We decided to make and sell crap. Why? Because we could get away with it. The quote re: autos — “Detroit decided that they would rather make money than cars.”
I'm not an economist, but I wouldn't be surprised if this had something to do with it. All the excitement about startups isn't just about getting rich and changing the world. It's also because everyone knows it's the only way a technical worker is allowed to actually think about improving the product. If you're in a big business, you aren't allowed to just improve the product. You're going to be kept busy doing things that improve the bottom line (really or just notionally) and half the time they make the product worse. But nobody says that, so you're dispirited by hypocrisy as well.
Worst is when you actually use some of the products and services from your company, know that they're worse than the competitors, know that anybody paying the market price for them is getting ripped off, and have to listen to management talk about how hard everyone has to work to live up to MyMegaCorp standards of quality. That's how you take productive people and reprogram them not to care about their contribution to society anymore. I'm really enjoying the stability of MyMegaCorp for a change (the company I work for was acquired a year ago) but I don't think I'm going to last here much longer.
And it could actually be much worse. At MyMegaCorp at least we all feel like we're on the same team. (No fooling; people reflexively cooperate.) At some big corporations, your team might actually intentionally sabotage product releases in order to make another team look bad. I've heard specific stories about documentation being intentionally obfuscated, vital product information being buried in obscure places, verbal commitments given and then intentionally broken and denied, and the most dramatic case, where resentment was so high that three teams knew a fourth team was making a large mistake and kept their mouths shut for months so the project would go down in flames and take the fourth manager with it.
We make plenty, it's just that (thanks to innovation) we don't have as many workers making the same amount of stuff. So while US manufacturing is healthy in terms of goods produced, there just aren't many manufacturing jobs around any more.
I stopped reading shortly after this sentence - the secret to speed-reading is to not waste time reading things that have been deduced from false facts.
But let me underline: this is no minor factual error. The whole piece appears to be built on falsehood. The author is trying to argue that the USA needs more innovation. But why can we produce more manufactured goods than ever with fewer workers? Increased productivity! And why has productivity increased? Innovation!
If you look for excuses to dismiss an article you're always going to find them. That way you're not likely to learn much, though. The error in this case was minor, because his reasoning doesn't depend on it.
The article is making the (rather mundane) point that more innovation is a good thing (premise) and that many of the best students are not going into industry but are lured away by academia and a few well compensated fields (law/medicine) and that the country is worse off because of it.
So whether the USA produces much outside of tech isn't that relevant.
many of the best students are not going into industry but are lured away by academia
So, I stopped reading, but did the OP support this with statistics? Because in my world -- the one in which I myself have gone back and forth a couple of times between academia and industry -- there's plenty of people who try to go into academia, but they don't find work because there aren't enough jobs, and those that exist have low pay, because there's high demand but a rather short supply...
Meanwhile, the thousands of highly-educated people who can't get into academia try to go into industry. Except that many industries aren't hiring much. Perhaps because their productivity keeps increasing and they don't really need armies of new Ph.Ds to keep cranking out widgets at the rate the market demands. I have a lot of friends with Ph.Ds, and not all of them are happily employed. [1]
And that's not even getting into the fact that drawing the line between "academia" and "industry" is increasingly difficult. Every professor has a startup on the side, every major university has a staff of lawyers to manage their intellectual property, and half the grants are industrially funded... or are funded by government grants that are aimed directly at industrially-relevant product development, e.g. drugs. Many industries don't want to do cutting-edge pure research anymore, but instead try to outsource that to academia. In the semiconductor field, a lot of the cutting-edge research gets done in academic labs. E.g. I knew some of the folks who did early OLED research, the product of which now sits inside various Android phones. They were academics, but they are innovating, and their innovations are promptly adopted by industry here and abroad. Similarly, a lot of drugs come out of academic labs and are then pushed through development, testing, and production by industry.
---
[1] Though most are, in fact, employed. Don't get me wrong. These days almost any job is a happy job compared to the alternative.
In fact, some of the claims in the article are so ludicrous I can't take them seriously at all. For example:
"... so an entire generation of high-school graduates went to college and learned to loathe industry" and
"so innovation [in the USA] died, and perhaps nine tenths of the brilliant minds that would have otherwise gone into industry and innovated the hell out of their field, that nine tenths went into the legal profession or the medical field or investment banking.".
I just can't take those remarks at face value. I must say though, that the author's claims of disdain for the industry by academia match my experience. The author's complaints about low salaries (relative to law/medicine) in technical fields also match my experience. Where I live (Europe) professors don't have startups on the side, even at the top universities. Different worlds, I suppose.
It seems to me that the rest of the article is premised on the claim that the USA's manufacturing production has not only ceased to grow quickly, but has actually fallen. This is crucial to establishing his point that "the country is worse off"; isn't it?
The article is interesting, and some of his other points about engineering, law, banking, academia, and compensation are interesting; but I wonder if the factual basis for those points is as radically wrong as the basic premise.
I couldn't find the sentence you were referring to in either article. In particular I searched for "secret" and "the secret".
The essay from the OP seems to be what you are talking about wrt innovation. The FiveThirtyEight link provided in the immediately parent post to yours doesn't mention innovation.
The statistics Nate Silver uses are extremely problematic. I would not trust them at all. Any index that uses Fisher price indexes introduces huge amounts of subjectivity. For instance, the decision to use an "overlap method" rather than a "direct comparison method" is subjective ( http://en.wikipedia.org/wiki/Fisher_index ). Choosing one method rather than the other can dramatically alter the resulting index. When you add up a large number of subjective decisions, the resulting numbers simply replicate the assumptions you started with. One government economist writes psuedo-anonymously: "Much of our time is spent 'forecasting,' which basically means making a common-sense appraisal of what some indicator or variable will do in the coming years, and creating a statistical model that confirms it. The second step adds nothing of value to the prediction – the math is just there for show, a means of impressing the innumerate by camouflaging shot-in-the-dark guesses in rigorous clothing." ( http://www.2blowhards.com/archives/2010/03/public_service.ht... )
Nate Silver's post has absolutely nothing to do with forecasting. Why include a quote about forecasting?
