Some facts, and claims, about the 21st Century Economy (updated)

by John Quiggin on October 11, 2020

In the process of working on my book-in-progress, The Economic Consequences of the Pandemic, I’ve been trying to integrate a number of facts about the economy of which I’ve been more or less aware for a while, along with claims I want to make, and put them together into a coherent account of the economic system prevailing (in advanced/developed economies( in the 21st century and how it differs from the industrial goods economy of the 20th century.

As a step towards this, I’ve put together a list of factual claims which I think can be established reasonably firmly, along with claims I want to make that will be more contentious. My plan is to put this together into a coherent analysis, including supporting evidence. So, I’m keen to get good supporting links for any of these points (I have quite a bit, but more would be helfpul). I also want to be sure I’m not missing contrary evidence, and to adjust the claims if necessary, so please point this out also.

Facts (I think)

  • Most economic activity in the 20th century, including services such as wholesale and retail trade, was fairly directly related to the production and distribution of goods
  • This is no longer true: most economic activity is now related to human services, information services and finance, and these are at most indirectly related to goods production. Reflected in declining share of consumption devoted to goods, which includes retail margins “Edwards and Lawrence (2013,table 3) document the fact that the share of consumption by Americans devoted to goods has declined from 50 percent in 1970 to 37 percent in 2000 and to 34 percent in 2010.”
  • The same pattern is evident, with a lag, in China, where manufacturing employment peaked around 2014. Moreover, peak manufacturing employment in the development process is at a lower level than it was in early industrializers “premature deindustralization”.(Dasgupta and Singh 2006, Rodrik 2016).
  • The combination of rapid technological improvements in IT and communications with limited progress elsewhere complicates measurement. For example, while manufacturing share of nominal GDP has fallen by half, and employment share has fallen even further quality-adjusted share of real output has remained broadly constant
  • Real interest rates for government debt and high-grade corporate debt have been below zero since the GFC and seem likely to remain there permanently under current conditions
  • Massive issues of government debt during the pandemic crisis haven’t changed this
  • Net private business investment (non-residential) has been declining relative to GDP/national income since at least 2000
  • Service industries less capital intensive than goods industries
  • Information economy firms (Facebook, Google etc) invest very little even counting R&D. This can be seen by looking at price-book ratios which are well above 1 for all these firms, or at Tobin’s q, the analogous measure for the entire corporate sector
  • Government investment in traditional infrastructure has been falling since 1970s, at most partially offset by private infrastructure
  • Corporate profits high, mostly derived either from financial sector or from “intangible” assets in IT.
  • My claims

  • Finance sector profits even higher if payments to managerial level in finance sector are treated as part of profit
  • Intangibles = monopoly
  • Revenue and profits in finance and Internet do not arise from sales to final consumers, and bear no obvious relationship to consumer welfare
  • Implies similar regarding wages for market work
  • Incentives don’t work in in this kind of economy (if they ever did)
  • Unmet needs for public investment in human services: health, education, aged care, early childhood, social work
  • Capacity to meet these through short term increase in public debt, long term increase in taxation
  • { 60 comments }

    1

    nastywoman 10.11.20 at 4:53 am

    @
    ”most economic activity is now related to human services, information services and finance, and these are at most indirectly related to goods production”

    That might be true about ”finance”? –
    BUT there is this very depressing article in the NYT today – which explains how an economy – which is mainly build on ”human services” looks like – when the humans are missing!
    (‘If No Tourists Come, I Have No Business’: New York’s Tourism Crisis
    International arrivals to New York are down as much as 93 percent, and the people and businesses of the city’s tourism industry are on the brink)
    AND as this article is just ONE example of many – about a completely changed world A.V. (after the Virus) – and as neither my favourite Hotel nor my utmost un-favourite Office in Manhattan will EVER be filled – the way it was filled B.V. (Before the Virus)

    There is only ONE conclusion – and solution for the new economy A.V.
    A totally radical change to a regional and local production and distribution of goods –
    while ”finance” –
    now that is a very much different story – as America for sure will keep on producing these… ”green” things called dollars…

    2

    nastywoman 10.11.20 at 6:06 am

    Just think about that:
    ”The leisure and hospitality industry is the single hardest-hit sector in terms of employment losses, according to state labor department data. Employment in the sector dropped by two-thirds between February and April.

    Accommodation and food services lost 252,000 jobs, or 68.9 percent of the February level, but have since recovered by 36 percent or 89,800 jobs. Still, 174,000 people who worked in food and drink services in the five boroughs were out of work in August, according to data published by the Federal Reserve Bank of St. Louis”.

    AND see the following – not just as limited local NY example – but as a worldwide trend – which currently re-educates ”the people” to a ”all new life” (and thusly economy)

    ”Making the most of the newfound calm on Mulberry Street in Little Italy, local New Yorkers, who until now had avoided the area because of the throngs of tourists, are increasingly visiting the neighborhood.

    Last week, Julia Gold, a 23-year-old waitress at the Italian restaurant Gelso & Grand, was serving about four tables at the restaurant’s outdoor dining area.

    “The biggest difference for us is that there are more local, young New Yorkers coming to eat here. It’s been nice,” she said. “Honestly, we’re still very busy, especially on weekends and nights. It’s hard to say, as this is all uncharted territory for everybody, what the future of dining out is supposed to look like. But I’ve found that locals are dying to come out and eat and be served.”
    Hotels that have reopened since lockdown are also reporting local interest, especially from those seeking luxury experiences”.

    “We are navigating our way through these new challenges one day at a time,” said Isabelle Hogan, the chief concierge at The Mark Hotel on Manhattan’s Upper East Side. “We have been pleasantly surprised to see that although NYC may lack ‘tourism,’ a luxury hotel experience is still desired by locals, who either want a change of scenery from their apartment or are between homes.”

    3

    nobody 10.11.20 at 7:24 am

    In addition to what you’ve listed, I think another keystone of the 21st century economy is the decreasing ability of non-giant enterprises to own things of value. This shift from ownership of products to rental of products may ultimately be as profound a shift in society as was the shift of the ownership of the means of production from workers to capitalists during the industrial revolution.

    The largest manifestation of the shift to rental, in the anglosphere, is in how the explosion of housing costs in comparison to wages has made home ownership an increasingly unachievable dream for millennials and younger generations. The rental shift also applies to consumer goods and even business services.

    People don’t own physical books anymore, they have temporary leases on encrypted Kindle data that Amazon can unilaterally and arbitrarily revoke without recourse. No one is allowed to own physical copies of music or videos anymore; you have to rent a streaming subscription that can be unilaterally altered by the provider and can’t be passed on to your heirs. Most software is now only made available under a rental model that requires end users to pay monthly so vendors can have a secure income stream without needing to maintain or improve their products.

    The only products consumers are allowed to own anymore are depreciating, or consumable, assets that can’t be used to generate monthly fees. For example: food.

    In business, in many sectors, small and medium businesses can now only exist as long as they can rent permission (permission that can, again, be arbitrarily revoked) from platform providers to use services like app stores, marketplaces, or video hosting. A business that sells apps formally owns the right to exist, but if the real owner of the app store decides to ban their product, the business will immediately go bankrupt. Many small independent video production companies can only exist as long as Google allows them access to YouTube.

    The economic model of the 21st century is sharecropping with digital characteristics. Where the economic model of the 20th century required consumers to work to fill their lives with things they enjoy, in the faint hope that they could enjoy them during the last few years of their lives, the economic model of the 21st century requires both consumers and smaller businesses to work, and be compliant with service owner requirements, to pay monthly fees that get very large businesses rich.

    4

    Peter Boothe 10.11.20 at 8:35 am

    Information economy firms (Facebook, Google etc) invest very little even counting R&R

    This feels false. Those firms have built very large and expensive data centers, and have laid many intercontinental undersea cables. This infrastructure is largely invisible to most people, but it is very real. You can see diagrams of parts of this built infrastructure at https://www.infrapedia.com/

    (full disclosure: I work as a software engineer for Google. Anything I say is my opinion and not my employer’s)

    5

    Tim Worstall 10.11.20 at 10:47 am

    Facts 1 and 2. Yes, but when? In 1900, certainly, in 2020 certainly. But the dividing line is unlikely to be 2000AD.

    3 and4. Well, yeeeees, but. We’ve some $12 trillion or something of QE out there. The aim, point and design of QE is to change interest rates. Taking the QE manipulated interest rate as being the rate that would exist without QE seems a little odd. That the QE is likely to persist, sure, but perhaps not forever. A claim of a general and secular – ie, not central bank policy related – decline to near zero interest rates would require an estimation of what rates should or would be without QE. Higher than current would be a reasonable guess.

    FB and GOOG investing very little. We come back to the definition of investment. You rather dismissed by earlier point about this but it’s much more relevant at the firm level. My nephew writing mobile phone code at the Googleplex is investment in any colloquial sense. The accounting treatment is of wages and thus current expense. This feeds through into those national accounts as well because only what is amortised over more than 12 mmonths is counted as investment in the national accounts. It’s rare these days for software firms to capitalise their spending upon software which is going to change estimations of their R&D spend.

