The Great Decoupling

I saw this chart in a Harvard Business Review piece called The Great Decoupling earlier this week:

decoupling

 

The “decoupling” is the divergence between labor productivity and employment/wages that happened in the US in the 1980s and has become quite pronounced over the past thirty years. During the great postwar boom, productivity and wages grew in lockstep in the US. Of course, we don’t see any data from the 19th century and the first half of the 20th century so it’s not clear that labor and wages have always grown in lockstep. But something certainly changed in the 1980s and the result has not been good for median family income which has been stagnant in the US for almost thirty years now.

The chart and the HBR piece is the focus of work done by Erik Brynjolfsson and Andrew McAfee, faculty members at the MIT Sloan School of Management. They attribute this great decoupling to the emergence of “digital technologies.” I would imagine the initial decoupling had as much to do with globalization and the pressure on wages that global competition for jobs in many sectors created. But, as we’ve discussed here before, the mechanization of information work, which Brynjolfsson and McAfee call “The Second Machine Age“, will accelerate this trend and it already seems to be doing that.

When I showed this piece to may partner Albert, he responded with disappointment for the policy ideas that the professors put forth as potential solutions. Those ideas are; education, infrastructure, entrepreneurship, immigration, and basic research. Albert is right that those are not new or original policy ideas and though I spend a fair bit of time and money on three of them, I do wonder if they will not be enough. So does Albert and here’s a policy idea he has been suggesting.

#policy#Uncategorized

Comments (Archived):

  1. JimHirshfield

    What solutions does Albert suggest?

      1. JimHirshfield

        Yes, indeed. I’ve read his writing on that point.

    1. andyswan

      A small number of men with guns, directed by an even smaller number of men who seek votes, removing money from those who earn it and giving a portion of it to those voting blocks with a heartbeat.

      1. JimHirshfield

        That’s one way to state it.

      2. fredwilson

        as opposed to a small number of men and women (you left them out Andy, on purpose?) making all the money and everyone else starving. your ideas on this topic are disgusting to me

        1. andyswan

          No one is starving Fred.  The wealth for every income tier is increasing dramatically.  Absolute poverty is being eradicated at a pace never even imagined in world history. It is not a zero-sum game!

          1. Jordan Thaeler

            I’ve lived overseas for a decade of my life. The US has ZERO poverty; you only go hungry if you’re mentally disabled an unable to go to the government trough.

          2. markslater

            The point here is (i think if i understand Albert correctly) – Why are we still so focused on capital? Why is capital the measure by which all of society exists – should it be going forward? he presents an ulterior measure – one that technology enables – and that being knowledge.From what i can read from your comments – you ground your entire arguments on the notion that capital and its accumulation – are the anchor by which society needs to continue to exist.

          3. pointsnfigures

            @andyswan:disqus, that is true-however big transitions in economics brought about by big innovations tend to destabilize societies. Historically, if we examine the rise of the Industrial Age, the result were a lot of wars. You and I might agree that we need to retrain, change the way we educate people to prepare them for the change, but we both know that spending more money on existing policies will 100% fail.

          4. Richard

            You don’t starve only by lack of nutrition, you starve through loss of freedom. having middle income students graduate with > 100k of student loan debt is perhaps one of the greatest freedoms ever lost to our society.

          5. andyswan

            that’s because gov’t confused correlation with causation and then decided to subsidize college for everyone via off-market loans.Ridiculous.

          6. Richard

            Im sure that higher education and banking lobbyists had more to do with this than any correlation analysis. Just as the real estate lobbyists and banking lobbyists have more to do with the rental housing prices.

        2. andyswan

          It amazes me that you don’t see the macro value of your role in society Fred. You could give away all of your money to the poor, and it would pale in comparison to the wealth you have created in this world by backing and advising the IDEAS and INDIVIDUALS that have created so much wealth. You are probably the best example of “decoupling” in this thread.  That’s a compliment.

        3. Bob Vance

          “making all the money and everyone else starving”For someone to make money, someone else doesn’t have to lose money. The factual ‘pie’ is not a fixed size. Gates didn’t make peoples lives worse by earning tens of billions of dollars, he created products which billions of people choose to purchase. And now Bill has the ability to do even more good with the B&MGF.Jobs didn’t make billions by taking it from others, he enriched all of out lives with multiple products, the iPhone being the largest.For Larry and Sergey to make tens of billions of dollars they didn’t have to take if from others, Google has done an immeasurable amount of good in the world, and they were compensated for their efforts.

      3. David Semeria

        Guns?

        1. andyswan

          How else can confiscation/redistribution occur but through the threat of violence?

          1. David Semeria

            The rule of law?

          2. andyswan

            And how is that enforced?

          3. David Semeria

            By punishment, including incarceration; but, far as I’m aware, not including getting shot.

          4. andyswan

            I can assure you that everyone involved in physically removing you from your home and placing you in the cell is well armed.

          5. Bob Vance

            Let’s say you don’t want someone to take 30% of the money you earn’t (even if it may go to ‘good’ causes). You don’t pay, so people say pay or you’ll go to jail, well, I don’t want to go to jail because I don’t want someone to take my money, so why should I go along with that? ‘Resisting arrest’ = death.

          6. David Semeria

            Resisting arrest = death appears to be mainly a US thing.

          7. Jordan Thaeler

            Funny how if you examine the tactics of Hitler and Mao you’ll see how they confiscated local arms to make their overthrows that much easier. Who’d have thunk?

      4. markslater

        wow – how on earth did you get to that?

        1. andyswan

          There is no other way to achieve involuntary redistribution than through the threat of violence. At its core, that’s what it always is.

        2. Bob Vance

          Don’t pay taxes > Be threatened to be imprisoned > Resist arrest > Get shot

  2. mikenolan99

    I see an interesting trend in the twenty-something generations – less of a focus on material possessions. My 25 year old son, living in Minneapolis with a great developer job – does not own a car. He lives smaller and seems happier than my 1980s fueled rush towards “stuff.” Man, at 25 my car was my identity.I wonder if one response to lower wages is simply less consumerism… of course that effects GDP, which in turn….

    1. JimHirshfield

      Lower wages means you really don’t have the option to be over consumptive.

      1. mikenolan99

        Agreed – but even higher wage people – like my son, like my wife and I, are choosing to lead “smaller” lives. We consume a lot of technology, just not a lot of stuff. Probably not good for China… not so bad for the US economy.

        1. JimHirshfield

          Yes, there’s definitely a trend I see in that direction. But I anecdotealy see the opposite as well: Plenty of over-consumption, including multiple electronic devices for even the pre-school members of a family.

        2. SubstrateUndertow

          High-wage low-consumption is a laudable trend but should not be conflated with the mounting structural distribution-of-wealth issue.

    2. fredwilson

      i am sure that is happening

      1. markslater

        This is where i lose andy swan. He anchors all his arguments in this whole notion of wealth creation – Albert is trying to look beyond capital – truly beyond the notion that he who dies with the most toys wins…..and towards knowledge as the great innovation arc that displaces capital.There is definitely early evidence with the younger generations. The need to own stuff is being disrupted……

        1. andyswan

          I do not equate wealth purely with “stuff”. It is also services, entertainment, Heath.The shift in which of those is desired is natural and cyclical. They don’t want a car, they want an iPhone, Facebook and uber availability. All are wealth.

          1. markslater

            But the notion of wealth is being uncoupled from capital – that’s the whole point…..innovation is shifting culture away from the consumerist approach to wealth and you could argue that what once was analogue (your land, your car, your stuff) is being digitized and a measure of digital wealth is being gathered by the younger generations through the tools and information they are building and consuming…..

          2. andyswan

            Which is fantastic and not at all contrary to my overall point.

          3. markslater

            ok…..

          4. JamesHRH

            Andy is right – its not contrary to his point. Whatever improves things creates value. Not necessarily hard goods.

          5. mikenolan99

            Andy – I kinda think of you like a hornet – you wake up in the morning just looking to f**k sh*t up! 🙂

          6. andyswan

            Maybe so. I would not have commented had I agreed.I’m learning how very easy it would be to be popular.

          7. JamesHRH

            They are going for the effect of wealth, without the wealth creation.I wonder if it is deflationary.

          8. markslater

            thats good james. value is not derived by capital. the uncoupling of value from capital i think is part of what’s being talked about here.

          9. JamesHRH

            Its the common ground between you & Andy.

          10. SubstrateUndertow

            Much of that digital-stuff used to be physical/expensive stuff for sure !I spend lost of money on records and photos when I was young, that stuff is almost digitally free at this point.

        2. LE

          truly beyond the notion that he who dies with the most toys wins…..If it makes someone happy to buy things what is wrong with that? The woman who spends a day at the mall shopping and spending money (and who can afford it) is perhaps equal or better off mentally than someone sitting at a park with a picnic basket leading, you know “the simple life”.Way back I remember going to the hobby store to pickup parts for my RC Helicopter. I had to drive about an hour there, take time in the store finding the parts, drive back an hour. Spend time rebuilding it and so on. I really enjoyed doing that. Was something I looked forward to. Ditto for supplies and equipment for doing photography in the darkroom.This idea that there is nothing positive with someone who is buying “toys” and it is all for nothing is really grossly judgmental.

          1. markslater

            read your starting quote from me. Its not about toys, its the competition for toys.

          2. LE

            What is the difference between the competition “for toys” and any other competition by which one gets pleasure?Why is a game of tennis, or some “stupid” video game ok to want to win but not a contest or competition for who has the most toys?A man who gets pleasure by collecting cars (or art, or postage stamps) is happy doing so. It is a game and a competition for them.In their brain they feel that it makes them happy.Likewise, a person living in suburbia trying to keep up with the Jones also gets pleasure doing that. Bigger barbecue than the neighbor. Head party and all.Now of course there will be mental health casualties from that behavior. But I hope that anyone doesn’t think that just because something is an organized sport (or the opera) [1] that that is more worthy to care about and/or collect and obsess over. To each his own and all of that.[1] Chris Christie is very proud that he has attended so many Bruce Springsteen concerts for example.http://www.cnn.com/2014/09/…Christie, 52, said in June that he has been to 132 Springsteen concerts. Yes, you read that right. 1-3-2.What the fuck is “normal” about that? (I’m happy with Bruce playing over the car stereo from the iphone but I think it’s great that Christie is obsessed and gets pleasure from concerts, I don’t..)

          3. markslater

            go back the the original discussion. this has nothing to do with these competitions you are mentioning – it has to do with capital. i have no idea how you link this discussion to tennis, video games or springsteen.

          4. JamesHRH

            Production of goods killing the earth – production o services (some) does not.That is the argument.And also the point behind The Matrix….

          5. LE

            Production of goods also employs people. Production of services does as well (like at a Springsteen concert or a tennis game).Don’t know anything about the Matrix. You are talking about a Hollywood movie though. So next time I will bring up http://en.wikipedia.org/wik… to back up some point that I am making!

          6. dufas_duck

            Then, in a perfect world, everyone would be just existing.. Sitting naked and alone somewhere contemplating their navel or watching an ant colony at work.Then, there is the theoretical resource based society like the Venus Project where every thing is owned by the collective, no individual owns anything. No one works, everything is provided for free. Everyone is supposed to spend their time studying or involved in the arts. Computers are supposed to organize this utopia and robots are to do everything from manufacture to cleaning blocked toilets. If someone needs or wants something, it is ‘checked out’ like a book from a lending library and returned when one is finished with it. It’s fans call it ‘a resource based economy’ but in reality, it is a giant welfare system governed by machines. Welcome to, as someone has already mentioned, the Matrix..[At least, the ants owned something…]

          7. JLM

            .Bruce Springsteen played at HS dances at Red Bank Catholic. I didn’t even know who he was.CC is a thug. He’s just white and loud. Still, a thug.JLMwww.themusingsofthebigredca…

        3. SubstrateUndertow

          Or is it just that they prioritize their stuff acquisition list differently ?

    3. David Semeria

      A lot of Albert’s thinking revolves around why we feel the need to own stuff. I don’t think I’m misrepresenting him by saying that he sees ownership as a way of offsetting financial insecurity.

      1. markslater

        aghh – you got there first david! see my comment below…andy missed the point of alberts argument imho.

      2. awaldstein

        I’m listening and learning from you and @markslater:disqus on this.Finally getting it I think.

      3. pointsnfigures

        I might disagree with that, but don’t want to speak for Albert. I think it has more to do with historical destabilization of society given big time innovation.

      4. LE

        why we feel the need to own stuff.People want to own stuff because it makes them feel good or it provides freedom in some way. Why even question that? [1] [2] Why does Fred watch basketball? Why does a man buy a large plasma tv to watch sports on it? Because they enjoys doing so. Why is one thing that someone enjoys and spends money on, any better or more worthy of an “experience” than what someone else decides to do with their time and money?I like my cars, don’t rain on my parade and tell me what you spend your money on is “better”.[1] Why does Fred need a Tesla on two coasts? Because he can afford it and he wants to spend his money that way. Has nothing to do with financial insecurity. Obviously.[2] Why do I choose to own my office vs. renting it? Or buy a car vs. leasing a car? Has nothing to do with “financial insecurity”. Has everything to do with being able to decide [3] what I want to do when I want to do it and not be subject to someone else telling me “a lease is up for renewal” or “you need to keep that car another year because that is the contract that you signed”. To me that’s freedom it is entirely my decision which is exactly what I like.[3] This traces back to the way I was raised under the thumb (as was common) of parents. As a result I want to make my own decisions. If my parents weren’t like that (like many millennial parents are today perhaps) I might not think the same way, who knows?

