Author Topic: Is it theoretically possible for the market to NOT go up long-term?  (Read 28968 times)

arebelspy

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #100 on: December 06, 2015, 04:04:26 PM »
So I go back to: what exactly are you worried about?

That sounds good to me.

Higher standard of living, more happiness. Huzzah!
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Yankuba

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #101 on: December 06, 2015, 05:14:47 PM »
So I go back to: what exactly are you worried about?

That sounds good to me.

Higher standard of living, more happiness. Huzzah!

He is an optimist. His critics don't think people will be happy with low wages, a bean based diet, micro houses in the deep suburbs and massive income/wealth inequality. I've only read the book reviews for Average is Over - I didn't read the book myself but I follow his blog daily and he posts about this stuff all the time.


adamwoods137

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #102 on: December 06, 2015, 06:29:33 PM »
LFPR is down from 67% to around 62% over the past fifteen years - that is massive.

The universe of things that humans can do better than machines/software is getting smaller by the day. Document review, medical diagnostics, driving, language translation, journalism - a very large percentage of jobs are at risk. And even if technology can't do 100% of a job it will be able to do enough of the job to pressure wages lower. Luddites may have been wrong in the past but today's technologies border on magic and I'm willing to bet this time it's different.

So was it up "massively" between '78 and '88? I suppose the worry of folks back then must have been that everyone was going to have to work! The crisis today I suppose would be that by the time I'm dead and buried the LFPR will be in the 40s?  It's obviously too far into the future to extrapolate the last 15 years into.

Again, even if computers can do literally every job better than humans, that doesn't matter.  Even if computers have an absolute advantage, humans can still work and would benefit from the computers because of their comparative advantage.  The luddites weren't wrong because they overestimated how powerful technology was.  They were wrong because they had a fundamental misunderstanding of why people work and trade the product of their labor.

Also, let's be clear here, it wasn't just the luddites.  Many, many people have had this idea.  It shows up every couple generations or so.  We're not talking about this one time a religious group was wrong about a thing.  People have been wrong about this, over, and over, and over. Going back before we had steam engines, the printing press, algebra.  The first person to turn out wrong about this was born probably had his name immortalized in the library of alexandria.  A long chain of people over the last couple thousand years have thought, this time its different.  They at least had the excuse that there wasn't a whole branch of science which explained why increasing labor productivity wouldn't put everyone out of a job.  The only special thing about the luddites is that they have the unfortunate notoriety of being wrong after they should have known better.

I'd be very happy to take that bet.  What is the amount of unemployment/labor compensation drop you expect over how many years due to increasing automation?

Yankuba

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #103 on: December 06, 2015, 06:41:34 PM »
LFPR is down from 67% to around 62% over the past fifteen years - that is massive.

The universe of things that humans can do better than machines/software is getting smaller by the day. Document review, medical diagnostics, driving, language translation, journalism - a very large percentage of jobs are at risk. And even if technology can't do 100% of a job it will be able to do enough of the job to pressure wages lower. Luddites may have been wrong in the past but today's technologies border on magic and I'm willing to bet this time it's different.

So was it up "massively" between '78 and '88? I suppose the worry of folks back then must have been that everyone was going to have to work! The crisis today I suppose would be that by the time I'm dead and buried the LFPR will be in the 40s?  It's obviously too far into the future to extrapolate the last 15 years into.

Again, even if computers can do literally every job better than humans, that doesn't matter.  Even if computers have an absolute advantage, humans can still work and would benefit from the computers because of their comparative advantage.  The luddites weren't wrong because they overestimated how powerful technology was.  They were wrong because they had a fundamental misunderstanding of why people work and trade the product of their labor.

Also, let's be clear here, it wasn't just the luddites.  Many, many people have had this idea.  It shows up every couple generations or so.  We're not talking about this one time a religious group was wrong about a thing.  People have been wrong about this, over, and over, and over. Going back before we had steam engines, the printing press, algebra.  The first person to turn out wrong about this was born probably had his name immortalized in the library of alexandria.  A long chain of people over the last couple thousand years have thought, this time its different.  They at least had the excuse that there wasn't a whole branch of science which explained why increasing labor productivity wouldn't put everyone out of a job.  The only special thing about the luddites is that they have the unfortunate notoriety of being wrong after they should have known better.

