Why a Julian Simon fan also should be a Malthusian

by on May 10, 2017 at 1:47 am in Economics, Uncategorized | Permalink

Let’s say you’ve read and loved Julian Simon, who stressed mankind’s indefatigable power of creation and innovation.  I certainly have.  Simon stressed that the cost of producing real resources likely would fall, thereby spreading wealth across mankind.  The bad news is that probably should make you a Malthusian.

The classical economists understood very well that the wages to labor cannot for very long exceed the cost of production to labor.  And if you are an optimist about the cost of producing copper, tin, and steel, you probably should be an optimist about the cost of bringing more humans into the supply chain for labor.  this could happen through:

1. Developing more and better IT to ease outsourcing.

2. Lowering the costs of raising children, so families choose to have more niños.  Or subsidize births, just for the heck of it.

3. Building human-like robots, or smart software that performs human-like functions.

4. Encouraging current individuals to work more hours or retire later in life, etc., or just taking in more immigrants of the kind who will compete with native workers and lower their wages.

5. Robin Hanson’s Ems.

6. 120 years from now, corporations build artificial wombs and create babies in large numbers in East Timor, for factory work, or military reasons, or to satisfy idiosyncratic philanthropic visions.  Or maybe just as gaming companions.  They will be bred or drugged so as to enjoy their lives, thereby brunting external criticisms, besides how many of you worry about Mauritania as it is?

7. What else?  Chimeras?  Aliens?  Imports from parallel universes?  Of course it is fine to focus on #1-4 and stick with the more commonsensical scenarios.

The Simon fan should not be a pessimist about this broad panoply of alternatives, even if he rejects some of the options as implausible.  Whether you like it or not, they all imply various forms of downward pressure on wages in the wealthier countries.  There is simply no reason for the technological optimist to think the cost of reproducing labor and labor substitutes should remain high forever.  The higher are real wages, the greater the pressures for such innovation!  Just visit Nevada — why should all that land remain empty, Australia all the more so?  Markets will create more surplus, but the best default presumption is that will be eaten up by the numbers, and not by your special privileged position as a natural-born North American, or whatever you may be.

Of course the optimists wish to have it both ways, but I say no, if you are an optimist about the cost of producing non-human resources, apply similar analysis to the cost of producing substitutes for humans.  The classical economists were a lot smarter than they are given credit for these days.

For a useful conversation related to this topic, I thank Bryan Caplan, John Nye, and Robin Hanson, can you guess which one disagreed with me most?

1 Matt May 10, 2017 at 7:56 am

David Hume on the production costs of producers: “I shall add, that, from the experience of our planters, slavery is as little advantageous to the master as to the slave, wherever hired servants can be procured. A man is obliged to cloath and feed his slave; and he does no more for his servant: The price of the first purchase is, therefore, so much loss to him…” (“Of the Populousness of Ancient Nations,” fn. 39).

2 Jorod May 10, 2017 at 9:25 pm

Tyler really knows little of Simon

3 pittpens87 May 10, 2017 at 8:00 am

Don’t corporations have an incentive to not lower the cost of labor? In the long term if they drive down cost of labor, and every company in the economy is doing this, then no one will be able to afford their products and they would go out of business. For example, in the present, offshoring to China works great at reducing cost of labor and total cost until in the long run all jobs are off-shored to cheaper labor countries and no one in the US can afford these products anymore because they no longer have jobs.

4 A Definite Beta Guy May 10, 2017 at 9:59 am

All demand-side problems can ultimately be solved by money helicopters.

5 Noumenon72 May 10, 2017 at 8:28 pm

Incentives don’t apply to groups. They apply to individuals. You’re basically asking “don’t the two prisoners in the prisoner’s dilemma have an incentive to keep quiet?”

6 The Engineer May 10, 2017 at 8:06 am

This is a weird argument. If wages fall… where does the money go? Profits? Consumer surplus (i.e. falling prices)?

If it is profits… how are they distributed? Is my 401(k) going to fill up to obscene levels? Or does it all go to Soros and his ilk?

Or does the Walmart effect spread everywhere?

7 A Definite Beta Guy May 10, 2017 at 9:09 am

Returns accrue to the scarce factors of production (capital, land, entrepreneurship). Capital ain’t the same as the stock market, though, especially with all these PE firms.