        1. SubstrateUndertow

          “People want to own stuff because it makes them feel good or it provides freedom in some way. Why even question that?”https://invigoratedsolution…At some point on up this hierarchy of needs your view may indeed come into play but for the more basic needs at the bottom of this hierarchy there are billions of people struggling with baseline ownership issues as their fundamental survival strategy .That “stuck at the bottom level realities” is slowly eating the American middle class alive.Now if one applies this hierarchy of needs to the view that society is in fact an instance of a complex(adaptive-living-system) level Holon then this problem becomes an existential stability threat to any advanced democray that cannot solve it on an ongoing basis.Digitally accelerated network conditions are now amplifying that “society as complex interdependent Holon reality” into our most pivotal social stability/survival challenge.We desperately need new more-organically integrativenarrativesmetaphorslanguagevaluesthat pivot around new production/consumption/ownership participation assignments that strategically aline with our new networked-interdependency Holon-overlord.Applying this “hierarchy of needs” at a collective social-Holon level has now become as fundamental as accepting gravity in mechanical design.Without an all out effort to establish a mass-culture of organic-process-literacy centred communication/visualization memes we will not possess the rudimentary collective-mind-set tools required to effectively carry on this crucial transitional debate.We are presently having a linear debate about an organic problem.Framing is everything here !

          1. LE

            there are billions of people struggling with baseline ownership issues as their fundamental survival strategyCan give some simple examples of these types of people. As in “Joe lives in Chicago and he is…” or “Ismail lives in Cairo and she wants…” and so on. I am having a hard time understanding who exactly your analysis applies to.

          2. SubstrateUndertow

            Think globally.ORjust think locally of the homeless/hungry/jobless in America.No Joe/Ismail names required !

          3. Twain Twain

            Exactly, Maslow is linear.The apex of Humanity is Da Vincian, as I keep saying until I’m blue in the face, :*).The academics even recently adapted Maslow for technology to factor in Da Vinci.

          4. SubstrateUndertow

            Agreed but cut me some first approximation slack here 🙂

          5. @mikeriddell62

            Narratives + metaphors + language + values are all being rolled into one blockchain enabled community currency that is earned into existence for contribution to the common good.I can provide evidence if you so wish but the point i want to make is that you are definitely on the right track with your thinking.

        2. JaredMermey

          Utility optimization is cardinal and money/consumption is but a piece that is weighted differently for all.

      5. BillSeitz

        Except lots of ownership (home, car, ahem children) actually increases your fixed costs, reducing your financial resilience.

    4. JamesHRH

      Your kid is causing deflation!The Baby Boomer / Millennial comparison is very intriguing: both groups so status oriented, but with such wildly divergent outcomes.

    5. LE

      Man, at 25 my car was my identity.In my teens, as I remember it, cars represented, in no particular order:a) being coolb) freedom from parents (they were oppressive, confining and not much fun) c) transportation to do something and to make friends as well. The world was quite different. There weren’t the same social and leisure time activities that there are today.Kids simply have less of a need or desire for a car today vs. yesterday I suspect because parents are much more catering to their needs, shelping them around and making them happy which was not the case when I was growing up. Parents also were adults and not people that you would ever hang around with any more than was needed.So I don’t know that it has as much to do with materialism. Your car was your identity because it was important to have that and you could use it to make friends.Let’s take a more modern day example. Today if you have a vacation home in the Hamptons, or down the shore, or on a lake, you can no doubt get any number of people to be your “friend” and come stay with you for the weekend. In fact, they will come out of the woodwork and suggest it to you prior to even getting invited. Ditto if you own a nice boat. You can invite people to spend time on the boat. People will want to hang around you because you have the ability to give them a fun experience at a very low or nominal cost. (There are of course further twists to this like what happens when many people have the same homes or boats or cars but that’s a different thread entirely…)

      1. mikenolan99

        Amen! , though my car wasn’t too cool (’78 ford Fiesta, followed by a ’81 SAAB!)

        1. LE

          I actually “talked” my dad into getting a 1976 Camaro (NEW) for my mom so I could use it. Which I did. And I got to take it to school almost every day until I got my own car (Chevy Monza).This was quite an accomplishment for me. My dad was very practical and a Camaro “with no back seat and no trunk” was pretty much the last thing he would ever consider buying. But I managed to pull it off. I simply talked about it so much and in the right tense that he finally accepted the idea.Now I will wrap this into Fred and Albert. If Fred ends up agreeing with Albert it will be because he both respects Albert and because Albert is always hocking him about it or hocking the world about it “series of posts”. The more something gets talked about the more likely people will be to begin to accept something that they had previously rejected and might have been laughable.As far as the Fiesta, at least it wasn’t an AMC Pacer which oddly enough doesn’t look as bad as I remember it looking back then.

    6. Richard

      The biggest problem with alberts plan is the cost of home ownership and rental housing and the wealth transfer (lower income to higher income) that results therefrom.

    7. Dave W Baldwin

      You are right. The 20 something wants to show what they’ve done and whom helped. Also want to work project and skip meetings.

  3. andyswan

    This decoupling isn’t new. If you look at the data from 1960-1985 on its own scale, you will also see a “decoupling”.As technology advances, the value of non-thinking labor is reduced, and the value of ideas increases. To put it bluntly, this is exactly the phenomenon that VC’s invest in.The decoupling was there when the first plow allowed one smart farmer to create the output of 8 “laborers”. It has increased in pace and velocity and will continue to do so. This isn’t policy, this is the universe. I don’t see many policy initiatives aimed at reducing the effects of gravity on the obese.Of course, the knee-jerk reaction is to “solve’ for “now”.Albert (who proposes that people are entitled to an income merely for achieving a heartbeat) and people like him believe that this decoupling is 1) bad and 2) capable of being solved by popular people instructing men with guns to take money from one individual and give it to another.Both are wrong.1) Decoupling is not bad nor good. It is amoral. It is.It is the result of something great — human advancement. That human advancement impacts all of humanity in a very positive way. Not equally, not all at once, but absolutely in a positive way. Just look at the MASSIVE decline in global poverty over that same 30 year “problem” period. Just look at what “poor” in America looks like in 2015 compared to 1985… hint: The poor are carrying devices in their pockets that literally connect them to anyone or any piece of information they desire within seconds.2) Redistribution scams will not “solve” it.They increase the problem. They rob people of ambition by giving them just enough not to riot. They incent neither labor nor ideas…. they reward breathing and complaining. If you want to see the most unhappy, least inventive, useful masses of voters — just look to where redistribution schemes have been the most engrained over the past 2 generations. Would it really be better if the lines were in lock-step at a gentler angle of growth??We need to REJECT the idea that this decoupling is a problem to be solved. We need to embrace it as the necessary symptom of the absolutely amazing phenomenon of massive, high-velocity wealth creation.No, it doesn’t show equality of outcome. That’s the goal of fools.This chart shows advancement. Leverage. Wealth. Health.Opportunity.Get on the right side of the technology lever– look what can be done!EDIT: I think this is a fantastic start for anyone curious how BOTH decoupled wealth-creation AND reduction in poverty can and do occur simultaneously: http://www.gatesnotes.com/2

    1. bartdewitte

      I am not so sure if the decoupling is related to the technological advancements and you are distracting from the fact that the growth in labor productivity has been a boon to corporate profits, but not to household incomes.

      1. andyswan

        I’m not ignoring that at all. It is also a necessary symptom.The inventor of Uber is creating insane amounts of wealth.  For consumers, for drivers, for shareholders and for himself. He will end up with a tiny portion of that massive wealth creation.  His shareholders a larger amount.  His drivers and customers and suppliers and associated businesses a huge portion. And individually, when compared against other individuals in that ecosystem, his wealth will look absurdly large.  But it isn’t. It’s a small portion of what his idea, and technological execution, has created. Thus the “gap” AND the wealth creation for all involved.  Embrace it.

    2. David Semeria

      Liking your own posts is uncool Mr Swan.

      1. andyswan

        I am not cool.

        1. phoneranger

          trudat bro

    3. fredwilson

      but what would you propose we do when half of our country is homeless and starving?

      1. mikenolan99

        I had an economics professor explain the GINA coefficient – the measure of income distribution. He said something like “Should you be concerned? Maybe, maybe not. But, consider that EVERY time in recorded history when this has hit the breaking point, the poor have risen up and taken the wealth from the powerful. EVERY time.”

        1. JamesHRH

          Short sightedness is a universal human trait – wealthy or poor, powerful or marginal.

        2. James Ferguson @kWIQly

          Interesting but self-fulfilling.If we assume synonymy between rising up and breaking point we see that this argument begs the question.It is the reaching of the breaking point that is a concern – not the symptom that witnesses it (obviously).BWT the “breaking point” of GINA co-efficient is 1 when one person has all wealth and 0 (when all have the same) – between these limits it is a smooth distribution (so there has been no “breaking point” or specific threshold in economic history)

        3. Richard

          BTW, It’s GINI coefficient not GINA coefficient 🙂

      2. andyswan

        The only way that happens is if we stop creating wealth.  Right now our poor are living in better conditions than the poor of a generation ago…and they’re fat, not hungry. The world, and its poor, are getting wealthier and healthier by the day.  This phenomenon, like the “decoupling”, is accelerating and has been at dizzying pace for 35 years. The places it has benefited least are those where distribution is controlled by the few.

        1. Salt Shaker

          “Right now our poor are living in better conditions than the poor of a generation ago.”What data are you using and how is that possibly a reasonable explanation? Moreover, the number and percentage of individuals and families qualifying as “poor” has grown considerably. Not advocating a socialist system, mind you, but the gap between rich and poor has only widened.

          1. andyswan

            The bar for defining “poverty” has been raised dramatically, almost systematically in order to retain and grow that %, rather than to use it as a fixed guidepost for progress. I won’t get into the political motivations for  that, they are evident in this thread.

          2. kidmercury

            do we have any definitive stats on this? i favor using homelessness as a measure of poverty since i think most people would agree if you’re homeless that sucks big time and you’re def poor. i’m finding mixed stats on homelessness; some say up, some say down. probably hard to measure accurately since the homeless are probably largely off the radar.anecdotally, i would guess homelessness has risen, and mirrors the growth in millionaires and billionaires, who benefit from a stock market that is subsidized by policy.

          3. Joe Cardillo

            I’ve seen stats in both directions. I don’t think there’s a pat answer, but one thing worth noting is that insecurity (hunger, financial, healthcare, education etc) has definitely increased. Mayor’s report last year dug into that —> http://usmayors.org/pressre… (.PDF).

          4. kidmercury

            thanks, that’s pretty interesting. one part suggested homelessness is rising in some areas but falling in others. that matches what is discussed here — http://www.endhomelessness…. — which notes that homelessness is down in some parts, up in others, but down overall.

          5. Joe Cardillo

            Yep I’ve seen that as well. From folks I know who work on the issue directly it sounds like many local and state govt’s are coming to realization that it’s more costly morally + economically not to do anything about homelessness. Federal level seems too mired in partisan gridlock to provide much support.

          6. andyswan

            I think this is a great start for researching the effects of wealth creation (and decoupling) on the poor: http://www.gatesnotes.com/2

          7. kidmercury

            bill gates is a source i find very corrupt, and i suspect you’ll find his views to be especially distasteful as his “humanitarian” efforts progress — such as his support for a carbon tax. but anyway, after looking a bit deeper at the data, i think we can say that homelessness is probably generally declining in the US.

          8. andyswan

            +1

        2. JamesHRH

          The places they have benefitted the least are the oldest cultures, where change is feared and labour supply has (for decades) been in chronic oversupply.Those places aren’t innovating (say with a living wage), they are holding people down by force.

        3. Joe Cardillo

          I grew up below the poverty line until mid-way through HS Andy. I have $20.90 in my bank account as of this exact moment, but at least it’s a choice because I’m an entrepreneur bootstrapping a startup. For lots of people I know it’s not.You said that empowerment and giving away crumbs are mutually exclusive, and I disagree completely. Bone crushing poverty, constant fear of being hungry, these things kill creativity and thus empowerment and thus economic opportunity. Scarcity thinking demands emotionally and rationally that there be losers, that it be someone’s fault that they are losers. Wrote more about it here: http://www.ecosystemsandent

          1. Girish Mehta

            A very powerful comment and linked post. Thank you.

          2. Joe Cardillo

            Np. Personally, I’ve seen creativity and empowerment do wonders for people across race, gender, and economic lines. But have to understand people you’re solving problems for, in order to solve the problems. And even better than that enable them to solve their own problems.

          3. andyswan

            Joe I appreciate your point of view. I think you’re right… what I should have said instead of “giving away the crumbs” is “forced redistribution”.I am (generally) in favor of voluntary charity from those who wish to provide it to those who truly need it, through no fault of their own. I actually participate in it quite heavily.I am terribly opposed to forced redistribution schemes that assume recipient’s worthiness.

          4. Joe Cardillo

            Gotcha, yes I responded to JLM on that also, I don’t see any reason to push forced redistribution. Totally agree. But I do think all people are worthy of having basic shelter, food, and healthcare. And may we all do as much as we can personally to ensure that.