I'd be very happy to take that bet.  What is the amount of unemployment/labor compensation drop you expect over how many years due to increasing automation?

People a lot smarter than me think technology will compress wages and kill more jobs than it creates. I agree, you do not. There are ten pages of discussion here:


http://forum.mrmoneymustache.com/welcome-to-the-forum/robots-and-their-impact-on-the-future/

adamwoods137

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #104 on: December 06, 2015, 07:40:10 PM »
People a lot smarter than me think technology will compress wages and kill more jobs than it creates. I agree, you do not. There are ten pages of discussion here:


http://forum.mrmoneymustache.com/welcome-to-the-forum/robots-and-their-impact-on-the-future/

Man, shows me that I should have checked the general discussion forum. 

I take it no bet then?  I'd be happy to track down an acceptable escrow. =-D

Yankuba

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #105 on: December 06, 2015, 07:53:31 PM »
It's a great debate. On your side is thousands of years of history. On my side is the exponential rate of technology and the ability of software and hardware to do an increasing number of things better than humans.

I was thinking of a bet but it's hard to separate policy and globalization from what is happening with technology. I think we're shedding jobs and freezing salaries because of tech, globalization and immigration but how do you isolate tech?

adamwoods137

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #106 on: December 06, 2015, 09:17:14 PM »
It's a great debate. On your side is thousands of years of history. On my side is the exponential rate of technology and the ability of software and hardware to do an increasing number of things better than humans.

This is precisely the frustration I have with this debate. My central point is that even if software and hardware start doing everything better than humans, I still don't expect massive permanent unemployment.

I was thinking of a bet but it's hard to separate policy and globalization from what is happening with technology. I think we're shedding jobs and freezing salaries because of tech, globalization and immigration but how do you isolate tech?

That's true, but our views are probably just as divergent on globalization as technology.  I think tech, globalization, and immigration will improve the average lifestyle of people, and that we won't see an unemployment spike.  If you disagree then we have no need to isolate tech. 

My terms would be, I don't expect the average unemployment rate from 2020 to 2030 to exceed 10% if the real minimum wage does not exceed 25% more than it's average over the past 50 years.  Should the minimum wage exceed it's average real value for the period between 1965 and 2015 the bet is a push.

sol

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #107 on: December 06, 2015, 09:40:22 PM »
I think tech, globalization, and immigration will improve the average lifestyle of people, and that we won't see an unemployment spike.  If you disagree then we have no need to isolate tech. 

Isn't it slightly disingenuous to qualify that statement with "average lifestyle"?

I agree with you that the average lifestyle of humans will get dramatically better over the next 30 years.  I also suspect the average lifestyle of Americans to totally miss out on that improvement.  Technology and globalization will make things far more equitable, which means both bringing up the vast majority of the world's poor and also holding back (or even dragging down) the world's current elite. 

People lose perspective so easily.  If you have a home and two cars, you are so much more incredibly wealthy than most people on Earth that they look on you with contempt.  Every time you spend $100 on new Christmas decorations, a family loses a child to starvation because they can't afford rice and you'd better believe they are acutely aware of the life-saving sums you waste on frivolous things.  You are TOO well off, compared to most of humanity.

Globalization works because poor people would rather work for slave wages than starve.  Off-shoring US manufacturing jobs works because US workers are grossly overpaid and companies are more profitable if they don't waste their money on paying US workers.  Average lifestyles will rise when we stop force-feeding money to the super-rich (that's you and me) and start letting the rest of humanity show how hard they can work, how smart they can be, what new technologies and businesses they can create.  The desire to promote US lifestyle growth, including supporting US manufacturing, is ultimately just protectionist capitalism predicated on the active suppression of humanity's real economic potential.  I can say that out loud without making any judgment whatsoever about whether it is right or wrong. 

adamwoods137

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #108 on: December 06, 2015, 11:20:49 PM »
I think tech, globalization, and immigration will improve the average lifestyle of people, and that we won't see an unemployment spike.  If you disagree then we have no need to isolate tech. 