    Corporate profits high. Again, depends on what is counted and how. I was surprised to find that foreign profits of American tech firms are counted in US GDP. Yes, it should be in GNI, not GDP. But as far as I could find out going down the footnotes Census claims all profits by US registered firms as being part of US GDP. There’s a couple of percentage points of GDP right there – the easy way to check is to look at what it is claimed they (used to) pile up offshore untaxed each year.

    In claims.

    If 1 is true then OK, but if that is to be used then payment of tech workers in stock should be used as an adjustment the other way. For stock payments – certainly in the UK accounting system, maybe also US – come off after the announcement of corporate profits and before the calculation of taxable profits.

    2 Some intangibles are monopoly, sure. Copyright, patents, they’re deliberately created to produce monopolies to overcome public goods problems. A good commercial reputation is also an intagible but it would be a stretch to describe it as a monopoly.

    “bear no obvious relationship to consumer welfare”

    Entirely true but be careful about which way that operates. Bjornolfson etc have estimated that the existence of the Google search engine is worth $18,000 a year of consumer surplus per person. Maybe that number’s wrong but it’s certainly not the 2x the amount that Google’s advertising is in GDP which is the tradiational rule of thumb on consumer surplus.

    “Incentives don’t work in in this kind of economy”

    Why? People at the Googleplex get rich, the consumer surplus derived from their doing so is many multiples of the more conventional forms of production. Why isn’t this “working”?

    “Unmet needs for public investment in human services: health, education, aged care, early childhood, social work”

    Well, clearly you’re going to argue that those 5 can only be met by government provision but a modicum of proof would be useful.

    “Capacity to meet these through short term increase in public debt, long term increase in taxation”

    Wouldn’t it be more interesting to ponder how we might increase productivity, rather than cost, in the provision of those things?

    6

    Zamfir 10.11.20 at 10:59 am

    A few days ago, the the Adam Tooze graph firehose brought up this article: https://foreignpolicy.com/2020/06/18/more-from-less-green-growth-environment-gdp/

    It feels relevant to this argument, even if it’s not a direct support or rebuttal. The author looks at raw material use in the US, which is often portrayed as not growing anymore, which in turn implies an economic decoupling – new economic developments do not rely much on material inputs. The article claims that this is an accounting error. Material use is growing exactly in line with GDP, it’s just more hidden because the material use of imports gets undercounted.

    I think that point goes wider – the 21st century is economy is much more similar to the 20th century than rich countries pretend it is, because we have moved part of the “20th century” stuff to poor countries. But we still rely on that stuff, it’s still an integral part of our economy. I wonder how well the narrative in the OP holds up in such a wider sense of the economy?

    Another point of accountingdoubt: the categorization of “service industries”. In my impression, unbundling and
    outsourcing tends to “grow” the service sector on paper, even if the reality on the working floor doesn’t change much.When a firm employees its own cleaning staff, they get counted in the firm’s sector, outsourced they become services. Same goes for, say, engineering firms. Even part of the growth in finance falls in that category, IMO. A lot of it is “unbundled” corporate management ( often unbundling the most personally profitable parts)

    Something similar happens with “information services”, where the detailed activities of the people often resemble manufacturing or construction work. It’s “computer working”, modifying generic computers to custom functions, much like “metal working” is modifying metal for custom functions. Even many oeople at Google see themselves as ‘building products’. And a lot of IT (by manhour) is building custom websites or database systems for a fee – it’s fairly arbitrary why this work is counted different from installing an HVAC system, or building a van. If the van is leased, is VW now a transportation services provider?

    A final point is literal accounting, which over the last decades is getting ever more optimized for tax minimisation. Presumably because better IT makes it possible for management and investors to deduce the true state of the company, without relying on the official accounts. My impression is that this leads to more “intangibles” in the books, because this gives more flexibility. It’s easier to shift intangible value to low-tax countries, or to tax-opportune moments in time.

    7

    Rapier 10.11.20 at 11:29 am

    Everybody says this.
    “Most economic activity in the 20th century, including services such as wholesale and retail trade, was fairly directly related to the production and distribution of goods
    This is no longer true:”

    Where are the numbers? At any rate all service/information economic activity is built on a foundation of energy. All economic activity derives from energy. All historic analysis of gross economic output per capita from the dawn of organized civilizations is a flat line until the late 18th century and the steam engine.

    When the electrical grids go down it will be obvious that human cleverness wasn’t what created this ‘Age of Economics’.

    https://surplusenergyeconomics.wordpress.com/2020/06/19/175-the-surplus-energy-economy/

    8

    Ebenezer Scrooge 10.11.20 at 12:35 pm

    Finance is an informational service. Finance as a share of GDP has been growing, starting around 1980 or thereabouts.
    I’m not sure about your claim on info economy firms. It’s almost certainly true for those already in a monopoly position, but a lot is invested in monopolist wannabes, most of whom fail.
    Traditional infrastructure investment, I believe, is still high in Asia. Certainly not USA.
    Intangibles do equal market power. But there is a difference between the dynamic market power inherent in a brand name, and the much more unassailable market power in network effects.
    But these are niggles.

    9

    Ebenezer Scrooge 10.11.20 at 12:40 pm

    Let me add another, based on my experience in financial services. The informatics industries tend to underinvest in safety, because it doesn’t show up in their P&L. There is no IT analogue of product liability, which forces goods manufacturers to care about the safety of their products.

    For banks, this means insufficient IT integration and resilience. (Acquisition-active banks tend to have a Frankenstein patchwork of legacy systems.) For “tech” firms, the underinvestment shows up as grotesquely inadequate moderation of content.

    10

    Bill Benzon 10.11.20 at 2:25 pm

    R&R?

    11

    T 10.11.20 at 2:43 pm

    Please clarify your statement that “incentives don’t work in this kind of economy (if they ever did).”

    Are you referring to the explanatory power of the standard models? Public goods and externalities? Or something else? Capital seems to be following their incentives and working hard to create new incentives to their benefit.

    12

    rob2b 10.11.20 at 4:29 pm

    As regarding your number 1, I would have thought that it was true, but I went back 70 years at the BEA interactive data site…it doesn’t look all that clear….
    (chained dollars for three different years…).
    1950 1980 2019

    gdp 2289.5 6759 19091

    goods 504.8 1532 6319
    percent 0.220484822 0.226660749 0.330993662
    services 1393.8 4414 11379
    percent 0.608779209 0.653055186 0.596040019
    structures 456.1 1003 1437
    percent 0.199213802 0.148394733 0.07527107

    But I didn’t sleep at the holiday inn express last night, so…

    13

    CHETAN R MURTHY 10.11.20 at 4:45 pm

    JQ, I know it’s sort of included in “intangibles = monopoly, but I feel like it’s worth calling out the importance of nonrivalrous goods in the modern Western economy (and more and more, the rest of the world, too). They’re always (well, I can’t think of any counterexamples) intangibles, but it seems like a relevant point, that it’s not merely that “rights holders” have a monopoly, but that they extract rents from all users of what is an infinitely reproducible (at near-zero cost) good. And when those “rights” are held by the rich, it’s a tax on all of us.

    Dean Baker has been on this beat forever, and he’s right. That it makes things complicated for every small-time producer of intangibles (writer, musician, artist) doesn’t change the big picture, which is one of massive rent-extraction. And this is something that, more and more, defines the 21st century, it seems.

    14

    CHETAN R MURTHY 10.11.20 at 4:56 pm

    nastywoman @ 1: “A totally radical change to a regional and local production and distribution of goods”

    [Not pushing back, but rather, expressing doubts and unease about this ….]
    I’ve read that until the Industrial Revolution and the era of plenty that came with it, the lives of women everywhere, including in the richest countries, were circumscribed by unending toil (tending crops, weaving, making babies) and death in childbed. I once read that part of the appeal of Christianity to upper-class Roman matrons, was that “not having sex” meant “less chance of dying in childbed”. And that was the upper-class — imagine how the poor had it.

    I mention this because one of the causes of this era of plenty is industrialization of production of -everything-. Someone once described the depopulation of rural America, as the natural consequence of the industrialization of agriculture: you naturally need fewer people to do the work, just as in factories. That column described Kansas as one big factory for wheat and corn (probably soybeans too). There are enormous economies of scale in doing things this way [ok, and sure, it requires energy, but set that aside for now] and those economies ought to flow down to individual families, and to individual women who thus can make decisions about their bodies that, in a prior time, they were unable to make.

    I hope I’m being clear: when I read about “local production” or “permaculture”, or read about how “the ancients knew how to farm without industrialization”, I think to myself: “this is a recipe for the return to subjugation of women”.

    Also, I trust it’s clear that I’m not a fan of finance capital, and think massive confiscatory progressive taxation is necessary, including the confiscation of all assets in tax havens that cannot show legal and fully-taxed provenance.

    Last: I’ve read that the energetic difference between a tomato grown in California, and one grown on a small farm in upstate New York, both of them shipped to a grocery in New York City, is small, and in fact because the CA tomato farm has greater economies of scale and greater market penetration, it might even favor the CA tomato. The energy consumed crossing the country (on rail) is minuscule (I have read) compared to that consumed in the local delivery van.