          5. James Ferguson @kWIQly

            Brave comment – Bravo.I would like to put the counter position that *sometimes* necessity is the mother of invention.For those that break out from poverty I have only respect – whether they achieve it on their own – or with help.Those who remain in poverty and keep trying – perhaps deserve even more than respect, also support. Just a viewpoint

          6. Joe Cardillo

            Yup I did address that a bit in my post…does poverty breed creativity in some cases? yes.Bummer is, poverty is complex. It’s very much an ecosystem level problem. Two houses over from me growing up was a classic welfare mom with kids from different fathers. “Yes!” The self-described far right conservatives might say, “we found the welfare queens from the 80s!” but that really wasn’t very common. If you’ve ever been seriously poor, dealt with food insecurity, being homeless or near homeless, you realize it’s not a desirable state. It sucks. The worst part about it is that your misery becomes boring. You start to believe that maybe you really don’t deserve to be a human with basic needs met. Even if you accept that, it’s a long way from “god this being on the gov’t dole thing is so great.” Humans are born to be creative, to grow, to wonder. That’s what we do best (well, besides moving our limbs and eating food).

          7. Joe Cardillo

            And honestly, I am not a brave dude. I just care about humans. A lot. I know from experience that ultra wealthy people have the same kind of heart as the very poor. Same w/respect to gender, race, religion.

          8. dufas_duck

            I grew up poor, living in the mountains. Most people here would, at that time, refer to me as a hick, or redneck trash. [This has happened when I was young. Usually by “city folk” driving up to ‘enjoy’ nature or early ecologists out to prove a point..] We were happy in our ignorance and didn’t even know we were poor until some government ‘do gooder’ came along and told us how bad off we were…..

        4. LE

          poor of a generation ago…and they’re fat, not hungry.Nice!and healthier by the day.Actually, as if a perfect storm, medicine is advancing so that the waddlers can be kept alive even if they eat fried chicken all the time and therefore are a continuing drain on the rest of us who pay for their healthcare.

        5. Richard

          “they’re fat” … b/c in part (also about ignorance) high caloric food is the least expensive.

      3. Robert Anderson

        Homelessness is primarily a substance abuse and mental health issue. If you want to solve homelessness, solve those problems. USV should fund ideas in those areas.

        1. James Ferguson @kWIQly

          Interesting (I have family affected) and I agreeHowever I think it is hard to identify root causes in many cases. are substance abuse and mental health issues problems or are they often can be symptoms exhibited as side effects of deeper societal issues.For example as long as “material drivers” , “who you know” or “what you look like” are metrics that determine the “popular adequacy” of a member of society there will be more suicides during “the festive season”

        2. LE

          USV should fund ideasUSV is a venture capital firm and operates to make money for it’s partners, not a foundation that is in dedicated to support social causes, like, say the Ford Foundation. [1][1] http://www.fordfoundation.o

          1. Matt Zagaja

            It’s been interesting to see non-profits (including Ford Foundation) start to make some big bets on technology and data to tackle the problems that they do.

      4. LE

        That is a future event that you will never get anyone to relate to. It’s to distant and to far off.How to handle? There will be bandaids that will be applied to keep the number well below anything near “50%” or even 20%. Same way that they currently deal with crumbling infrastructure. Squeaky wheel basis.

      5. Pete Griffiths

        Apparently private landing strips in New Zealand were the talk of Davos. Somewhere to run to when the peasants rise with their pitchforks.

        1. JLM

          .Better have a big bird if you’e going to NZ. Long trip over deep water.JLMwww.themusingsofthebigredca…

          1. Pete Griffiths

            :)buy more landing strips 🙂

          2. JLM

            .Nah, didn’t the gold rush teach us anything?Sell pitchforks!JLMwww.themusingsofthebigredca…

          3. Pete Griffiths

            LOL

      6. Richard

        real issue may not be the safety net for kids but for seniors.

    4. falicon

      I think one of the larger points around this debate is that historically freedom has been tied to wealth but we are rapidly approaching the point where that no longer *has* to be the case.We now have the growing opportunity to tie freedom to knowledge, and the ability to share that knowledge with the masses.One of the super interesting points that was made in a panel around Basic Income Guarantee the other night was “what basic things do humans inherit at birth?”…depending on your bloodline it might include wealth and/or desired physical attributes…but we all take for granted the fact that we auto-magically inherit a wealth of knowledge and human history/experience…when you think about it in those terms, what’s the difference between getting that for simply “achieving a heartbeat” and including some level of, society-provided, currency into it?To me – even though it’s called “basic income” and the details are focused mostly on wealth distribution, the problem people are actually trying to solve is around “basic freedom”…having enough means to make basic choices throughout your life (instead of being born into indentured service disguised or labled as ‘poor’).Overall – I’m not yet educated enough to be a fan one way or another of any proposals…but I def. find the debate healthy and fascinating.

    5. Jordan Thaeler

      This was amazingly well-written; spoken in true Austrian Economics. I’ve always argued that wealth redistribution schemes support a biologically-artificial cohort of humans who are 1) not contributing to economic/societal advancement, and 2) detracting resources from those who do. We’re not talking about people who are mentally or physically handicapped.What’s interesting to think about is a time in the future when 50% of today’s jobs are roboticized. What happens to the displaced human workers? Do they learn new skills (doubtful), fade away (won’t happen under socialist wealth redistribution schemes… those are votes!), or live off the fat of the producers and spend their days on permanent vacation? One could argue that a large percentage of the US population already embodies the last of the three options and it’s becoming a mathematically unstable proposition for the country’s finances on the macro.

      1. pointsnfigures

        Government regulation stops a lot of people from being able to make a living. For example, let’s assume a large pool of unskilled labor. By unskilled labor I am assuming that they have zero chance of getting a job in the knowledge economy. What can they do?Many can do what we would term manual labor-but not digging ditches. Many could grow and sell food. But, government regulation stops that. Just look at how hard the city of Chicago comes down on food trucks. See how the USDA makes it difficult for farmers. If I grow free range organic chicken in Indiana, I am prevented by regulation from selling it in Illinois direct to consumer. I have to go through a distributor.

    6. JamesHRH

      Andy, it brings a tear to the eye to see such a heartfelt and accurate post.However, the thesis of your argument is that man improves his environment for his own betterment. Find Mike Nolan’s Econ professor’s practical, historically accurate flaw in your approach: its not just men with guns who redistribute the wealth, its women with rocks and children with sticks.The level of rewards for breathing and complaining are irrelevant, until they fall to the point that they threaten the stability of the entire system that fuels human advancement.Not speaking for Albert here, but a living wage is a systemic stabilizer not an individual pacifier. Its a worthy idea.

      1. andyswan

        I agree with the goal, not the means.I don’t think giving away crumbs is the right approach. I think empowerment is. The two are mutually exclusive.

        1. JamesHRH

          We all have a naive blind spot – 100% empowerment seems to be yours 😉

          1. andyswan

            I’m fine with that on my tombstone 🙂

    7. JLM

      .The problem with all redistribution schemes is maintaining the productivity of the makers while watching the line of the takers getting longer and longer.More than half of the US today is on the gov’t tit.We are running out of people to fill the gov’t tit.We are at a disastrous level of labor force participation. Disastrous.If you have a declining level of productive workers and an increasing number of tit suckers — the lines cross and you go broke.JLMwww.themusingsofthebigredca…

      1. John Rhoads

        I agree with all of this, but I also believe just as there are more tit suckers there are more people who are full beyond being fat and happy. There are more who are seeing diminishing returns to their wealth.Some of them, will simply redistribute wealth out of the value and pleasure it brings them.This is most certainly to be encouraged, but also that money isn’t going back to the government which should cause all of us to think very careful about what this communicates about our trust in the efficiency of government and the long run effects of that level of trust

        1. JLM

          .I would normally trot out the realities as to how our progressive tax system impacts the most productive elements of our economy saddling them with a disproportionate burden of taxation.You know the rant, pretend I said it. I will spare you.The urge to “give back” is not a gov’t program and charitable giving in the US is a laudable and real activity.At the same time, it has become a scam of gargantuan proportions. One has to only believe that 10% of the crap being written about the Clinton Foundation has an element of truth to see this.Who trusts the gov’t? Not me.I love my country. I served my country. I would do it again. For you and me not for the White House.I do not trust my gov’t.And, it is getting progressively worse and worse.The gov’t itself doesn’t know what it is doing — the President routinely tells us he learns what’s going on from the freakin’ newspaper — and cannot even fathom what they themselves are up to.Edward Snowden provided one good service, he alerted the President and the Congress to what the intel community was really doing — which they had been lying to Congress about for decades with impunity.JLMwww.themusingsofthebigredca…

          1. Chimpwithcans

            The picture you paint is not so different from many African countries. Kenya for example functions despite the government, not because of it. The government literally sucks the country dry, AND the creativity, energy and downright deviousness that is employed in funneling charity money in Africa is astounding. If only it were channeled elsewhere.

          2. JLM

            .Interestingly enough, our current President has Kenyan blood flowing through his veins.While most everything really was George W Bush’s fault (whatever is left over is that devil Cheney’s, no?), maybe it is the fault of Kenya?This, of course, is a joke. A small, tasteless one but still not to be taken seriously.JLMwww.themusingsofthebigredca…

          3. Chimpwithcans

            Yes he’s a Luo from the Western Kenya – Or his ancestors once were. I hereby submit to the panel that Kenya should be an American territory ……along with Mexico and Canada. That is the only answer for this conundrum.

          4. JLM

            .I second your motion and I will begin bribing politicians after lunch today.JLMwww.themusingsofthebigredca…

          5. John Rhoads

            I’m appreciative of your perspective and also concerned about how this trust level (distrust) translates into behaviors. Specifically infrastructure spending. https://twitter.com/dleonha…Are there any small measures the government could take to start restoring your trust?

          6. JLM

            .Fumigate the White House too big an ask?Term limits?Reform the tax code?Get the lobbyists under control?Secure the border?JLMwww.themusingsofthebigredca…

          7. John Rhoads

            Haha Touche

          8. Jim Ritchie

            Graph failure by not starting Y axis at zero. Looks like infrastructure spending has actually been about the same over any 10 year period.

      2. Joe Cardillo

        The half of U.S. being on gov’t dole, I’ve never read / seen anything definitive on affirming that. But I do agree w/you on redistribution, that’s part of the reason Albert’s UBI proposal is thought provoking for me…I like and believe in the incentives of entrepreneurship, but I’ve also seen the realities (personally and through others) of what poverty does. To me, there is absolutely a basic level of safety / stability needed and then we should incentivize the hell out of going beyond that. In other words, America should be a place where anyone can make it to the top, but that’s not mutually exclusive to anyone can also fall into mind numbing poverty.

        1. Jim Ritchie

          Reading Mary Meeker’s report earlier this week and this slide was the most shocking to me. Yes, 50% of the population on the government dole up from 30% just 30 years earlier.

          1. Joe Cardillo

            Hmm…that’s what I was questioning, hadn’t dug into Meeker yet but I read something like that a while back. Includes every form of pension / insurance, a lot of which is stuff that people receiving benefits paid into. That’s very different from housing assistance or food stamps. When people say “on the govt’ dole” they’re usually referring to entitlement spending…

    8. John Rhoads

      I think we all agree that having more people who can participate effectively in conversations like this one would be a desirable outcome.The breakdown on this thread seems to be “how”. By emphasizing and rewarding individual opportunity and potential? By lifting up the bottom so all are in reach?

    9. IS

      Wow — the poor have smartphones! See, this is the problem with the “tech lifts all all ships” argument. The counterpoint might be, I dunno, food deserts. Lack of access to basic nutrition. Chronic illness. Lack of access to capital. Multiple low-paying jobs strung together simply to keep the lights on. But I guess none of that matters when you have access to Facebook in your pocket.Myopia is a hell of a thing – and dangerous. Technological advancement marvelous. But the diffusion of new technologies doesn’t mean a damned thing in its own. You don’t solve economic displacement with cheap smartphones (which is not to say they won’t play a role).

      1. andyswan

        it was one example. If you want to go down the list of medical advancements that have “trickled down” we certainly can.Poor people in America are obese, not starving.

        1. IS

          If you insist on self delusion, be my guest. It’s an absolutely tone-deaf position to look at poverty and obesity and conclude that the obesity epidemic is due to abundance. Or maybe you look at cheap, unhealthy food as “abundance.” Not to pick this example to death, but I hear the same libertarian crap all the time. And others:Poor people can afford washing machines! They didn’t have those 50 years ago.Poor people are living longer than they did 50 years ago (yay science! ) … but compare life expectancy to more affluent populations with reliable access to health careAnd so on.Point is, technology doesn’t stand still, income disparity doesn’t stand still, and poverty isn’t some line in the sand (oh, now your HHI is above $28k, so you’re positively wealthy!). Nominal increases in the poor population’s standard of living (in terms of comforts, certain conveniences) aren’t immaterial by any means, but poverty is always a relative thing. And in today’s world, that smartphone, that dishwasher — those things don’t mean a whole lot when people can’t get ahead despite 4 jobs. Can’t save. Can’t build wealth (and that’s the real kicker) and break the cycle. Spend all of their energy trying to simply survive. And if you don’t understand that point, I think you’re a heartless zealot.It’s an entitled position — and intellectually dishonest — to suggest that technology diffusing downwards makes poverty less bad. Or can use the word “abundance” in the same sentence as “poverty” and keep a straight face. And that, somehow, the manual jobs that are being automated out of existence aren’t going to pinch the poor more than the current state. I’m all for efficiency, but what’s the next step?What’s the avenue for low-skilled workers to find gainful employment? See, that’s structural. That’s what policy needs to address. And since the private sector doesn’t seem to care, it seems like a perfect opportunity for government to get involved. It’s a funny thing about those men with guns… They take on programs that just ain’t sexy to the market.We can debate policy, what works, what doesn’t, whether dramatic changes are needed to entitlement programs (almost certainly), but if you’re entering the discussion from the ludicrous position that started this thread, then I’m sorry … you deserve to be roundly ignored.