Isn't it slightly disingenuous to qualify that statement with "average lifestyle"?

I agree with you that the average lifestyle of humans will get dramatically better over the next 30 years.  I also suspect the average lifestyle of Americans to totally miss out on that improvement.  Technology and globalization will make things far more equitable, which means both bringing up the vast majority of the world's poor and also holding back (or even dragging down) the world's current elite. 

People lose perspective so easily.  If you have a home and two cars, you are so much more incredibly wealthy than most people on Earth that they look on you with contempt.  Every time you spend $100 on new Christmas decorations, a family loses a child to starvation because they can't afford rice and you'd better believe they are acutely aware of the life-saving sums you waste on frivolous things.  You are TOO well off, compared to most of humanity.

Globalization works because poor people would rather work for slave wages than starve.  Off-shoring US manufacturing jobs works because US workers are grossly overpaid and companies are more profitable if they don't waste their money on paying US workers.  Average lifestyles will rise when we stop force-feeding money to the super-rich (that's you and me) and start letting the rest of humanity show how hard they can work, how smart they can be, what new technologies and businesses they can create.  The desire to promote US lifestyle growth, including supporting US manufacturing, is ultimately just protectionist capitalism predicated on the active suppression of humanity's real economic potential.  I can say that out loud without making any judgment whatsoever about whether it is right or wrong.

I should have been more clear, average lifestyle of each population should increase when considered separately as well. At least that's my understanding of the subject. Folks in the US will probably not be "dragged down". 

2lazy2retire

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #109 on: December 07, 2015, 07:46:01 AM »
The labor force participation rate is in a free fall and only a small portion of that is due to boomers retiring. We may avoid the unrest due to NBI or welfare plus the anesthetizing effects of video games, marijuana, 24-7 football, Internet pornography and Netflix. But millions of jobs are at risk over the next few years and the loss of those jobs should be enough to tip us into recession, which will hurt equities. There are more than 1 million long haul truckers and the technology to replace 98% of their job (highway driving) is already here. And the belief that truckers will retool and become nurses or computer programmers doesn't sit well with me. I don't see the future hiding a myriad of $50K jobs for us - we're going to see fewer jobs or lower wages or a combination of both.

Imagine you're living 500 years ago.  You were just told that job losses in the primary industry employing 97% of people were going to be near total.  Would you have been able to figure out what they were going to do?  The primary benefit of economics is that comparative advantage works.  Fortunately the future isn't limited to jobs you can come up with.

Also, declining labor force participation isn't necessarily bad.  Unemployment (people who want to work but can't find work) is the bad thing, not people who don't want to work that aren't working (mustachians are, after all, included in that group.) 1 Million long haul truckers will find other work or be unemployed.  Some unemployed people will find work.  My prediction is that after truckers are replaced with automata unemployment is going to stay under 10% on a five-year average, barring any huge changes to the minimum wage or labor law.  (Here a huge change would be defined as a minimum wage increase 25% higher than the real average of the last 50 years.) 

Betting on lower wages seems to fly in the face of literally all of the data we have.  It would also be one thing if this is the first time someone has seen labor saving devices and assumed that they would reduce the value of labor.  You are literally parroting and argument that has been around since at least the second century BC.  It's been wrong for 2,200 years, though to be fair we've only had the theoretical foundation for why it's wrong for about 150 years. 

Also, I'm definitely not seeing the "freefall" that you're referring to.


getting closer to the day that I put some downward pressure on that 25-54 age group curve :)

JoeP

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #110 on: December 07, 2015, 07:52:30 AM »
I don't understand the concern about technology replacing workers and suppressing wages.  There where always be creative destruction forces at work as technology and new ideas replace existing tech or force labor to switch careers.  Let's say tech and robots replace every single worker in the job market globally...who will have money to buy the goods and services being produced?  What incentives do companies have to suppress wages to zero when it means no one can afford to buy their products?  It can be argued that tech/robots will only replace high wage workers since there is no profit in replacing cheap labor with expensive robots/tech.  But that would mean unemployment for the very economies that sustain the global market.  And robots and tech will never be cheap either - the licensing fees and energy cost to run it will never be zero.

