26 July 2017

I Still Hate Neil Irwin, part the ninth [update]

Poppy Bush called it voodoo economics. Its zealots call it supply side theory. It's all bogus wealth transfer from the many to the few. If any form of supply side were true, producers would rev up the production lines whenever demand goes slack. They don't do that, of course.

The inevitable inference is that growth is demand driven. Yet, it takes a 'radical' paper to make the point.
It's a chicken or egg problem: Does low productivity cause slow growth, or does slow growth cause low productivity?

The second possibility is the provocative argument of a new paper published Tuesday by the Roosevelt Institute, a liberal think tank. The paper argues that the United States economy is not actually closing in on its full economic potential and has plenty of room for continued growth -- so long as the Federal Reserve doesn't put on the brakes of the expansion prematurely.

The data, and logic, lead one to conclude that capitalists respond to increasing demand, not to decreasing cost. The former impels them to produce. The latter to pocket the savings.
"On Mondays and Wednesdays, economists argue that wages are low because robots are taking people's jobs. On Tuesdays and Thursdays, it's that we can't have wages rise because productivity growth is low," said Mr. Mason, an economist at John Jay College. "Both can't be true."

In other words, instead of worrying so much about robots taking away jobs, maybe we should worry more about wages being too low for the robots to even get a chance.

Foxconn, which may or may not be building plant here, has been doing the robot thing in response to labor costs (that's 2011, and there're lots more recent reports of carrying this out).
Yesterday, Foxconn announced (at an employee dance party of all places) that they're planning on buying some robots to replace their human workforce. And by some robots, they mean one million robots over the next three years.

So, in addition to the segue from actual production in the economy to overhead labor (and the loss in global productivity), we find that we can't get growth if wages don't expand to demand more of what the economy actually produces. The lower and middle classes don't consume financial services to the degree that the 1% does.

Well, that didn't take long. Hot off today's presses is more info on Foxconn.
The technology futurists Andrew McAfee and Erik Brynjolfsson of MIT recently told Yahoo Finance that the technological change of the last 20 years is nothing compared with the imminent revolution to be wrought by artificial intelligence and machine learning. "We are never again going to have a large, prosperous, stable middle class in this country doing routine industrial-era work," McAfee said. "The assembly line jobs of the 1970s, those jobs are gone. To try to go back to the 1950s, I find that un-American."

Un-American?? A bit extreme. Who's gonna have the moolah to buy the stuff? London Whales?

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