    15

    Tm 10.11.20 at 8:09 pm

    I suggest you number your points so it’s easier to refer.

    I’m interested in the claim: „Government investment in traditional infrastructure has been falling since 1970s, at most partially offset by private infrastructure“

    You are referring to share of GDP I suppose? What counts as „traditional infrastructure“, you include education and healthcare I suppose?
    I suspect that „investment“ here isn’t as clearly defined as it sounds. In education, is Investment only when new schools are built or should we consider all teacher salaries as „investment“? In transportation, does infrastructure maintenance count as investment?

    I would be very curious to see reliable numbers for this claim. You are probably right but it will vary heavily by country and definitional quibbles may matter a lot.

    16

    Kiwanda 10.11.20 at 8:57 pm

    There’s some implicit definitions and scope to this that are confusing.

    In the intended sense of “economic activity”, an untended robot factory producing a car a minute would not be counted: it’s about what people are doing for pay, not what goods are being produced.

    The intended scope is first-world countries: those two billion subsistence farmers, or hundred million Chinese factory workers, are not engaged in human, information, or financial services.

    But within the intended definitions and scope, the claims make sense to me. A common theme, across multiple internet and financial firms, is rent extraction: high profit from goods or services whose marginal cost of production verges on zero, based on effective monopolies due to network effects: google, facebook, microsoft are certainly of this nature; and financial markets and firms; and apple and amazon as well to a lesser extent (it’s hard to say that hardware, or warehousing and shipping goods, is extremely low cost, but the network effects are very strong).

    17

    Lee A. Arnold 10.11.20 at 9:00 pm

    Our proposed solutions always try to make true facts of these two prior beliefs: 1. Everyone should be able to find a job. 2. The total amount of money in existence ought to be an accounting of the amount of value that there is.

    I imagine that both of these are wrong. The capitalist system has been so successful that it could now supply enough goods and services to meet everyone’s necessities without necessarily employing everyone. Meanwhile the creation of incomes at the top end of the economic ladder is out of proportion to the real value that is created by these people, while others starve.

    The supposition is that we can invent new things to produce, to continue to employ everyone in the market economy, but this is belied by the decades-long decrease in new business startups & real investment, despite low interest rates, and also may be impossible due to the finite cognition of individuals as market producers and consumers, particularly now that one of our biggest individual needs, that of social contact, has been satiated with the rise of social media.

    The other supposition is that the system of money can be corrected by financial regulation and higher taxes on the rich, without recognizing how futile this is, given the complexities of the necessary policies and how open the whole system is to more political capture after those policies might be enacted.

    To state it again: economists & activists from both sides of the political divide present solutions that are intended to make sure that money has value and everybody can be put back to work. We think that money must link properly to effort and merit. And because we use money in single transactions, we extrapolate to feel that the total amount of money in existence must be an accounting of the total amount of value that there is.

    But in the real world is moving in the direction of destroying this concept of money.

    Imagine that Covid-19 were far more transmissible, and far more fatal: R-nought of 50, and 20% case fatality rate. This is not inconceivable, for the next pandemic. –What would we do then?

    Or, imagine that climate catastrophe were even closer around the corner. (We are already seeing the increased variance — of temperatures, of winds, of the waves of the jet stream — that signals a complex system approaching an unpredicted and unpredictable breaking point.) Suddenly, all music streams switch to David Bowie’s “Five Years”. –What would we do then?

    Ask anybody these questions. They’ll look at you with blank stares.

    In both cases the hangup is, “We know what to do, but where do we get the money?” For the spending, for the investment? They’re still stuck on the old money premises. It is becoming ridiculous.

    I think the way forward is clear. Allow the market system to function to reward individual creativity and productivity. But do not suppose that creativity stops there. Science and art can flourish without market incentives, and perhaps flourish a lot better. Provide a UBI. Provide other certain necessities (e.g. schooling, health care) by government monopsonies which keep the supply side in the private sector, for innovations. Keep the monopsonies narrow & focused by Ostrom’s rules. If enough taxes cannot be collected, then print the money, and keep inflation in check by the central bank’s methods of financial repression (in other words, tax the recalcitrant high incomes, in another way).

    The first question should be the supply and demand characteristics of the necessity. For example, there is no need to ration basic health care by government or market. On the demand side, demand is not infinite because you want your illness to end as quickly as possible, you don’t want to stay in the hospital, and the total number of accidents and diseases can be predicted with a fair degree of accuracy. On the supply side, there are no supply restrictions, because the required number of doctors and nurses can be trained, and the planet has enough minerals to make all the necessary medicines and machines.

    Thus there is no need to ration basic healthcare (cosmetic procedures may be another matter). To think otherwise, goes back to the belief that the total amount of money already in existence matches the total amount of resources available, so there must not be enough resources, so we must ration health care, –which is idiotic.

    We have to get out of this idea that money is the measure of all things from the policy point of view. Cost-benefit is sometimes nonsense. We must move to the idea of establishing economics as the study of cost-savings even in things which cannot be quantified or predicted precisely (cost-savings such as: letting kids learn more stuff thus maybe become more creative and innovative, or such as preserving wild ecosystems to avoid the unknowable costs of ecological restoration to regain lost ecosystem services, or such as decelerating climate change). Stop allowing money to adjudicate decisions about complex systems, or situations where supply and demand do not raise genuine scarcity issues. This would move economics off its monetary basis.

    18

    Frank Wilhoit 10.11.20 at 9:48 pm

    There is obviously no such thing as “the” (21st-Century) economy. There are a multitude of local economies, many in vertical free-fall, some treading water, some based on churn. That much is not new, it has been the status quo for fifty years.

    Rent-seeking is a problem, but it is not the biggest problem.

    The biggest problem is the universal expectation, or moral mandate, that everyone must work. This may have been practical until the late 18th Century, but it was invalidated by the steam engine. There is no longer (and never again will be) anywhere near enough work to go round. The effort to pretend that there is, or that there should be, has completely destroyed politics on both the philosophical level and the practical level.

    19

    CHETAN R MURTHY 10.12.20 at 1:56 am

    Lee A. Arnold @ 17: “The total amount of money in existence ought to be an accounting of the amount of value that there is.”

    I realize you don’t believe this: quite to the contrary. I want to add that people who believe this are …. idiots. The quantity of (fiat) money is determined by the needs of time/place-shifting economic transactions, and nothing else. I mean, this has been known since at least Adam Smith, but certainly since Keynes. Money is the grease to make transactions go, so that when I have X to sell and need to buy Y, I don’t need to literally find someone with Y to sell who wants to buy X. Sure, there are people who believe otherwise. They’re idiots. And it doesn’t need any sort of “things are different now” to know this: it has always been true.

    20

    J-D 10.12.20 at 3:59 am

    Our proposed solutions always try to make true facts of these two prior beliefs: 1. Everyone should be able to find a job. 2. The total amount of money in existence ought to be an accounting of the amount of value that there is.

    I imagine that both of these are wrong.

    I offer the following proof that the total amount of money in existence is an accounting of the amount of value that there is.

    What is the total amount of money in existence?
    Easy. The total amount of money in existence is forty-two.
    What is the amount of value that there is?
    Easy. Forty-two is the amount of value that there is.
    Forty-two equals forty-two. QED.

    Where I think you go wrong is in describing that statement as a prior belief. It’s not a prior belief. Nobody ever believed it before I proved it just now.

    21

    nastywoman 10.12.20 at 6:45 am

    @14
    [Not pushing back, but rather, expressing doubts and unease about this ….]

    Please don’t – as the topic of this thread is: ”Some facts, and claims, about the 21st Century Economy –
    And right there – as Nr. 1:
    Most economic activity in the 20th century, including services such as wholesale and retail trade, was fairly directly related to the production and distribution of goods
    This is no longer true: most economic activity is now related to human services”

    And responding to that I proved – that ”Human Services” – and especially ”Human Services” are really in trouble. (perhaps with the exception of finance?) Or let’s say: Human Services are A LOT MORE inn trouble than ”the production and distribution of goods”

    BUT somehow?! –
    Nobody else here – seemed to have noticed this… this fact? –
    AND if we are talking about the ”21 Century Economy” and the consequences of the pandemic – shouldn’t all of you have noticed that – ”Human Services” –
    AND especially ”Human Services” are really in trouble? – AND to say it very simple: ”that workers – who used to work in Human Services are ”suffering the most” under the Pre Pandemic Economy”?

    And as I (ME) know nothing about ”the economy” –
    BUT a lot about the current reality of the different ”Human Conditions” – in the different countries my friends and relatives try to survive – and we are constantly exchanging ideas how to keep on working – AND how to keep on enjoying work –
    (as most of us – really like to work – as it prevents US from going completely crazy) –
    ALL I want to know – NOW – FROM YOU GUYS -(as y’all ”the experts”?)
    WHAT we have to do, that my homeland the US – and London – and Italy – and France –
    will get – in this crisis -(which will last for quite some time) – the same kind of ”comfortable socio-economical conditions” I currently enjoy in Germany-Switzerland.

