It’s as if you were working.
Piketty, Hayek, Marx, Pareto. The supercritical Matthew effect. Informational feedback Matthew effect.
What the hell is growth, and who does it? Do we care if only the minority does it? Is it a problem if technocapitalist god kings rule over a blasted landscape of diseased stunted serfs, or is that totally cool? If fine, is it sustainable? If not sustainable, does that really matter, or should we just go out with a billionaire yacht orgy on the swollen rotten oceans then blow the lights out with nukes?
Chris Dillow, on increasing income inequalities amongst companies
- Many profitable companies operate in niches which are big enough to offer nice profits, but too small or too specialized to attract entrants: each week, the IC describes dozens of such firms.
- New technologies enjoy increasing returns to scale. As Stian Westlake and Jonathan Haskell say: “Intangibles are often very scalable: once you’ve developed it, the Uber algorithm or the Starbucks brand can be scaled across any number of cities or coffee shops.” This creates a winner-take-all effect.
- Network effects generate an incumbency advantage. If I set up a more efficient supermarket than Tesco, I should win enough business to get by, and to force Tesco’s prices down. But if I set up a potential rival to Facebook, I face a tougher job. Because the value of a networking site depends upon others using it, Facebook has a more entrenched advantage.
If all of this is right, and these are long-lasting changes – which is a big if – then we need to ditch some old mental models and rediscover some others. We should abandon the idea that competition equalizes profits and restrains monopolies and perhaps return to some older Marxian ideas.
Are intangibles worsening the productivity gap between leading firms and laggards?:
We wonder whether might be more going on here than just a failure of technological diffusion. Specifically, we suspect that the nature of what the winning businesses are doing is changing in a way that makes it harder for their competitors to catch up.
Of the many attractions offered by my hometown, a west coast peninsula famed for its deep natural harbor, perhaps the most striking is that you never have to leave the house. With nothing more technologically advanced than a phone, you can arrange to have delivered to your doorstep, often in less than an hour, takeaway food, your weekly groceries, alcohol, cigarettes, drugs (over-the-counter, prescription, proscribed), books, newspapers, a dozen eggs, half a dozen eggs, a single egg. I once had a single bottle of Coke sent to my home at the same price I would have paid had I gone to shop myself.
[…] These luxuries are not new. I took advantage of them long before Uber became a verb, before the world saw the first iPhone in 2007, even before the first submarine fibre-optic cable landed on our shores in 1997. In my hometown of Mumbai, we have had many of these conveniences for at least as long as we have had landlines—and some even earlier than that.
A staggering 96 per cent of America’s net job growth since 1990 has come from sectors known to have low productivity (construction, retail, bars, restaurants, and other low-paying services were responsible for 46 percentage points of total growth) and sectors where low productivity is merely suspected in the absence of competition and proper measurement techniques (healthcare, education, government, and finance explain the remaining 50 percentage points):
We often hear that our big jobs problem is that workers without college degrees don’t have the skills needed for “today’s economy.” I’ve been thinking a lot about this chart (from Autor 2015), and I want to suggest that our problem for the last 15+ years has been basically the opposite. For some reason, the economy isn’t creating enough high value-added jobs for college grads and this is messing things up for everyone else.
In the 1980s we seemed to be headed toward a knowledge economy, with rapid employment growth among technicians, professionals and managers. […] But from 1999 to 2007 (and arguably beyond) something really unexpected happened. Growth in the share of highly skilled occupations plateaued while low skill job growth accelerated sharply. There was no increase in employment share above the bottom third of occupations. The economy just created a bunch of low-paying, low-skilled jobs. During the same period the 2 decade-long rise in the college wage premium abruptly stopped growing (Beaudry, Green and Sand 2014) and the rise in demand for non-routine analytical and interpersonal skills, ongoing since the 1970s, leveled off (Autor and Price 2013). […] What happened to the knowledge economy?
There are two explanations that hinge on technology, one secular and one cyclical […]
Nation of Slaves is Charles Stross’s pleasing employment-obsession rhetoric:
There are two tests I’d apply to any job when deciding whether it’s what anthropologist David Graeber terms a Bullshit Job.