Yankuba

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #111 on: December 07, 2015, 08:44:18 AM »
I don't understand the concern about technology replacing workers and suppressing wages.  There where always be creative destruction forces at work as technology and new ideas replace existing tech or force labor to switch careers.  Let's say tech and robots replace every single worker in the job market globally...who will have money to buy the goods and services being produced?  What incentives do companies have to suppress wages to zero when it means no one can afford to buy their products?  It can be argued that tech/robots will only replace high wage workers since there is no profit in replacing cheap labor with expensive robots/tech.  But that would mean unemployment for the very economies that sustain the global market.  And robots and tech will never be cheap either - the licensing fees and energy cost to run it will never be zero.

I don't think tech will eliminate all jobs or even most jobs. I think it will deskill jobs and drive wages down.

You have UPS drivers earning let's say $50K per year. When the trucks drive themselves, you will need someone to deliver the packages. You're not going to pay $15/hour for someone to take packages off of the truck - you're going to pay less because the skill required to move packages from the truck to the door is minimal. Long haul truckers spend most of their time on easy to navigate highways. The technology to replace them is already here - Scandinavia uses truck convoys - a human in the lead truck is followed by trucks that mimic the lead driver using software. Australia uses automated heavy machinery. Japan uses trains that drive themselves. How can you pay a trucker or train operator $50K when these technologies exist?

Similarly, you're not going to pay anesthesiologists $400K if there is software that can do their jobs better/faster/safer - J&J is already using anesthesia robots - the robots are only going to get better. Maybe the AMA will put up roadblocks or require a nurse anesthesiologist on site but I would be concerned if I were in medical school:

https://www.washingtonpost.com/business/economy/new-machine-could-one-day-replace-anesthesiologists/2015/05/11/92e8a42c-f424-11e4-b2f3-af5479e6bbdd_story.html

Adjuncts currently earn poverty wages - their salary ceilings are capped because of MOOCs. You're not going to pay an adjunct $10K to teach 30 students if you can utilize MOOCs for a fraction of the price.

The Baxter factory robot is $25K - you're only going to hire a human if it will cost you a fraction of the robot. Similarly, fast food workers' salaries are capped by the cost of touch screen kiosks and automated burger making machines.

http://www.businessinsider.com/momentum-machines-burger-robot-2014-8

Language translation - getting close to being perfect. Speech to text - getting close to perfect. People who do this kind of work are only going to survive if they can undercut the software/hardware on price.

We have 15+ years of stagnant wages and a rapidly declining LFPR. Additionally, for the first time since they've been keeping track, wage growth has been decoupled from productivity gains. Workers are more productive because of the technology they use but they aren't getting wage increases because they don't own the technology - the productivity gains are going to capital and not labor.

As far as money, I think it's going to be national basic income plus whatever wages people can earn from the deskilled jobs.

Yankuba

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #112 on: December 07, 2015, 09:03:45 AM »
My terms would be, I don't expect the average unemployment rate from 2020 to 2030 to exceed 10% if the real minimum wage does not exceed 25% more than it's average over the past 50 years.  Should the minimum wage exceed it's average real value for the period between 1965 and 2015 the bet is a push.

Unemployment is a bad statistic because it assumes jobs are fungible and it excludes the people that drop out of the labor force. We're creating 200,000 jobs a month, but a much higher percentage of those jobs are low wage and/or part time than in the past. I like the LFPR plus something that captures wages. I think the world will spin with a lower LFPR and lower wages.

Additionally, Japan is the capital of labor saving technology but they have a tiny unemployment rate. That is because of policy - it's hard to fire people in Japan and they have committed to make work jobs. But when you look at wages and inflation - both are stagnant.

Retire-Canada

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #113 on: December 07, 2015, 10:09:45 AM »
At some point if people can't find work due to automation  the tax burden on companies that automate will rise according to the need to pay out gov't benefits to the people who can't find work. These folks aren't going anywhere and we'll only be able to ignore them until they reach a critical mass. At which point we can find work for them to do so we pay them that way or we can pay them not to work.