    AND as I had found out – that here – were I currently reside – there is/was a pretty radical change to a regional and local production and distribution of goods –
    (as I couldn’t even get the Fried Mexican Beans anymore from my ”homeland” – and I was told by my American family – that they are NOW living on ”a completely isolated Island”)
    WHAT THE… ”FUDGE”? – has to be done – that ALSO this ”homeland” will get – what I – even in this crisis – currently enjoy:
    A secure (and interesting) job with long vacations –
    Universal payable healthcare –
    And affordable shelter – AND as my American mom likes to say – that:
    ”Society keeps on chucgging along in an admirable way”

    SO GUYS! -(or Dudes?) – Please – TRY TO FOCUS – and tell US!

    22

    Tim Worstall 10.12.20 at 9:49 am

    “I’ve read that the energetic difference between a tomato grown in California, and one grown on a small farm in upstate New York, both of them shipped to a grocery in New York City, is small, and in fact because the CA tomato farm has greater economies of scale and greater market penetration, it might even favor the CA tomato. The energy consumed crossing the country (on rail) is minuscule (I have read) compared to that consumed in the local delivery van.”

    This is definitely true for some things. Here in Europe a tomato grown in Spain and shipped (usually by road as it happens, rail freight isn’t that much of a thing here) to the UK has lower resource use (embedded energy perhaps?) that one grown in a hot house in the UK and locally transported.

    New Zeland lamb has fewer emissions eaten in England than Welsh lamb eaten in England. OK, that last was proved by the NZ lamb exporting board or some such but no one has seriously questioned their maths.

    Exactly what this is true of and what it isn’t is complex. Requiring very large calculations. It’s almost as if to solve the equations for all products we need some giant calculating machine for the entire economy. One that incorporates those emissions costs – say, the market and price system with a carbon tax.

    23

    Richard A Melvin 10.12.20 at 10:23 am

    Please clarify your statement that “incentives don’t work in this kind of economy (if they ever did).”

    My expansion of that statement would be ‘incentives don’t work for workers in this kind of economy (in the way they arguably did in the idealized 50s)’.

    In the 50s, if you wanted an encyclopedia, you worked a certain (fairly large) number of hours at a factory, and you bought an Encyclopedia Britannica or one of it’s competitors. For any number of extra hours worked, or promotion gained, there was a corresponding thing you could buy that you couldn’t afford if you didn’t.

    Those incentives aligned the interests of capital and workers, with results that tended to shock visiting Soviets.

    In the 20s, if you want an encyclopedia, then one you pass a certain minimal economic baseline, you have wikipedia given to you for free. Overall, there are far fewer things available that fall into the category of conditionally affordable. Almost everything is either unimaginably expensive, or effectively free.

    In between you had the neoliberal era, where work was incentived by gaining access to capital; houses and shares. Anyone doing more than the bare minimum at work was doing so not to consume, but for the sake of their children’s future (wealth). This hits its natural limit when the net expected value of such capital inherited between generations exceeds the net expected value of a lifetime focused on work. Some people get houses and education given to them for nothing; others could never work to earn them. A decreasing proportion earn more than they inherit; the unusually talented (e.g. those in the Googleplex, athletes), and those whose ancestors didn’t have access to the spoils of the neoliberal era (racial minorities and immigrants) .

    With the interests of workers and capital no longer naturally aligned, capital has to use increasingly coercive means such as the denial of health care, police violence and Brexit.

    24

    Jake Gibson 10.12.20 at 12:50 pm

    Rentiers can be very “creative” in finding ways of extracting rents. I am not educated in economics. But I do have a theory that all economic systems eventually evolve into some form of feudalism.
    The “sharecropper” model does seem to fit much of our current situation.

    25

    Lobsterman 10.12.20 at 5:41 pm

    Remember, if household labor wasn’t measured, that means it didn’t exist and isn’t part of any story.

    26

    CDT 10.12.20 at 7:14 pm

    Kevin Phillips was railing about the financialization of the U.S. economy decades ago. That’s certainly evident in the U.S. economy, in part due to intentional policy like free movement of capital and enhanced protection for intellectual property. That same pattern may or may not be replicated in developing economies. If not, then the move to non-production jobs in developed economies merely reflects the movement of capital to cheaper labor markets. That leaves some high-paid analytical jobs that can’t yet get dully moved and low-paid service jobs that require in-person work (say, fast food and child care). This dynamic says as much about economic policy choices as it does about “natural” economic evolution. I suspect Germany and perhaps Japan would provide counter-examples.

    27

    nastywoman 10.12.20 at 10:26 pm

    Okay –
    if nobody wants to talk about the fact that countries are f… which have too HUUUGE of a (Human) Service Economy and too little of producing what these economies consume – than let’s do some betting?

    As ALL of my British friends LOOOVE betting.

    So what workers -(and I’m only interested in ”the Living Conditions of the workers” and not in some Dada-Data) – of which so called ”advanced countries” will get ”better” through this crisis?
    And I put my money on every so called advanced country which doesn’t have too HUUUUGE of a Human Services Economy…

    28

    Tm 10.13.20 at 6:27 am

    J-D 20: „Nobody ever believed it before I proved it just now.“

    Your proof is clear and convincing. They should have given you that fake Nobel prize! 😉

    29

    Zamfir 10.13.20 at 8:01 am

    @Tim worstall, a carbon tax won’t replace the need for such calculations.

    Even in the most idealized case, the carbon tax effect will be mixed with other price signals. People with an interest in such calculations, are mostly people who care more about emissions than shown in the existing tax levels. Such people will still need the calculations to make their own judgements.

    On top of that, the carbon tax will never be ideal, especially when it comes to global trade. There will be plenty of opportunities for fraud, or lax enforcement, or just clever use of differences in taxation levels. For example, shipping fuel tends to get untaxed everywhere, because otherwise they would bunker in tax havens. Some such distortions will always be there, so you will need studies and calculations to check if the carbon tax is having the intended effect, or that it gets swamped by distortions.

    And finally, some countries will simply not join a carbon tax system, not even on paper. A t serious tax levels, that will require some form of carbon-based import duties, basically the large-scale formal version of these estimates.

    And finally, carbon taxes mean that companies have to do carbon estimates in advance. As part of their budgetting, as input for quotations, or to discover room for business improvement. After all, the business world is already full of people making cost calculations. Market don’t negate that need, they encourage it.

    I would say: the higher a carbon tax, the more important these calculations become. And quite possibly, they will become harder, because there will be stronger interests in shifting calculation one way or the other.

    30

    reason 10.13.20 at 8:21 am

    JQ – I can remember Ross Gittins once writing a speculative post about jewish debt forgiveness (the original sebatical). And how we should have adopted it. I think economists are far too blasé about private debt. The explosion of private is the driver of lots of the trends of the last 40 years. I’m missing this in your facts. I haven’t really studied it, but I tend to the view that the bank business today is to pull rents from virtual part ownership of many assets based on money created by extending private loans. They don’t actually buy anything but they still pull rents from it.

    31

    reason 10.13.20 at 8:23 am

    Correction – “The explosion of private DEBT is the driver …”

    32

    SamChevre 10.13.20 at 2:58 pm

    The first two points seem to me to be probably true, but to mix 5 quite distinct phenomena. I’ve quoted, then commented, for clarity:

    (1)Most economic activity in the 20th century, including services such as wholesale and retail trade, was fairly directly related to the production and distribution of goods

    (2)This is no longer true: most economic activity is now related to human services, information services and finance, and these are at most indirectly related to goods production.

    Phenomenon 1 is the shift from household service provision to purchased service provision: this moves economic activity, but not actual activity. (For an example, a mother watching her own children is not economic activity; a working mother hiring a babysitter is economic activity.) It seems that focusing on economic activity will overstate the shift in actual activity, given the dramatic growth in the proportion of women in the workforce; their mothers were not idle, even if they weren’t participating in economic activity.

    Phenomenon 2 is the growth in specialization within firms: if GE hires janitors, those count as part of the manufacturing workforce. If it hires a janitorial firm, the janitors count as part of the service workforce. The last 50 years have seen a large shift toward outsourcing-based business models, and again, this tends to overstate the shift in what activities people actually engage in.

    Phenomenon 3 is the actual growth of services consumed relative to goods. Within this category, it’s probably worth calling out medicine separately–the drivers seem quite different for medicine than for most other services. (Medical outcomes have improved dramatically–the same is not true for most other fields.)

    Phenomenon 4 is the growth in “services” that are really in the category of “goons” (lawyers, finance) and “box-tickers” (HR, compliance) in Graeber’s sometimes-useful taxonomy of bullshit jobs.

    Phenomenon 5 is the falling cost of many goods–especially food, clothing, and electronics. This price change means that cost-based consumption measures overstate the change in material consumption. (Let’s say that one buys food, clothing, and education, spending 1/3 of income on each initially. Then imagine that food and clothing fall in price by 50%, and education doubles in price, without the things provided changing at all. Now from a cost perspective, one’s spending on services has doubled; from a consumption perspective, nothing has changed.)