          1. andyswan

            Actually technology DOES make poverty less bad, and it is exactly why I am a proponent of policy focusing on CREATING WEALTH rather than equalling outcomes.I imagine a world where 200 years ago it was determined that it was the right of every man to own a horse and every home to be equipped with a coal-burning stove. Not good. Wealth creation impacts ALL levels of income in a positive way. That’s my point and I won’t back down from it. We need to embrace the idea that “low-skilled” isn’t as valuable any more, because that’s the actual truth.I don’t think obesity among the poor is due to abundance. I can also, with logic, determine that it DOES undermine the cries of “they’re starving in the streets!”You can dismiss me if you like, I really don’t care. I’m not after votes.

          2. JLM

            .Went ugly on an ape a little too early on Swannie. Got to take him like an acquired taste — good when acquired but takes some time.We give a great deal of money to people under the guise of helping their plight in life when in reality we are just creating a dependency.If we re-deployed all the unemployment money into job training maybe we’d have a different outcome.Learn A/C repair and move to Texas. I defy you not to make a buck. Ever call an A/C guy at 4:00 PM on a Saturday when it’s 105F?You’re perfectly right, it is structural. Nobody wakes up in the morning and says “ahh, poverty, isn’t that a grand condition?” but lots of people wake up at noon which dooms them to be poor forever.Changing outcomes requires changing behavior. No way around it.JLMwww.themusingsofthebigredca…

    10. Bayowolf

      I’m not sure from where the confusion is coming. If productivity is measured by “amount of product / cost of labor” then productivity increases could reflect (partially) lower wages. But maybe I am confused.

    11. SubstrateUndertow

      So your argument is that only fools try to walk and chew gum at the same time !For such a bright guy your zoom-out bottom appears to be stuck or broken ?”1) Decoupling is not bad nor good. It is amoral.”Agreed, over concentration of wealth/power/education/control is not so much immoral as it is a mathematically unsustainable homeostasis, especially under ever accelerating network interdependency conditions.These very conditions are now amplifying structural decoupling at a rate that is destabilizing our transition from a linear/material based culture to an information based interdependent network-organics culture.Your augment implies that managing such a complex/unprecedented watershed transition can be left to obsolete linear/myopic/localized/volitional market forces. At some point accelerating complexities/interdependencies demands serious collective analytic introspection that targets at survivable sequential/synchronization management. By any measure of prudence we can assume we have arrived at that point!”We need to REJECT the idea that this decoupling is a problem to be solved.”Sorry to say but that assertion is absurd on the face of it.Why would complex decoupling problems in social organization/stability be any more immune to failures than in mechanical/software design problem-solving both of which are orders of magnitude less challenging than social stability.That just seems like a case of “rearview mirror” simpler-times presumption/denial at best !”2) Redistribution scams will not “solve” it.”After all, it is not like redistribution has ever solved any mechanical or software problems so it surly can’t possibly work on any social/economic problems ?A lot of this problem is not so much a “REDISTRIBUTION” problem as a “PROPER DISTRIBUTION” retrofit to centuries go oligarchic necessity that have now been superseded/obsoleted by networking tools/techniques that suddenly allow for a stable/distributively managed participation in all things human. Corporations, individuals and societies can now be potentially managed as symbiotic/interdependent Holons thanks to the magic of networked synchronicities.This zeitgeist spirit-of-our-times imagination-challenge is no “SCAM” rather it represents the oncoming noonsphere at the far end of an evolutionary tunnel.

  4. Aviah Laor

    This is the expected result after decades of intentional effort to separate one’s income from the value she creates. “Big government”, “maximizing shareholder value”, “socialism”, “nonrecurse debt”, “takeover”, and so many other common economy norms, have one thing in common: all claim, and deliver, that the spoils are not going to the people that actually created the value.

    1. andyswan

      What creates value is changing.

      1. Aviah Laor

        But you could argue that technology and productivity should bring government costs to 10%-15% of the GDP instead of 50%, and thus the tax cuts would then spread the value created elsewhere to a higher free income in the now less valuable jobs. SciFi, I know. But also in tech jobs and more valuable jobs, the same pattern exists, the separation of income (even when it’s better) from the real value.

        1. andyswan

          I’d say 8% is more than enough for the Federal gov to do its limited job

          1. Jordan Thaeler

            I’d say less if you revert to tariff schemes that worked in the 17 and 1800’s. Though we did default on our loans…

        2. JamesHRH

          Aviah – great point on government not being a strong organizational deployer of tech advancements.

          1. Aviah Laor

            Thanks. Indeed. In a perfect world the government would act somewhere along the lines of the Gates Foundation, and leverage wealth (tax money) into real, scalable solutions, instead of overhead.

    2. vruz

      “Separating one’s income from the value one creates”Sounds to me like robbery. Wait… it is robbery!

  5. Seenator

    Fred,Suggest that you add an update to the post that Albert also probably believes in Basic Income as one policy tool as you have blogged about. People would probably be curious on what he thinks (one commentor already asked for his ideas)Here are some links to what you & Albert blogged about previously.http://avc.com/2014/07/the-http://continuations.com/po

    1. fredwilson

      added that. great suggestion

  6. vruz

    Nice euphemism they came up with.1) In other countries we call that ‘rampant predatory and anti-social behaviour’, or an ‘all-out assault on the people’.It’s just more comfortable to call it a ‘decoupling’ because it sounds like a physical phenomenon, like gravity. Things just crumble and fall to the ground because of gravity.But calling it an action, a behaviour, we would have to ask next who are the actors, and who the predators. That would be too complicated and it would demand that we check who is responsible, accountable, and impune for this.2) There’s more holes in this boat than there is boat.When you have widely recognised systemic failure, you don’t plug a few holes. You try to come up with ways of floating a different boat, one that can’t possibly sink.

  7. Shaun Dakin

    What happened in 1980? The election of Reagan and the introduction of “voodoo economics”. In which tax cuts to the 1% were marketed as being able to “trickle down” to the rest of us.Hasn’t worked out that way.Income inequality / Wealth inequality is the single biggest factor in 2015 leading to the society that we have.It was a choice that we had. We made the wrong choice.(PS: Clinton’s deregulation of the banking industry and Wall Street is also a factor)

    1. andyswan

      Explain why you think the lower class is not wealthier (in absolute terms) than it was in 1985.Btw, the top 1% pay a greater percentage of total income tax receipts today than they did in 1980.

      1. Jason T

        Agreed 100%. There’s probably also a decoupling of quality-of-life and income. For many, technology advancement means you can now live very comfortably with tremendous access to information and resources. That didn’t exist 30 years ago. A high quality lifestyle and income are not as connected as they used to be.

      2. Richard

        Let’s hope so! You know why this is the case, I sure.

    2. pointsnfigures

      I disagree. Income inequality is a poor statistic to look at. What’s the alternative? Income equality. What societies have tried to enforce that, and how did it work out?

  8. John Fox

    It would be interesting to see what happened during the Industrial Revolution, and other periods of time where there were step function changes in technology.

    1. Perry Ismangil

      Slavery, leading to wars. World wars.

  9. Matt A. Myers

    “education, infrastructure, entrepreneurship, immigration, and basic research” are, in part, the results we’d be looking for – however the foundation and policy required to structure it will be different and less broad, they will be settings and not concepts or simply titles for desired outcomes.There is a leading metric for everything and design to support those leading metrics is how we win.GDP is the wrong metric to be looking at anyway.

  10. Ryan_Lanham

    Assume a theoretical maximum global consumption as C. And a maximum “economic” consumption as C’. The economy is approaching C’ in human labor terms. Growth advocates propose projects to approach C. Capitalist/libertarians propose a steady state at or near C’.The trouble with C’ is that we can achieve that with relatively few firms and people working on a global scale. And if productivity increases, consumption will not keep pace. People just can’t travel/eat/furnish/live in as much capital as has been the case from WW2 to computers as decision aids.The trouble with C is that it isn’t economic. There must be a new deal. All solutions devolve from choosing C or C’, Democracy will choose C. Economics will choose C’. What follows is crisis that resolves the direction of choice. I have little doubt it will be C. Thus, we are in a wind-down of conventional wealth and economics as we move toward some version of techno-utopia.

  11. falicon

    Albert took part in a panel discussion about Basic Income Guarantee this past Tuesday that I was lucky enough to attend…I threw together and shared some basic notes around it in case anyone is interested -> http://falicon.com/post/119…It’s a really interesting idea that seems to be gaining a little momentum around the world as of late.

    1. kidmercury

      your visual note taking was cool — i felt like i learned from it just by seeing your visualization. a really great concept that i’m now inspired to employ myself!

      1. falicon

        Thanks – I picked up the Sketchnote handbook ( http://www.amazon.com/Sketc… ) in hopes of making note taking more interesting/fun/useful for my kids…but ended up getting myself hooked and have been working on the skill.

  12. kidmercury

    all that matters is debt, it is the mother economic variable from which all other economic variables stem. solve debt you solve the problem; fail to solve it, you don’t.

    1. Ryan_Lanham

      Debt is just consumption moved from a future to a spot trade. Any future has credit/default/deliver risk. Your note implies you think the default/delivery risk is somehow interesting. If you have inflation, it isn’t. Inflation is simply excess demand. Our problem isn’t demand, but supply. We have excess supply. No one anticipated that in classical economics. Everyone assumed we would want to consume more and more. Trouble is, we don’t. Governments spend future money now to spur demand, not to raise supply. That is actually sensible if you are a capitalist.

      1. kidmercury

        debt is not consumption moved forward. all money is loaned into existence so debt and money are sort of the same thing. that is the root problem and why the word is inherently insolvent — there is never enough money to pay off the debt.inflation is growth of the money supply, or if we mean inflation of prices, it is resultant from many factors international in scope (debt almost always playing the role of primary variable, by virtue of its relationship to money creation).

        1. Ryan_Lanham

          No real point in arguing monetarism. It’s as discredited as homeopathy. There are no serious advocates any more. Even Greg Mankiw is a Keynsian.If I believed in monetarism, I would argue for some sort of “backed” money. Marxism used a labor theory of value. Capitalism used gold or silver. All are rather silly.Money is a contract. Always was, always will be. It is a contract to deliver value when it is required. It is inherently a future because it can be discounted, has backwardization, etc.All uninteresting in my opinion. The point is how do we soak up supply… not how do we limit demand. Debt is only interesting if you are attempting to limit demand. Otherwise it is a shock risk… nothing more and nothing less. If you believe it “creates” money–you are right. But anyone with a pen can have a legal contract.

          1. kidmercury

            my point is not really related to any economic -ism, though i can see how it might be interpreted as such. there are two simple points:1. all money stems from debt2. the supply of debt is greater than the existent money supplythese points are often extrapolated upon to create various economic -isms, though i am not interested in endorsing one over the other. i’m interested only in pointing out facts/mathematical certainties.incidentally, if one wishes to find economic papers that look at historical data and attempt to mathematically illustrate the correlated (and perhaps causal) relationship between debt and economic productivity, they are out there. lacy hunt’s paper from a few years back is probably the most popular example.

    2. falicon

      I’m with you on the debt bit for sure…I’m not sure history has ever had a solution for it beyond ‘revolt and reset’

      1. Cam MacRae

        It certainly has: Debt jubilee.

        1. falicon

          at scale?

          1. Cam MacRae

            Not in the biblical sense, but debt forgiveness is a pragmatic modern parallel practiced to the tune of 100s of billions of dollars per year.

      2. JLM

        .The solution to most debt crisis has been inflation — the ability to pay back dollars with dimes.JLMwww.themusingsofthebigredca…

        1. falicon

          Which I think slows down or at least delays the ‘revolt and reset’ tipping point…but I don’t think it solves for it…but I guess time will tell as it does seem to be the approach we’ve had throughout my life… 😉

  13. Franklin

    The chart in the HBR article stops with 2010 data. But just in the past year (Q4, Q1 and now Q2) productivity growth has mysteriously crashed. Alan Blinder wrote about this two weeks ago ( http://www.wsj.com/articles… ). Also, Jeremy Siegel was just fretting about this at a Wharton School event. This new mystery does not invalidate the work of the authors, but it’s interesting and disturbing. It’s also probably narrowing the (divergence) gap somewhat. I am at least partly persuaded that the reduced productivity is an illusion caused by the growing inadequacy of current methods for measuring GDP. These methods don’t capture lots of productive new capabilities (essentially Albert’s “digital abundance”) that the new technologies have brought us.

  14. Tom Labus

    A legit economic history should be a mandatory requirement for everyone getting a HS and college degree.in the US. We should also be explianing to our kids that risk is an essnetial element for their future success and they should be taught how to evaluate and deal with it.I believe the US obesity problem is some bizarre reaction to being economically nuetered

  15. William Mougayar

    I agree with the lack of originality or insights in the prescriptive parts of their conclusions. If this is a so-called US problem, then they ought to have made deeper comparisons to others countries, to gain more insights.I had to do a double take on this meaningless statement: “The best way to respond to change is…to roll with the punches.”