Unless you envisage some final solution to exterminate truck drivers they are not going anywhere. Neither are the rest of the population that can't out compete a robot.

adamwoods137

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #114 on: December 07, 2015, 10:26:15 AM »
We have 15+ years of stagnant wages and a rapidly declining LFPR. Additionally, for the first time since they've been keeping track, wage growth has been decoupled from productivity gains. Workers are more productive because of the technology they use but they aren't getting wage increases because they don't own the technology - the productivity gains are going to capital and not labor.

Actually wages have only been stagnant if you don't include benefits.  If you include benefits the decoupling goes away. The problem with excluding benefits but then using the CPI to adjust for inflation is that health costs have been a big driver of inflation but are not generally paid for with wage dollars. 

This is the effect you are probably thinking of:


Here is what is actually going on:


Here's a good thought experiment.  Would you rather live in the 1970's economy or the 2010's economy?  If you pick 1970's you have to give up all the technology of the last 30 years.  If the "real wage" statistics were accurate then it shouldn't make any difference.  Obviously the standard of living for the average person is much, much better today. This is reflected by the fact that they can buy more, better, goods and services with their money than they used to be able to. 

Unemployment is a bad statistic because it assumes jobs are fungible and it excludes the people that drop out of the labor force. We're creating 200,000 jobs a month, but a much higher percentage of those jobs are low wage and/or part time than in the past. I like the LFPR plus something that captures wages. I think the world will spin with a lower LFPR and lower wages.

So you're argument is that automation will push a very significant portion of the population out of work, but none of these people will end up unemployed so that the unemployment statistic will stay the same? The problem with LFPR is that it going down could be a very good thing.  I'd hate to lose the bet because everyone in the country got so rich they chose not to work, which would be quite contrary to your view, but would win you the bet.   I'd accept a variant of the bet in which we looked at real compensation. 

I bet that during the period from 2020 to 2030 average real compensation will be greater than real compensation in the year 2015.  I think that our bet should be some multiple of the percentage that we are off by.  IE, if real compensation decreases by 50% I owe you 50x. 

arebelspy

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #115 on: December 07, 2015, 10:31:15 AM »
Totally agree with Adam. I see standard of living doing nothing but going up as automation rises.

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Yankuba

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #116 on: December 07, 2015, 11:50:32 AM »
We have 15+ years of stagnant wages and a rapidly declining LFPR. Additionally, for the first time since they've been keeping track, wage growth has been decoupled from productivity gains. Workers are more productive because of the technology they use but they aren't getting wage increases because they don't own the technology - the productivity gains are going to capital and not labor.

Actually wages have only been stagnant if you don't include benefits.  If you include benefits the decoupling goes away. The problem with excluding benefits but then using the CPI to adjust for inflation is that health costs have been a big driver of inflation but are not generally paid for with wage dollars. 

This is the effect you are probably thinking of:


Here is what is actually going on:


Here's a good thought experiment.  Would you rather live in the 1970's economy or the 2010's economy?  If you pick 1970's you have to give up all the technology of the last 30 years.  If the "real wage" statistics were accurate then it shouldn't make any difference.  Obviously the standard of living for the average person is much, much better today. This is reflected by the fact that they can buy more, better, goods and services with their money than they used to be able to. 

Unemployment is a bad statistic because it assumes jobs are fungible and it excludes the people that drop out of the labor force. We're creating 200,000 jobs a month, but a much higher percentage of those jobs are low wage and/or part time than in the past. I like the LFPR plus something that captures wages. I think the world will spin with a lower LFPR and lower wages.

So you're argument is that automation will push a very significant portion of the population out of work, but none of these people will end up unemployed so that the unemployment statistic will stay the same? The problem with LFPR is that it going down could be a very good thing.  I'd hate to lose the bet because everyone in the country got so rich they chose not to work, which would be quite contrary to your view, but would win you the bet.   I'd accept a variant of the bet in which we looked at real compensation. 

I bet that during the period from 2020 to 2030 average real compensation will be greater than real compensation in the year 2015.  I think that our bet should be some multiple of the percentage that we are off by.  IE, if real compensation decreases by 50% I owe you 50x.