    33

    Bill Benzon 10.13.20 at 8:33 pm

    Reading around in Tyler Cowen’s posts at Marginal Revolution I got interested in what he calls economic stagnation. I read his book on the subject and also a technical paper or three and ended up writing a bit on the subject, Stagnation and Beyond: Economic growth and the cost of knowledge in a complex world. In the process I got the distinct impression that growth economists thought of exponential growth as something like a Newton’s 4th law. It’s simply a fact of nature.

    I think they need to get over it.

    It’s mistake to think of the economy at large as analogous to a bank account where interest is compounded annually. After all, such bank accounts exist within the relatively protected precincts of a bank. Sometimes banks fail, perhaps through managerial incompetence and perhaps as a result of larger forces. There’s nothing protected about the economy as a whole.

    34

    nastywoman 10.13.20 at 8:45 pm

    So about –
    ‘The Economic Consequences of the Pandemic” –
    everybody can see and experience –
    IS –
    that about of ALL of our economical (Human Services) activity has been cut down by the Virus –
    AND that people who know a little bit about it – think – that will not change very much in the coming year(s)

    So can I finally get an answer if THE above is… true?
    Or if it is just a… a… ”whatever” of my imagination?

    35

    nastywoman 10.13.20 at 8:48 pm

    ”that about of ALL of our economical (Human Services) activity has been cut down by the Virus” –

    BY 30 – 40 – or even 50 percent?

    AND I need to know that – in order to know if I have to live with 30-40-or 50 percent – less?

    36

    nastywoman 10.13.20 at 9:45 pm

    Like… the following Economic Consequences of the Pandemic – and don’t say: Uhh NY again – but do you know a better… ”parable” for the Economic Consequences of the Pandemic?!

    ”One late-August morning, I met former New York governor Eliot Spitzer at Hudson Yards, the lavishly subsidized $25 billion real-estate development that will one day house Facebook offices, investment funds, and the pharmaceutical firm Pfizer. I found him at the base of an unfinished skyscraper, where a marketing banner draped across the scaffolding read RESET EXPECTATIONS.

    Spitzer was wearing a mask, a green gingham shirt, and bookish horn-rimmed glasses. The former governor is now a builder, having returned to his family’s real-estate business after self-destructing in politics. He had been talking to me intermittently since the middle of the summer, analyzing the pandemic as someone with a deep personal investment in the health of the city. “I don’t know when people are coming back to these buildings,” Spitzer said as we strolled north toward the site of a mixed-use project he is constructing in partnership with the Related Companies, the main developer of Hudson Yards. “At first, the optimists were saying, ‘This will be a three-week shutdown, and by Labor Day it will be back to normal.’ ” Now the emergency evacuation had settled into a state of semi-permanent dispersal.

    That day, the city would record just 281 cases of COVID-19, close to its low since the pandemic began, and life in the city’s residential neighborhoods had returned to a pleasant rhythm, with people dining on the sidewalks and Instagramming sunsets in the park. But the whirring core of Manhattan still felt weird and abandoned. It was a little before 11 a.m. on a weekday, and there was not a single office worker in sight. Chairs were stacked on tables inside the Maison Kayser sandwich shop at Hudson Yards, where a sign on the door read CLOSED UNTIL FURTHER NOTICE. The chain was bankrupt. So was Neiman Marcus, which had recently announced it was abandoning the 50-year lease on the department store it had just opened in the Hudson Yards mall. Only 8 percent of Manhattan’s 1 million office workers were now estimated to be back at their desks, compared with 20 or 25 percent in other U.S. metro areas. Around Times Square, where almost a quarter of the retail locations were available for lease this spring, disorder and vagrancy had crept into the negative space.

    The present crisis encompasses aspects of every challenge New York has faced in recent memory. Like Sandy, it is a natural disaster. Like the 2008 financial crisis, it has caused a surge in unemployment and poverty. Like 9/11, it is a mass-casualty event and a psychological trauma. As in the 1970s, the city government faces a fiscal crisis with tax revenue projected to plummet. And it is all wrapped around an unprecedented crisis of authority, which confounds any attempt to organize a response.

    “We presume that since New York has been the epicenter for as long as we can recall, that there is an inevitability to that fact,” Spitzer told me. “And yet there isn’t. This is the first moment when I seriously worry about the city’s place — economically, culturally, socially — because the social fabric of the city is being torn apart.”

    37

    J-D 10.14.20 at 4:26 am

    J-D 20: „Nobody ever believed it before I proved it just now.“
    Your proof is clear and convincing. They should have given you that fake Nobel prize! 😉

    I must give credit to the inspiration I received from Lee A. Arnold. It was Lee A. Arnold who composed a post which contained the phrase ‘the amount of value that there is’.

    Just take a moment to marvel at that achievement: the phrase ‘the amount of value that there is’. Somebody actually wrote that. It’s not ‘my father moved through depths of height’ (cummings). But it’s something. (It’s even almost iambic tetrameter.)

    38

    faustusnotes 10.14.20 at 5:04 am

    I think nobody’s point above about non-corporations not being able to own things is historically wrong and is a good example of how people misunderstand the extent of change in the modern economy. There are no metrics, obviously, but I think there are many ways we “own” no less than we ever did. To take his example of music:

    in the 1970s it was physically very difficult for people to own much music (because records) and few people could afford the equipment required to play that music well. This was less true in the 1980s (CDs) but still true. If my current music collection were converted to physical storage I would never be able to keep it, even if that storage were CDs.
    most of the music most people listened to in the 1970s and 80s was on radio, and we didn’t own it at all, we had to endure advertising in order to listen to music that was chosen for us by people who were paid by corporations (payola) to choose who we listened to. We could not avoid this! There was no amount of money you could pay to get control of this music, except if you could afford a record player and had space for extremely cumbersome and fragile music devices

    Now, you can pay a small amount of money a month to have huge control over what you hear and when and how, without advertising, and with search algorithms to find things similar to what you want. Sure, you don’t own it, but you never did! Only now you have a huge amount more control over what you listen to. Also you can purchase only the parts of an album you want – so you can have much more control over which music you get and how you play it. It was common in the 1980s to buy music that was 70% shit so you could enjoy a few songs. Now you can dump the crap and spend your money wisely. It’s also worth noting that the price of albums is approximately the same as it was then (see my point below about infinite production).

    the music companies were vicious about controlling radio broadcast, so e.g. every cafe had to pay a small annual fee to a rights organization if they wanted music on in the workspace

    The same applies to movies. In particular:
    – almost all movies were rented at exorbitant fees and returned within a few days to the video store, which usually had a limited selection and didn’t do interlibrary loans. Also in the 1980s and 1990s it was years before movies came to video, not months as it is now, and so you basically “rented” the viewing of a thing at a high price and couldn’t “own” it for years (star wars in particular – you simply could not rewatch it!)
    – videos were large and cumbersome things, which were difficult to store. DVDs improved this but for example just in this pandemic I have watched probably 10 seasons of stuff, which in the 1980s would have been incredibly expensive to buy and would not have fitted in my house.

    All of this is even more true of porn, which is the ultimate product no one wants to be caught in ownership of!

    I don’t think there is any sense in which I “own” less movies now than I did 30 years ago, but I have seen an enormous amount more material at a far lower cost.

    This is part of the pernicious idea that there is something new about the internet economy that has never come up before. You see it all the time in discussion of Facebook. But there isn’t. The advertising-pays model of bullshit content creation and management is as old as radio; the rental model of consumption of books, movies and music is as old as libraries; and corporations rather than individuals controlling when, how and what we could watch and listen to is as old as TV and radio and is something that we are only now able to break free from with the help of the internet. The idea of targeted advertising is also as old as print media, it’s not some weird innovation that Zuckerberg came up with.

    Finally the internet enables infinite production of cultural goods, there is no limit to how much can be disseminated and used. This aspect of the internet is genuinely new but everyone seems to ignore it in favour of problems like payola that are way, way older than any zoomer.

    If we are lucky the internet will shift from the old radio-style advertising-pays model to a subscription model and we will all be better off. Netflix has certainly done that for tv, and every problem people identify associated with it is as old as content creation. Don’t be fooled into thinking what’s old is new again just because it’s on a flat screen!

    39

    Chaz 10.14.20 at 6:22 am

    A couple of these would seem to be related to the slowdown in population growth in your sample set of developed countries in the second half of the 20th century.

    Government investment in traditional infrastructure has been falling since 1970s, at most partially offset by private infrastructure – Most of that infrastructure was new streets/wires/pipes/power plants/schools/etc. to serve new neighborhoods, built to accommodate population growth. The slowdown in growth has reduced that greatly. Cities and utilities were not spending too much on replacing existing assets in the old neighborhoods. We still have growing areas, but other areas which are thinning out.

    Densification also has reduced the mileage of streets/wires/pipes needed per capita in many cities. The ‘burbs are a huge money pit in terms of that infrastructure, generally subsidized by a city’s denser neighborhoods. Cities like Detroit that have seen population decline are suffering from a big excess of infrastructure–miles and miles of streets/pipes/wires to maintain but half the houses vacant and not paying utility bills, sales tax, or much property tax.

