

Academia and the decline of wealth in America - asciilifeform
http://brucejacob.tumblr.com/post/373498114/academia-and-the-decline-of-wealth-in-america

======
geebee
I actually do think he's onto something when he talks about the decline of
engineering relative to law, banking, and medicine.

It's interesting, because in the midst of an article about how much poorer we
are than our parents, he does discuss extremely high salaries in these fields.
I think the problem is that the "Best and Brightest" young Americans are now
chiefly interested in entering fields where they _get_ a lot of money but
probably don't _create_ much wealth.

I read a while back that many economists believe that while a good legal
system is critical to a modern economy and state, the marginal value of an
additional lawyer in the US is actually negative - that is, additional
regulation, litigation, and so forth is actually wealth destroying. Banking,
as defined as moving money from where it is to where it is needed is a
valuable economic activity, but a lot of banking lately seems to have been a
wealth destroying activity that is lucrative for its practitioners as well.

Medicine seems more defensible, but my father (a prof of medicine) told me
recently that he was disturbed by a report on how much of a person's lifetime
medical expenses are accrued in the last few years/months of life.

By the way, sorry about the lack of cites. But I'm guessing that these
generalities really aren't all that controversial.

A friend of mine (a lawyer) makes a lot of money by creating corporations that
exist purely to purchase expensive equipment (such as airplanes) and then
lease them back to the actual "owner", mainly because this creates a favorable
tax write-off. Have the methods used by the "elites" to gain personal wealth
always so unaligned with the general creation of wealth?

One really wonderful thing about the US is that there isn't all that much
class resentment. People generally talk about "making" or "earning" money, and
we admire people who do it, largely because we believe that they create wealth
for everyone as they create it for themselves. I think this is very true of
high tech entrepreneurship and other activities... but it does seem
(especially from the massive expansion of the banking sector) that many of our
current wealthy elite seem to be adding about as much to the general economy
as feudal lords.

They'll try to cast this in terms of "disliking people who make money", but I
really don't. It doesn't bother me at all that the google guys have billions.
I may envy them, but I don't resent them. However, I _resent_ AIG and GS,
because I'm utterly unconvinced that they are contributing a damn thing, and
that they are probably damaging wealth creation.

~~~
fnid2
_lifetime medical expenses are accrued in the last few years/months of life_

When my mother got terminal cancer, the last few months of her life became her
most valuable. Those last days were scarce. In a way, they are infinitely more
valuable than all her other days, because she knew at that point that she had
a finite number. Until you are given a terminal diagnosis, you feel infinite,
and perhaps -- with the innovation in life extension -- you actually could
live forever. Of course accidents still happen and with more days to live, the
law of large numbers kicks in, so we'll probably never live forever, but I
digress.

Point being, the last days are the most valuable and the treatments to keep us
alive under terminal conditions are expensive. It's expensive to fight death
and few want to die. Most believe not dying to be the most important and
valuable thing in their lives, so it is understandable that the last years, in
general, cost the most to keep.

The only alternative to this situation is to embrace death. Make it normal.
Make it not scary. Treat the emotional aspects of dying rather than the
conditions that cause death.

We are a long way from a society like that.

~~~
blots
Well, anyone reading this now will most probably die within the next 80 years.
It's not that much really...on an astronomical scale.

~~~
cabalamat
Not if Aubrey de Grey ( <http://en.wikipedia.org/wiki/Aubrey_de_grey> ) gets
his way!

Seriously, I expect there are people alive today who will still be alive in
1000 years.

~~~
joubert
1000 years?

~~~
fnid2
The argument life extenders make is that in 20 years, we'll cure all the
ailments that may cause death for another 20 years and then within that time,
another set of cures will evolve until eventually, we've cured everything that
could kill a person.

The trend supports them, somewhat. Lifetimes centuries ago were 30-40 years on
average. Only a handful of people lived 60 or more years. Today, many people
live to 100, many more to 80... so we are getting better at preventing death.

At some point, if this trend continues, we'll be almost perfect at it.

