

A Definite Beta Guy November 25, 2013 at 5:24 pm

We already do this and it depends on how smart the robots and how smart the “immigrants” are. Let’s use some “hypothetical” numbers. A Fortune 50 that can effectively resolve 99.5% of its receivable is still generating 6,000 errors per day, at roughly 2 million errors per year, that add up to $100 million.
Managing that kind of workload still requires a lot of manpower, and requires a lot of organizational capital. Small gaps in knowledge, oversights, and processes not worked, because of your outsourced-damaged organizational capital, jumps a write-off rate from 2% to 20%.

Integratiion is key

albatross November 26, 2013 at 3:26 pm

One thing to point out here: this model is a really nice way to evolve into more and more functional robots and other AI.

Start with a robot where you have it work autonomously 90% of the time, but 10% of the time, you need relatively low-cost human assistance. Contacting the call center in Bangalore and getting the problem figured out looks, to your software, just like calling an unusually slow subroutine to deal with this problem. As you develop better techniques for dealing with the problems your robot faces, most of the software stays the same, the robot design stays the same, but that call to Bangalore becomes an internal software call, which may still hand the problem off to a call center if it runs into a really hard case.

You start with a robot that costs $X up front and $Y per month and needs internet connectivity. (You then charge your customers $X+something up front and $Y+something per month.) Each time you decrease the dependence on human help, the per-month cost goes down, and you can try to work out how to split that cost decrease between yourself and your customers.

The Anti-Gnostic November 25, 2013 at 11:22 am

Yeah, but automation just doesn’t deliver that same sense of superiority and smug self-satisfaction that comes with ordering diminutive, brown-skinned, poor people around. You can’t put a price tag on that.

A.B Prosper November 25, 2013 at 10:28 pm

Humans are inherently status conscious to some degree and in most places at most times, serveants increase that status. Its tells your community you are powerful enough and rich enough to need extra workers just to take care of your business. Thats a big thing.

Now there are communities where that isn’t true but such views are far from the majority.

As to automation and effects, its highly likely that widespread automation will end up creating permanent subreplacement fertility. The problem basically the entire industrialized world is facing is population decline as jobs means income and staus and reproduction. The extremely high unemployment and underemployment rates in Europe and elsewhere are a great deal resposnible for the low birth rate.

The assumption that high funtioning consumers for tommorow will be popping out kids and living on beans and that this will actually help a technological society in some way is chartiably, flawed. A society with a mix of only elite, the low investment parenting crowd and the highly natal religious will not do very well in comparison into one with a stronger middle.

The US in particular will suffer from this as we have seen in our most populace state California which went from 1st to 48th in educational quality and where more than 1/2 of the top graduates need remedial education for school. This will erode innovation and vastly increase the weight of taxation and security costs.

The demand defecit we see now with governments resorting to zero or negative interest to fight it is likely to continue. A thought experiment, if robots make the gods,load them into self driving trucks, unload them and sell them, who will buy them?

The answwer is either the State or the demand for them will drop. A lot.

How that will play out with pak resources and such is hazy but suffice it to say, the lack of demand is the threat society faces more than any other,

Mark Thorson November 26, 2013 at 12:22 am

If robots make the gods, they are the gods.

Marian Kechlibar November 26, 2013 at 5:23 am

“The extremely high unemployment and underemployment rates in Europe and elsewhere are a great deal resposnible for the low birth rate.”

I do not really think so.

My home country, the Czech Republic, has quite low fertility, and it seems that the people with the highest education and the best-paid jobs are precisely the ones who do not seem to have time and energy to have even one child. On the other hand, the Roma (gypsy) community has unemployment over 60% and birth rate comparable to sub-Saharan Africa.

Jonathan Caverley November 25, 2013 at 9:43 am

War becomes an exercise in fiscal rather than social mobilization. The median voter logic of Meltzer-Richard becomes increasingly important. Wealthy, inequitable democracies with capital-intensive militaries start lots of conflicts.