The BLS (bureau of labor statistics) numbers do indeed have some problems with the way they are calculated. Any way you choose to calculate these sorts of things is going to have some problems with it. I don't believe the problems are nearly as big as you seem to think, but that's beside the point. The point is, there are simply no better numbers than the ones the BLS provides. Nate Silver's evidence may have some flaws in it, but there simply is no better evidence out there. There is certainly no evidence out there to suggest that the author of the blog post is correct in saying "we don't make anything anymore".
Nate Silver's post has absolutely nothing to do with forecasting. Why include a quote about forecasting?
The quote is a snapshot of the thinking inside government statistics offices.
Nate Silver's evidence may have some flaws in it, but there simply is no better evidence out there.
Sure there is. Report the actual quantities of how many goods are being manufactured. Look at statistics for how many cars, refrigerators, tractors, memory chips, steel, etc is being produced over time. Then make your own subjective judgement about whether its better to produce a ton of steel or a dozen computer chips.
The claim that such huge increases in manufacturing can be explained by variations in indexing--well, that's a pretty nutty claim to make. For example, the CPI is actually thought to overstate inflation. And not by very much. The PCE/PI--an index the Fed uses that leaves no room for subjective selection of a goods basket--rises by about a third of a percent less than the CPI. This is a lot in the very long run, but over, say, two decades, that compounds to a little over 6%.
Tiny differences in inflation measures--and inflation has been, by any measure, pretty tiny for quite a while--cannot possibly be big enough to invalidate Silver's numbers. The changes are just too big.
Unfortunately I don't have the statistics on hand, but one time I was looking at the average price of cars compared to the price index that had adjustments applied. During a given seven year period, the average price of cars had risen by about 25%. I looked at one specific model (a Corolla) and the price rose by about 15%. But the price index, with adjustments applied, had actually fallen by about 10%. The adjustments applied can make an enormous difference.
For example, the CPI is actually thought to overstate inflation.
That's not a meaningful statement. Whether CPI overstates or understates inflation depends on the question you are asking, depends on the goods involved, etc.
Tiny differences in inflation measures--and inflation has been, by any measure, pretty tiny for quite a while--cannot possibly be big enough to invalidate Silver's numbers. The changes are just too big.
Not true, a difference of one percentage point a year compounds, and thus makes a huge difference in long term measurements.
There's a patently false assumption here: that a "specific" model is comparable across a 7-year span. What happened to the price if you normalized on, say, curb weight?
With expensive items like airbags, air conditioning, and high-end audio, a car is more like a "basket" than a single item.
You are correct in pointing this out. What people really mean when they say- 'We don't produce anything anymore." - is that it's hard for uneducated worked to find good paying jobs. This has contributed to the belief that one must get a college education in order to find good work.
My anecdotal experience is that this has caused an increase in college admissions and this leads to lower standards. Except in the top universities we have a good students being bored in college just like they are in high school. It's not a good long term prospect for the country.
The actual amount we manufacture is mostly irrelevant. We are manufacturing much less than we consume, especially compared to previously, witness our terrible balance of trade with the rest of the world. That is the proportion of manufacturing to consumption is too low.
I think the point he was making is that more and more American manufacturing is following a service model itself.
As we centralize our manufacturing to a few larger companies (per industry), the only innovation available is really optimization which is not the leaps-and-bounds/change-the-world stuff of tech startups.
I actually do think he's onto something when he talks about the decline of engineering relative to law, banking, and medicine.
It's interesting, because in the midst of an article about how much poorer we are than our parents, he does discuss extremely high salaries in these fields. I think the problem is that the "Best and Brightest" young Americans are now chiefly interested in entering fields where they get a lot of money but probably don't create much wealth.
I read a while back that many economists believe that while a good legal system is critical to a modern economy and state, the marginal value of an additional lawyer in the US is actually negative - that is, additional regulation, litigation, and so forth is actually wealth destroying. Banking, as defined as moving money from where it is to where it is needed is a valuable economic activity, but a lot of banking lately seems to have been a wealth destroying activity that is lucrative for its practitioners as well.
Medicine seems more defensible, but my father (a prof of medicine) told me recently that he was disturbed by a report on how much of a person's lifetime medical expenses are accrued in the last few years/months of life.
By the way, sorry about the lack of cites. But I'm guessing that these generalities really aren't all that controversial.
A friend of mine (a lawyer) makes a lot of money by creating corporations that exist purely to purchase expensive equipment (such as airplanes) and then lease them back to the actual "owner", mainly because this creates a favorable tax write-off. Have the methods used by the "elites" to gain personal wealth always so unaligned with the general creation of wealth?
One really wonderful thing about the US is that there isn't all that much class resentment. People generally talk about "making" or "earning" money, and we admire people who do it, largely because we believe that they create wealth for everyone as they create it for themselves. I think this is very true of high tech entrepreneurship and other activities... but it does seem (especially from the massive expansion of the banking sector) that many of our current wealthy elite seem to be adding about as much to the general economy as feudal lords.
They'll try to cast this in terms of "disliking people who make money", but I really don't. It doesn't bother me at all that the google guys have billions. I may envy them, but I don't resent them. However, I resent AIG and GS, because I'm utterly unconvinced that they are contributing a damn thing, and that they are probably damaging wealth creation.
If you have a large student loan balance hanging over your head, you do tend to be less interested in creating wealth than getting money. Sallie Mae doesn't care how much wealth you've created for society.
Med school students start their careers about $150,000 in debt (comparable to the average mortgage debt), but even that's reasonably preferable to being $50,000 in debt without a medical degree.
Just let foreign doctors practice in US. Bam! Problem solved. I don't care how much you overpaid for your education, all I see is that I am being charged 300% of what a Japanese patient would have paid for an absolutely identical MRI scan.
Japanese MRI scans are not identical. A typical japanese MRI operates at 0.25-0.5 Tesla. In the US, we operate at 1-2 Tesla and get significantly better resolution.
The japanese love medically unnecessary scans the same way americans love medically unnecessary pills (antibiotics for viruses, etc). This created demand for cheap, low quality MRIs.
We do let foreign doctors practice in the US. If you go to rural areas in the USA, over 50% of the doctors are foreigners on J-1 visas, because you can't get Americans to practice in those areas.