  16. Twain Twain

    Thanks for link to ‘The Second Machine Age’ book. The economics dimension needs as much consideration as the “No killer robots” dimension wrt Machine Intelligence and how it works positively with human intelligence.The challenge for us is as Da Vinci noted: “Learn how to see. Realize that everything connects to everything else.”My view is that there needs to be intergovernmental frameworks in place for Machine Intelligence asap — akin to how Bretton-Woods, NAFTA, GATT and other frameworks supported international trade and economic development.At Deep Learning Summit in SF a few months ago Andrew Ng, who created Google Brain and is now Chief Scientist at Baidu, said: “If we succeed in building self-driving cars, that’s 3.5 million truck drivers who might have to find a new job. During the industrial revolution, the population had 200 years to shift from 98% farmers to 2% farmers. The transformation brought about by computer technology will be much faster.”The policy ideas will need to be much more radical and perhaps include:(1.) Different mechanisms for people to monetize their content and data, including equity/stock options in the Machine Intelligence startups.(2.) Democratization of how Machine Intelligence is defined. At the moment its definitions, parameters and purpose are determined by a dozen or so highly-educated, elite academics who are several layers removed from Joe+Jane Public except through petri dish experiments.(3.) Limitations, vetos and quotas on the number of humans the machines are allowed to replace.There are ways to ensure a more coherent and beneficial coupling of humans with the machines and it’s vitally important we think this through.Otherwise, we risk the machines killing us economically before they do so physically.Just as new schools of economics arose in decades past (Mercantilism, Ricardian, Monetarism, Keynesian, Neoclassical, Heterodox etc.), there will need to be a radical new school of economics too to factor in the fusion of human and machine intelligence and productivity.

    1. panterosa,

      The challenge for us is as Da Vinci noted: “Learn how to see. Realize that everything connects to everything else.”YESSSSSS!This is what I’m doing – making those seeing tools. for connective vision. It also relates to machine learning. We need to talk sometime. @Shana thought we’d jive.

      1. Twain Twain

        Did you read this?* http://www.forbes.com/sites…When Da Vinci wrote: “All our knowledge has its origins in our perceptions” he didn’t mean just the functions of our visual optics — useful though that is, imo.

        1. panterosa,

          No I did not – thanks for the link.perceptual learning and pattern recognition connect the seeing eye to the thinking brain. that transition is more or less successful in my view in what that eye sees, quality, clarity, and how it is trained to classify.

          1. Twain Twain

            Let’s discuss this more offline? I am twainventures at gmail.com.The machines will soon be the arbiters of beauty rather than us, given their advances:* http://www.technologyreview…What the eye sees is not perception, imo. That’s optics.Perception is the value and emotions our senses assign to our experiences.

          2. panterosa,

            I will ping you.I’m interested in this NYT Learning to See Data article featuring perceptual learning http://nyti.ms/1HdLbBR

  17. ZekeV

    The BIG is a plausible policy solution to the evils of capitalism, on certain assumptions. My instinctual reaction to the proposal, however, is negative. I’ve thought a lot about that, and tried to come up with an explanation of why I hate the BIG without invoking my knee-jerk right wing beliefs about the role of government. Here’s what I think is the source of my irrational disgust at the BIG proposal –In advocating for the BIG, you are positing a world where technology has concentrated more and more capital in fewer hands. And not only that, but you are suggesting that a large segment of society will become permanently unproductive, will not have the opportunity to perform meaningful economic work.You imagine yourself as a reluctant capitalist, who while doing his part to bring this dystopian vision into being through your financing of tech and information monopolies, also promotes redistributive policies so that the losers created by your success can at least live with basic dignity. We losers live a higher standard of living than ever before on the fruits of the monopolists, who also capture 100% of the value of our views and clicks. We get a check in the mail every month, financed by taxes on the monopoly profits, which we use to buy all the basic services of life.This is a depressing vision of the future. I would rather imagine — and in fact I believe — that we’ll see a wave of decentralization, which will break many of the existing monopolies, and will provide greater opportunities for individuals and small groups to perform meaningful economic work. The economies of the developed world will look increasingly like the noisy bazaars of the developing world. Tech monopolies will certainly still exist, but will be challenged on many fronts by decentralized markets. The BIG will become a moot point, and governments will be unable to collect taxes efficiently enough to fund it anyway.

    1. Bob Vance

      How are you defining ‘monopoly’? I can’t think of a real tech monopoly (being the only supplier/provider).

      1. ZekeV

        Thinking of it in terms of Peter Thiel’s definition — he thinks all the successful tech companies are at least quasi-monopolies.

        1. Bob Vance

          I disagree with Peter, he argues that Google is a monopoly. However they are not the only search engine. They are however the best one, from my personal analysis. I’ve tried Bing and DuckDuckGo as well as several other variants and the results were sub-par. That, by my definition, is not a monopoly. Given Google’s market share in the search market I’d say it’s the universal superior product, not a monopoly.

          1. ZekeV

            Of course Google always points to available alternatives as evidence that it is not a monopoly. I am suspicious of that argument. If Google’s not a monopoly, then why is it nearly impossible to build a product that competes with it? Google invests billions in its technology, has vast network effects by locking in publishers and advertisers into its various ancillary services, has armies of sales people selling ads. It only looks like an undefended company from the perspective of an ordinary end user, but then the end user is not the true customer of Google (or of Facebook, Twitter, etc.)

          2. Bob Vance

            >”Of course Google always points to available alternatives as evidence that it is not a monopoly.”Via multiple dictionaries/sources [1] – “Monopoly – the exclusive possession or control of the supply of or trade in a commodity or service.”I agree with this definition, the sole provider of a particular product or service is a monopoly. By definition the very fact that there are other competitors points to Google not being a monopoly.[1] http://www.investopedia.com…,http://dictionary.reference…,http://www.thefreedictionar…,http://economictimes.indiat…,http://www.merriam-webster….

          3. ZekeV

            Even Standard Oil wasn’t the single source of oil in its day. The alternatives have to be meaningful competitors. Economically the monopolist can be identified by its ability to charge a monopolist’s price. Google is free to you and me, but I would bet that it enjoys a lot of pricing power on AdWords…

          4. Bob Vance

            >”The alternatives have to be meaningful competitors.”At what point does a company become a monopoly purely on the inferiority of its competitors?As someone who uses AdWords, if it did not provide a meaningful ROI I would not continue to use it. I have choices for distribution.

          5. ZekeV

            Why is AdWords a better choice? If Google has a paid search monopoly (or not) it must have something to do with the difficulty involved in matching Google’s offering. Maybe Google is not a classic monopoly, b/c the markets they dominate involve a cost center and a profit center. Google dominates search through its tech and brand, but makes no money directly from end users of search. It also dominates *paid* search, ie, adwords. But based on what, I don’t know — am not a user of paid search. As you point out, publishers and advertisers are certainly free to use other distribution channels.

    2. Ryan_Lanham

      Realistically, a huge portion of the human mass is unproductive in economic terms. BIG or some other “fix” or continuation continues to stretch out the status quo as long as possible–something some friends of mine call “kwoning.” To kwon is to extend the life of a system because it is fun or beneficial to some powerful people but not really useful in social terms. Everything goes into kwon sooner or later. Right now, digital abundance and artificial scarcity are kwon terms for a new reality… I can copy a hard disk and a program and the only reason I don’t is because government says I can’t. What is a patent anyway? It’s all nonsense.

      1. ZekeV

        Well said! It is ironic that you share a last name with the key author of the US Copyright Act…

  18. Jan Schultink

    If you were able to collect this data on a global basis, you might still see the coupling?

  19. laurie kalmanson

    riders of the purple wage: 1967In the story, all citizens receive a salary (the purple wage) from the government, to which everyone is entitled just by being born. The population is self-segregated into relatively small communities, with a controlled environment, and keeps in contact with the rest of the world through the Fido, a combination television and videophone.http://en.wikipedia.org/wik…In his afterword to the story, Farmer mentions the Triple Revolution memo, a document sent to United States President Lyndon Johnson in 1964, with policy suggestions for the future of the nation in the face of “three separate and mutually reinforcing revolutions.” These were identified as “The Cybernation Revolution,” (massive automatic production, requiring progressively less human labor), “The Weaponry Revolution” (the development of new forms of weaponry which can obliterate civilization), and “The Human Rights Revolution” (a universal demand for human rights).

    1. ZekeV

      Sounds like a great sci-fi distopia! Just shows I am severely under-read. Will have to go look this one up. Thanks.

      1. laurie kalmanson

        Logan’s Run is a 1976 American science fiction film directed by Michael Anderson and starring Michael York, Jenny Agutter, Richard Jordan, Roscoe Lee Browne, Farrah Fawcett and Peter Ustinov.[3] The screenplay by David Zelag Goodman is based on Logan’s Run by William F. Nolan and George Clayton Johnson. It depicts a dystopian future society in which population and the consumption of resources are maintained in equilibrium by killing everyone who reaches the age of thirty, preventing overpopulation. The story follows the actions of Logan 5, a “Sandman”, as he runs from society’s lethal demand.[4][5]http://en.wikipedia.org/wik…

      2. laurie kalmanson

        Soylent Green is a 1973 American science fiction film directed by Richard Fleischer and starring Charlton Heston, Leigh Taylor-Young, and, in his final film, Edward G. Robinson. The film combines the police procedural and science fictiongenres, depicting the investigation into the murder of a wealthy businessman in a dystopian future suffering frompollution, overpopulation, depleted resources, poverty, dying oceans, and all year humidity due to the greenhouse effect. Much of the population survives on processed food rations, including “soylent green”.The film, which is loosely based upon the 1966 science fiction novel Make Room! Make Room! by Harry Harrison, won the Nebula Award for Best Dramatic Presentation and the Saturn Award for Best Science Fiction Film in 1973.http://en.wikipedia.org/wik

    2. Perry Ismangil

      @ZekeV “In Time” movie by the same guy who did Gattaca is an interesting look at how debt & inflation is used to siphon the basic income. Warning: it has a real stupid ending though.

  20. Dave W Baldwin

    We have to look realistically about what is happening. When not too long ago you could have a picture of preschoolers stating that over half of them will be in a career that doesn’t exist today, that is getting bigger each year.Instead of devolving into Voodoo vs. Big Brother, we need to face the fact that the combination of Automation and Directed Biology will displace most people working. The Chinese have made it clear they’re looking to automate vs. increase wages and the same is happening here. We just have more safety nets allowing the ‘poor’ to partake in purchasing however many tech products.There is a group of thinkers that push advancement in AI over to going more parallel with automation tools where the managing of debt and investment can be handled allowing the lower income class to increase the worth of their assests.Will that ever bring them on par with that evil one percent? No. But, we have to face reality so that the ‘two worlds’ on this Earth are not so far apart that the ‘lesser world’ doesn’t destroy itself.

  21. JLM

    .It is amazing that this discussion could have gone on so long today with nobody throwing onto the table some of the enormous policy blunders that have contributed to what has been a decades long decline of the American work place.There are huge specific, structural reasons why these things are happening.First, let me touch upon what is likely the most contentious problem: IMMIGRATION. Let me focus that big word a little more tightly — illegal immigration.Living in a border state for much of this period of time (since 1979), I have had a front row seat on the magnitude and impact of illegal immigration here in Texas.In the good times, the magnitude of illegal immigration has dampened demand driven wage growth with a flood of low wage workers tempering the necessity for employers to compete in the market place to overcome the high and unfulfilled requirements for labor.In Texas, think 15MM in population, the introduction of 1-5MM illegal workers — WORKERS, not just bodies — the impact has been incredible. Cement finishers, a trade that Mexicans can pick up easily and one they excel at, haven’t seen an increase in the cost to finish a SF of concrete in thirty years.In that period of time, the market has been flooded with 3-man Mexican, pickup truck finishing companies. Why “3” cause that’s how many men can ride in the front of a pickup. Since the advent of 4-door trucks, these little companies have become 6-man companies.This is the small earthy stuff you learn when you have a front row seat. Think anybody in Congress knows this stuff?This is true of every trade you can think of. This is real. This has been happening for years and it is not being impacted by the government — not an Obama rant, every President since WWII gets a smack in the head for this one.Solution? Secure the damn border.To jump to the present — what do you think is going to happen to wages in the next ten years when low skill, low wage illegal immigrants are given the protection of the President’s executive amnesty? Wages are going down, y’all.That’s a policy failure.Second point — the offshoring of jobs. To jump to the chase, if you are going to allow folks to offshore jobs to jurisdictions wherein there is prison labor, no environmental laws, child labor, no fair wages, etc. — you are stealing American jobs at fair pay and fair work conditions by preying upon labor in other jurisdictions.You can pick any number of industries — textiles in the Uplands part of South Carolina, as an example — and trace their employment decline to this offshoring being done by huge companies, profitable companies.It is a disgusting but clear example of the political reward for greed.Third is market access. America provides almost unlimited market access to “unfair” traders and we constantly shoot ourselves in the foot by failing to get access to their markets in return. There has not been a single President who has wielded the power of market access to right wrongs.The negotiation on the current trade bill are a perfect example of a failure of leadership by both political parties — the Dems for having proposed it and the Reps for having coughed up the votes.They are conducting secret talks with secret documents in a secret room — we are a freakin’ democracy. We elect these dipshits. They work for us — and we let them keep such secrets from us?It is policy that is driving much of these self-inflicted ills.Heading for my second cup of coffee.Backstroke, it’s still raining in Texas. I ran into a guy named Noah yesterday. I bought a couple of tickets.JLMwww.themusingsofthebigredca…

    1. Ryan_Lanham

      The trouble with the right wing is that they are exactly where the left wing was 30 years ago–at an end and bankrupt of ideas about the future. Liberal/libertarian capitalism is as dead as socialism was.The reality of the present is that we can far outproduce human demand that can be generated in like for like terms. Humans just aren’t worth much anymore and most growth comes from artificial ideas like patents, copyrights, etc. that really are as anti-capitalist as you can get. Now we approach AI. There aren’t any conventional answers for this stuff. We’re all stalling. It’s a end game. We all know it. So now what?