Shameless self-promotion:
http://www.cambridge.org/us/academic/subjects/politics-international-relations/international-relations-and-international-organisations/democratic-militarism-voting-wealth-and-war

Bob Knaus November 25, 2013 at 9:58 am

John Deere’s international sales growth strategy assumes that #6 is wrong as countries like India find a field labor shortage consolidates traditional smallholdings. Yes, self-driving tractors, creating self-leveling fields, greatly reducing runoff and nutrient waste.

On the other end of the size scale, things like cheap solar-powered drip irrigation will make specialty crops on the remaining smallholdings profitable enough to compete with urban jobs.

roadrunner November 25, 2013 at 10:06 am

“Wealth without wealth generation?” I’ve never heard “economic basket case” so optimistically and delicately described.

mulp November 25, 2013 at 12:29 pm

Well, how else would you politically describe the pillage and plunder economic policies.

If you have money, you can buy guns to buy the support of dictators who will let you pillage and plunder a land and destroy the local economy, with the dictator relied on to kill the property owners who fight your taking of their property. The pillage and plunder of the Congo is a good example, but hardly the only one. The Spanish American War was fundamentally to support pillage and plunder economics. The conflicts in Iran have been about pillage and plunder economics and the Iranians refusing to accept that economic system imposed on Iran by the West – even now, the argument is that Iran has no reason for the high labor value add of nuclear power because pillage and plunder would easily eliminate the need for the Iranian economy to be based on such Iranian labor intensive activity – if Iran agrees to pillage and plunder, the the Iranian labor will be idled, Westerners will come in to pillage and plunder and pay dictators to buy off the people, like in Saudi Arabia, or oppress them with military power like in Iraq..

Rahul November 25, 2013 at 10:10 am

#3 ignores the fact that cheap labor isn’t the only thing that makes these nations competitive. Automation may very well solve that bit, but the more persistent competitive advantage is the aversion of a wealthy nation for “pollution” & catastrophic risk.

A case in point is refining / commodity chemicals. More than cheap labor, laxer laws & lesser liability drives those eastwards. Your competition isn’t cheap labor in this context, but the far lower cost of an actuarial life. Almost axiomatically this advantage won’t die so long as these nations remain less wealthy.

8 November 25, 2013 at 10:25 am

1. I see the elites taking their nations down the tubes and a mass global game of political Russian Roulette follows. The large wealthy nations may emerge again because they are the least likely to play “pick a crackpot,” but the elite-elderly alliance is what will doom these nations to a major crisis. This is Digital Equipment Corporation at the national level. Nothing they’re doing is “wrong,” the policy choices are rational, but the end result will be total failure for those trying to prevent it, the rest of the country and the world will benefit from the rebalancing of wealth and power.

msgkings November 25, 2013 at 12:53 pm

This is a lot of vague generalities. What exactly does it mean to ‘take your nation down the tubes’? And then what exactly are the large wealthy nations ‘emerging’ from?

John B. November 25, 2013 at 5:03 pm

I worked at Digital for many years, including the last years, and I have my own ideas about what went wrong and why. I don’t think they apply to nations as a whole. What exactly do you think was the flaw in Digital? It certainly wasn’t electoral politics, because Digital didn’t elect its bosses.

collin November 25, 2013 at 10:50 am

One aspect I don’t see is how the lowering of the global birth rate may play into the geopolitical analysis. At this point, it dropping a lot (estimated at 2.36 children per adult female) and all very developed economies, outside of Israel, have below replacement level fertility. All this automation and competition we need fewer workers but a low birth rate will create the huge Keynes liquidity trap as consumer demand and investment has a ceiling.

My other question is how Singapore, the most functional, productive, and wealthy society, has such a low birth rate. Why do richer nations, outside of petro-states, have lower birth rates?

Roger Sweeny November 25, 2013 at 11:25 am

” Why do richer nations, outside of petro-states, have lower birth rates?”

I can think of several possibilities. Per Bryan Caplan, citizens of richer nations think kids are expensive, both monetarily and in terms of hassle. Citizens of richer nations have a lot of other things to spend money on that kids interfere with: travel, eating out, even spending hours watching television. If you’re a woman trying to “get an education” and “start a career,” it is easy to put off kids until one (or none) is really all you think you can handle.