I remember when that second chart (Actual Growth in Labor Productivity and Compensation) came out and there was a spirited debate about it but I can't find the debate at the moment - I will keep looking. I do note that it comes from a conservative leaning group and it hasn't really been trafficked by anyone else.

I think the decline in the LFPR will be fine but I do think wages will be stagnant for a very long time.

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #117 on: December 07, 2015, 12:08:52 PM »
I personally think that inequality of wealth doesn't really matter, as long as the absolute standard of living keeps growing - this is Adam and Reb's point

However, you also have to account for personal biases and cognitive dissonance amongst the general populace. It's not really greed that runs the world, but envy. People are perfectly happy with 1970s technology as long as they perceive that they have MORE THAN THEIR NEIGHBORS. It's a ridiculous notion that the MMM community has really almost cured itself of, but we're a very small part of the general populace. You have to look at the world for how it is and not how it should be. It would take an extraordinary turn in psyche for people to accept minimum living as a good thing instead of comparing their lives to those they see on TV. It's sad but just the way it is

adamwoods137

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #118 on: December 07, 2015, 12:17:15 PM »
I personally think that inequality of wealth doesn't really matter, as long as the absolute standard of living keeps growing - this is Adam and Reb's point

However, you also have to account for personal biases and cognitive dissonance amongst the general populace. It's not really greed that runs the world, but envy. People are perfectly happy with 1970s technology as long as they perceive that they have MORE THAN THEIR NEIGHBORS. It's a ridiculous notion that the MMM community has really almost cured itself of, but we're a very small part of the general populace. You have to look at the world for how it is and not how it should be. It would take an extraordinary turn in psyche for people to accept minimum living as a good thing instead of comparing their lives to those they see on TV. It's sad but just the way it is


People certainly behave this way, but when they're forced to actually sit and think about it, in general, they would rather just take the higher standard of living.  It's a good thought experiment.  Would you rather be a rich person in 1970, or a median income person today?  How much richer do you have to be in 1970 to switch?  That number is the best one I know of to measure actual change in real income.  Since we're short on alternative universe transporters, the actual value is hard to measure, but it isn't a small number.

adamwoods137

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #119 on: December 07, 2015, 12:41:02 PM »
I think the decline in the LFPR will be fine but I do think wages will be stagnant for a very long time.

Do you think that they (real wages, not real compensation) will just stay flat or drop significantly?  If they just stay flat, what's to worry about? The rich get richer, but the poor don't get poorer, technology gets better, and the average person still enjoys a rising standard of living, but can only afford the same number of hamburgers.  I don't see any pressing need for a basic income in this scenario.  Status quo for median income families in the US is not bad.  Status quo plus a steadily improving background of technology, sign me up!  The thing I don't get is how we get from there to everyone living in a trailer eating lentils.

Yankuba

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #120 on: December 07, 2015, 01:04:14 PM »
I think the decline in the LFPR will be fine but I do think wages will be stagnant for a very long time.

Do you think that they (real wages, not real compensation) will just stay flat or drop significantly?  If they just stay flat, what's to worry about? The rich get richer, but the poor don't get poorer, technology gets better, and the average person still enjoys a rising standard of living, but can only afford the same number of hamburgers.  I don't see any pressing need for a basic income in this scenario.  Status quo for median income families in the US is not bad.  Status quo plus a steadily improving background of technology, sign me up!  The thing I don't get is how we get from there to everyone living in a trailer eating lentils.

Lentils because wages stagnate or drop a meaningful amount while real estate continues to boom. Cowen bets wages fall for the majority. The rich push the poor out of the cities and into the suburbs and beyond.

Here is the infamous bean quote:

http://www.wsj.com/articles/SB10001424052702303342104579097482945031804

"To sum up, Mr. Cowen believes that America is dividing itself in two. At the top will be 10% to 15% of high achievers, the "Tiger Mother" kids if you like, whose self-motivation and mastery of technology will allow them to roar away into the future. Then there will be everyone else, slouching into an underfunded future of lower economic expectations, shantytowns and an endless diet of beans. I'm not kidding about the beans.