8 Debany May 10, 2017 at 9:27 am

” If wages fall… where does the money go?”

… where does the money come from to pay any wages at all ?
… what determines the level of wages anywhere ?

If we’re not careful we’ll stray into discussing actual economics here.

Labor is generally a scarce resource, as are capital and available natural resources. Rational combination of these factors can “produce” stuff we need and want. We don’t get stuff without human labor… and labor’s share of the produced goodies depends upon its output contribution to useful production, in an open economy.

Wages rise/fall for many localized factors of production, market demand, and coercive interventions (government, criminals, fraud..). These specific temporal causes determine how much money is available for wages (if any) and how it is distributed among owners/investors/workers and 3rd parties (government, warlords, mafia..). There is no preordained slice of pie that labor is supposed to get.

9 Mark Bahner May 14, 2017 at 12:34 am

“We don’t get stuff without human labor…”

Yes, and people didn’t get around most towns without horses…until the Model T. Human labor can and will be replaced. Handsome Al Mandelstamm knew that, even back in the 1970s.

10 Jason Bayz May 10, 2017 at 10:59 am

I think the point was for Tyler to make an anti-immigration post(“taking in more immigrants of the kind who will compete with native workers and lower their wages”) while disguising it as a convoluted argument about something else.

11 Troll Me May 10, 2017 at 11:16 am

Not workers. I.e., those who hold capital.

I.e., wealthy people and not the rest. But it might not be that bad because stuff will be cheaper, and maybe something else will cause higher wages (such as a technological advance).

12 Axa May 10, 2017 at 8:10 am

Reducing the cost of reproducing labor?

For the sake of intellectual inquiry, let’s throw morals by the window and assume “reproducing labor” means having and rearing productive children. Then, we continue by estimating what’s the real cost of reproducing labor. Parents strongly subsidize the costs of reproducing labor. Sometimes there are estimations of food, health and education costs, but what’s the labor cost per hour of being a “parent”. If any business would like to compete with parents, would this business be profitable?

Another important question, is parent labor scalable? Assume some software is designed to be a parent and it can be copied with ease. Thus relatively few humans can parent thousands of millions of children then reducing the costs of parenting labor. But, does this work? I think the real world examples we have are orphanages, boarding schools and several attempts to redesign family structures along story. Boarding schools are more expensive than classical parenting, thus no cost reduction in labor reproduction. Orphanages are not chosen by anyone, they’re always plan B. The last strong attempt to redesign family structures was done in the USSR, young women should work, child care is the default option since 6 months old. Child care since 6 months old seems to be an alternative for lower income people, but will it become the default option of higher income people too?

I have to acknowledge this is an interesting approach to AI problem. If making AI is so damned complicate and expensive, would it be easier to reduce the costs of human intelligence?

13 Troll Me May 10, 2017 at 11:30 am

“If making AI is so damned complicate and expensive, would it be easier to reduce the costs of human intelligence”

At least, if people could be pushed/trained/coerced into more similar categories, then the AI would have an easier time “teaching” according to these now-limited options sets of human typologies.

A lovely pathway to serving as cogs on wheels! The people to serve the economy and not the other way around.

14 dangerman May 10, 2017 at 4:32 pm

“is parent labor scalable?”

Yes, but only over N = 2 to about 6 or so.

Source: my screaming toddlers.

15 Andrew M May 10, 2017 at 8:13 am

“if you are an optimist about the cost of producing non-human resources, apply similar analysis to the cost of producing substitutes for humans”

Take out the “substitutes for”, and it’s just another story about importing immigrants vs encouraging domestic population growth.

16 nigel May 10, 2017 at 8:18 am

Bryan Caplan disagreed the most. Maybe…don’t know enough about John Nye. Definitely not Robin Hanson. This is right up his alley.

This almost feels like a Tyrone post. Are we sure Tyrone didn’t sneak in and write this one?