This is a little off topic, but I really don't like policies based on the phrase "we can't get Americans to ____, so we need to create a visa where foreigners are allowed to live in the US and apply for citizenship provided they spend __ years doing ____"
If you can't get Americans to do this, that's because it's a crap deal. And it's not going to become a better deal if you can indenture workers to do it instead - in fact, these policies virtually guarantee that nobody with choice will ever want to do this job.
Btw, I'm alright with foreign doctors coming to the US, I'm just opposed to these conditional immigration programs. Everyone who participates in the US economy should be free to make their own choices.
These jobs are three year contracts at six figures a year. A GP from Pakistan can make $170k base + extra for o.b. or ER on-call. This is in an area of the country where you can buy a suitable home for $80k or a doctor's mansion for $200k. It's not a crap deal, there is no preference for foreign workers, the pay is the same. it's that American
doctors really won't do it. It's not really a problem, the small town I grew up in liked having the international diversity. Without the J1 there wouldn't have been a decent Kid's soccer coach, either.
It doesn't necessarily mean it's a 'crap deal.' It just means that it's a 'crap deal' by comparison to other opportunities out there. I'm sure being a doctor in a rural area is a 'better deal' than a lot of other jobs out there that Americans do.
You realize that outside of China's top 5 hospitals, when a Doctor from China comes here to practice, they have to repeat their residency before they can be licensed? Because the majority of Chinese doctors are no better than made-in-china toothpaste.
This astute observation was more interesting than the entire article we're discussing.
Other things to point out is that the tech and housing bubble were results of Wall Street really only having one "safe bet" to push towards investors/funds for pensions and municipalities. So they tried to extract as much profit from the avenues.
However, pushing money into the market in such a rapid fashion distorts it. Nobody thought home prices would peak, when realisitically, they had to at some point. Same with tech stocks during the dot bomb.
A large enough investment in a market sector can displace organic growth, and runs the risk of destroying wealth.
lifetime medical expenses are accrued in the last few years/months of life
When my mother got terminal cancer, the last few months of her life became her most valuable. Those last days were scarce. In a way, they are infinitely more valuable than all her other days, because she knew at that point that she had a finite number. Until you are given a terminal diagnosis, you feel infinite, and perhaps -- with the innovation in life extension -- you actually could live forever. Of course accidents still happen and with more days to live, the law of large numbers kicks in, so we'll probably never live forever, but I digress.
Point being, the last days are the most valuable and the treatments to keep us alive under terminal conditions are expensive. It's expensive to fight death and few want to die. Most believe not dying to be the most important and valuable thing in their lives, so it is understandable that the last years, in general, cost the most to keep.
The only alternative to this situation is to embrace death. Make it normal. Make it not scary. Treat the emotional aspects of dying rather than the conditions that cause death.
I don't think I'd say infinitely more valuable. I'm sure that she was willing to spend infinite amounts of resources to prolong them if she gains nothing from forgoing the more expensive outlandish treatments.
Let's say I got a terminal illness. I have a one year old son. Would I prefer to spend every last drop of our savings and go into debt to hang on a few more weeks? I hope not. Life is valuable, but delaying death is only one thing we can spend money on. At some point it has an incredibly high marginal cost.
Making the patient more aware of these costs would make it possible for the actual interested parties to decide whether pushing 3 months to 3 months and a week is more important than the survivors being financially better off.
I think this ties into the article as well -- the reason we don't create real wealth is because it's more lucrative to find ways to game the system and siphon off value. Think of lobbyists, the root cause of the problem and one of its most obvious examples. They create nothing. They just get their preferred regulations into law. So millions are spent on both sides to argue over whether we should mortgage our children to pay for prescription drugs for todays elderly.
"When my mother got terminal cancer, the last few months of her life became her most valuable."
Suppose you have an anti-cancer drug, and two patients in front of you. Resources are limited, so you can only cure one of them.
- Person A, if they are cured, would live an additional thirty years.
- Person B, if they are cured, would live an additional three months.
Who are you going to choose?
"Point being, the last days are the most valuable"
Citation? Saying that your mother felt her last days were the most valuable is just personal opinion, but saying that they are the most valuable, as a generally applicable fact, needs a citation or an argument or something other than simple assertion.
Valuation are necessary subjective, not objective.
What are you interested in, it seem, which individual will contribute more to your overall wealth. However, to the dying mother, her time near the end of her life is the most valuable to her.
There is no citation to be founded, per se, because you came from a different perspective.
Something of which is valuable to me may not be valuable to another person. However, a "price" is much distinct from "value" as price are exchange ratio for two goods, not the overall utility to a person.
I might as well quote your Wikipedia article since you don't get it:
"If it is true that the economic value of things cannot be ascertained without subjecting a particular good to individual value judgements in a market"
Notably, there's a big 'if' and later it intimates some other essential things like the complete lack of studied consensus that might be required to baldly assert it as true in a forum of discussion without a proper background, caveat, or concession.
So yes, if you insist that firetrucks are not firetruck red, you should probably disclaim the special point of reference from which you make your claims, or expect people to not kowtow to your every esotericism.
That said, fuck your mother's cooling corpse for even a few minutes more of, e.g., Einstein.
The argument life extenders make is that in 20 years, we'll cure all the ailments that may cause death for another 20 years and then within that time, another set of cures will evolve until eventually, we've cured everything that could kill a person.
The trend supports them, somewhat. Lifetimes centuries ago were 30-40 years on average. Only a handful of people lived 60 or more years. Today, many people live to 100, many more to 80... so we are getting better at preventing death.
At some point, if this trend continues, we'll be almost perfect at it.
>Lifetimes centuries ago were 30-40 years on average. Only a handful of people lived 60 or more years. Today, many people live to 100, many more to 80
The average in previous centuries was heavily skewed by infant/childhood mortality. Plenty of people lived into their 80's back then. It's just that half of their brothers and sisters died before age 10, which dragged the average down. Still more succumbed to disease and infection before even middle age.
The average isn't going up because people live longer, it's going up because fewer people die young.
if we figure out how to cure diseases that kill us off around a median 90 years, why wouldn't we find cures for those conditions that kill us off at the "imaginary" boundary of 1,000 years?