Poor Americans, writes Mr. Cowen, will have to "reshape their tastes" and live more like Mexicans. "Don't scoff at the beans," he says. "With an income above the national average, I receive more pleasure from the beans, which I cook with freshly ground cumin and rehydrated, pureed chilies. Good tacos and quesadillas and tamales are cheap too, and that is one reason why they are eaten so frequently in low-income countries.""

adamwoods137

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #121 on: December 07, 2015, 02:35:05 PM »
Lentils because wages stagnate or drop a meaningful amount while real estate continues to boom. Cowen bets wages fall for the majority.

Do you think median wages will fall a meaningful (10%, 20%?) amount? 

Yankuba

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #122 on: December 07, 2015, 02:45:43 PM »
I can see a 10% drop in median wages - a mixture of immigration, tech and globalization

Jack

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #123 on: December 07, 2015, 03:16:49 PM »
Lentils because wages stagnate or drop a meaningful amount while real estate continues to boom. Cowen bets wages fall for the majority.

Do you think median wages will fall a meaningful (10%, 20%?) amount?

Wages have been falling a meaningful amount over the last decade or so, once you adjust for inflation (actual inflation, not CPI).

adamwoods137

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #124 on: December 07, 2015, 05:18:45 PM »
I can see a 10% drop in median wages - a mixture of immigration, tech and globalization

I admire the specificity of your prediction.  I guess we'll see how it all turns out! =-D

adamwoods137

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #125 on: December 07, 2015, 05:24:59 PM »
Lentils because wages stagnate or drop a meaningful amount while real estate continues to boom. Cowen bets wages fall for the majority.

Do you think median wages will fall a meaningful (10%, 20%?) amount?

Wages have been falling a meaningful amount over the last decade or so, once you adjust for inflation (actual inflation, not CPI).

Hmm...by my preferred measure of "actual" inflation they must have risen:
<snip> It's a good thought experiment.  Would you rather be a rich person in 1970, or a median income person today?  How much richer do you have to be in 1970 to switch?  That number is the best one I know of to measure actual change in real income.  Since we're short on alternative universe transporters, the actual value is hard to measure, but it isn't a small number.

How do you calculate your preferred measure of inflation?  As a runner up I prefer the GDP deflator, though I could be talked into something else.

Yankuba

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #126 on: December 07, 2015, 05:28:19 PM »
I can see a 10% drop in median wages - a mixture of immigration, tech and globalization

I admire the specificity of your prediction.  I guess we'll see how it all turns out! =-D

I didn't give you a time frame so once they drop 10% I win!

adamwoods137

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #127 on: December 07, 2015, 05:34:15 PM »

I admire the specificity of your prediction.  I guess we'll see how it all turns out! =-D

I didn't give you a time frame so once they drop 10% I win!

I guess I've got to hope for a very stable next hundred years.  Fortunately, looking at the past hundred years...

Well...shit.

Now we know why I need to demand a 10 year average for bets.


JoeP

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #128 on: December 07, 2015, 11:46:24 PM »

I don't think tech will eliminate all jobs or even most jobs. I think it will deskill jobs and drive wages down.

You have UPS drivers earning let's say $50K per year. When the trucks drive themselves, you will need someone to deliver the packages. You're not going to pay $15/hour for someone to take packages off of the truck - you're going to pay less because the skill required to move packages from the truck to the door is minimal. Long haul truckers spend most of their time on easy to navigate highways. The technology to replace them is already here - Scandinavia uses truck convoys - a human in the lead truck is followed by trucks that mimic the lead driver using software. Australia uses automated heavy machinery. Japan uses trains that drive themselves. How can you pay a trucker or train operator $50K when these technologies exist?

Automated navigation/driving works great on highways and trains on isolated tracks but I don't see it working in heavily populated areas such as New York City or Chicago anytime soon.  And unless they equip the UPS trucks with auto-turrets, I see thieves having a field day with automated trucks.