17 Michael Stack May 10, 2017 at 9:50 am

Oh yeah, Bryan for sure (excepting Nye as I too am unfamiliar with his opinions)

18 Sergey Kurdakov May 10, 2017 at 8:26 am

downward pressures?
in short run yes, in long run the argument is like Marx thesis of ‘infinite pressure on worker wages, so that workers forever live near substitution level’. Why wages in other countries won’t ever rise?
Was Marx right? he was not, wages will rise.

so what are current major barriers to growth in less developed countries?
less technology adoption and less energy use.
IT will reduce barrier for technology adoption, energy – it’s quite plausible that ‘Terrestrial energy’ like reactors will pop in 20s. The cost of energy is less than coal with much improved safety over current nuclear reactors, with 5 times less uranium use – there is enough uranium to power world for quite a while. plus cheaper wind and solar is coming.

thus having less constrains to growth, given that median income in the world is >$10000 year, the worst one can assume – a pressure over few decades.

to see it worse – there is need for more ingredients: assumption that inequality will significantly increase and that relatively poor people won’t cooperate even if barriers to effective communication will keep falling down.

19 Troll Me May 10, 2017 at 11:41 am

Capital per capita reasons.

When there is more value to joining the workforce, the economic benefits of having children (e.g. on the farm) are lower. Contrarily, when there is little prospect to join the workforce, then people tend not to go to school and have more children.

20 Sergey Kurdakov May 10, 2017 at 3:28 pm

that is difficult to me, so I did not get your point.

I see this way: imagine some future where all world is developed ( because since 1990s there is convergence between countries incomes and due to lower barriers to technology transfer it will likely continue )
so East Timor won’t be any different from US or Europe in likely scenario, neither there will be any different to make such imaginary experiments in Timor or in Texas. And likely there will be same norms – so what society prohibits in US will be prohibited elsewhere – just with rising incomes people start to value freedoms and rights highly ( see worldvaluessurvey )
with the same norms and high communication channels rules of play – what is allowable will be the same all around the world.

now – what are possible incomes in that near future world? incomes are >$100 000 year with basic income ( paid just for being a human ) about $60 000 year ( figures are approximate but just to make a point ) and there is no economic inventive to have a huge family ( low income agricultural societies tend to produce a lot of children due to economic incentives – more hands in the field ). Children in affluent societies play a role to make life to feel more complete. Now – while average high income person can have multiple cats – most end up with just one cat. The same for children – two children are enough to feel comfortable family relationships. So affluent societies tend to have stable populations ( or even decreasing – many choose to have just one child )
Thus a do not see growing population in affluent future, no significant pressure on wages due to moral norms ( and we either should postulate non convergence – i.e. stick with hard marxism or we assume that people elsewhere have different biology and do not value freedoms and rights like high income us or european citizens ).

so basically those propositions above do not fit well with Julian Simon ideas and possible implications of progress.

With such incomes and basic guaranties people will tend to do what they like. Maybe they would choose dancing etc. Some will choose engineering etc. But no one will be hard pressed in incomes to feel sorry or there will be ways to trick international system to some sorts of destabilization ( there will not be poor places where it is easy to make tricks ).

I do not see reason to feel sorry or worry for people who enjoy dancing and get $60 000 year – and people with same income in East Timor will choose doing just the same.

21 Slocum May 10, 2017 at 8:46 am

Producing more humans has always been a cheap, DIY project. The expensive part is providing for them. But the cost of that has declined dramatically in the last century (how many hours of labor do median workers need to afford enough food for their families now vs 100 years ago?) And the number of humans on the planet has quadrupled in that time even while median living standards have improved dramatically. We don’t need to spin sci-fi scenarios to imagine the process continuing.

22 Tom T. May 10, 2017 at 8:47 am

Option 2 is empirically false; children in developed countries are far more expensive, and birth rates drop accordingly. Basically, parents respond to reduced resource costs by converting their children from low-tech inputs to high-tech inputs, a distinction that would have been lost on Malthus (who, of course, didn’t even conceive of birth control).

23 ladderff May 10, 2017 at 11:40 am

Tom,

I grant that it takes more of an investment to bring talented children to their full potential. However: 1) contrary to much magical thinking about “education,” investing in even talented children exhibits diminishing returns. 2) There are many things about our abysmally low-quality government that raise the price of child-rearing beyond the true intersection of marginal cost and marginal return. Some of these policies have to do with the way schooling is done and some don’t.

On the education side, we need only cite Bryan Caplan (who said he was good-for-nothing?). On the price of safe housing close to various complements to investing in your kids, see Steve Sailer. On the related issue of inflation, see common sense.