Yes. Even today, people occasionally live to 120 years. Therefore on the principle of mediocrity, in 2130 there are likely to be people who were born on or before 2010. And it's very likely IMO that immortality will be a given by then, either using uploading, or via careful repair of damage caused by aging.
It's very likely that we know all of the mechanisms of damage associated with aging. (Looks like there are only 7.) It also seems very likely we can cure all of them. There are two sticky problems, however.
Damage in Mitochondrial DNA might be a difficult problem. Replacing the function with nuclear DNA may not be an option in cells like nerve cells, which can be very long on cellular scales.
Cancer may be an insurmountable problem. Cancer is not a singular disease. It's more of a consequence of the laws governing evolution. However, if the problem were reduced to just cancer, we would still achieve considerable life extension. (Ending with a very bad disease.)
so you think our life expectancy will be well beyond 1,000 years by then? how will actuaries calculate life expectancy in 2130 (which is less than 1,000 years from now)?
You make a good point. It would be interesting to break this down a little further. I've had a similar experience, and I did greatly value those last months and years.
Your comment made me think about a documentary on Quants I watched a month ago. The part about the documentary that disturbed me the most wasn't the financial derivatives that were being created. The part that disturbed me the most was the amount of intellectual power that went into creating said financial derivatives.
I sometimes wonder if there is a brain drain from engineering and sciences to legal and banking because of salaries.
Thank you for your comment. You put into words something that has been bugging me since the beginning of this financial crisis.
> It doesn't bother me at all that the google guys have billions. I may envy them, but I don't resent them. However, I resent AIG and GS, because I'm utterly unconvinced that they are contributing a damn thing, and that they are probably damaging wealth creation.
This is my position too. If people get rich by making the world a better place, they deserve it. If they get rich by making the world a worse place, then morally they are no better than thieves.
Generally, successful countries are those that most align people's personal interests with those of society, so that people's natural greed can be harnessed for the common good.
The Soviets liked to accuse people of economic "wrecking", but in a capitalist society, we generally do not accuse people of economic sabotage--intentional or otherwise--without a good reason, and we generally say people are free to fairly trade with one another unless there is a compelling reason for this not to be so.
In the case of GS, the SEC has uncovered a grand total of one CDO product which may or may not been sold in a completely fair way (independent observers seem to disagree). But hey, according to you all those securities regulations are probably "wealth destroying" anyway, so who cares if they were violated...
"One of the things they teach you in American college is that industry is to be looked down upon."
This statement is not at all true in engineering schools. At least when I went to school (Northwestern, '00), there were huge numbers of industry/academic partnerships and the innovation talked about in this article was pushed as the sort of thing it was expected for you to do after graduation, unless you had the misfortune to continue on for your Ph.D., which very few people did. Maybe that quote applies more to non-engineering schools?
Can other engineering-educated folks relate to his quote?
I have a bunch of friends who are philosophy students and right now they are "on strike", occupying a building at Middlesex University.
The irony that they gleefully proclaim that they aren't studying a lowly "vocational" or "technical" course, yet have purloined the language and ideology of, umm, actual workers seems to have entirely escaped them.
Then again, several of them genuinely believe that writing essays at university is morally equivalent to building tractors at a factory... Marxists, eh? They'll be in for a bit of a shock when they have to meet the real world.
Well their message to taxpayers is "work harder for longer for less so we can go on sneering at you from our ivory tower", so they really don't belong to the real world. Yet, but they will soon...
They don't belong in the real world in the sense that people get paid in the real world. Meanwhile, most academics go into debt, earn very little, and work long hours trying to genuinely contribute something to society as a whole.
This is why so many phd students in computer science and related technical fields go into industry where they can get over double the salary from day one. Many academics do have a very negative view of none academics, precisely because of the sentiment that you so eloquently put into words.
The irony is that society is eager as ever to consume the technologies and knowledge that comes from academic research, yet somehow expect all that for free, and even get angry when their results don't come fast enough.
My experience is in the the UK, but when I worked in academia (from '89 to '95) I was paid roughly the same amount as my friends in the private sector.
Looking at academic salaries these days they don't look too bad when you compare working conditions, perks (access sports centers etc.), long holidays and the rather generous final salary pension scheme.
Yeah, I can imagine PhD students have a hard time everywhere - but I really don't have much sympathy for salaried staff in academia (or most of the UK public sector) complaining about wages and conditions.
So it's not so much that the philosophy students have purloined the language and ideology of "actual workers", but rather that their intellectual ancestors created the social context in which these "actual workers" were able to strike, form unions, and etc.
When I was wrapping up my Master's and various professors were trying to convince me to stay for a PhD (CS), I definitely sensed them having this point of view.
I don't necessarily think that profs will see someone going to industry as a failure, but it is a loss. If someone a prof supervises goes on to a tenure track position, they become a long-term colleague and demonstrates the influence they have on Academia. A portfolio of grad students who went on to be captains of industry isn't as academically sexy as ones who all have long publication lists.
Absolutely wrong, if you are talking about apply for grant money. If there is one thing that the government loves when giving out grants, it's strong industry support and/or clear impact on society.
The view you saw more likely comes from the fact that the knowledge those people generate in industry will be locked up behind IP walls for generations, and thus it's a loss to the academic pool of information.
This was a pretty typical viewpoint of CS professors in the mid and early 90s. The job market was dismal and the jobs available were boring. Academia was more stable, arguably more interesting, and depending on the situation, possibly paid about the same as industry.
For tech, this is almost certainly not a universal thing. Back when I was in college doing a BSCS, we almost universally respected the industry and it's ability to execute and research.
Sure, there were jokes about making money instead of quality research or software. There were jokes (very valid ones) about the pain of dealing with the uninitiated; we all feared and obsessed over life under a PHB. But the tech sector and even compsci and math didn't carry any derision towards I could detect in my interactions with people from diverse schools across the US. Perhaps because there was so much money to be made, even post-bubble.
When I got my Masters in maths a few years ago, it was generally acknowledged (and only part in jest) that future income was inversely proportional to ability. People who weren't smart enough to study 'real' maths, took the much easier statistics and financial mathematics courses and went on to get high paying jobs.