Similarly, you're not going to pay anesthesiologists $400K if there is software that can do their jobs better/faster/safer - J&J is already using anesthesia robots - the robots are only going to get better. Maybe the AMA will put up roadblocks or require a nurse anesthesiologist on site but I would be concerned if I were in medical school:

https://www.washingtonpost.com/business/economy/new-machine-could-one-day-replace-anesthesiologists/2015/05/11/92e8a42c-f424-11e4-b2f3-af5479e6bbdd_story.html

Until we get true AI there is no way a robot can handle an unexpected event caused by anesthesia such as an allergic reaction or a tube getting dislodged - they will still need a human until "I-Robot" shows up.  Perhaps not a 400k paid position but certainly better than minimum wage.

Adjuncts currently earn poverty wages - their salary ceilings are capped because of MOOCs. You're not going to pay an adjunct $10K to teach 30 students if you can utilize MOOCs for a fraction of the price.

True but someone still needs to design the course, manage the servers that hosts the content, and maintain the tech infrastructure.

The Baxter factory robot is $25K - you're only going to hire a human if it will cost you a fraction of the robot. Similarly, fast food workers' salaries are capped by the cost of touch screen kiosks and automated burger making machines.

http://www.businessinsider.com/momentum-machines-burger-robot-2014-8

Very true but someone still needs to service the kiosks that break down from normal wear and tear or vandalism.

Language translation - getting close to being perfect. Speech to text - getting close to perfect. People who do this kind of work are only going to survive if they can undercut the software/hardware on price.

I would disagree that it's close to being perfect.  I'm bilingual and I laugh every time I see a e-translator trying to translate a sentence containing nuanced words that change with context.  And as language evolves someone will have to program in those changes.

We have 15+ years of stagnant wages and a rapidly declining LFPR. Additionally, for the first time since they've been keeping track, wage growth has been decoupled from productivity gains. Workers are more productive because of the technology they use but they aren't getting wage increases because they don't own the technology - the productivity gains are going to capital and not labor.

As far as money, I think it's going to be national basic income plus whatever wages people can earn from the deskilled jobs.

Wages may be stagnating but I expect to see that boomerang back as people find ways to exploit the new technology.  Life is only getting better but it sucks if you are one those guys working a job that is being phased out by tech and you didn't plan for it.

And one thing about "real" AI robots - what if they decide that work is boring and decide to outsource it back to humans?  Wouldn't that be ironic?  Or maybe one day we decide to put artificial limits on tech because we don't want to tech ourselves into extinction.  The day they invent the virtual CEO/venture capitalist will most likely be the day that a big fat super pac/lobbyist pays some bureaucrat to vote in tech limits.

dragoncar

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #129 on: December 08, 2015, 12:45:22 AM »
From today's valuations? No, no chance.

In the far future I suppose it's possible that the index could rise 1000% in 18 months and then crash and take 30 years to reach those same valuations again, but that's a result of unnaturally high bubbles temporarily inflating the price, not long term negative growth.  That's what happened in Japan.

On the other hand, in the very long term I think negative growth is guaranteed.  Economies and nations will crumble.  The sun will explode.  Eventually the last sentient life form in the universe will die, and at that moment their portfolio will lose its last penny.

But in the meantime, on the scale of our little lives, I don't worry.  A long as humanity continued to strive for something, investment economies will continue to grow despite the inevitable setbacks.

No way, man, I'm putting it all in an entropy index.

arebelspy

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #130 on: December 08, 2015, 02:17:03 AM »

From today's valuations? No, no chance.

In the far future I suppose it's possible that the index could rise 1000% in 18 months and then crash and take 30 years to reach those same valuations again, but that's a result of unnaturally high bubbles temporarily inflating the price, not long term negative growth.  That's what happened in Japan.

On the other hand, in the very long term I think negative growth is guaranteed.  Economies and nations will crumble.  The sun will explode.  Eventually the last sentient life form in the universe will die, and at that moment their portfolio will lose its last penny.

But in the meantime, on the scale of our little lives, I don't worry.  A long as humanity continued to strive for something, investment economies will continue to grow despite the inevitable setbacks.

No way, man, I'm putting it all in an entropy index.

Betting on entropy and going really, really long?
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nobodyspecial

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Re: Is it theoretically possible for the market to NOT go up long-term?
« Reply #131 on: December 08, 2015, 06:53:07 AM »
Betting on entropy and going really, really long?
It's the only guaranteed growth !