Lotus Eater macro

The question was what happens in macroeconomies as consumption approaches satiation.  Here's Bryan Caplan's answer:

…as consumption approaches satiation, workers reduce their hours of work to prevent themselves from actually reaching
satiation.  More technically, as workers approach satiation, their
labor supply curves start to "bend backwards."  The result is that
rising labor demand stemming from rising productivity raises wages yet
reduces employment.

A longer statement of the question is here and I believe it is fair to assume people still are not satiated in leisure and thus they will work less.  Does productivity have to be rising (rather than just high) in this scenario?  And isn't MU-weighted labor productivity probably falling?

My other query is whether the real interest rate approaches infinity.  Can the resulting incentives for capital consumption keep the economy away from virtual satiation altogether?  A trickier question is what is optimal monetary policy in such a setting.  Can you figure it out?


It looks like Bryan Caplan did address this point previously. See his 2007 Econlog post "What would a hedonistic economy look like?" http://econlog.econlib.org/archives/2007/10/what_would_a_he.html The gist of it is that as desire for leisure increases, labor supply falls and we end up producing just enough to keep the stock of goods at the satiation point.

What about new goods? What about immortality? As division of labor gets more complex new products are more assembled systems. Systems don't always work incrementally. E.g. "Zero to Hero." That is when someone who doesn't play video games gets a game system just to play guitar hero.

What about the growing desire to be away from goods, aka environmentalism?

You don't have to claim that a growing economy is killing the planet in order to want to take a weekend hike in the woods every now and then.

Some things are too important to be left up to the market.
All the best economist agree that central planning is the
way to go, how stubborn can you be? There is huge scientific

Monetary policy is sooo complicated that only old guys
working in secret groups free from the FOIA can determine
the best monetary policy. These people are much smarter than
you and it is silly to think that they would use their power
in ANYWAY that would benefit themselves over the health of
the country. Only people of the highest character get in on
monetary policy decision making proccess and besides
monetary policy doesn't really affect anything, just pay
your taxes and sut up.

We must not let the populist conspiracy nuts pass HR 1207. Just trust
that the federal reserve bank owners are working for your
best interest Bob. They have been helping us since 1913,
would you really want to go back to riding a horse or using
smoke signals?

I concur with Gabe. Bob, as Cowen and Tabarrok have repeatedly pointed out to us, Ben Bernanke is likely the best informed man in the world in these matters, and we should not be second guessing him. We should be glad to have such fine men working their magic for us.

It's just like when that mean old Roubini guy was being such a credit snob...happily we have our GMU experts to set the record straight.

This theoretical exercise ignores the ascendant role positional goods and status assume in such an economy. Or any economy, really. Doesn't the fact that Americans work more hours than ever give you pause? It's true that you can now life a life of idleness and even some satiation for not much money, but the cheapness of things like food, books, TV, videogames and cars just means there's more money available to chase good school districts, trips to jetset ski resorts, and fashionable clothes.

I would say that the optimal monetary policy in this sense (as interest rates reach infinity) would be, actually, the reverse of interest: demurrage.

everyone having the lifestyle of Louis XIV

I'd say this is the core point: having lots of servants, and otherwise having a lot of people do your bidding is a luxury in itself, and not one that productivity increases can make available to the masses.

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