I can't speak to your math department's prejudices. I was just making a point that I don't think the derision is universal. And in the slinky more practical CS, CSE, and CE. Programs we had a healthy respect for the industry.
A lot of very good work has been funded by private initiatives in the last 5 years.
I wouldn't call it prejudice as much as observation. The stats and financial mathematics people did go on to earn the big money, and those courses where, on the whole, filled with people (like me) who couldn't cut it in the harder PhD level pure math courses. That is simply how it was.
I never argued that private initiatives didn't fund a lot of (or even most) cutting edge research.
Agreed (Northwestern, 2012). Not only do professors not look down on industry, many either come from or participate actively. I'm not sure if you're CS or remember Larry Birnbaum, but you can't take a class with him without hearing something about his new startup ;)
>Think of all the examples of American innovation since the 1970s. How many examples are not in the tech sector?
Um, I can think of thousands, but then again, I'm not some moron PhD. How about all the innovation in the medical field? Better imaging technology like the fMRI has come about since the 1970s. How about the cervical cancer vaccine? How about Viagra? Flonaze?
How about airbags? Anti-Lock brakes? BioDiesel? Cars are safer, more fuel efficient, more reliable, and all around better than they were in the 1970s. It's not up for debate. Innovation is still innovation, even if cars existed in the 1970s. By the same token, the cars coming out of detroit in the 1970s were way better than the Model T. Why? Innovation!
On the energy front, we have new wind turbine designs. We have nuclear batteries. We have off-shore wind. We have more efficient CO2 scrubbers. We have LED lightbulbs and CFLs. We have hybrid drive trains in consumer vehicles. We have shipping barges harnessing wind-power through computer-controlled deployable sails.
On the social innovations, we see that seeking help from a mental health specialist is no longer stigmatized. An entire generation is fighting to stay healthy despite a lifetime diet of high fructose corn syrup. People are attempting to return to the ways of buying locally and minimizing their impact. Women continue to advance towards career and earning equality with men.
Long story short, Academic prattles on long and hard about nothing.
The key phrase is "American innovation". A lot (most?) of your examples come from outside of America, I think. I know a lot of medical imaging and vaccine research gets done in Europe, there's a lot of Nuclear design in the UK and Russia, a lot of the off-shore wind stuff is done in Europe, many of the automobile advances are German or Japanese.
He may be engaging a little in hyperbole, but he does have a kernel of a point. Dismissing him because of his job is a little harsh.
Do they? I know the American Healthcare system funds a lot of medical research that doesn't happen in countries with socialized medicine. I'm not trying to make a ideological point over one system being better over another, but drug research, especially, seems to be funded by the 'vanity market' of consumer brand name drugs. And our (arguably strong) patent system (while broken IMO) provides a great incentive for developing and repurposing drugs.
Medical Imaging is a field of research that is global. I only know what is being with people I've worked with in the past.
Vehicles, well, even if the technology was developed outside the United States, our market was the motivation for the innovation. Audi invented "Shift Lock" for automatic transmissions back in the 80s because they had the same problem in the U.S. that Toyota does now -- consumers claiming of cars that just accelerate forward and cannot be stopped. Shift Lock seemed to have put a stop to that.
As for dismissing him because of his job, well, he brought it up 'My dad was a professor and I'm a professor, but I'm in poorer than my father ever was".
The first thing I learned as the child of a PhD is that if you want to actually have money to do things like travel, go on vacations, and afford college for your children, its that you don't get a PhD unless its in engineering or law. I went with engineering but only got a master's.
And it being my last week of finals, in my last semester for my master's, I'm really, really tired of hearing academics drone on with little actual grasp of reality. I apologize for the display.
I can sympathise with it being exam week. Don't worry about it.
I think that the problem that you have with academics is that to be good at research you must concentrate on that, and that alone. Teaching gets you nothing, so the good researchers tend to put as little effort into it as possible and the people who spend their time worrying about teaching are left behind on the research front. Not always, but often. So, if someone's interested in talking to you as a student, then they're more than likely poor at research or really not interested in you.
If you can find the research-oriented staff on your campus and talk to them on their own terms, I guarantee that your opinion of 'academics' will change. You'll find a lot of interesting, dedicated people who do wonders on shoe-string budgets, working long hours on things that they find fascinating. Of course, these people tend not to get permanent jobs because of the amount of hideous politics that abounds in the upper echelons of academia...
I don't get it - if you're on any kind of growth curve at all, you should be getting wealthier.
The drop from a 3% curve to a 2% curve just means you're getting wealthier slower, but you can't lose wealth unless the growth goes negative.
He's right about not being able to afford his dad's house, but that's because when his dad bought it, it was probably a middle-income area. Now, thanks to city growth, it's probably a middle-to-upper income area.
So he's comparing apples to oranges.
Well, it's possible for their to be distortion from the top x% garnering a disproportionate amount of the growth in wealth. So while a country grows 2% per year the concentration could be at the top. This causes variation in wealth distribution to increase and this is what leads to the perception of people getting poorer. Poverty is a relative measure. In the past 30 years in the U.S. wealth has dramatically shifted to the top 1%. That is, the top 1% have a much higher portion of the nation's overall wealth today than they did 30 years ago.
Look for "GDP growth vs S&P 500 returns", the blue line. This should, I believe, correct for inflation - that's what the whole "corrected for CPI" thing is about.
Interesting things about this graph: national real GDP has been growing, and there is no obvious discontinuity in the 1970s - sure, there was a big recession then, but that's just a jog in the chart. Squinting at the data, it looks like the average rate of growth is about the same immediately before and after the 1970s; if anything the rate of growth is a tiny bit higher since then.
So, either this chart is bogus or the OP is bogus. Having already caught the OP citing false facts about domestic manufacturing output, I have my suspicions. But feel free to cite a better GDP chart; it will be nice to have in the files for when the next nonsense article comes along.
"Squinting at the data, it looks like the average rate of growth is about the same immediately before and after the 1970s; if anything the rate of growth is a tiny bit higher since then."
Look at actual wages, which stopped increasing in the early 1970s.
