Krugman On Future Econ

While Paul Krugman and I disagree on some things, but those disagreements are small compared to our common ground, from being both economists. Especially on the future, where most folks rely way too much on their intuitive naive social science. So it was a pleasure to read Krugman being reasonable on the future:

Maybe by the 24th century it’ll be different again, but I’m not so sure about that optimistic view of Captain Picard. One thing I think we see is that greed has a way of breaking through, no matter what we do on other fronts. … I think we’re probably going to have something like a market as far as the eye can see, although actually by the 24th century, since the artificial intelligences will probably be doing everything … I don’t know how they’ll do it, but we don’t need to know because they’ll do it. …

You’d like to imagine that we could eventually get to a point where we really are post-scarcity. But it’s a hard road. John Maynard Keynes wrote an optimistic essay called “Economic Possibilities for our Grandchildren” [PDF] in the ’30s where he talked about once the world was four times or eight times as rich as it was when he was writing, at that point we would no longer be concerned about material things and we could get past all of this striving and greed. And actually we are about as much richer as we were supposed to be according to [Keynes] projection, and somehow the striving and greed is still with us. So it’s a further away goal than we’d like to imagine. …

When I’m having a bad day, I try to think, “What are the possible routes by which we don’t turn into a dystopian society?” I mean, we’ve got the environmental threat, … [and] there’s real echoes of the 1930s in a lot of what’s going on politically, mostly in Europe, but there’s some of it here too. And information technology has been so far by and large a force for liberation, but it’s not too hard to see how it could turn into a force for the opposite. …

It’s quite possible that the long run state, that the natural state, except for special episodes, is one of extreme inequality. … I was asked to write something … written as if looking backwards from the year 2096. … I wrote of a society where basically not just the middle class was gone but education was devalued and wealth came largely just from owning resources — back to the old days of a resource-based aristocracy. We still think of that “Ozzie and Harriet society,” … that we had for a generation after World War II as being somehow the natural end state of modern technology, modern development, and I guess the balance of the evidence says, no, that’s not how it works. …

I’m not sure exactly how major media organizations are going to survive in the long run. … We thought for a while that it was going to be very democratizing, and it turns out not to be. … You end up with what is a very hierarchical system, in which a few people really do garner the great bulk of the attention in any particular area of discussion. (more; HT Tyler)

It seems here that for Krugman a society with extreme inequality must be dystopian, no matter what its other features. With that view I heartily disagree. But that’s a political value judgment, not economics.

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  • Nicholas Podges

    Very often, I find Krugman has most of the data / facts correct, but I almost always totally disagree with his conclusions.

    I suppose that’s the result of his valuing material equality and my valuing liberty.

    • Sister Y

      How should liberty be distributed?

      • Nicholas Podges

        That is a bad question.

        Liberty should not be distributed. In order for liberty to be distributed, the state must be the source of all liberty.

        Do you believe the state is the source of your(and all) liberty?

        The state ought to be protector of liberty, but it is not the source.
        States only have the power to take liberty, not grant it.

        The source of liberty is God or Nature, depending on your views.

        You were born free. What liberty you have now is what you’ve been left by the state, not what the state has given you.

      • Hopefully Anonymous

        “You were born free.”
        -That’s a particularly funny concept, calling up the idea of a homesteading frontier baby.

      • Sister Y

        In the absence of a state, do all have perfect liberty? Or is there some kind of…distribution?

      • Nicholas Podges

        @96167800c97e4f80e64ef4f28d270c72:disqus  you seem to be a troll.

      • Strange7person

        Sounded to me like a legitimate question about your position.

      • Sister Y

        I think I understand the problem – just as the existence of “creation” doesn’t imply a (divine) creator, the existence of a distribution doesn’t imply a (state) distributor.

      • Mark Tiedemann

         Liberty is too abstract a concept.  Is the state the source of liberty? No, but in order for it to be the protector of liberty, definitions must come into play.  Have to know what it is you’re protector because you have to know what doesn’t count.  If Nature is the source and, by inference, the definer, then we are at liberty to be eaten, live on the razor edge of fear and starvation, and die before we can acquire the requisite perspective to understand what Liberty is.