Test (a): Is it good for you (the worker)?
Test (b): Is it good for other people? […]
When he prescribes full employment for the population, what he’s actually asking for is that the proles get out of his hair; that one of his peers’ corporations finds a use for idle hands that would otherwise be subsisting on Jobseekers Allowance but which can now be coopted, via the miracle of workfare, into producing something for very little at all. And by using the threat of workfare, real world wages can be negotiated down and down and down, until labour is cheap enough that any taskmaster who cares to crack the whip can afford as much as they need. These aren’t jobs that past test (a); for the most part they don’t pass test (b) either. But until we come up with a better way of allocating resources so that all may eat, or until we throw off the shackles of Orwellian Crimestop and teach ourselves to think directly about the implications of wasting a third of our waking lives on occupations that harm ourselves and others, this is what we’re stuck with …
The Coasian flip:
As software eats the world, and companies get smaller and we enter a networked economy - as the Coasean flip takes place - there’s a sharp end:
TaskRabbit workers paying the cost of the company pivot. Neighbours of Airbnb letters soaking the externality of strangers in their space without choosing to accept it. Drivers who used to be employees being encouraged to be independent Owner Drivers - still in City Link livery - bearing the risk of the company’s capital expenditure and future success… without seeing any of the potential upside.
And then that risk being cashed in, on Christmas Day after the turkey, invoices unpaid.
Chris Ladd on white socialism:
Why are economically struggling blue collar voters rejecting a party that offers to expand public safety net programs? The reality is that the bulk of needy white voters are not interested in the public safety net. They want to restore their access to an older safety net, one much more generous, dignified, and stable than the public system – the one most well-employed voters still enjoy.
When it seems like people are voting against their interests, I have probably failed to understand their interests. We cannot begin to understand Election 2016 until we acknowledge the power and reach of socialism for white people.
Americans with good jobs live in a socialist welfare state more generous, cushioned and expensive to the public than any in Europe.
[…]What is often forgotten is that in another sense there is also a cost to not redistributing money.
A dollar is worth a lot more to someone with an income of 10,000 a year than to someone with an income of 100,000 a year, and it is worth even less to someone on one million dollars a year. Thus there’s a certain inefficiency in giving a dollar to someone who already has many dollars, equally then there is a certain inefficiency to some having many dollars while others have few- those dollars could be more effectively contributing to the happiness of humanity if they were given to those who had less. Using certain mathematical techniques it is possible to quantify how much better a society would be in which everyone had an equal portion of income, yet the total pool of income was the same.
Inequality and conflict
We do have strong and consistent predictors of social conflict. They just don’t include inequality. Paul Collier and Anke Hoeffler, in “Greed and Grievance in Civil War” Oxford Economic Papers 56:4 (2004), found that many variables simply do not matter. Not inequality. Not political rights. Not ethnic polarization. Not religious fractionalization.
So what did matter? Chris Blattman and Edward Miguel’s review paper, “Civil War,” in the Journal of Economic Literature 48:1 (2010) tells us that two factors are robustly linked to civil war: “low per capita incomes and slow economic growth.” Håvard Hefre and Nicholas Sambanis, “Sensitivity Analysis of Empirical Results on Civil War Onset” Journal of Conflict Resolution 50 (2006), which tested standard predictors for robustness, identified a few more:
… large population and low income levels, low rates of economic growth, recent political instability and inconsistent democratic institutions, small military establishments and rough terrain, and war-prone and undemocratic neighbors.
I haven’t read the quoted studies, but I presume they assume that inequality doesn’t lead to conflict, controlling for economic growth, democratic institutions and so on. Leaving aside the question of whether one can select the true causal factors here with high probability from the awful data on natural experiments available, and presuming the authors have responsibly identified spurious influences by good choice of instruments and so on, this is interesting. FWIW though, the link between long-term inequality and long-term slow economic growth and weak democratic institutions is what I’m more interested in, and this does more to make me think that in fact I should be more concerned about inequality in the light of its potential indirect linkages to conflict.
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