(This shows household income, which is slightly increasing, but only because more women are in the workforce now than in 1970; personal income is stagnant.)
"The problem is that if you don’t build anything you cannot possibly innovate--you cannot innovate if most of your economy is service--or anything other than manufacturing."
Quoted for disagreement. (Was this posted for disagreement?) I think plenty of HN participants know that innovation is possible in service industries. They have seen it done, because they have done it themselves. That means wealth-creation is possible in an economy based largely on services.
After edit: Upon a bit more reflection, it appears that the author of the submitted article has had an extremely poor education in economics.
You can innovate in service industries, but service industries contract when an economy contracts, whereas manufacturing and industry expands.
e.g. Who cares if my Barista can be faster and more efficient? I just want coffee for less.
The problem with innovation is that it's leaky. There's no national border to it. America is a tremendously innovative country, but there's nothing stopping that innovation from finding its way to countries where they'll produce that same innovative product for less. (e.g. Look at the iPad and forthcoming Adam from India.)
Economies are equalizing. Nothing, including innovation, will stem that tide.
Well, more like "service industries necessarily contract when an economy contracts (unless they help others deal with the government)", "whereas manufacturing and industry may expand."
E.g. your solution to "coffee for less" may be making your own, which will involve some equipment purchases on your part, but on the other hand the coffee shops you and people like you used to frequent won't be buying more equipment (in fact, new entrants/shops will likely be buying used but serviceable stuff from failed shops).
Getting outside of the service field, lots of people including my father have decided to drive their current vehicles much longer than they'd previously planned. Auto companies are seeing much less demand due to that sort of thing (uncertainty on the part of my father, others just don't have the money) and are buying less capital equipment, tooling, etc.
> That means wealth-creation is possible in an economy based largely on services.
How so? The service economy is basically masturbatory. I can trade my services for your services, around and around, but at the end of the day we both still need to eat. We need to put gas in our cars. We need medical supplies and all sorts of other consumables.
If we have a 'service economy' where all we do is sell services to each other, and buy all the real physical stuff from abroad, we're going to be in big trouble.
This seems to be exactly the situation that the U.S. is in. Yes, we still have something of a manufacturing industry but it's not producing enough to offset our imports. We've gotten away with it for a few decades because other countries are willing to send us useful stuff in exchange for Treasury notes, but that doesn't seem exactly sustainable.
Unless we can make the 'service economy' into something that essentially replaces exports (selling services abroad), I don't see how we can avoid going broke. And selling services abroad is a lot more tricky and much less stable than grinding out widgets and packing them into a shipping container.
It doesn't seem like we have much of a plan, moving forward. About the only good thing that I can see is that we still produce much of our own food, so that we probably won't starve if the rest of the world decides to stop sending us manufactured goods in exchange for worthless slips of paper. It'll be a lot of white bread, corn chips, orange juice, and peanut butter, though.
The author seems to appreciate the wealth produced by ideas, at least here:
Why do I finger innovation? Because innovation defies all laws of conservation: with innovation, you create wealth out of nothing. One day, you have nothing in your hand. The next day you have created, out of pure unadulterated thought, something that people want bad enough to give you money for it. You have created a thing of value. You have created wealth.
Out of nothing.
But then he goes on and (imho) contradicts himself, claiming that manufacturing only creates wealth, not ideas:
We don’t build anything here anymore, outside of tech. Kitchen appliances, power systems, washers/dryers, airplanes, raw materials, electronics, trucks, ships, even satellites these days — nothing is built here. We are no longer the only player in any of these markets; for nearly all we’re not even the predominant one; for most we don’t even play. We stopped manufacturing, and with that we stopped innovating. In industries where we still do manufacturing, we innovate like mad, but the number of industries is shrinking, and I fear that the economic footprint of those industries as a percentage of the global economy is also shrinking. The bottom line: even though we are an innovative people, our innovations are a drop in the global bucket. Meaning that our country’s growth will largely be static, and mostly in the downward slope compared to elsewhere.
I'm not sure what he thinks wealth comes from: ideas or manufacturing.
He's making a huge mistake by applying averages to EVERYONE. He does this routinely:
"Bottom line: every individual in the country became wealthier over time.
I’m not talking about companies, I’m talking about individuals. This is why, for centuries, every American child fully expected to do better than his/her parents. Every parent’s dream of seeing his/her children do well (financially) came true."
The problem is, that was never entirely true (clearly not everyone did better than their parents) and it's become less true over time, especially since the 1980's.
Since then we've had a seismic shift of wealth away from the middle class and to the upper class. The fact is that the average middle class American is doing about the same as their parents, while the average rich American is doing much better.
The why of this is debated. It's some combination of Reaganomics and globalization. But the fact is that simply adding a percent of growth won't help the problem if it all goes to the rich.
"In the US, it used to be that every year you could expect to be wealthier. Your purchasing power grew over time: you could afford things you couldn’t the year before. Your salary increase every year outpaced inflation."
I think the author is from a different socio-economic-status than me. My parents didn't believe they were going to be wealthier year after year. My grandfather (i lived with my grandparents) cut sheet metal for a living. I remember my life being pretty good when I was little, then the recession of the 80's hit, and we were on food stamps. Certainly not better year after year.
Maybe that was a fluke, but if I go back one more generation, my great grandmother lived through the great depression. She didn't believe she would be better off year after year. In fact, she was super paranoid about the opposite happening. She used to hide food around the house "just in case".
Also, no one in my family got a salary, maybe that is a give away to the different americas we seem to have grown up in.
Sorry, I have a hard time with "essays" where the first paragraph seems false to me.
Interesting read. I wonder what the author thinks of personal debt. From where I'm sitting it seems like massive amounts of personal debt are the problem. I don't think my grandma had any credit cards a car payment or a mortgage costing her about a third of her take home pay.
Hard to come out on top when you are spending 5 - 30% more for an item than inflation says you should thanks to interest.
This is an interesting point - I wonder how debt also impacts individual risk aversion and wealth accumulation and if these effects can be seen (measured) in the post-mid-century US.
I would assume that debit would encourage risk-seeking behaviour. But, outside of real estate speculation, which, until recently has been seen as not very risky at all, I haven't seen it.