        Contrary to what you claim, the state—any state—defines an area within which people may be more or less “free”, which is again relative.  For our purposes, freedom is that which you find beneficial in relation to the laws within which you live.  In some places, “freedom” means you can stone the village harlot and have multiple wives.  Here that wouldn’t pass muster (at least for most of us).  We define our freedom different, set up a state (theoretically) to guarantee those freedoms, chafe when circumstances abrade our ideal definitions.

        The paradox is, you can’t have the kind of freedom that we recognize as civilized without a state.   Freedom and a free state are not the same things, but they seem to be mutually dependent.

      • Nicholas Podges

        @31577c9feaaa67b1e889188dbac83155:disqus I agree with most of the above, but I don’t find your paradox to be all that paradoxical.

        Of course we give up certain things in order to be part of a safe society. We must accept the laws of the land or face their consequences.

        I don’t see how what you said is contrary to anything I said.

        I said the state is not the source of liberty. It is not.

        I am literally “free” to rape, kill, steal or whatever by my nature. I should face whatever consequences I have earned.

        There is no paradox involved. You give up some liberty in exchange for safety and civility. I prefer a state which asks its citizens to give up as little liberty as is required to physically protect the rest of the citizenry.

      • Mark Tiedemann

         Fair enough.  In my view, though, without a stable context—i.e. a state—there is no liberty, because the concept doesn’t exist in nature.  That would require Nature to have a political philosophy, which it doesn’t.  Hence my paradox.  A state may not be the source of liberty, but you can’t have it without a state.  Because liberty is a concept created within a context of civilization, which is another meaningless concept in nature.  In my view.

    • IVV

      What does material equality have to do with liberty? If liberty is freedom to do what you wish, while accepting whatever consequences the land may require… then we all have liberty, no matter how totalitarian the state.

      And even then, we’re not talking about material equality. I believe material equality and liberty are independent qualities–the level of one has no bearing on the level of the other.

      • Mark Tiedemann

         That sounds good, but just about all revolutions are aimed at the freedom to Have Something being denied.  The American revolution, regardless of its other qualities, was very much a propertarian revolution  (you will not tax us without due representation) and was started and largely fought by hopeful landowners and entrepreneurs.  A middle class revolution, in other words, which makes it unique among revolutions and perhaps one reason it has rarely if ever been duplicated.  The vast majority of Central and South American revolutions, going all the way back to the early 19th century, are based in land reform.  Unequal distribution of “liberty”—however you care to define it—has always manifested as inequitable distribution of resource.  Gaining the ability to say “This is mine and you can’t have it” underlies all revolutions.  (Including England’s Glorious Revolution, which resulted from a question of patronage tied to taxes and the succession.)

        Your phrasing—“If liberty is freedom to do what you wish, while accepting whatever consequences the land may require..”—-implies the freedom to act materially.  “Doing things” requires resources.

    • Jay

      I think you may be conflating “liberty” with “economic opportunity”.

      Think of the masterless samurai of Japanese costume drama.  They are free to go wherever they wish; it’s the source of their appeal.  They are also starving, even if they’re too Zen to make a fuss about it.  Most Asian societies tend to equate liberty with poverty; either you have a place in society (and the duties that come with it) or you don’t.

      Would you really want the perfect liberty of the hobo?  Or would you take any job available, understanding that your new employer can cut off your food supply, making him (or her) your master?  Don’t assume you can just find another job… think 1935 (that’s the Great Depression for the history challenged).

    • daedalus2u

       
      You should read up on the “agree to
      disagree” literature. It has been proven that two rational agents
      with the same priors cannot agree on those priors and then honestly
      disagree on what follows from those priors.

      Robin has made some interesting
      contributions to this literature, for example.

      If you find yourself agreeing with
      Krugman’s data (i.e. priors), then find yourself disagreeing with his
      conclusions, either you don’t actually have the same priors, or one
      of you is being dishonest.

  • Mark Tiedemann

    —” It seems here that for Krugman a society with extreme inequality must be
    dystopian, no matter what its other features. With that view I heartily
    disagree. But that’s a political value judgment, not economics.”

