
The American Economy Is in a Funk, But Not for the Reasons We Think - Teckla
http://freakonomics.com/podcast/american-growth/
======
guelo
US GDP per capita is larger then it has ever been. We are richer then we've
ever been and this economist predicts we'll be richer still for the
foreseeable future. The problem is that 30 years ago or so the middle and
lower classes stopped receiving any of the gains.

~~~
dangrossman
Healthcare providers and insurers have received much of the gains, it's not
just a class issue. Since 2001, employers' benefit costs have risen 60%, which
is almost twice the rate salary increased. Perhaps salary increases would've
outpaced inflation, leading to the real wage gains everyone's missing, if that
money weren't being diverted into the employer's share of health insurance
premiums.

~~~
WalterBright
The government's share of GDP has increased substantially.

[http://www.usgovernmentspending.com/us_20th_century_chart.ht...](http://www.usgovernmentspending.com/us_20th_century_chart.html)

~~~
fweespee_ch
In perspective its really not that odd.

[https://research.stlouisfed.org/fred2/series/FYONGDA188S](https://research.stlouisfed.org/fred2/series/FYONGDA188S)

1) 2015 is 20.55%. 1980 is 20.64%.

2) Recessions increase spikes as a share of GDP, really bad recessions have
bigger spikes.

~~~
WalterBright
Scroll down to chart S.03t. It shows a consistent trend upwards. The chart
shows total government spending, not just federal.

~~~
fweespee_ch
The point is, I can't fix the other 49 states with magical powers.

------
sien
I've just started the book this guy wrote. It's really good so far and is very
readable. It's not like the epic and unreadable Picketty.

Note that he is saying that the growth were getting will be the same as levels
from 1820 to 1870, just not the same as it was from 1870 to 1970.

The book is worth reading because he has loads of data, not just Internet
comment opinions about how things are going. Even if he is wrong and
productivity shoots up again he's shown fairly strongly that between 1970 and
2016 growth has slowed.

The consequences are pretty serious for the welfare state. Either benefits
cannot continue to grow or taxation must increase.

~~~
Retric
Per capita GDP has been going up far faster than entitlement spending per
capita. The top have been getting most economic gains and fewer taxes which is
the core problem.

We could talk about long term demographics, but GDP growth is loosely tied
with workforce size.

PS: A lot of systemic corruption is also going on. Almost half of the lifetime
gains from a 401K ends up as management and other fees, that was clearly
designed to make someone money, but not working class Americans.

~~~
sien
Hauser's law, that states that federal tax revenues since World War II have
always been approximately equal to 19.5% of GDP, would suggest that tax levels
are similar as a percent of per capita GDP.

[https://en.wikipedia.org/wiki/Hauser%27s_law](https://en.wikipedia.org/wiki/Hauser%27s_law)

~~~
Retric
U.S. gov spending is 20,000$ per person which takes vastly more than 19% GDP.
[http://www.usgovernmentspending.com/per_capita](http://www.usgovernmentspending.com/per_capita)

Local, State, and Federal = ~32 to 42% GDP over last 30 years.
[http://www.usgovernmentspending.com/spending_brief.php?brief...](http://www.usgovernmentspending.com/spending_brief.php?brief=recent).
Defense for example is all over the map, 7% under Reagan down to 3.45% with
Clintion then bumped under Bush to amost 6% and then back down under Obama.

PS: US tax code is designed around talking points so people can support all
sorts of things. But at the end of the day Total government spending is what's
important not what you call it.

~~~
zaroth
Thanks for editing to point out that is Local+State+Federal. sien's point and
"Hauser's law" is about Federal revenue and specifically how Federal tax
revenue doesn't seem to respond to policy changes in the marginal Federal
income tax rates as you might expect. They are both good metrics to consider
at different times, for example sometimes you ignore certain classes of taxes
and spending (like local/property taxes which are largely for K-12 education)
when you want to focus on welfare spending, which is 95%+ Federal.