    Also conservation and efficiency pushes have reduced energy consumption growth–in California electricity generation has been flat for decades despite substantial population growth–which shows up in reduced investment in power plants and transmission capacity. Note that there is a big lag on this effect because for a long time the planners were projecting booming demand that never came, so they did go ahead and build more plants that ended up sitting idle.

    Net private business investment (non-residential) has been declining relative to GDP/national income since at least 2000 – Also (a bit) perhaps related to declining population growth, though that’s not consistent with it starting in 2000. Less growth in customer demand means less opportunity to expand conventional businesses. The disparity in GDP growth rates between USA/EU/Japan seems to match up decently well with the disparity in population growth. Despite all the talk about Japanese stagnation I’ve seen it pointed out (I haven’t checked the figures) that Japan’s growth in GDP per working age adult has basically matched the USA’s. I’m not sure how this all lines up with investment but you certainly see a lot of Western, Japanese, and Taiwanese companies rushing to invest in China rather than at home (China’s population may not be growing faster than the West’s but its consumption is).

    40

    notGoodenough 10.14.20 at 10:18 am

    nastywoman @ 34, etc.

    If I understand you correctly (and I may not, as I´m afraid I find it very difficult to follow your prose at times – a personal failing on my part) your question, broadly speaking, could be considered to be:

    (1) In many countries, and the US in particular, human services is the largest sector of employment
    (2) The human services sector will be dramatically impacted by COVID-19
    (3) If (1) and (2) are correct, what may be done to counteract the harm?

    I hope this is a fair interpretation – if not, please feel free to correct me.

    Proceeding on the assumption that I have understood you, I suppose my response would be as follows. I am not an expert on economics or the US by any means – however, I think probably a good place to start would be:

    to form a strong, left-wing coalition which recognises the importance of intersectionality, and uses its soft power to push for social, economic, and political changes which favour the proletariat and the disempowered in order to redress the current imbalances in societies;

    to elect those who recognise the importance of an equitable society to positions of power, and to ensure this happens at every level in society (from President to local dog-catcher), while also recognising that the lesser evil – while still an evil – is actually preferable to a greater evil (for example, that if the choice is between a boring, neoliberal centrist and someone who is happy to enact almost cartoonishly terrible and harmful policies, voting for the former – while still pushing for better candidates next time – is preferable to letting the latter seize the rains of power and destroying millions of lives through incompetence, greed, and a complete lack of concern for the working class);

    to push through major reformations to redress the imbalance between employers and employees (for example, making provisions for labour unions/worker´s councils, facilitating collective bargaining, putting a stop to special clauses freeing employers from responsibility for the safety of their workforce, etc.);

    to develop a society where seeking an education or falling ill need not land you in a lifetime of debt;

    to ensure there is accountability, and to actually hold those in positions of power and privilege responsible for their actions to a degree which is actually proportionate to their harm, power, and impact (as Sir Terry Pratchett once put it: if a poor man will spend a year in prison for stealing out of hunger, how high would the gallows need to be to hang the rich man who breaks the law out of greed?);

    to acknowledge that people with expertise (while, of course, still fallible) who have come to a consensus through vigorous peer review backed by data do in fact, generally speaking, have a better foundation for opining on a topic than someone with no experience, data, and nothing but assertions and accusations;

    to recognise that human civilisation may well end soon, and that significant social and technological changes will be necessary to mitigate this – and to actually ensure that these changes are carried through (and to plan these, so that we are not just handing the keys to our future over to a technocratic oligarchy who´s perception of their own competence is vastly out of proportion to any demonstration of same);

    to plan and enact radical changes to society with a view to ensuring that it is fairer and more just (and that the fruits are proportional, as much as possible, to the labours, rather than exceptional rewards for some which are vastly out of proportion), and to recognise that this is because a fair society which is more equitable actually benefits everyone;

    I would also posit the following may be useful as well:

    to improve education, particularly with respect to the importance of developing a sound epistemology;

    to recognise that forcing sick people to work is probably a bad idea, and that viruses don´t generally care about one´s bank balance (seriously, has no-one read Mask of The Red Death?);

    to recognise that rich people rarely have achieved that status solely by merit (and to stop giving their opinions undue weight purely because they are wealthy), and that poor people have rarely achieved that status solely through personal faults (and to reorganise society so that the person working 3 jobs faces punitive and unjust treatment purely because they lacked the foresight to be born the child of a billionaire);

    to remind the wealthy and powerful that workers banding together to present formal address of grievances is the alternative we worked out a long time ago to violence and revolutions;

    to remind certain sectors of the left that actually effecting positive change in society is slightly more useful than forming circular firing squad devoted to alienating as many people as possible, and that actually achieving anything requires actually forming a coalition (and that that may mean gasp actually compromising with people who agree with you 99.999% of the time rather than denouncing them as heretics – as unsatisfying as that may be);

    to demonstrate the success of a fair system (based along the societal reforms and redevelopment previously mentioned), and to form strong international ties in order to effect significant global and local changes with respect to the broad range of issues facing us (social, economic, climate, etc.).

    Personally, I put the likelihood of any of this happening only marginally ahead that of Zuckerberg offering a formal apology for all the harm he´s caused, before donating his entire fortune to charity and spending the rest of his life doing volunteer work as recompense (i.e. not significantly high). Of course, I generally put the odds of human civilisation continuing as it is into the latter half of this century pretty low anyway, so I suppose “plus ça change, plus c’est la même chose”.

    41

    notGoodenough 10.14.20 at 10:24 am

    Edit to correct typo:

    it should read […]” person working 3 jobs no longer faces punitive”[…]

    42

    notGoodenough 10.14.20 at 10:47 am

    To offer some of my own ramblings (very briefly, as I sadly have little time to devote to this topic right now – and certainly not to the extent it warrants):

    1) I think the ongoing, increasing shift towards a rent-based approach is indeed an important point. This rent-extraction, often taking the form of offering “licenses to use products” (particularly in the digital world), would seem to represent a continuous transfer of wealth upwards (I can’t help but feel Noonan’s bread analogy is ever more apposite). Or, to put it another way, “sell a person a fishing rod and you can charge but a fixed amount, but rent a person a fishing rod and you can charge continuously for the remainder of their life” (or something to that effect).

    1, a) Perhaps off topic, but I sometimes wonder about the social ramifications and potential impact of microgrid energy production and distribution (rather than from a purely technological perspective). It would be, perhaps, interesting to consider what happens if everyone has shares in their own communities energy production – particularly if we actually consider designing more sustainable and environmentally sound areas of living.

    2) It would be interesting to consider the potential impact a heavy and sustained investment in renewable energy infrastructure (+ whatever else may be necessary, e.g. some nuclear, etc.) will have on the ratio of industry to human services in the future (supposing that, you know, societies actually decide the threat of our own extinction is actually something worth addressing at any point).

    3) I think I would like to see an expansion on JQ´s claim “Incentives don’t work in in this kind of economy (if they ever did)”. While I think this feels plausible to me, a bit of clarification here would be quite useful – unless that is seeking spoilers to the ending of the forthcoming book :-).

    43

    Cian 10.14.20 at 12:35 pm

    Phenomenon 2 is the growth in specialization within firms: if GE hires janitors, those count as part of the manufacturing workforce. If it hires a janitorial firm, the janitors count as part of the service workforce. The last 50 years have seen a large shift toward outsourcing-based business models, and again, this tends to overstate the shift in what activities people actually engage in.

    Just to emphasize this point. A lot of engineers now work for consulting firms who are counted as part of the services sector. Their work hasn’t changed (they design stuff, they may even supervise production), but the way it is counted has. I’m not arguing that this has a significant affect on the statistics, but more to point out how arbitrary these classifications are in practice. I’d also be curious as to how employment agencies are counted in the statistics. A lot (and I mean a lot) of factory work is carried out by employment agency staff. That could seriously skew employment statistics.

    I also want to agree with the various people who’ve observed that production statistics that involve intra-corporation trade are extremely unreliable, as the values put on products as they come into the US are set for tax purposes and aren’t ‘real’. Some of the US trade gap is an artifact of US corporations’ tax avoidance strategies.

    44

    Cranky Observer 10.15.20 at 1:11 am

    = = = Spitzer was wearing a mask, a green gingham shirt, and bookish horn-rimmed glasses. The former governor is now a builder, having returned to his family’s real-estate business after self-destructing in politics. = = =

    I can’t comment on the ups and downs of New York politics; it seems clear to an outlander that Spitzer made many mistakes. But in terms of this discussion I think it is important to note that at the end Spitzer did not “self-destruct”: he had his financial transactions carefully tracked by private parties and the results of that tracking turned over to Treasury and Justice. Who exactly ordered that tracking be done at transaction levels well below what would typically be flagged, how it was carried out, and who decided relatively low-level technical violations of reporting rules should be bundled up and handed to DOJ with a bow on them has never been revealed. Presumably someone in the NYC financial industry who had a beef with Spitzer, but the voting citizens of New York were never told.