~~~
jbange
>Lifetimes centuries ago were 30-40 years on average. Only a handful of people
lived 60 or more years. Today, many people live to 100, many more to 80

The average in previous centuries was heavily skewed by infant/childhood
mortality. Plenty of people lived into their 80's back then. It's just that
half of their brothers and sisters died before age 10, which dragged the
average down. Still more succumbed to disease and infection before even middle
age.

The average isn't going up because people live longer, it's going up because
fewer people die young.

------
dkarl
_We decided to make and sell crap. Why? Because we could get away with it. The
quote re: autos — “Detroit decided that they would rather make money than
cars.”_

I'm not an economist, but I wouldn't be surprised if this had something to do
with it. All the excitement about startups isn't just about getting rich and
changing the world. It's also because everyone knows it's the only way a
technical worker is allowed to actually think about improving the product. If
you're in a big business, you aren't allowed to just improve the product.
You're going to be kept busy doing things that improve the bottom line (really
or just notionally) and half the time they make the product worse. But nobody
says that, so you're dispirited by hypocrisy as well.

Worst is when you actually _use_ some of the products and services from your
company, _know_ that they're worse than the competitors, _know_ that anybody
paying the market price for them is getting ripped off, and have to listen to
management talk about how hard everyone has to work to live up to MyMegaCorp
standards of quality. That's how you take productive people and reprogram them
not to care about their contribution to society anymore. I'm really enjoying
the stability of MyMegaCorp for a change (the company I work for was acquired
a year ago) but I don't think I'm going to last here much longer.

And it could actually be much worse. At MyMegaCorp at least we all feel like
we're on the same team. (No fooling; people reflexively cooperate.) At some
big corporations, your team might actually _intentionally sabotage product
releases_ in order to make another team look bad. I've heard specific stories
about documentation being intentionally obfuscated, vital product information
being buried in obscure places, verbal commitments given and then
intentionally broken and denied, and the most dramatic case, where resentment
was so high that three teams knew a fourth team was making a large mistake and
kept their mouths shut for _months_ so the project would go down in flames and
take the fourth manager with it.

~~~
vidar
I believe Oracle has seen some really weird group interactions on this level.

------
rauljara
"We don’t build anything here anymore, outside of tech."

Not true. [http://www.fivethirtyeight.com/2010/02/us-manufacturing-
is-n...](http://www.fivethirtyeight.com/2010/02/us-manufacturing-is-not-
dead.html)

We make plenty, it's just that (thanks to innovation) we don't have as many
workers making the same amount of stuff. So while US manufacturing is healthy
in terms of goods produced, there just aren't many manufacturing jobs around
any more.

~~~
mechanical_fish
I stopped reading shortly after this sentence - the secret to speed-reading is
to not waste time reading things that have been deduced from false facts.

But let me underline: this is no minor factual error. The whole piece appears
to be built on falsehood. The author is trying to argue that the USA needs
more innovation. But why can we produce more manufactured goods than ever with
fewer workers? Increased productivity! And why has productivity increased?
Innovation!

~~~
gizmo
If you look for excuses to dismiss an article you're always going to find
them. That way you're not likely to learn much, though. The error in this case
_was_ minor, because his reasoning doesn't depend on it.

The article is making the (rather mundane) point that more innovation is a
good thing (premise) and that many of the best students are not going into
industry but are lured away by academia and a few well compensated fields
(law/medicine) and that the country is worse off because of it.

So whether the USA produces much outside of tech isn't that relevant.

~~~
mechanical_fish
_many of the best students are not going into industry but are lured away by
academia_

So, I stopped reading, but did the OP support this with statistics? Because in
my world -- the one in which I myself have gone back and forth a couple of
times between academia and industry -- there's plenty of people who _try_ to
go into academia, but they don't find work because there aren't enough jobs,
and those that exist have low pay, because there's high demand but a rather
short supply...