~~~
Retric
[https://research.stlouisfed.org/fred2/series/FYONGDA188S](https://research.stlouisfed.org/fred2/series/FYONGDA188S)
Even then federal outlays go from 10 to 25% post WW2. There is little support
for a law. People love to pretend marginal rates are the hole story while
ignoring tax breaks, social security, gas taxes, etc. it's a political tug of
war and positions hate to make things clear cut.

Ex: hand outs in the form of very targeted tax breaks are rarely considered
spending even as they subsidize industries.

------
jqm
This article may (or may not:) be a little short sighted.

Basically it claims the inventions of what it terms "The third industrial
revolution" (computers) affect a much narrower slice of life than the
proceeding industrial revolutions. So they won't produce the growth the
proceeding revolutions did and the rapid growth is over.

But earlier in the article:

"GORDON: When we had the invention of steam engines, steam ships, locomotives,
factories making cotton fabrics, and then the telegraph. All of those things
were invented in the century between 1770 and 1870. And they set the stage for
the inventions that happened after 1870. "

So there was a lag between the large number of invention and the true
realization of potential in subsequent inventions and thus improvements in
life.

First of all I don't think digital technology does affect a narrower slice of
life when looked at in broader terms. I think it affects an even greater slice
of life. True we have a bunch of cat videos and Facebook but that's just the
surface.

But the main point, going back to the lag, I believe that is where we are now.
We have the technology and are really just getting started with what it can
do. Digital technology hasn't really infiltrated everywhere it can and many
things are still being done in inefficient ways. When the subsequent set of
innovations begin to appear I think we will see an even greater increase in
standard of living than the previous industrial revolutions. More efficient
distribution mechanisms. Better control over biology (including our own).
Automation and robotics. Things like that. Social structures need to catch up
though also... likely part of the reason for the lag.

~~~
Malician
Yes! To a large extent the visible nature of digital technology is a
reflection of the capability of people to take advantage of it.

If we never progressed past the Commodore 64, we could still be discovering
advantages and uses for it. As it is, new tech is coming our way far faster
than we can effectively apply it.

Or, to rephrase, a lot of office work could be completely replaced by a basic
excel spreadsheet macro, let alone machine learning and the latest neural
networks.

------
caf
_Before the telegraph, which was invented in 1844, the fastest that news could
travel was by the speed of a horse or a sailing ship._

Not strictly true, the semaphore telegraph predated the electric telegraph by
about 50 years.

~~~
pbhjpbhj
And very rudimentary message passing was made using signal fires.

There's smoke signals and messenger birds (eg pigeons) but I don't know
whether/when/how they were used historically.

Edit: Just thought, maybe signal mirrors too?

~~~
nommm-nommm
Pigeons were used to carry important military messages during war up until
1957.

[https://en.wikipedia.org/wiki/War_pigeon](https://en.wikipedia.org/wiki/War_pigeon)

[https://en.wikipedia.org/wiki/United_States_Army_Pigeon_Serv...](https://en.wikipedia.org/wiki/United_States_Army_Pigeon_Service)

~~~
yanekm
Let's not forget RFC 1149 specifying "IP over Avian Carriers"

[https://www.ietf.org/rfc/rfc1149.txt](https://www.ietf.org/rfc/rfc1149.txt)

------
dotrat1989
>As compared to me, where I think that new technologies are coming, but
they’re occurring at an amazingly slow pace.

This is problem with economists analyzing technological growth in the economy.
They think there must a new google or iphone to come out every 10 years.

20 years ago very few people have ever sent an e-mail. Now I can send an
e-mail/call anybody from any place on the earth. We are making significant
technological progress and it's where the most growth is at the moment.

~~~
jmadsen
I don't think "Google or iphones" are the type of technology he is referring
to.

He's thinking more plows, or cotton gins, or fiber optics

~~~
mousa
Those kinds of technologies are coming at a faster pace too. But the fact you
discount search engines and cell phones kind of shows how fast new
technologies are moving. They're on the same scale as cotton gins but we don't
have decades to marvel at how they were gamechangers because they seem like
nothing a couple years after they are invented and there is so much more going
on.