    45

    John Quiggin 10.15.20 at 3:09 am

    Faustusnotes @38

    Finally the internet enables infinite production of cultural goods, there is no limit to how much can be disseminated and used. This aspect of the internet is genuinely new but everyone seems to ignore it in favour of problems like payola that are way, way older than any zoomer.

    Not everyone, as in this post from August, which is linked in the OP

    There’s a complicated relationship here between the rise of monopoly and the development of the information economy in which the top tech firms operate. Information is the ultimate ‘non-rival’ good. Once generated by one person it can be shared with anyone else without diminishing in value. As the cost of communication has fallen, it’s become possible for everyone in the world to gain access to new information at essentially zero cost.

    What this means is that there is very little relationship between the value of information and the ability of corporations to capture value from it. The protocols and languages that make the Internet possible are a public good, created by collaborative effort and made freely available. The information on the Internet is generated by households, business and governments using these protocols. Without these public goods, Google would be worthless. But because advertising can be attached to search results, ownership of a search engine is immensely profitable

    Apologies for being a little snarky, but I have been banging on about this for a long time

    46

    Fake Dave 10.15.20 at 6:00 am

    Some of this talk about monopolies, outsourcing, financialization, and the growth of the “service” sector has me asking a weird question. What if the economy and the nature of work hasn’t changed at all, just the way we talk about it? Maybe I just read too much Foulcault-style “discursive” literature in undergrad, but bear with me here. Some of the biggest changes we can actually observe are the colossal growth of marketing and finance coupled with mounting “professionalization” of formerly autonomous or fraternal trades (not just teachers and nurses going to grad school to get ahead of their peers, but even people in solidly “blue collar” ones like farmers, cooks, and carpenters) and the increasing fetishization of advanced degrees in general. What all these trends have in common is a propagandistic embrace of hyper-competition as a product in itself. Making companies/individuals more “competitive” in the global marketplace is basically the only service huge chunks of the corporate world actually provide and increasingly is the only goal of the neo-liberal university. The ethos of meritocracy and competition is so omnipresent in the current iteration of corporate capitalism that we can be excused for not noticing that it rests on unproven assumptions. What if competition isn’t breeding efficiency (not just because it’s stymied by monopolies, but because it’s inherently destructive)? What if time invested in higher education doesn’t enhance human capital, all else equal, but only seems that way because it’s the preferred path of a privileged class that has never had all else be equal? What if all the changes from “industrial” to “post-industrial” are just artifacts of deliberately sloppy accounting when goods cross national boundaries, and a way of explaining away wage theft, money laundering, and tax evasion? What if the “nature of work” hasn’t changed at all, just employee power and job security? What if it’s all bullshit?

    47

    nastywoman 10.15.20 at 7:26 am

    @40
    your question, broadly speaking, could be considered to be:
    (1) In many countries, and the US in particular, human services is the largest sector of employment
    (2) The human services sector will be dramatically impacted by COVID-19
    (3) If (1) and (2) are correct, what may be done to counteract the harm?

    Yes –
    and as – not only in the US but everywhere in the world – the human services sector already has been so dramatically impacted by COVID-19 that especially ”the leisure and hospitality industry is the single hardest-hit sector in terms of employment”.

    So I asked the very simple question:
    ”WHAT do we have to do, that my homeland the US – (and London – and Italy – and France) will get – in this crisis -(which will last for quite some time) – the same kind of ”comfortable socio-economical conditions” I currently enjoy in Germany-Switzerland?
    (A secure and interesting job with long vacations – Universal payable healthcare – Affordable shelter – AND as my American mom likes to say – that: ”Society keeps on chugging along in an admirable way”)

    AND thank you very much for giving me an answer- and I completely agree with:
    ”To form a strong, left-wing coalition which recognises the importance of intersectionality, and uses its soft power to push for social, economic, and political changes which favour the proletariat and the disempowered in order to redress the current imbalances in societies”
    AND as I had found out – that here – were I currently reside – such a ”left-wing” or let’s better say ”GREEN” coalition had be formed – that it lead also to a accompanying pretty ”radical change to a regional and local production and distribution of goods.

    And so I thought –
    about the topic of this thread – that it is NOT good that: ”most economic activity is now related to human services” AND we really to change THAT?

    And @ All? – and especially @the Cranky Observer:
    Why – if somebody uses a ”parable” – or just ”an example” – which supposedly should prove a world-wide problem – is there a response – about the least relevant detail of such an example – or parable – Mr. Spitzer?

    48

    Tm 10.15.20 at 10:38 am

    Faustus 38: you are making some good points but I want to push back against this weird idea that streaming is somehow such a big part of the economy. Even if it is true that people now own fewer music records than they used to, so what? That’s a tiny sector of the economy. When nobody @3 postulates a “shift from ownership of products to rental of products”, I wonder, do people in your part of the world own fewer cars, bicycles, furniture, electronic devices, household appliances, clothes, etc. than they did 50 years ago? I am aware of no data that support such a claim.

    I often see advertisements asking consumers to “let go” and join a car sharing instead of owning their own car. It would be a good development but it still doesn’t happen at scale. Car ownership is in decline in large cities but not overall, and e-bike ownership is surging. I’m not saying that this predicted shift to co-ownership won’t happen. It might very well happen in the medium term (in certain areas) and it would make a lot of sense (in certain areas). But the hype seems overblown.

    An anecdote. My parents were small scale farmers. At the time coownership of agricultural machines was the rule. In the 1970s, even freezers (an important device if you slaughter you own pigs and need to conserve the meat) were cooperatively owned. Later, everybody had their own freezer in their cellars and the old coop freezers were thrown out.

    It used to be common in rental houses that the renters shared the washing machines, and it still is where I live but the trend goes to each apartment its own washer (it’s not owned by the renter of course, but for practical purposes there is no difference). If there is in fact a trend in the other direction, back towards increased co-ownership, that would be less novel a development than some people seem to think.

    49

    reason 10.15.20 at 11:15 am

    notGoodenough @42
    I generally agree with your posts and enjoyed greatly the referenced post, except for one thing that caught in my throat and that I’m not quite sure whether it was meant as snark or not.

    I don’t like the word proletariat. There are poor people and rich people, but there are just people. Assigning people to the proletariat (or the peasantry) sounds to me like a way to verbally write them off. It may just be a quirk of mine (I am and have always been safely in the “middle class” whatever that may mean exactly), but it seems to me that that language is part of the problem, not part of the solution.

    50

    reason 10.15.20 at 11:24 am

    Just to add a point to my comment about not liking the word proletariat, it also can be related to my view that there is no such thing as unskilled job, although in current circumstances it looks like “president of the United States” might come close.

    51

    Tm 10.15.20 at 11:30 am

    Btw streaming also plays a role in the debate whether a “decoupling” of economic growth from resource use is possible. The argument goes that data-based services supplant stuff-based products, and since data can be almost infinitely replicated at almost no resource cost, it should be possible to keep growing this data-based sector without growing resource use.

    I think the problem with htis argument is that economic value is measured by prices. i would say that the value that the internet provides to me (in terms of access to knowledge and information and data and music and so on) is far higher than what I pay for it, but for economic accouting that is irrelevant. The other problem is that while data can be replicated infinitely, human time is finite. I could easily afford to watch many more movies, listen to more music, read more e-books (I rarely read e-books but for the sake of argument…), and I would like to, but I don’t have the time. The revenue generated by streaming and similar services cannot grow beyond humand capacity of consumption, that is no different than for stuff-based products.

    52

    faustusnotes 10.16.20 at 1:35 am

    Sorry John, I was not thinking about the aspect of information use that you identify in that post, but about the transformation of the physical economy of cultural products like books, movies and music. Basically these industries are no longer constrained by supply – there is no physical limit to the distribution of products and almost no physical limit to their storage – and this should have huge implications for how we consume them, what proportion of our income is spent on them, and how much control we have over them. But most people who comment on this issue still seem to think in terms of physical laws of supply and demand. Even the concept of “owning” music, books and movies doesn’t make much sense anymore. Why would I want to e.g. own a copy of Aliens for $20 when I am gonna watch it a few times in my whole life and I can do that on demand for a small fee? And when the most iconic scenes are free for me to relive on YouTube? It’s a different economy, and I was responding to nobody’s complaints about renting things in light of that.

    Your point about the value of information and corporations’ ability to take value from it is interesting but is it a threadjack? In any case if it’s not, I’d like to point out that a single huge source of information – wikipedia – is free, and I’m guessing a large chunk of google’s ad revenue comes from people searching for a thing and going straight to the wiki page, when they could search within the wiki page without advertising. How much of google’s money comes not from capturing information but from capturing people’s laziness or unwillingness to use the internet more carefully?

    53

    John Quiggin 10.16.20 at 5:37 am

    Fake Dave: Formal professionalization began in mid-C19 with doctors, engineers and other male-dominated professions and was largely complete for the stereotypically-female professions by mid-C20 (like nurses and teachers). We haven’t seen much of it in the Internet economy – there’s no professional qualification for Web designers or Instagram influencers AFAICT.