One thing that pushes in the other direction. To the extent that there is some genetic “propensity to have babies,” those who have more kids (Mormons Orthodox Jews, people with poor self-control) will have kids who have more kids and the birth rate may rise over time.

msgkings November 25, 2013 at 12:57 pm

These are part of the answer, but the simplest reasons wealthier nations’ women have fewer kids are lower infant mortality (the ones you have tend to survive rather than die of something before age 5 so you don’t have so many) and female education (educated women can implement birth control, and have more reason to).

My concern is not that wealthier nations are having fewer kids, it’s that the whole world will have a declining population starting late this century. How does capitalism work if the whole world is like Japan? I guess like it does in Japan?

Pierre November 25, 2013 at 2:11 pm

+1

Adrian Ratnapala November 25, 2013 at 3:49 pm

Yes, but what happens if you ask “On average, how many daughters of any given women reach the age of 20″.

Once upon a time, the low-birth rate strategy might have given the largest answer for this question. But today?

mike November 25, 2013 at 6:15 pm

“These are part of the answer, but the simplest reasons wealthier nations’ women have fewer kids are lower infant mortality (the ones you have tend to survive rather than die of something before age 5 so you don’t have so many) and female education (educated women can implement birth control, and have more reason to).”

This is the politically correct liberal homo economis answer, so it’s obviously wrong (probably 180 degrees from the truth)

msgkings November 25, 2013 at 6:47 pm

Man, you sometimes post angrily, and you sometimes post insultingly (couldn’t you have called me a shitlib again?), but you rarely post this stupidly.

mike November 25, 2013 at 7:44 pm

You are a shitlib moron and you are wrong about the way the world works because you are wrong about the way human beings work. The wrongness of the worldview you espouse is the cause of the immiseration of hundreds of millions of people.

PS: To be fair, I did still sort of call you a homo.

Marian Kechlibar November 26, 2013 at 5:27 am

Msgkings, the fertility dropped significantly even in Egypt, where 50% of the female population can’t even read and write, infant mortality is still quite high even in comparison with the rest of the Arab world and women aren’t exactly empowered politically and economically.

I would say that some places the birth rate goes down because they hit Malthusian limits on water and food.

The Anti-Gnostic November 26, 2013 at 12:51 pm

How does capitalism work if the whole world is like Japan?

Like it worked before we adopted the monetary and fiscal policies of Charles Ponzi.

msgkings November 26, 2013 at 4:03 pm

Really? I know what you are snarking about, but before the world’s current policies came about we had the exact opposite demographic profile than Japan does now.

So I assume you’re saying scrap social insurance whereby the workers help support the old…what happens then as the world’s population gets so much older and also somewhat smaller?

The Anti-Gnostic November 26, 2013 at 6:04 pm

but before the world’s current policies came about we had the exact opposite demographic profile than Japan does now

Reality is trying to tell you something.

derek November 25, 2013 at 10:57 am

1. The elites created the economic collapse of 2008. Elites created and promulgated the ideologies that killed hundreds of millions last century. Weren’t almost all the genocidal maniacs very well educated? Elites came back from Munich waving a piece of paper.

In other words, instead of Boston, expect Detroit. We saw last week something that is indicative. China declared the disputed islands as a no fly zone, and will enforce it with military action. Japan considers those islands theirs. For a long time these disputes were settled when and American or British battleship parked itself in the vicinity.

A real dumb question. Much of the elite power is due to capital. If Japan and China got into a shooting war, how much capital would the elites have left when the financial system collapses? There is a very ugly truth here, that the elites don’t have any money either, it is only the capability to borrow at below cost that allows them to keep their influence.

I think you were wise to not predict the geopolitical ramifications of the stagnation. It is totally unpredictable.

This won’t be over until there is nothing left to lose.

msgkings November 25, 2013 at 1:02 pm

“This won’t be over until there is nothing left to lose”

- Quote from every incorrect pessimist ever in history.