Investment, defined as current production used (saved and invested) for future growth, is critical to growth. Since the federal reserve has gotten control of the dollar, the dollar has been steadily dropping in value. This discourages savings and investment and rewards borrowing and consumption. Also, the government has been steadily growing. This crowds out investment. Also, government regulation discourages investment. As investment decreases, so does growth.
Well, borrowing is just using future production for current growth, which is more efficient but less reliable. Assuming the future production will be there (and that otherwise someone will take care of it for a small fee), that's obviously more efficient.
It's pretty clear that proper investment is the only way to get growth. It's less clear whose wealth should be invested - that's why we have both borrowing and regulation, and by extension consumption (if you assume ceteris paribus, you damn well better advance entrenchment).
Innovation and efficiency are at odds with one another, and as we get more and more complexity, the only innovations easily reachable are paradigm shifts. What we might need next is a way to simulate and bootstrap scenarios further and further from the local optimum - and that might have to be government investment.
A growth rate of 2% instead of 3% doesn't mean you're getting poorer instead of richer. It means your country is getting richer at a 2% rate. And it certainly doesn't give grandpa evidence to blame all the perceived economic woes of the country on the things that were better back in his day.
But of course, this is not an evidence based article. This is a mindless rant.
>>an entire generation of high-school graduates went to college and learned to loathe industry. They learned that working in the factories, in the design houses, in the drawing rooms — they learned that type of work was beneath them.
>>And so innovation died, ... the brilliant minds that would have otherwise gone into industry ... went into the legal profession or the medical field or investment banking.
While I may be sympathetic to some of his thesis, I stopped reading when I realized he was making up numbers, or getting them from an unreliable source. The 80's and 90's were just fine for growth, thank you, and held for the most part above his magic 3% growth (82 and 91 were recession years) even so average GDP growth in both spans 81-90 and 91-2000 was 3.2%. Here are the numbers courtesy of the Statistical abstract of the United States calculating GDP in constant 1996 dollars:
Money is a means of accounting, a proxy for value, but money != value/wealth.
Because ALL of our money is by nature exponential-interest-bearing debt money, it is guaranteed that in due time the debt will overwhelm the system. We've been good for 200 years because our interest rates have been sufficiently low, and bankruptcies have been injecting money into the system (at the price of inflation, which is essentially just a hidden tax).
One understands this once s/he understand the nature of the National-Debt and the function of the Federal Reserve. The personal debt per citizen is now over $50K, and the nature of our money is such that this debt CANNOT BE PAID OFF in full. How can we focus on creating real value when we're all chasing the ghost?
Interest may have driven innovation in the past, but it's basically just a slave-driver now. Any doctor can tell you.
BTW, if you get this, and you want to work on a long term solution with me, email jae@glyphtree.com
> You can even see it in things like the government’s long-term programs, for example Social Security — who in the hell in their right mind would start a long-term program without an appropriate plan for funding it?
A politician trying to get reelected by spending other people's money.
There are other forces that have a part to play in this, although having engineering and other creative industries is important:
1, The change in the nature of money. Once money hand an intrinsic value, it was linked to a commodity: gold or silver. I thought one of the points of fiat money was if you put money in a teapot today, it would be worth less tomorrow. To increase wealth don't people need to maintain the ratio of money they have to the total money in circulation? If the government prints more money the money in circulation is worth a little less.
2, Competition, once the world was a lot less equal. America and some European countries more-or-less had all the technology and drove the pace of change.
There's an easy way to avoid being harmed by inflation: Don't hold cash. If you wish the currency was backed by gold so you could put it in a teapot, buy gold with your fiat money and put it in a teapot.
An economy in which the primary currency of trade can deflate sucks. We've been there.
I wasn't advocating holding money in a teapot, just that erosion of wealth is built into the system. I was not also advocating the gold standard, just saying there are other dimensions why some professions have not attracted money. To reduce wages salaries just need to be static.
That decline of wealth coincides with American politicians finally killing off the new deal and Keynesian economic policies and falling hook line and sinker for the Chicago school swindle.
You can argue that economic growth was stopped before that point, but here that is because of the fuel crisis which was of course an external event that had nothing to do with US economic policy. If you correct for the fuel crisis, the US growth malaise starts with Reagan and his policies. And it just keeps on going only being very partially and temporarily alleviated by the ever so slightly populist policies of Clinton.
Yadda yadda blah blah blah -- real income growth curve used to be 3% (mostly true)
blah blah blah -- New income curve is 2%. Changed in 1970s (think so. So far so good)
yadda yadda yadda -- wise president Carter warned us of this but nationalistic Reagan glossed it over and it became anathema
WTF? Is this a politics article or something about the economy?
blah blah blah -- This is what it means to fall off a growth curve. (a bit extreme of an extreme judgment, at the least)
blah blah blah I will be poorer than my father
Okay. You get a couple of WTFs for any article. But we're done here. The growth curve, presumably from sticking along so far, is now 2%, not 3%. I poked around a bit, and I didn't see where you said we were on a negative growth curve. Plus any reasonable person can see that even at a negative growth, our kids are going to have a tremendously better life than we did. The very poor today are much better than the richest of rich from 70 BCE
I did not finish. From the pattern so far, I would expect lots more exaggerations and oversimplifications in order to make some quasi political point. I'm just guessing though. Sorry if I missed a good read. I thought it was important to show how these things are read.
Remember -- if you are going to put in a WTF, either do it at the beginning and then support it, or build up to it and hit it as a climax. But don't sprinkle them throughout the essay. Readers would like you to tell a story that has some conclusion, even if they disagree. But if you fail to establish common ground, we're out of here.
Inflation-adjusted wages haven’t had 2 percent growth since the 70s; they’ve stagnated or slightly decreased. Productivity keeps improving, but wages don’t keep up.
Edit:
Hmm, I did some googling, and there seem to be substantially divergent charts/numbers floating around. Some numbers have real wages going down, others have them staying approximately flat, and some more optimistic estimates have ~2% rises. I don’t have the time to do deep investigation.