    Despite this, the demand for formal education increases steadily. I discussed this recently

    54

    Tm 10.16.20 at 7:04 am

    Fake 46, JQ 53:
    I don’t about cooks and carpenters but modern farming definitely is a high-skilled, science heavy profession. It makes a lot of sense for farmers to get a solid higher education (without wanting to disrespect the experience that farming families have traditionally developed with their land over generations). A higher degree in farming makes a lot more sense than in marketing or some such.

    And as JQ points out, professionalization was well under way in the 19th century. In the US, most state universities are land grant universities established under the Morrill Act:
    „The mission of these institutions as set forth in the 1862 Act is to focus on the teaching of practical agriculture, science, military science, and engineering… This mission was in contrast to the historic practice of higher education to focus on a liberal arts curriculum“ Wikipedia

    I find the view of education as a driver of competition unconvincing. When jobs are scarce, there is competition. Whether employers use credentials or some other criteria for selection is beside the point. I would agree however that the meritocratic discourse around education, respectively credentialing, is ideological. The idea that if everybody had college degrees, everybody would get good, high paying jobs, is ridiculous.

    55

    faustusnotes 10.16.20 at 7:15 am

    Tm, I was responding to specific examples that nobody gave, but you are right, much of the rest of our lives remains the same or more ownership than before. I guess you might say that the growth of uber on top of taxis has less people using cars but it’s unlikely. In Tokyo where many people don’t own cars, the growth of car share services doesn’t seem particularly astronomical.

    It’s also worth noting that in cities with good public transport where people don’t need cars or private transport, nobody ever complained about transport companies “renting” space in their trains or buses – people take it as natural and good that people don’t waste their money owning something they don’t need. It’s weird how these assumptions don’t shift across to other more modern forms of rental in other parts of the economy.

    Regarding the limits of streaming due to the human consciousness, this is true and a good point (it leads to an interesting new form of economics for these markets where carrying capacity becomes an issue) but this, too, is an area where the growth of e-services has simply expanded the market. When I flew to the UK in 1994 I could read as many books as I could carry on the plane; when I fly to Europe now I can read as many books as I want. Similarly I used to not listen to music on the train or while walking because a walkman is a hassle, and even if I did I would only listen to one tape; or a mix tape that took a lot of time to make; or a radio station that played the same 10 songs. Now I can listen to music for hours. Wireless speakers mean I don’t even change my music when I move to a different part of the house. All of these things mean that in addition to having much more music available to me, I have much more time to listen to it. So the market has expanded by multiples. Sure, there is a limit, but that limit is so much greater than it used to be!

    56

    Matt 10.16.20 at 8:46 am

    TM at 48:
    I often see advertisements asking consumers to “let go” and join a car sharing instead of owning their own car. It would be a good development but it still doesn’t happen at scale.

    Two times in my life I have been members of care share programs – when I moved (back) to Philadelphia from NY City, around 2009, and when I moved from Philadelphia to Melbourne in 2017. In both cases, the car share program was useful for me, but so much less useful, in both of these cities, than having a car, that I soon just bought a car. (In the first case, I hadn’t had a car for more than 10 years before that, but some of that was due to not having any money for a long time – when I was a grad student.) The car share plans were… okay. But, in both cases, it was necessary to walk at least a kilometer or two to get to a car, book in advance, know about how long I’d need it, etc. That was just way too much work for me in most cases. Maybe it would have been okay in NY City, where I almost never needed a car, but in places like Philadelphia or Melbourne, where transit is vastly less useful than in Manhattan, it wasn’t a substitute. And, this is even before you figure in that my favorite pass-time is white water kayaking, which isn’t really something you can do with car sharing.

    In any case, maybe if self-driving cars even really become a reality this will change for more people, but until then, car sharing will be a good thing to have, but mostly a niche thing, in most places.

    57

    notGoodenough 10.16.20 at 6:20 pm

    nastywoman @ 47

    Thank you for your comments – this is an important (if broad and complex) topic, and one I suspect I am poorly suited to offer any sensible thoughts on. Certainly your point regarding what might constitute a reasonable quality of life seems pretty fair to me.

    One possible point, though – I infer (perhaps completely incorrectly, so again please correct me if this is wrong!) you mean that it is bad that most economic activity related to human services because that work is typically not what we might call “good” work (i.e. secure, rewarding, plenty of leisure time, etc.).

    My question (sincerely asked as I don’t know the answer) would be: is this necessarily a function of the work itself, or is it a function of how people working those jobs are typically treated? If workers were treated with the dignity and respect they deserve, appropriately compensated, etc. would it become ”good” work (thinking of the old Twilight Zone episode “But Can She Type?”, if the reference makes sense)? As I say, I don´t know – but it might be interesting to consider.

    In many ways, I suspect that significant social changes are coming whether we want them to or not – and it is up to humanity to shape whether these changes will be for the better or worse. I think collective action can move mountains, and so – to borrow from Russell – the only thing that will redeem humankind is cooperation.

    58

    notGoodenough 10.16.20 at 6:26 pm

    reason @ 49 and 50

    Thank you for offering your perspective – I appreciate that people can infer different connotations, and good communication is important to me (even if I am generally bad at it!). I will take this as a learning opportunity, and try to be more careful in future.

    My use of proletariat was not intended to be dismissive or snarky (perhaps it was a poor choice of wording on my part). And (not to derail too much) I would agree that I can’t think of anything I would class as unskilled jobs (and certainly not unskilled people!). I vaguely remember there recently being a previous thread on people being able to fill positions when required to do so! Regardless, I certainly did not intend for my use of the word to imply that sort of thing, or to be offensive.

    To again simplify horribly (well, class and social structures are pretty complex topics, so I don’t want to go too deep into the weeds!), by proletariat I meant people whose main possession of economic value is their labour (and not necessarily purely manual labour, but any kind of labour). I think, as someone coming from a family background of (what may be simplistically considered as) Anglo-Irish Socialism, the word doesn’t have quite the same implications (or negative undertones) as it might for you – which is a good thing for me to know in the future.

    Thanks again for your patient and reasonable discussion – it is much appreciated!

    59

    Fake Dave 10.17.20 at 3:00 am

    Web design is probably professionalizing as we speak though, along with many other tech jobs. Just because there isn’t anything as built up as the AMA doesn’t mean there isn’t a culture and ethos that one is expected to assimilate into to advance. The “unwritten” quality of the rules of the trade and its inaccessibility to the uninitiated has encouraged people to treat IT guys as inherently talented wunderkind or elder lorekeepers, but the reality is that they mostly aren’t alchemists jealously guarding their secrets as they toil over reagents. Like with law or medicine, they need to know far more than any one person can learn. Half of what they do would be impossible without immediate searchable internet access to tech support forums, tutorials, code libraries, etc. that depends on infrastructure maintained by para-regulatory bodies like the Unicode Consortium. Its all pretty arcane and complex and extremely hard to get a handle on for anyone who lacks expert mentoring.

    You may not need to go to Web school and get a Web degree to do web design, but you definitely need to know how to use the latest versions of Java, html, etc and the industry “standards” and every techie knows that “keeping up” with new technology and trends is part of their jobs. Many of them relish their independence and emphasize their unique inborn talents and skills (the apparent birthright of the antisocial white male), but “good code” is almost entirely arbitrary in its definition (the best code is what will work with everyone else’s code) and conformity is generally
    seen as a virtue. The growth of design schools and “incubators” as well as the odd Civil rights lawsuit
    is opening up tech to new faces and voices, but that means actually codifying the unwritten rules and expectations of what constitutes “professionals” work (because otherwise only good “culture fits” can succeed). Now that governments and HR departments (another emergent profession) have started actually trying
    to regulate the tech bros, we can expect this process to accelerate. Even in an industry famous for individualism, the iron cage of oligarchy is impossible to escape for long.

    As for “influencers,” its not a profession because its not a real career so much as something people do in addition to or instead of a real job. The people making real money are engaged in modeling/porn or direct marketing and are part of those professional ecosystems. For the rest, it’s like “socialite,” “hustler” or “student of life” for the pretentious unemployed of the camera phone generation.

    60

    Fake Dave 10.17.20 at 3:50 am

    Another thought I had is that the whole “gig economy” and the “disrupter” ethos has positioned itself as as the solution to overregulation, creeping professionalism (especially over-education/accreditation) and the iron cage, but that’s only possible because of the benign neglect of the neo-liberal state. Industries have been very willing to regulate themselves and accept
    limits to their profit motive when the alternatives (state regulation, public ownership, legal scrutiny, worker revolt, etc.) were intolerable.

    With a corporate controlled government, complacent consumers and investors fed on industry propaganda, and a cowed and/or corrupted labor movement, those pressures seem to vanish and companies dream of running “lean” (no unions, no professional associations, and no internal oversight to speak of) and the forces of professionalization seem to dissipate, but I think its a blip. Most of those “disruptors” are just criminals who haven’t been punished (yet) and industries will rediscover the importance of professional standards and start holding themselves accountable again almost the instant there is a threat of someone else doing it. Even the current toothless regulators (plus social media shaming campaigns) have pushed tech to self-regulate. Imagine what actual governance would do.

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