      1. JLM

        .There is temptation to identify ends of the same spectrum — the political spectrum — as having an impact on the marketplace when, in fact, it is the gratuitous deeds of the middle that make most policy — bad policy in particular.A bad idea promulgated by a majority is still a bad idea.These are basic economic notions that, like the law of gravity, are immutable and can only be dealt with by structural actions.Introduce 10-20MM illegal, low skill, low wage workers into the US and guess what?If you make a living with your muscles, you are screwed. Your wages will not just stagnate, they will go down and then age will catch up with you and some young illegal will not just dampen your wages, he will take your job.This has nothing to do with the tech folk whose fortunes are being built in different arenas. They are going to do just fine.We will always have a job driven, muscle driven layer of our economy. We are doing nothing from a policy perspective to make that any fairer or more effective while we are doing much to make it a disaster — illegal immigration, offshoring, regulation, etc.JLMwww.themusingsofthebigredca…

    2. Tom Labus

      How does Supply Side fit into this mess?

      1. JLM

        .That is one of those questions that is likely to create a political knee jerk reaction which stifles an intelligent exchange.There are some basic realities that cannot be ignored and they should be addressed.In the end, we have to create jobs, good jobs — but jobs that can employ the actual work force. We can only create good jobs when the economy is expanding. Right now, it is within the chalkstripe as to whether the economy is even expanding — there is no recovery.When the economy is growing and we are creating jobs, somebody is going to get rich in the process. We have to stop intellectually demonizing success and wealth for the pragmatic reason that it is a job killer.Instead of investing wealth to create jobs, wealthy people are investing in purely financial instruments, hiding from the tax man and sitting on the sidelines. This is true also of corporations which are sitting on tons of cash.Government is growing so quickly and has gotten so fat that Jabba the Hut is a weight loss exemplar in that world.What is not being spoken of is simple government spending control. Every state governor and statehouse has to balance its budget. In Texas and Wyoming, they do it for two year cycles.The Feds just need to control the rate of increase to bring things into balance. We are enjoying record — RECORD — tax receipts at the Treasury.When can you control expenses and really make an impact? When revenues are high. Now. Not one political person has let the words “expense control” escape their lips.Every instance in which the US has cut personal taxes, the subsequent receipts to the IRS have grown — GROWN. It is like grandma’s home remedy for a cold. It works. Nobody can explain but it does. John Kennedy got this.JLMwww.themusingsofthebigredca…

    3. Matt Zagaja

      Most economists are pro-immigration and open borders. Why?”It might seem intuitive that when there is an increase in the supply of workers, the ones who were here already will make less money or lose their jobs. Immigrants don’t just increase the supply of labor, though; they simultaneously increase demand for it, using the wages they earn to rent apartments, eat food, get haircuts, buy cellphones. That means there are more jobs building apartments, selling food, giving haircuts and dispatching the trucks that move those phones. Immigrants increase the size of the overall population, which means they increase the size of the economy. Logically, if immigrants were “stealing” jobs, so would every young person leaving school and entering the job market; countries should become poorer as they get larger. In reality, of course, the opposite happens.”http://www.nytimes.com/2015…We tend to view population growth as an economic positive overall. More people working, earning wages, and paying taxes.

  22. pointsnfigures

    I asked Senator Rand Paul about basic income yesterday. He was in Chicago and had a lot of great things to say. His ideas are not retreads from other campaigns. I think he gets it. He and Warren Buffett favor the earned income tax credit. This was the first time Paul had though about the idea, and his initial reaction was that it might be ripe for fraud.Milton Friedman posited the idea of earned income tax credit years ago. I have been sparring a bit with Albert, and letting the idea work in my mind. I could be persuaded to be for a basic income for every adult American provided there are a LOT of other changes. For example, get rid of every single welfare program and all the bureaucracy that oversees it. Turn Social Security into a privatized system. Instead of requiring people that make under a certain income level to pay into the social security system, make employers pay. Give incentives to government bureaucrats to underspend their budgets.Government transfer payments to individuals have gone up a lot over the last 8 years. They consume 62% of the government budget last time I checked and that is unsustainable.There are a lot of things in government that the establishments of both political parties are beholden to and we need to gore those sacred cows.

  23. Tom Hughes

    It seems to me that the “decoupling” is most readily explained by the addition of massive supplies of labor in China and other countries belatedly joining the world economy. As that supply expanded over the last thirty years, labor’s price (relative to other inputs like capital and land) has declined. Given the size of the increase, it’s remarkable that the decoupling hasn’t been more severe. China is off the boil (the working-age population is now shrinking) and other massive populations (India, Indonesia, Nigeria) have barriers to world-economy participation that are probably going to fall slower than they did in China, because they don’t have an equivalent to Deng and the Chinese Communist Party, able to change policies rapidly and with wide effect. If that’s the case, the labor supply should tighten and demand should increase. The same thing happened at the end of World War Two: the non-labor inputs like capital and land, which had been tied up by the war itself, were released, and the labor force grew only slowly (Rosie the Riveter went back home to give birth to the Baby Boomers). If this is the case then the “conventional” policy responses are in fact the right ones: invest in the value of people so that they keep more of their value-creation and benefit more from the overall rise in demand for labor. This is the great story of the GI Bill, which catapulted millions of returning soldiers into the middle class. The 21st Century, I hope, will have nothing as disruptive as WW2 to stir things up!

    1. JLM

      .I agree with you more than you do with yourself.I want to formally associate myself with your comments and bask in their glory.I am forcefully redistributing your wisdom to me.Well played.[More paragraphs, please.]JLMwww.themusingsofthebigredca…

      1. Tom Hughes

        The outlook is not all rosy: the biggest risk is rampant inequality, where all the gains of a resurgent market for labor go only to the very highest earners, who use their outsize wallets to corrupt our political system and purchase their own perpetuation. This happens today: the most powerful lobbies in the land will do anything and spend any amount to protect their subsidies: e.g., the mortgage-interest deduction (benefitting homebuilders) and preferential treatment of investment income (benefitting the financial industry). Neither of those are “little guy” redistributive policies: they overwhelmingly help the people who are already top of the heap, and the great danger is that the fact of this — the naked grotesgueness of the fattest in the land successfully steering everything to their own trough — will so disgust the rising generations that they give up on democracy.If there is another near-to-hand explanation for the “decoupling” it is this: the lowering of marginal tax rates starting in the Reagan years. Many reading this blog, I suspect, benefitted mightily from this development, I know I did, but we should ask ourselves whether U.S. society, as a whole, has really benefitted. Or, if we all did benefit — by unleashing a tidal wave of innovation and risk-taking — then it’s past time to reckon the costs that came with those benefits.Turning briefly from economics to the arts, Voltaire parodied the rosy-outlook crowd in the character of Dr. Pangloss, from Candide, and Tom Stoppard did the same in the character of Archie, in Jumpers, which was first performed in 1972 but feels utterly fresh today. Here is Archie’s final speech, I think of it whenever I find myself indulging in smug meliorism:Do not despair — many are happy much of the time; more eat than starve, more are healthy than sick, more curable than dying; not so many dying as dead; and one of the thieves was saved. Hell’s bells and all’s well — half the world is at peace with itself, and so is the other half; vast areas are unpolluted; millions of children gorw up without suffering deprivation, and millions, while deprived, grow up without suffering cruelties, and millions, while deprived and cruelly treated, none the less grow up. No laughter is sad and many tears are joyful. At the graveside the undertaker doffs his top hat and impregnates the prettiest mourner. Wham, bam, thank you Sam.

        1. JLM

          .I must now request to be disassociated with your comment.The metric that is being used is the “median” family income, not the “average” family income.In determining the median family income — half of America above and half of America below — it makes no difference what the top 1% makes. Think about it for a second and review statistics theory.Even if the top 1% increases their income by a 1000x, it does not change the level of median family income. Therefore, if median family income increases, it is a real increase and should be respected as such.There is no reason to worry about this phenomenon because median family income is in no danger of increasing. It is plummeting and has been for some time. In addition, mandated costs (such as Obamacare) have made net disposable income also crater.If we have an increase in median family income, it will be real. Do not hold your breath.As to the issue of inequality — why does Person B feel entitled to a portion of Person A’s income when Person A has gotten up early, stayed late, worked hard and Person B has elected not to do so.Let’s be honest here. We are not really talking about income here, we are talking about wealth. The redistributers have long since used the tax code — under the false flag of progressivity — to redistribute A’s income, now they want some of his stuff.Sen Fauxcohantus Warren — a house flipper in her early days and a bit of a closet capitalist, it turns out — does not want to balance incomes, she wants to confiscate and redistribute wealth.The Reagan tax cuts resulted in increases to the Federal coffers and therefore one has to look at what the gov’t did with the money.These cuts allowed Bill Clinton to get credit for what Newton Gingrich did in the House to control spending — not much but it brought the deficits down to the lowest levels in recent times.The results clearly argue for more tax cuts even now — but only if one is dispassionate and honest enough to look at the actual math.Today, the gov’t enjoys the highest Fed tax receipts in history. That’s right, in 2015 the IRS will collect more money than ever before in the history of the US.The tax system could surely be improved but it is the level of spending — crack head level of spending — that is the problem.The lobbyists hold sway because of the insatiable desire for campaign funds of elected and aspiring politicians. They all hold out their souls to be rented and to be used like the rented mules they are.Who wrote Obamacare? A bunch of lobbyists and their consultants who were paid handsomely to manipulate the public in the manner in which the infamous Dr Gruber suggested they could be manipulated.JLMwww.themusingsofthebigredca…

          1. Joe Cardillo

            Much more going on there than I could comment on, but income vs. wealth is a good nuance, and one that’s sorely need here in this thread and on a broader level. Also, I agree re: Obamacare, ironically from what I can tell on the ground level it’s doing a lot of good (I know a few people who are getting healthcare for the first time in their lives).

          2. JLM

            .At the average cost per “new” coverage, it would have been substantially cheaper to have forced the White House physician to make house calls.I provided company paid (85-100%) health insurance — health, life, dental, vision and wellness — for 33 years. Not one bit of gov’t assistance.I am three years gone but now that company has been shredded and their plan has been Cadillaced out of existence.I personally went from $453 to $961/month with a huge deductible that applies to everything. I cannot even elect to self-insure.JLMwww.themusingsofthebigredca…

        2. Aviah Laor

          For centuries, tax was a tool to transfer wealth from one class to another. The modern point of view claims that taxes are paid to buy services for the society at large. Between those poles, where does a government that consumes something around 50% of the GDP stands?

          1. Tom Hughes

            It seems to me democracy’s great challenge is to answer that question: how do we balance fairness (you get what you deserve and you keep what you work for) with social inclusion (nobody is left too far behind, the strongest help the weakest instead of hurting them), under conditions of massive technological change, irreversible globalization and climate instability?

          2. Aviah Laor

            Agreed. Yet even if we answer the moral issue, we should solve the technicalities: what is the overhead? What part of the tax money actually finds it way back to the people who need it? The two main tools that should have theoretically help to spread wealth more equally, taxes and the public stock market, seem to achieve the opposite.

  24. John Rhoads

    The conversation here has been impressively emotional. Perhaps this is the first component to seek improvement on.I slightly disagree with Albert’s frustration about McAfee’s non-new ideas. The lack of novel concept should not be a flaw, particularly if the application or level of investment is novel.I’m also very hopeful that philanthropy will become and increasingly efficient, powerful, and long-term component of our economy

    1. Joe Cardillo

      We tend to funnel ecosystem level problems through individual rational / emotional ideas of how we got where we wanted to go (or didn’t). “It’s true for me” isn’t often the same as “it’s true for you.”Agree w/you on non-new ideas, ecosystem level problems require a variety of solutions. But, the underlying “can it scale to be worth billions” does hurt a lot because many things can’t and that’s ok. If anything, when talking about technology we need to emphasize more open platforms and investing in people building them. Which, to your last point we need more of when it comes to doing good.

      1. John Rhoads

        Indeed being a good listener and emotional correctness, even in disagreement, are powerful and rare skills.

  25. BillMcNeely

    pbs had an eye opening but sad film that outlined this trend last year called Two Familes. Here is the link http://www.pbs.org/wgbh/pag

  26. Joe Cardillo

    I try to avoid the political posts because, well, blood pressure. But it’s worth saying that there is absolutely a line in the sand financially beneath which creativity and self-empowerment (which are the heart of entrepreneurship IMHO) are radically decreased.It’s worth understanding the federal standard ( http://aspe.hhs.gov/poverty… ) but honestly, if you don’t know anyone who lives in poverty (and there are 50 million of them in the U.S.) you should go experience it. (edit: also a good resource is the U.S. Mayor’s report on homelessness and hunger —> http://usmayors.org/pressre… )

  27. Mark Cancellieri

    It is important to remember that *wages* could easily “decouple” from productivity if other labor costs increase. It is *total* labor costs for a given level of output that businesses are concerned about, not *wages* per se. So if the government decides to add policies that increase non-wage labor costs, such as a health insurance mandate, higher payroll taxes, or labor regulations, then this will necessarily reduce wage gains, other things equal.I also feel that the “decoupling” is not our greatest concern, but rather the stagnant productivity gains that we have seen lately (probably due to stagnant private investment likely due to increased taxes, increased regulation, greater regime uncertainty, and a weak currency). Here is one article of many that talks about stagnant productivity.Productivity Growth Continues to Plunge: Why A Growth Policy Is Necessaryhttp://www.progressivepolic…

    1. JLM

      .You make an excellent point — wages are only one component of the cost of labor. Much of that cost is on the employer’s side of the table.Well played.JLMwww.themusingsofthebigredca…

  28. Simone

    Thank you for sharing the link.Back to your question – ‘I do wonder if they will not be enough’, my answer is: there won’t be enough time to adjust. I see this as the main difference between the Industrial revolution and the Digital revolution – time and impact.Back then there was the industry, few segments were affected, still many could carry on their lives and had a long time to adjust. Right now all companies in all sectors are in a race to automate/digitise. We will fall from a cliff in the next 5 years when most automation updates will be completed. Because..Albert is adorable to think about guaranteed income, but he chooses to ignore how we behave as receivers of a guaranteed income (humans are not happy idle) and as givers (I cant imagine the source for this income, when e.g pensions or health are a growing issue).