The Anti-Gnostic November 25, 2013 at 11:45 am

We might see billionaires adopting particular regions or groups and transferring technologies to them at relatively low cost.

It’s called “buying,” not “adopting,” and the British East India Company and Cecil Rhodes have been there and done that. But yes, I agree this is likely to happen. As aid from Western taxpayers dries up, desperate failed states will either sell what comparative advantage they have or collapse into chaos and mass starvation.

dearieme November 25, 2013 at 12:49 pm

“desperate failed states will either sell what comparative advantage they have or collapse into chaos and mass starvation.”

What; you mean that everyone will leave California and go to live in Texas?

msgkings November 25, 2013 at 1:03 pm

Yes, in 10 years max Silicon Valley will have completely moved to Austin to escape the chaos and mass starvation in Palo Alto.

The Anti-Gnostic November 25, 2013 at 4:07 pm

Silicon Valley will own Palo Alto, to the extent they don’t already.

And they won’t let just anybody in, either.

mike November 25, 2013 at 12:56 pm

“Wealth without wealth generation” will describe many locales.

Like Fairfax County, Virginia and the rest of the Greater Washington area.

msgkings November 25, 2013 at 1:03 pm

Zing!

prior_approval November 25, 2013 at 2:00 pm

Hey, that is where our esteemed hosts reside. Understandably – there are a lot of benefits living in the wealthiest part of a wealthy nation.

But admittedly, I prefer the German version – the richest parts of Germany are based on creating the sorts of things average people use and buy.

mike November 25, 2013 at 6:29 pm

I live in Fairfax County myself, so it’s not meant to be a dis of Tyler

Ed November 25, 2013 at 3:55 pm

I’m confused by the description of Westminster democracy as “pure”. I’m used to its being described as corrupted by an elite class of ex-Oxbridge politicians. Why do you think that it’s pure?

I was talking to a colleague about Scottish independence today, and the independence of [most of] Ireland came up. He said that Ireland never had a vote on independence. I said that their election of mostly Sinn Fein MPs was interpreted as a vote for independence. In those days, referendums were unheard of in Britain.

Jacob November 25, 2013 at 4:26 pm

The notion (although its truth is strongly debatable) is that a system with its relatively dispersed power centers between the states/provinces, and national government; bicameral legislatures and strong constitutional restrictions (on legislation) make it hard for any faction or party to gain power and make sweeping changes. While the government in westminster style systems can essentially do anything provided they stay in confidence. Thus as the democratic mood shifts the westminster style systems can respond to the electorate, but other like the US have structural power divisions that limit such responses. However, I think it is clear in practice, as you mention, that the shadow system of influence and elite power dealings rides upfront when determining practical political action and government policy.

Jacob November 25, 2013 at 4:35 pm

> 6. In talks (but not in the book) I have suggested that food production is the best candidate for “what will be most difficult to augment” in an age of smart software. – See more at: http://marginalrevolution.com/marginalrevolution/2013/11/automation-inequality-and-geopolitics.html#comment-157939872

In the short term this seems right. But 15-30 years out, the practical implications of biomedical advances that are coming out of labs today seems to implicate that we have a very interesting future of with bioengineering enhancements. Even if we ignore the potential of GMO foods themselves, the surrounding infrastructure has many areas ripe for innovation. How about engineered deep root cover crops that can provide moisture in arid environments. Or worms that can displace the need for plowing and then go dormant. Algae that can displace petrochemical fertilizers. New strains of crops that require less land, less work and are more nutritious. Many foods still are unable to make use of specialized machine picking, and rely on unskilled labor – that will change – and existing breeds will improve in nutrition and flavor.

mike November 25, 2013 at 6:17 pm

what about food that tastes awesome and has no calories and makes your dick bigger

dearieme November 25, 2013 at 7:04 pm

Honey. Except for the calories.

dirk November 25, 2013 at 7:00 pm

Re technology and commodity prices: keep in mind it isn’t all about software. A big challenge in the oil patch is drilling while withstanding higher pressure and temperatures. This blog and the American media has a software bias when it comes to technology.

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