    Obviously, that will depend on which end of the spectrum you find yourself.  I suppose if you haven’t got enough to eat, can’t be sure where you’ll be living from month to month, and your kids are guaranteed to grow up illiterate because there’s no resources to teach them, the bright, shining towers and radical advances in medicine, space travel, and so forth it would be curmudgeonly to only see the down-side…

    I see inequality not just as inevitable but to some degree a driver, but you don’t need such extremes to provide motivation and the depths of poverty are not so inevitable as to be somehow “natural.”  Utopia is a pipe dream, dystopia implies nothing works at all.  There’s a lot of wiggle room in between and we do have choices we can make.

    • Robert Koslover

       No.  “Extreme inequality” does not automatically imply that anyone is impoverished.  There clearly exists extreme inequality right now between me and Bill Gates, yet I am quite comfortable, have plenty to eat, did not grow up illiterate due to a lack of resources, etc. 

      • Mark Tiedemann

         Isn’t that slightly disingenuous?  Granted it’s a relative scale, but that’s no excuse for talking as if extreme poverty didn’t exist or that it’s simply a lifestyle choice.  The distance between you and Bill Gates is certainly real enough, but so then is the distance between you and the family living in its car and getting by on handouts. You aren’t in the condition Krugman and others are talking about. (And neither am I.)

      • http://overcomingbias.com RobinHanson

        Extreme poverty does not equal extreme inequality.

      • Mark Tiedemann

         Poverty as a concept and a condition exists only in relation to its opposite, which by definition makes it a question of equality.  I suppose you could make the statement that, in your eyes, Bill Gates and Sam the Panhandler are “equal” insofar as you choose not credit either with more intrinsic value than the other and you would certainly, I suppose, expect the legal system to treat them the same (but it doesn’t in reality).  But that’s a selective view of equality relevant to your perception, certainly not to either Bill Gates or Sam.  As far as they’re concerned, there’s no functional equality there, and Sam certainly lacks virtually all the options in life Gates has, purely by virtue of his economic status.  So how then are the two not related?

        (Oh, I should modify my first statement—medically, we know that there are many and nasty consequences to absolute poverty, that there is a level below which chronic lack impacts us physically as well as emotionally in ways that no other state of existence creates.  So when I said “poverty” exists only in relationship to its opposite, I meant specifically poverty as concept.)

      • V V

         Your standard of living is probably closer to the standard of living of Bill Gates than to that of some random Sub-Saharian African guy.

  • Seti

    My own reviews of human history makes me think that in steeply hierarchical societies much depends on the material status of the people on the bottom. If the bottom is truly powerless and destitute as in the Old South for blacks or the concentration camps of WWII for the Jews then you can have a fairly stable situation with rare unrest. On the other hand, if the people at the bottom have even a bit of power, they will organize, pick up a gun or a stone, and you will get a situation like Egypt. An elite that wants to keep its status must crush the proles, find a way to co-opt their leadership, or find a way to distract them with bread and circuses.
    Mr. Podges sees the dialectic as a strain between freedom and equality. I see it as a contest between constant vigilance or sleeping well at night for the aristocrats.

    • Nicholas Podges

      I must say I don’t understand the substance of your post nor the conclusion.

      RE:black slaves in the Old South or Jews in concentration camps, these are not cases merely of extreme material inequality. These are cases of dehumanizing domination and a total lack of liberty or value for the dominated.

      It is the lack of liberty that made these so evil, not the material inequality that resulted from a lack of liberty.

      You are correct that I see the values of Liberty and Equality as at odds.

  • http://www.facebook.com/people/Mark-Bahner/100001061961585 Mark Bahner

    You’d like to imagine that we could eventually get to a point where we
    really are post-scarcity. But it’s a hard road. John Maynard Keynes
    wrote an optimistic essay called “Economic Possibilities for our
    Grandchildren” [PDF] in the ’30s where he talked about once the
    world was four times or eight times as rich as it was when he was
    writing, at that point we would no longer be concerned about material
    things and we could get past all of this striving and greed.”

    Well, why not look at some actual statistics to evaluate the situation? For example, here is a nice site that reviews retirement in the U.S.:

    http://eh.net/encyclopedia/article/short.retirement.history.us

    We see that, prior to 1880, roughly 75 percent of people 65 and older were still working. In other words, there was no retirement. People worked until they became completely disabled, or died.