  29. JLM

    .The argument for the BIG is like a bowtie.Bowties are perfectly acceptable for certain types of places and wearers. You know exactly what I mean.Others only wear a bowtie when they wear their tuxedos. Who doesn’t love a festive red bowtie at Christmas? Maybe a pocket square, you rake.Most of these occasions end with your going home drunk and throwing the bowtie into your closet until the next Christmas.The argument for the BIG is the kind of thing that can only be promulgated by full bellied, well heeled folk who are not currently punching a time clock or doing work that requires a bit of sweat.To the recipients, getting a check under any means is going to beat the hell out of actually working for it. I would like one of those checks myself.What it does not consider is the social cost of devolving into a world of late sleeping, navel gazing, beer connoisseurs. We find our best selves on the operating end of a shovel — whether your metaphorical shovel is a real one or a keyboard.We define ourselves by our work. Ask Fred Wilson who he is and what does he answer?Our Fred says, “I am a Venture Capitalist.” He defines himself by his work and conversely his work defines him.He could have said, “I am a thinker and a philosopher who pays his bills by engaging in a bit of tawdry commerce called venture capital, vile little business really but it does pay the bills.”The other problem with the BIG is that it posits all other hand outs and sugared titties will be retired. Good luck with that. That’s like trying to get the mohair subsidy cancelled or the peanut allotment. No, once a gov’t program is created, it does only one thing — grow.We don’t have to worry about the gov’t cancelling other programs to launch the BIG.I have to run, I’m going to buy a couple of bowties.JLMwww.themusingsofthebigredca…

  30. DJL

    This looks like a “climate change” graph to me. Its very easy to plot trends that seem to validate our impressions. It is extremely difficult to do the work of documenting the underlying causes that contribute. Unless you can reliably associate the causes, you will legislate the wrong thing. (Welcome to the US legislative process.) So, all of you who don’t believe that technology is to blame for this problem must be “technology change deniers.”.

  31. Pete Griffiths

    I believe that the work of Pikkerty is much more comprehensive and now must be considered the most serious starting point for work on changing patterns of distribution of wealth:http://www.hup.harvard.edu/…PS all his data, which is the most comprehensive data set ever constructed, is open source.

  32. Phil Chacko

    20th century concepts of GDP, and particular of capital, are too constraining. I think we’re moving into an “attention” economy. We give our attention (monetized in various ways) increasingly to digital properties, and get tremendous value at low *conventional* cost.We pay in attention and the best jobs (tech) pay and benefit from the creative attention of employees moreso than from traditional hours or capital. This form of technological deflation isn’t captured in the metrics.

    1. DJL

      This is a great point. Any “metric” that attempts to measure large scale effects should be updated to reflect the current reality. Most of these long-standing metrics (GDP, Unemployment Rate, Jobless Claims) that get thrown about are hopelessly uncoupled the reality they supposedly represent.

  33. Felix Dashevsky

    Apropos article in last week’s Economist: http://econ.st/1Hwk2Vo. (tl;dr: basic income is unaffordable).

  34. Matt Zagaja

    The income distribution issue is going to create a ceiling on potential new business opportunities for corporate America. Lots of people would love to make a living creating music or movies but you can’t sell advertising against it if the audience doesn’t buy things and you can’t sell it directly if the audience doesn’t have money to pay for it.The “new” economy where instead of taking in entry level workers and training them in the businesses tools and practices and hoping they stay with the company, corporations only hire people with rather specific skill sets and attempt to get government to fill the education and training gap also exacerbates things.

  35. Twain Twain

    Bringing Lincoln into conversation.

    1. laurie kalmanson

      “what are you, a communist?”if there aren’t enough crumbs left for the workers, the workers won’t have enough money to buy things.

      1. Twain Twain

        Ha, :*)!According to the Utopian model, the machines are now the workers and they have no need for money to buy things. They have no needs…except, somehow, the machines’ owners are miraculously supposed to have capital to pay for the electricity to run the machines that are generating the production output.So the machines’ owners will have to get capital somehow from us — except…no one has any money to give them because the machines took all the jobs. See the little paradoxes/That model also sells the idea the machines will be so much more productive, intelligent and safer (because they’re not irrational and emotional like us) that we won’t need to work and can dance away our days doing more creative things — like collecting sea shells for our collages, playing the flute in the forest, carving beautiful wooden objects that we can give to people for free (because we have no need for money or crumbs).I’m telling you, we’re all just hapless pawns in successions of non-sensical thinkers who don’t care about humanity or what it means to be human as much as they should.

        1. Simone

          have you read ‘Who owns the future’ by Jaron Lanier. Albert should read it too 🙂

          1. Twain Twain

            Exactly, :*).Maybe @fredwilson:disqus can check with Albert to see if he’s read Lanier?

          1. Twain Twain

            There are robo-ethicists who are frame working ways to ensure we don’t overwork and abuse the machines, apparently.

          1. Twain Twain

            Ok, choices, choices…Do we put our lives in the hands of central bankers, the godfathers of AI or Keanu Reeves…

  36. Simone

    We are trying to apply old fixes to a new issue.Until we find the solution to what looks like the most difficult challenge we have faced in our history, I hope someone is keeping score at what level the lost jobs will jeopardise the prosperity of shareholders everywhere (too much of a good? thing)

  37. obarthelemy

    I’d say the main issue are regressive taxes on corporations and individuals, which have the domino effect of condemning poorer people to bad public services (policing, education, health…). That’s compounded by lobbyist/campaign contributor-based resource allocation and legislation, away from stuff that works and towards whatever serves their paymasters (bridges to nowhere, the war on drugs, immediately decommissioned mis-targeted military spending, …).Fix taxation,and fix political funding, the rest will fix itself.

  38. static

    I think the metrics are bad. To some extent, GDP is not domestic, as it includes revenue from labor outside of the US. If we look at numbers globally, they make a lot more sense. The idea of looking at these macro economic statistics on a just national level is dead.

  39. Chris Phenner

    I had this vision upon seeing (again) the Basic Income Guarantee topic arise on AVC, and noticed The Economist weighed in on the topic earlier this week (sorry not to link).- USV’s funds, by 2025, will have produced ‘GDP’ of [tons of money].- Also consider the wealth then created for portfolio company workers.- Now consider USV’s partners will be into their 60s (sorry to remind).- And think about the ‘Second Acts’ to come (a la Gates Foundation).Here is the MVP and experiment:1. Raise a pile of money — like an endowment2. Ask for folks to apply for Basic Income3. Select a cohort who are a sample4. Provide them Basic Income5. Measure them like madI suppose I am thinking about a time when the ‘writing and thinking’ phase of Basic Income is over, and what form the Real Life Experiment takes (and when).Because policymakers are not going to move as fast or as thoughtfully.

    1. Q

      they did this (twice, I believe) in the 70’s. results were inconclusive. I agree it should be done again in the future, but the sample cohort has to be so large and diverse, the experiment becomes impractical.

      1. Chris Phenner

        Yeah, but they didn’t have ‘data’ in the seventies.I’m only half kidding. Consider what could be known now.

    2. Simone

      why not just measure people who have been on benefits for +2 years worldwide

  40. Raymond P. Burrasca

    There’s a much simpler explanation for the great decoupling … take a look back to 1972 when the last remnant of the gold standard was abandoned and Arthur Burns was directed by Richard Nixon to start printing money, principally to kick start the economy and ensure Nixon was reelected. From that moment on, asset values and employee wages started to diverge in a very fundamental way, and that divergence has continued up to and including the present moment. Print more money, keep wages low, voila! The Great Decoupling.

  41. ErikSchwartz

    I’m not sure about the rest of the country but I see a large number of VC backed tech companies (mostly start ups) in the bay area that are monstrously OVERstaffed.When that adjusts (companies need to be cash flow positive and not subsidized for “growth”) there’s going to be a huge local decoupling around here.

  42. John Frankel

    Basic income make sense, but there is no way to get there from here. You have to flatten the tax code at the same time. The politics of it all will not allow for the simplification that results.

  43. Dan Epstein

    Warren Buffet had a topical op-ed in the WSJ the other day:http://www.wsj.com/articles…Not sure I agree with EITC as the solution, but he does a good job showing there’s a problem in the first half.Excerpt:That mismatch is neither the fault of the market system nor the fault of the disadvantaged individuals. It is simply a consequence of an economic engine that constantly requires more high-order talents while reducing the need for commodity-like tasks.The remedy usually proposed for this mismatch is education. Indeed, a top-notch school system available to all is hugely important. But even with the finest educational system in the world, a significant portion of the population will continue, in a nation of great abundance, to earn no more than a bare subsistence.

  44. Dave Pinsen

    I wonder if Albert is familiar with the proposed Fair Tax. Its “prebate” could easily be tweaked into Albert’s Basic Income Guarantee.The idea of the Fair Tax, in a nutshell, is to replace the federal income tax and employee portion of the payroll tax with a national sales tax of 23%. The “prebate” is designed so that any spending up to the poverty level is tax free: everyone gets money from the government every month equal to [(0.23)(The Poverty Rate)]/12.The easy tweak would be to raise the monthly prebate to (The Poverty Rate)/12. That way, everyone would get enough money from the government to stay out of poverty, and then they would pay a 23% flat sales tax on whatever they spent above that level. But they wouldn’t pay any taxes on income.

  45. Stephen Voris

    So, a take on this I don’t think I’ve noticed here yet – I think the worlds of online gaming have useful perspectives when it comes to this. Many online games these days have economies – virtual items, virtual currencies, means of exchanging one for the other between players – and where there are such economies, there are (in my experience) massive disparities in wealth, along with the accompanying complaints and accusations thrown back and forth on the necessity and provenance of the higher-end sums.This suggests that covering the ‘necessities’ will not, in fact, eliminate complaints about inequality in the long term; people will instead redefine what they think is ‘necessary’.Game designers have somewhat different incentives than governments – their ‘taxes’ are relatively voluntary, for instance, they can change their ‘regulations’ much faster, and they have much more efficient methods of distributing currency created out of thin air – but the similarities are enough to draw useful parallels, I think.An alternative approach to basic income that seems to be catching on in games is that of “daily quests” – a step beyond rewarding people just for showing up (though some games do that too, although they generally also have up-front entry costs or restrictions on multiple account usage), they are essentially tacking additional, rate-limited incentives on to specific activities players would be doing to create in-game wealth anyway. This approach could potentially be used in the real world to highlight desirable behaviors without having to mandate them – cash for good grades, for example, has a positive effect on the poorest kids (at least, if the source I only vaguely recall reading is accurate).On the other hand, the money does have to come from someone: printed out of thin air generally means “someone” translates to “everyone who isn’t a central banker”. Further, games have a significantly constrained set of possible behaviors compared to real life – slapping “daily quest” incentives onto everything in a non-virtual setting would be an administrative nightmare.

    1. Bob Vance

      Never thought of that comparison, super interesting!

    2. Felix Dashevsky

      great analogy. the real world answer to quests is work and EITC (as someone else’s post noted by citing warren buffet’s WSJ oped).

  46. djglasco

    Thanks for sharing and starting the dialogue around this topic – we are in need of some real solutions to the causes of financial issues that more and more people are facing instead of the usual diatribes around blaming the victims.

  47. David Koosis

    Brynjolfsson and McAfee don’t have silver bullets to propose, but you owe them credit for a little more buckshot than you’ve granted.The HBR interview omits several ideas that are in B&M’s book, including the Basic Income Guarantee. In their book they observe that Thomas Paine, Bertrand Russell, and Martin Luther King, Jr. all wrote in favor of the idea. (“The solution to poverty is to abolish it directly by a now widely discussed measure — the guaranteed income.” – said King in 1967, quoted in “The Second Machine Age,” hardcover p233.)B&M propose tax changes. They quote Milton Friedman speaking favorably of a “negative income tax,” that gives back “unused deductions” for those who earn less than minimum taxable income. They advocate Pigouvian taxes (that is, taxing “negative externalities,” like the cancer that comes along with a box of Marlboros). They advocate taxing “economic rents.”B&M also discuss the shortcomings of the GDP as a metric and how it ought to be revised. Which is a whole other discussion…/dk

  48. 4thaugust1932

    Tax Corporate Revenues, Not Profits;

  49. aleksj

    It’s a frequent pattern of people to explain a complex system with just one favored and simple cause – when in reality there are many things happening at once. Here’s another cause for your (or MIT faculty) consideration http://www.pewhispanic.org/

    1. laurie kalmanson

      “what are you, a communist?”supply / demand is not the sum total of human existence?related: the tragedy of the commons, and economics 101 treating air and water, and the breathable/drinkable supply of as externalitieshttp://en.wikipedia.org/wik…The tragedy of the commons is a term, originally used by Garrett Hardin, to denote a situation where individuals acting independently and rationally according to each’s self-interest behave contrary to the best interests of the whole group by depleting some common resource. The term is taken from the title of an article written by Hardin in 1968, which is in turn based upon an essay by a Victorian economist on the effects of unregulated grazing on common land.”Commons” in this sense has come to mean such resources as atmosphere, oceans, rivers, fish stocks, the office refrigerator, energy or any other shared resource which is not formally regulated; not common land in its agricultural sense.