------
swehner
Who's reading freakonomics?? I don't think they (freakonomics) ever corrected
their horrendous mistakes with respect to climate change.

[http://www.theguardian.com/environment/climate-
consensus-97-...](http://www.theguardian.com/environment/climate-
consensus-97-per-cent/2013/jul/08/climate-change-superfreakonomics-
superfreakingwrong)

[http://scienceblogs.com/deltoid/2009/10/16/why-everything-
in...](http://scienceblogs.com/deltoid/2009/10/16/why-everything-in-
superfreakon/)

Embarrassing people! Here they serve up some more gossip ...

~~~
Bromlife
I've always kinda hated "Freakonomics" \- albeit irrationally. It just never
felt like the author truly understood the difference between correlation &
causation.

~~~
GSimon
I too grew a distaste for them, more accurately the Freakonomics Podcast.
Steven Levitt comes across like a total snob and he has all these annoying
quirks and preferences, I find his personality really irritating. He reminds
me of someone who won't do manual labour and thinks it's funny and charming to
be someone who sees anything physically strainful as being this horrendous
undertaking. He really embodies so many detestable human qualities, and that's
the thing, it's like his 'image', he's this weirdo guy who gets to be
reprehensible because he's a notable economist. Also their Podcasts frequently
air re-runs, and their shows consist of 1 revelatory finding (i.e. legalizing
abortion reduces crime rate) that they drag out for 30 mins until you get to
the 'gem' of their findings. That being said these are personal gripes from
previously being an avid listener who got tired of their stuff.

------
Moshe_Silnorin
I suspect we're on the verge of pretty big advances in genetic engineering,
robotics and other physical technologies, including technologies that are
likely to spur the development of other technologies. Genetic engineering of
embryos for increased IQ is looking very feasible, for example. This is likely
to increase the pace of innovation drastically in those countries that allow
it.

~~~
Mikeb85
> This is likely to increase the pace of innovation drastically in those
> countries that allow it.

And create a divide between the rich who can afford it for their children, and
the poor who can't.

~~~
Moshe_Silnorin
There is already a huge wealth and status divide between those born with high
IQs and those born with normal IQs.

The incentives are such that it's going to happen. Also, it looks like very-
large increases in IQ will be possible once we have millions of genomes tagged
with their donor's IQ and a reliable means of editing thousands of alleles.
More than a few standard deviations. I would certainly use this were it
available today. If a rich person has to fly to Korea to do it, so what? Any
country that bans it will fall behind.

The gains from this may be such that governments will think it worth
subsidizing it for the poor's children. High IQ people commit less crimes, pay
more taxes, tend not to use welfare. Liberals and conservatives will likely
both converge on such subsidization.

~~~
pbhjpbhj
>a huge wealth and status divide between those born with high IQs and those
born with normal IQs //

Are you saying that's the primary reason for the status divide? Any citations
that support that, the most recent research I've seem looked at societal
status/wealth of families a few generations back and then traced living
descendants to find how stratified things were. They found a high degree of
stratification; that across generations it was far less likely that poor
ancestors had wealthy descendants. Perhaps IQ goes this way too?

>High IQ people commit less crimes //

Or get caught less often. Wealthy people (in the UK) often commit some common
crimes at what seems like a far larger rate because the penalty is usually
just a fine and to the wealthy it's pocket-change [speeding, parking offences,
tax evasion ...].

~~~
mikerichards
You seriously think that high IQ people are committing as much crime as
"whoever else", but get caught less often? Seriously?

Obviously a high IQ person on average will have a better job/more money and
therefore have less reason to commit crimes.

You think average/below average IQ people are scared to jaywalk, illegally
park because they're scared of the fine?

Does your ideology really cloud your reasoning to that extent?

~~~
jqm
There are all kinds of criminals. Hi IQ adults probably don't (generally)
shoplift $3 worth of beauty products nor hold up gas stations for $56.

Bernie Madoff was probably pretty smart though don't you think?

And there are no doubt plenty of others who are too smart to get caught, and
if caught not prosecuted, and if prosecuted not convicted. I'm not convinced
hi IQ people commit that much less crime. Just that they probably commit less
petty crime.