    In 1930, 58 percent of those 65 and older were still working. By 1940, it had dropped to 44 percent. By 2000, only 17.5 percent of people 65 and older were still working.

    Add to that the fact that, in 1950, a man at age 65 could be expected to live 13 more years, and now he can expect to live 18 more years.

    Add to that the fact that the hours worked each year has gone down.

    In short, despite all the “striving and greed,” people in the U.S.
    work a considerably smaller portion of their lifetime than when
    Keynes wrote his essay.

  • Curudgeon

    Why do economists keep talking about “greed” when they mean “self-interest”, which not necessarily greed?

    • Mark Tiedemann

       Only in certain rhetorical constructions. Self interest does not mean owning everything you can without regard to consequences.  Greed is indicated by doing whatever you have to to get More, even when the consequences are ultimate loss of everything, as in the inevitable burstings of bubbles that are driven by greed.  I think they know very well the difference and use the terms accurately.

  • gc.wall

    Until various economic hypotheses have solved the problem of poverty, they are incomplete. There is no economic theory that can claim superiority to any other because of factors other than material considerations. The economic theories’ components are not axioms, but are merely conjecture. Top economists are those individuals who are best at selling a nation’s style of economics back to that nation’s people. They style of economics across nations is in reality of one type: those with the advantage exploit the disadvantaged.

  • gc.wall

    Not all poverty equals suffering. Poor people who live in environments where their need for shelter, clothing and food are satisfied are happy people. The type of poverty that crushes the human spirit can be found where the environment provides nothing. These people would farm, sew and build if their environment made it possible. Concrete and asphalt make farming difficult. One cannot build where one does not own property. One cannot build where raw materials are unavailable. Hopelessness, depression and hunger are causes of suffering. Unfortunately, humans will tolerate a great deal of suffering before they rebel; making it nearly impossible for revolutions to succeed. Besides, the poor are told that they live in the “best” nation on earth. “If you can’t make it here, you can’t make it anywhere.”.

  • http://babyplaymats.ca/ Baby Play Mats

    I guess we’ll have to wait and see.

  • Misaki

    >a society with extreme inequality must be dystopian, no matter what its other features. With that view I heartily disagree.

    http://en.wikipedia.org/wiki/Price_discrimination#Premium_pricing

    This effect can lead to (seemingly) perverse incentives
    for the producer. If, for example, potential business class customers
    will pay a large price differential only if economy class seats are
    uncomfortable while economy class customers are more sensitive to price
    than comfort, airlines may have substantial incentives to purposely make
    economy seating uncomfortable. In the example of coffee, a restaurant
    may gain more economic profit by making poor quality regular coffee—more
    profit is gained from up-selling to premium customers than is lost from
    customers who refuse to purchase inexpensive but poor quality coffee.

    • daedalus2u

      If the marginal utility function of a resource is non-linear (and it is), decreasing at higher magnitudes, then total utility over all individuals will be maximized with uniform distribution.  Extreme inequality in resource distribution must cause a lower total utility. 

      Of course if you discount the ability of the poor to notice they are living in a dystopia, or work them so hard they don’t have time to notice, or are too exhausted to feel hunger and pain, perhaps you don’t feel it is a dystopia? 

      • Dremora

        You’re correct. However, this is only true in scenarios where resources are limited. For instance, if someone invented a feasible asteroid mining technology and extracted massive profits from it, extreme inequality might increase while total *and* per-capita wealth could also increase.

        This can only happen in transitional periods where innovations can unlock new forms of value or give access to new resources.

        It also has an externality in that the same innovations/profits can’t be made by others who might act more altruistically.

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  • free_agent

    Krugman writes, “at that point we would no longer be concerned about material things and we could get past all of this striving and greed”.

    The best analysis I’ve seen along these lines is:

    “In a post-industrial society, it is social status, more than anything else, that drives people to work so diligently all their lives.” — Edward Castronova, “Virtual Worlds: A First-Hand Account of Market and Society on the Cyberian Frontier”

    That is, people will no longer have greed for material necessities, but striving will continue in other arenas. (iPhone, anyone?)