If we could have sane and effective government, developed country birthrates would drop/be low relative to pre-industrial or developing-country levels, but not nearly so low as the crazy levels we observe today.

24 Troll Me May 10, 2017 at 11:46 am

If you use the phrase “true intersection of marginal cost and marginal return”, therefore anything you say it right.

(P.S. – don’t forget externalities. You learn more talking with educated people than ignorant people. That is, if you approach situations with a desire to learn, as opposed to simply trying to twist any argument in order to self position as higher, which would be more conducive to brainwashing yourself than learning anything.)

25 ladderff May 10, 2017 at 1:42 pm

Nathan exhibits that magical thinking I mentioned. “Alien invasion fleet approaches Earth: thought leaders stress importance of education.”

26 Troll Me May 10, 2017 at 4:45 pm

The future of Earth would not be well served by the end of learning.

27 ladderff May 10, 2017 at 5:23 pm

Which, of course, nobody here has proposed.

28 Slocum May 10, 2017 at 12:00 pm

It’s clear that parents in developed countries do spend a great deal of time and money on their children. It’s less clear that it’s all necessary or even beneficial. For example, here in the U.S., one of the major investments of parental time and money I see is in year-round ‘travel team’ club sports. They spend innumerable hours driving their kids to practices and games as well as weekends traveling to tournaments. It’s not clear that all of this has any positive effect on their kids future success.

29 collin May 10, 2017 at 2:14 pm

It’s clear that parents in developed countries do spend a great deal of time and money on their children. It’s less clear that it’s all necessary or even beneficial.

Isn’t this classic Prisoner Dilemma? Everyone claims we spend too much on kids but not their kids. The most obvious is Bryan Caplan is home schooling his children all the while complaining most people spend too much time and money on their kids.

30 Chuck May 10, 2017 at 4:37 pm

It’s clear that people in developed countries do spend a great deal of time and money on their vacations. It’s less clear that it’s all necessary or even beneficial.

31 collin May 10, 2017 at 8:50 am

I am confused on the issue as it appears we have too little labor supply and we need to pay them less? We might returning to the 1950s economy which was slower growth and little job growth in reality. It appears the issue here is the richer we are, the less we can afford to have children. I sure making Pregnancy a pre-existing condition would help.

Otherwise, I would recommend finding ways to make easier:
1) One income families. How is working more hours going to long increase the population?
2) Find ways of getting people feeling secure their careers earlier in life
3

32 Arthur May 10, 2017 at 9:14 am

Never thought of it that way….

33 austrartsua May 10, 2017 at 9:37 am

Why does it matter? If the cost of goods and services also decreases then who cares if wages go down?

34 Mark Bahner May 14, 2017 at 12:40 am

“Why does it matter? If the cost of goods and services also decreases then who cares if wages go down?”

The problem is that the wages of some people potentially go down faster than the costs of goods and services go down. Or if there is a minimum wage, they might not be able to find any job.

35 Alex May 10, 2017 at 10:48 am

“the cost of production to labor”

Did anyone understand this phrase?

36 Matt Reardon May 10, 2017 at 11:18 am

If you type “meditations on” into Google, Meditations on Moloch is the third auto-fill option. Surprised it wasn’t linked/mentioned here: http://slatestarcodex.com/2014/07/30/meditations-on-moloch/

37 Someone May 10, 2017 at 4:32 pm

I don’t see why this long-winded essay gets so much attention. Its preoccupied with ridiculous fantasies that make Tyler’s speculations above look tame.

38 NatashaRostova May 11, 2017 at 5:13 pm

I’ll fight you IRL if you talk bad about my boy Scott like that.

39 jdgalt May 10, 2017 at 11:44 am

Just visit Nevada — why should all that land remain empty, Australia all the more so?
Those lands are empty because there is no known, economically sustainable way of getting water supplies to them. I don’t see this problem being solved anytime soon.

40 Philo May 10, 2017 at 12:20 pm

The economics of producing people is different from that of producing copper: the cost is borne by the parents, the benefit is (mostly) enjoyed by the offspring.

41 Someone May 10, 2017 at 12:56 pm

I don’t understand this argument. Some of these options involve more people, but some involve substitutes for people. Why do more substitutes imply Mathusianism?