  50. laurie kalmanson

    there’s thishttp://www.nytimes.com/2015…At 9:30 a.m. on a sunny weekday, the phones at Candelia, a purveyor of sleek office furniture in Lille, France, rang steadily with orders from customers across the country and from Switzerland and Germany. A photocopier clacked rhythmically while more than a dozen workers processed sales, dealt with suppliers and arranged for desks and chairs to be shipped.Sabine de Buyzer, working in the accounting department, leaned into her computer and scanned a row of numbers. Candelia was doing well. Its revenue that week was outpacing expenses, even counting taxes and salaries. “We have to be profitable,” Ms. de Buyzer said. “Everyone’s working all out to make sure we succeed.”This was a sentiment any boss would like to hear, but in this case the entire business is fake. So are Candelia’s customers and suppliers, from the companies ordering the furniture to the trucking operators that make deliveries. Even the bank where Candelia gets its loans is not real

    1. Stephen Voris

      I like the concept they demonstrate of “practice” work – though obviously real work is better if there’s any to be had, it makes the transition back to work or entrepreneurship smoother.One does wonder what sort of hurdles there are to turning a fake company into a real one – so far as I can tell in the article, these are all administrative jobs, rather than involving physical products (which makes sense – if you’re going to make something, faking for practice is just prototyping). Indeed, it quotes: “About 60 to 70 percent of those who go through France’s practice firms find jobs, often administrative positions, Mr. Troton said.”That’s quite possibly a weakness of the program – although the market prices for executive-level administration suggest that there’s room…

  51. Mark

    Though they are not new, the policy recommendations (e.g. education, infrastructure, basic research) listed by Brynjolfsson and McAfree do help at a macro-level, however much of the economic benefits do NOT accrue to the employees at a micro-level – thus the great decoupling.The key challenge is to help all employees create greater distinctive value that is not subject to automation, which will allow them to earn more. How can employees be more creative at work to provide greater value-added so that they can earn more?Coincidentally, just prior to Fred’s posting, I had shared the following comment (excerpted) at Albert’s Tumblr, and also included a creativity-driven analog to the universal basic income idea.http://continuations.com/po…”By providing unique creativity-driven work, all working adults can both derive personal meaning and remain gainfully employed. I have already shared the opportunity of using the proposed SG platform to help working adults to thrive amidst the increasing computerization of routine jobs – March 2015 presentation.https://docs.google.com/pre…Creativity-Driven “Meaning” analog to UBIThe universal basic income (UBI) concept proposes providing money so that recipients can purchase and consume life’s basic physical necessities. However life should also include meaning, which is often derived from creative pursuits.I believe that all should be entitled to the opportunity to cultivate their creative abilities, and pursue their passions. If the SG 1000 creativity platform can truly broaden, accelerate and deepen creative capacities, then I will hope that all will be entitled to receive “imagination” credits to have basic access to the SG 1000 creativity platform.”BTW, I will be in NYC from May 30 – June 2 so that my daughter can attend BookCon @ the Jacob Javits CC before we leave for Singapore. If anyone is interested, perhaps we can meet to explore and share ideas :)Many thanks! Mark

  52. Pat

    How about just taxing ceos that make more than 50x their lowest paid employee? With basic income employers will just reduce the wages they pay by the amount of the basic income.But if the irs increases the income tax owed by the ceo, then the ceo has an incentive to increase the employee wages. So if he raises the yearly wage from $20,000 to $30,000 the ceo will be able to go from $1 million to $1.5 million without penalty

    1. Bob Vance

      How did you come to 50x? Why not 25? 20? 5? 2? 1? 1:1 is fair right?

  53. Pat

    Don’t forget the destruction of the unions which destroyed the ability of labor to negotiate on equal footing with management

  54. lunarmobiscuit

    Fred, have you read Picketty’s “Capital in the 21st Century”? I found the answer in his data (but not his conclusion). The first half of the 20th Century was an anomaly. The norm, and flaw, in capitalism is that the capitalists receive a disproportionate amount of the profits.In the second half of the 20th Century and through today, we put got inflation under control and stopped bombing the cities of Europe into oblivion, and with that, we’ve reverted to the norm of the rich getting richer.As a fellow professional investor, I find this troubling, as there seems no simple fix that can both keep the capitalists happy making reasonable returns, while at the same time reducing inequality. Picketty’s historic data set shows that has never happened before. Only the reverse, from hyper-inflation, panics, depressions, and wars.More details on this is on my blog, http://lunarmobiscuit.com/a

  55. stevenwillmott

    This is a huge issue. Definitely agree that the solutions in the Second Machine Age are pretty handwavy – the question in my mind is *how* do you distribute the ability to create value and keep it spread. I wrote a bit about that here: https://medium.com/@njyx/te….

  56. Ludwig

    especially for your thesis on globalization being amongst the drivers of the decoupling it would be interesting to look at data from the 19th century since the globalization back then was much bigger then today’s.

  57. andyswan

    Serious question Charlie: why would anyone accept working for less value than they create?Why not create that value for themselves?I have never understood this line of thinking…even when I worked for min wage.

  58. Jordan Thaeler

    This is the kind of argument (no offense intended Charlie) that affirms the rationalization for Big Government. If there’s a market for things like clean air, clean water etc, private industry will – if I may steal a term from you – capitalize upon it.

  59. JaredMermey

    Risk tolerance.

  60. Bob Vance

    Would you pay for dirty water?I wouldn’t. Right now, I don’t have a choice, I’m forced by gunpoint to accept a particular water source, irrespective of it’s quality or price.Would you pay for a local subscription service to a firefighting division? (You already are, but a middle man is taking a large cut)

  61. Jordan Thaeler

    There are plenty of rich people (Bill Gates) who donate money to cure diseases that aren’t economic. I worked at Amyris, one of his companies that took his private funds to develop a low cost replacement for malaria treatments.When my building is on fire, or when I need protection, I could very easily assemble a private, non-unionized company to do a better job, cheaper. Again, I happen to work in an area with experience in that I work with TSA/DHS. Socialists would argue it would be impossible to more efficiently manage airport screening for less money, yet all empirical evidence points to the contrary (nobody who actually runs a business is surprised).The TSA previously had a private security program where airports could manage their own security operations. The private screening operations are 65% more efficient and 42% cheaper. Unions pressured TSA to cancel the program (it was ultimately negotiated that the existing private screening would remain in place but there would be no expansion of the program). The House Committee on Transportation did a nice report on it in 2011 here: http://www.aaae.org/?e=show…First the TSA said private screening was 17% more expensive. Then they said it was 3% more expensive. The Committee didn’t buy the number, pinged GAO, OIG and did their own study. The numbers speak for themselves.So yes, for every query you raise, there’s a “myopic” libertarian response that comes with supportive data, which I know is not the most convenient outcome for your theoretical positions.

  62. andyswan

    You are claiming their labor is significantly more valuable than they are getting. That’s present value, not based on any of the traits you describe.So I repeat my question…why would someone provide their current value of labor for significantly less than it is worth?

  63. Bob Vance

    You did not answer my first question, please take another look at it.>”I can’t count on Comcast and would never trust them or some private company with private interests “I wouldn’t count on Comcast either, they are able to provide a poor quality experience because you are not allowed to compete with them, there’s a reason Google Fiber is not in their home city – they are outlawed from providing a better product.>”to put out fires in teh community interest.”They are not doing it for the community interest, they are doing it because they are paid. Would you pay for someone to NOT provide a service? No, you would go elsewhere were someone will provide value for the cost.>”Same with healthcare. imagine what the roads would look like if we all had to fend for ourselves. Pretty much like healthcare.”Another industry where there is heavy government regulation, protecting of incumbents and stagnation of innovation. If you think the healthcare market is a free market you are sorely mistaken.Both the examples you have provided are allowed to create bad quality products and services because they are protected by the guns and force of the government, they do not have to compete for their customers because possible competitors are not allowed to compete, I implore you to take a further look.

  64. andyswan

    In other words, the employer provides them with significant non-monetary value in addition to the paycheck, which makes the transaction equitable and agreeable.

  65. LE

    We choose to pay more than market rate, which isn’t an ethical rate at the bottom of the market.You realize that on a bespoke basis you can do that. But you also must acknowledge that on a larger scale that is almost impossible to do.For example the price that is charged at McDonalds directly relates to what it’s competitors will charge which relates to costs. It is simply not possible to just “do the right thing” if your competitor doesn’t do the same thing or once you get to a larger scale. At this point I trot out again “you can only be as honest as your competition”. You know, Sun Microsystems, now owned by Oracle, doesn’t make any low end servers anymore. You can’t buy a $1000 box from them and haven’t been able to for years. They can’t compete in that market anymore.Your business is a niche player you aren’t http://stroehmann.com/About… which for that matter isn’t http://www.cargill.com/So while it is nice that you are following your conscience like that I hope you realize that the person who picks up your bread at the market not only isn’t aware that you are doing that but doesn’t care about that in terms of a buying decision.

  66. andyswan

    I’m curious what number you assign for “human value” to your employees. Are some worth more than others, or is there a constant “human value” for each employee that you pay, and then add on “value to the company” after that?If this is a model worth replicating world-wide, we’re going to need to see the numbers.

  67. andyswan

    No one is arguing against voluntary charity. No one.

  68. LE

    I have always noticed this phenomenon with people, sometimes lower class, sometimes not, and pay. If you take someone who is earning $7 per hour and give them $15 (say you hire them from another job where they were making jack shit) the thrill lasts a very short time. After a while they just think of themselves as a $15 per hour person and aren’t appreciative or grateful like they were at the start. Then they just spend that extra money and they still don’t have any money left over (or a bank account see “why are there check cashing places in poor neighborhoods”). So they still live paycheck to paycheck. Gross anecdote but what I have observed.I suspect that many of the people that are espouses these theories (say Albert) haven’t really been on the front lines with this class of worker. I have. Even before my experiences that I have had in my own business, my Dad had employees like this. They would leave at lunch and come back drunk from the bar. Had to withold pay so their wives could pick up the money. When he needed them to show up at gift shows, special effort was put in so that they didn’t go out drinking the night before and show up drunk the next morning at the convention center.In one case (and this was the 70’s) one guy quit and took a job at UPS thinking he wasn’t treated “well enough”. He was back the next month iirc, UPS fired him. They weren’t willing to put up with the bullshit like my dad and my uncle did and, hey, UPS didn’t provide any necessary emotional support or hold money for your wife so she could feed the kids.

  69. LE

    Ok that’s fine and I wish you luck and hope that I am wrong.By the way, have you thoroughly vetted the McDonald’s purchase? I don’t have a positive long term feeling with that franchise. I believe the low hanging fruit of that opportunity has long passed.For example (and this is not the reason I am thinking this btw) this was in the journal the other day.The company has been struggling in its critical U.S. market, where Mr. Easterbrook said it has failed to keep pace with shifting consumer tastes. He has rolled out several major initiatives, including structural changes aimed at reorganizing the business along geographic lines, selling more company-owned restaurants to franchisees and eliminating management layers.http://www.wsj.com/articles…Also Charlie, isn’t there a better way to achieve your social mission than by selling sugar water (you get the point let’s face it that food is really low end, right?) to children? I guess I find it odd that of all people you would be buying a McDonalds franchise.

  70. andyswan

    I like that Charlie!

  71. LE

    Well before you succumb to some really good rationalization for doing this, please keep in mind that what you will be able to do with a franchise, and a McDonalds franchise of all things, will be severely and almost totally restricted by the franchise agreement.

  72. andyswan

    Yep. Employer takes cost of risk, provides employee with value beyond compensation by de-risking job

  73. JaredMermey

    Might be saying same thing but employee might just prefer certainty and stability of a paycheck. There is nothing wrong with that.We are all optimizing for happiness but everyone’s happiness formula weights the different variables of life differently.

  74. Jordan Thaeler

    I’ve just showed you, with data, how superior privatized systems are to their public analogues. My question to you would be what should the government NOT provide since you seem to be of the opinion that they do everything better than their private counterparts. I want a sex change; should Uncle Sam foot that bill?

  75. Jordan Thaeler

    The government was collecting mass data that violates the 4th Amendment. If Snowden had been a unionized, federal employee, we likely wouldn’t have heard anything about this (hadn’t heard anything in the previous decade had we?). Snowden should have gone to a US-based media outlet, but these are semantics.There’s no logic or data that can sway socialists, despite the fact that every single instance of wealth redistribution has ended in massive failure and poverty. The US became the power it did as fast as it did because it embraced capitalism and a free market, especially relative to other countries.Democracies consistently fail because it eventually becomes mob rule. Republics were established to protect the minority (ie the 20% that produce 80% of the value). People are naturally selfish and brutish, and do things in their best interest. This means that producers want rules and laws that protect what they’ve built, and socialists want victimization extolled to justify taking from the producers and giving to the hangers-on. The hangers-on, incapable of producing, keep socialists in power so they can keep getting something for nothing. I could list many case studies where socialist regimes go belly-up but you will categorically ignore the data.What I could never understand is why socialists want to ruin what America has. If socialism is so good, go move to Cuba, Venezuela, or a handful of other decaying countries and live in that utopia.This will be my final comment because you simply cannot force logic on the illogical.