~~~
zaroth
'Crime' is a ridiculous term, because the argument reduces to everyone is a
criminal to some degree. But I think it's well established that there is a
negative correlation between IQ and crime, of course not just using raw
conviction rates, but after attempting to correct for factors like
arrest/conviction rates.

mikerichard's point about less 'reason' to commit crime I think is a good one.
A lot of crime stems from desperation.

Now I don't know about trying to create some kind of Bentham inspired calculus
to put criminality on a weighted scale versus IQ and see if it all balances
out.... The most terrible outliers are often economic or political leaders, by
definition, their power in society gave them opportunity to commit "worse"
crimes.

------
mchahn
Most evolutionary experts, like the late Stephen Gould, espouse Punctuated
Equilibrium. Basically the theory says that environments are stable for long
periods of time and then there are bursts of changes in small periods of time.
The Cambrian Explosion is a good example (read Gould's book on the Cambrian,
it's awesome).

If you consider technology to be like evolution, which it surely is, then
infrequent advances in short periods is only natural.

~~~
mmmBacon
>>If you consider technology to be like evolution, which it surely is, then
infrequent advances in short periods is only natural.

What you are describing is basically Thomas Kuhn's notion of the nature of
scientific revolutions.

[https://en.m.wikipedia.org/wiki/The_Structure_of_Scientific_...](https://en.m.wikipedia.org/wiki/The_Structure_of_Scientific_Revolutions)

------
vlehto
My personal bet for current 1st world lack of rapid economic growth is simply
lack of demand. Not absolute lack, but people in the rich countries aren't
hungry, cold, physically exhausted or sick. They aren't even close, most
people have some money buffer between then and hunger, called "expendable
income".

At first you would think that the expendable income would breed economic
growth like mad. But what exactly are you buying with your money if you are
generally ~happy about your life and your stuff? Four wheeler? Snake oil?
Snowboard? One off things that you know are overpriced, you won't buy another
one soon, and you might indefinitely postpone that purchase if you don't feel
like it.

Your purchase decision is more and more likely to be based on advertising or
status than price. So ROI of advertisement is better than ROI of improving the
production lines. Especially when consumption of luxury goods is so fickle.
This is not really a recipe for long term exponential growth.

Compare this to Peru, Cambodia or Chad. Everybody lacks money, but everybody
would have several dire needs for some capital. You have reliable demand and
really top notch _consumption_ _efficiency_ from the customer side.

------
WalterSear
>It sounds as though your argument is essentially that many of the inventions
provided by the Digital Revolution, while exciting and appealing and sexy —
and maybe, because they are so sexy, they gain more of our attention than they
warrant — that as exciting and sexy, etc., as they are... they don’t stand at
all in comparison to the breakthroughs of the earlier technological
revolution.

This is the perspective of an outsider looking into the world of tech. As
someone on the inside, I would argue that those benefits simply haven't
arrived yet.

I just left a start up who business model was automating a large (Multi-
billion $), ancient industrial vertical and who's only technological
improvement since the invention of the telephone was using excel rather than
paper ledgers.

------
basicplus2
There is the top 1% that own and control 90% of the worlds wealth, then the
"upper" classes that are doing very well thankyou and think they are the
normal "if everyone just worked hard like me", then there is the rest.. the
slave class

If the upper class (used to include an upper middle and middle class) was
larger, and was the majority of the voting class and the top was no less than
2%, the balance of slavery can be contained and controlled and the fiction of
a fair society can be perpetuated.

The reality is the top 1% exist in their own economy and the rest of us exist
in our own, so when one of us makes a bucket load we are really only ripping
off our fellow man.

When the super rich throw out more "free" cash eventually they reel it back in
again to suck up more wealth from our economy.

It is important to remember the US reserve is a private bank of the top 1%
that is NOT controlled by elected officials, and debt is the trojan horse.

------
jhallenworld
Well power must have something to do with it. The 2nd industrial revolution
made essentially unlimited chemical power available to many people.

Next revolution? Unlimited nuclear power available to many people...