Related article
https://www.nytimes.com/2017/05/06/opinion/sunday/to-be-great-again-america-needs-immigrants.html
It claims that as productivity growth lessens, sheer numbers may be important to national competitiveness. I’m not sure how much I buy this but I do buy it enough to say that birth rates below replacement are bad.

42 Jorod May 10, 2017 at 9:22 pm

According to Simon, more people means more economic growth only when you have liberty, rule of law and individual property rights. Based on progressive policies, we are doomed.

43 Donald Pretari May 10, 2017 at 2:13 pm

#4…Is this some kind of plea for self-sacrifice? This focus on expanding the pie to the detriment of personal projects sounds like a Soviet poster.

44 Michael Caton May 10, 2017 at 2:49 pm

I love the reference to Mauritania. Any idle cocktail party chatter about going back in time to kill Hitler, or what you would have done to stop slavery, should immediately be met with “there are slaves in Mauritania, right now. What are you doing about it?”

45 Sergey Kurdakov May 11, 2017 at 5:43 am

interestingly, Tyler wrote a philosophical book about thinking on future. There – Hitler is discussed in details in perverted ‘kill Hitler’ way (like: imagine what if Hitler was not Hitler due to different genetic makeup). Though it was not just Hitler genetics. Prussia had a militaristic ideology for two centuries. And that allows for quite a range of bad outcomes after WWI even if Hitler was a bit different.

46 NatashaRostova May 11, 2017 at 5:14 pm

Making progressives (I guess anyone) feel bad about themselves is not socially acceptable.

47 Jorod May 10, 2017 at 9:18 pm

News flash. We already subsidize births at huge cost to taxpayers and workers. You should get out more.

48 J May 12, 2017 at 12:59 am

Not really. And it is not working.

49 Larry Siegel May 11, 2017 at 5:51 am

The number of hours of undesired effort (‘work’) required to sustain a given standard of living will continue to fall by around 2% per year, in most parts of the world. That is the only measure of economic progress that makes any sense. Thus, while I don’t like to disagree with Tyler, Simon is right.

50 Mark Bahner May 14, 2017 at 1:28 am

“The number of hours of undesired effort (‘work’) required to sustain a given standard of living will continue to fall by around 2% per year, in most parts of the world. That is the only measure of economic progress that makes any sense. Thus, while I don’t like to disagree with Tyler, Simon is right.”

In order to have a given standard of living, a person needs to have find someone willing to pay money to meet that standard of living. But why would a person get paid if a machine could do what they do for less?

For example, when autonomous vehicles become ubiquitous, why would anyone pay a truck driver, bus driver, taxi driver, or Uber/Lyft/whatever driver?

51 grey enlightenment May 12, 2017 at 10:58 am

Or subsidize births, just for the heck of it.

it’s called the welfare state

52 Mark Bahner May 14, 2017 at 12:23 am

“And if you are an optimist about the cost of producing copper, tin, and steel, you probably should be an optimist about the cost of bringing more humans into the supply chain for labor.”

I’m not an optimist. I simply have a reasonable grasp of the history and likely future of artificial intelligence:

http://markbahner.typepad.com/random_thoughts/2016/02/recalculating-worldwide-computing-power.html

“3. Building human-like robots, or smart software that performs human-like functions.”

Bingo. Think of one *trillion* human brain equivalents within the next 20 years.

53 Dave May 15, 2017 at 12:05 am

Imagine removing all subsidies for the poor and all taxes and regulations pertaining to human labor. Suddenly millions of people have to find work *now* or starve to death in the streets. Wages for the unskilled would fall by an order of magnitude (and with them, prices of basic food and non-luxury housing), while robots would cost about the same, so many businesses would go back to using humans. Social pressure to do so would be enormous — if you persist in employing immigrants and robots, you may find a smoking cellar hole where your business used to be.

Economics can barely describe our current world and is quite at sea with such hypothetical questions, so let’s turn to biology instead. Why did we get rid of horses when cars made them obsolete? Why not let them roam free? Because horses compete with humans and meat animals for arable land. If robots make humans obsolete, what will they do with all that land? Might as well let humans have it for cattle ranching and farming.

Very similar life forms (e.g. lions vs. hyenas) tend to compete for the same inputs until the stronger defeats the weaker. Very different life forms (e.g animals vs. plants, men vs. women, humans vs. robots) tend to settle into mutually beneficial arrangements where one’s output is the other’s input.

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