----
The US also has an unprecedented and unique-among-western-countries incarceration rate; people have substantially more debt (college loans, credit card debt, etc.) than they did a few decades ago, and the laws are much less friendly to debtors than they were between the 40s and the 70s; families are less stable than before, and there are more working single mothers. There are an unacceptably high (in my opinion) number of uninsured children. And so on.
In other words, we face all manner of difficult social challenges. At the same time, US society is in many ways much more tolerant than it was 30 or 40 years ago. We have many nifty technological tools that improve people’s lives, safer cars, better communications infrastructure, some great medical advances, etc. All in all, I’m optimistic about the future, but it is true that the American working class could use help from our regulatory/economic policy.
Some points from the article are really good..specially innovation is more important then cost cutting...isn't that what Apple does, they innovate and create new products that creates a whole market altogether, imagine what would have happened if they would have got into only services (they would have made money still no doubt), but would they have been at the same place they are now.
What the author doesn't mention is that continual 3% or 2% growth represents exponential, not linear, growth of an economy. It can't continue indefinitely.
If my economy is growing, this year's 2% growth requires substantially more innovation and resources than last year's 2% growth, simply because it's a larger pie.
My guess is that before it had a very low population density and a lot of fertile land. That changed when population density increased. Check the conclusions of this article. http://mises.org/daily/1568
No trade unions to speak of... no middle class to speak of.
Without a legitimate threat of strikes costing business interests big money in lost profits, there's no reason for businesses to pay workers a reasonable wage for their labor.
Most of the article, I think he is trying to connect something that isnt there. But he is unto something with the STEM students going into Professional Vocation.
Face it, it's just as much hardship to do these profession but the return is greater.
We've stopped manufacturing, but have we stopped designing? No.
The real money is made not by the people who make the stuff physically, but the people that design the stuff that is made. In that sense, we, too, are "making things out of nothing".
"I can’t afford any of the houses I grew up in — and it’s not like my dad is a millionaire or anything; he’s a professor just like me. Identical social standing. The difference: I am poorer than he was. My children will be poorer than me."
Bullshit. You may have less money in the bank, but that doesn't make you poorer. Could your dad afford to buy a 65" TV when you where a kid - NO. They didn't even exist. Can you afford a holographic entertainment system - No, they don't really exist right now, but I bet you're kids will have one when they're grown up.
Stop looking at money and start looking at standard of living.
Why does everyone insist on defining wealth in terms of housing?
Today, virtually everyone has air conditioning. When I was a kid, this was quite rare.
Today , everyone has at least one telephone. I can remember families sharing party lines, or even having no phone at all.
Today, most infections can be readily cured (yes, even for people without insurance!). For my grandparents this was unthinkable.
Today I can store food for a long time, and enjoy a cold drink whenever I want. A century ago, who could have that?
Today we have so much food available to us that the overriding health concern is obesity.
Today I can listen to virtually any piece of music, or view any piece of art, on the slightest whim, in the comfort of my favorite chair. That was unthinkable when I was a child.
All these things are within the economic reach of virtually everyone, at least if he's got the most basic job. Yet even a century ago they could be enjoyed only by kings, if that.
Regardless, the demand for the land under his dad's house has greatly increased since it was purchased (unless the house is in Detroit). If you consider housing in areas with zero or negative population growth over the past generation, people can probably afford their parents' houses.
That he can't afford the house he grew up in has to do mainly with two factors:
1. House prices are still ridiculously high, since cities and college towns haven't hit the back side of the bubble yet.
2. The academia job market has shit all over its knees.
The economic tone of the past 35 years isn't growth or decline but stagnation. Some people are better off than their parents; some are worse off. This has always been the case, but it used to be that being better off was far more common. Now it's 50/50.
Economic growth has been decent in the past 35 years, and world economic growth has is at record highs, but the upper class (which is better described as a malevolent and extremely powerful interest group than any kind of formal conspiracy; of the latter, there is none) has done an excellent job of siphoning off all of the gains for themselves, leaving the lower 99.5% of the American population in essential stagnation. They don't want the American lower- and middle-classes to get poorer (they'll revolt) or richer (they'll challenge their position) but to stay right where they are.
So, I find this article very strange. The author seems quite intelligent, yet he has avoided learning much of anything about macroeconomic history. Is he really so naive to think that economists haven't noticed and thought about this phenomena?
He could start with two simple things: first, America left WWII with essentially the rest of the industrialized world flattened. It took everyone else a while to rebuild, but they eventually did. The prosperity of America post WWII is a historical outlier hopefully never to be repeated.
Second, America for a long time had policies that grew the middle class. Without starting a political pissing match, it's pretty clear that either those policies or their effect is gone. Wealth accruing at a disproportional rate to particular sectors of society isn't just happenstance or the "right" outcome in some moral scheme, but rather the outcome of specific government policy.
If the author wants to understand these things, he could start by reading Brad DeLong's blog and / or asking him for book recommendations.
I'm not an economist, but I wouldn't be surprised if this had something to do with it. All the excitement about startups isn't just about getting rich and changing the world. It's also because everyone knows it's the only way a technical worker is allowed to actually think about improving the product. If you're in a big business, you aren't allowed to just improve the product. You're going to be kept busy doing things that improve the bottom line (really or just notionally) and half the time they make the product worse. But nobody says that, so you're dispirited by hypocrisy as well.
Worst is when you actually use some of the products and services from your company, know that they're worse than the competitors, know that anybody paying the market price for them is getting ripped off, and have to listen to management talk about how hard everyone has to work to live up to MyMegaCorp standards of quality. That's how you take productive people and reprogram them not to care about their contribution to society anymore. I'm really enjoying the stability of MyMegaCorp for a change (the company I work for was acquired a year ago) but I don't think I'm going to last here much longer.
And it could actually be much worse. At MyMegaCorp at least we all feel like we're on the same team. (No fooling; people reflexively cooperate.) At some big corporations, your team might actually intentionally sabotage product releases in order to make another team look bad. I've heard specific stories about documentation being intentionally obfuscated, vital product information being buried in obscure places, verbal commitments given and then intentionally broken and denied, and the most dramatic case, where resentment was so high that three teams knew a fourth team was making a large mistake and kept their mouths shut for months so the project would go down in flames and take the fourth manager with it.