Meanwhile, the thousands of highly-educated people who can't get into academia
try to go into industry. Except that many industries aren't hiring much.
Perhaps because their productivity keeps increasing and they don't really need
armies of new Ph.Ds to keep cranking out widgets at the rate the market
demands. I have a lot of friends with Ph.Ds, and not all of them are happily
employed. [1]

And that's not even getting into the fact that drawing the line between
"academia" and "industry" is increasingly difficult. Every professor has a
startup on the side, every major university has a staff of lawyers to manage
their intellectual property, and half the grants are industrially funded... or
are funded by government grants that are aimed directly at industrially-
relevant product development, e.g. drugs. Many industries don't _want_ to do
cutting-edge pure research anymore, but instead try to outsource that to
academia. In the semiconductor field, a lot of the cutting-edge research gets
done in academic labs. E.g. I knew some of the folks who did early OLED
research, the product of which now sits inside various Android phones. They
were academics, but they are innovating, and their innovations are promptly
adopted by industry here and abroad. Similarly, a lot of drugs come out of
academic labs and are then pushed through development, testing, and production
by industry.

\---

[1] Though most are, in fact, employed. Don't get me wrong. These days almost
any job is a happy job compared to the alternative.

~~~
gizmo
Statistics or references? None are offered.

In fact, some of the claims in the article are so ludicrous I can't take them
seriously at all. For example:

 _"... so an entire generation of high-school graduates went to college and
learned to loathe industry"_ and

 _"so innovation [in the USA] died, and perhaps nine tenths of the brilliant
minds that would have otherwise gone into industry and innovated the hell out
of their field, that nine tenths went into the legal profession or the medical
field or investment banking."_.

I just can't take those remarks at face value. I must say though, that the
author's claims of disdain for the industry by academia match my experience.
The author's complaints about low salaries (relative to law/medicine) in
technical fields also match my experience. Where I live (Europe) professors
don't have startups on the side, even at the top universities. Different
worlds, I suppose.

------
larsberg
"One of the things they teach you in American college is that industry is to
be looked down upon."

This statement is not at all true in engineering schools. At least when I went
to school (Northwestern, '00), there were huge numbers of industry/academic
partnerships and the innovation talked about in this article was pushed as the
sort of thing it was expected for you to do after graduation, unless you had
the misfortune to continue on for your Ph.D., which very few people did. Maybe
that quote applies more to non-engineering schools?

Can other engineering-educated folks relate to his quote?

~~~
gaius
I have a bunch of friends who are philosophy students and right now they are
"on strike", occupying a building at Middlesex University.

The irony that they gleefully proclaim that they aren't studying a lowly
"vocational" or "technical" course, yet have purloined the language and
ideology of, umm, _actual workers_ seems to have entirely escaped them.

Then again, several of them genuinely believe that writing essays at
university is morally equivalent to building tractors at a factory...
Marxists, eh? They'll be in for a bit of a shock when they have to meet the
real world.

~~~
arethuza
Top tip for annoying an academic: refer to the "real world" in a way that
implies that they don't belong to it.

The professor I used to work for used become incandescent with rage when
someone did this. :-)

~~~
gaius
Well their message to taxpayers is "work harder for longer for less so we can
go on sneering at you from our ivory tower", so they really don't belong to
the real world. Yet, but they will soon...

~~~
tensor
They don't belong in the real world in the sense that people get _paid_ in the
real world. Meanwhile, most academics go into debt, earn very little, and work
long hours trying to genuinely contribute something to society as a whole.

This is why so many phd students in computer science and related technical
fields go into industry where they can get over double the salary from day
one. Many academics _do_ have a very negative view of none academics,
precisely because of the sentiment that you so eloquently put into words.

The irony is that society is eager as ever to consume the technologies and
knowledge that comes from academic research, yet somehow expect all that for
free, and even get angry when their results don't come fast enough.

The me generation indeed.

~~~
arethuza
My experience is in the the UK, but when I worked in academia (from '89 to
'95) I was paid roughly the same amount as my friends in the private sector.

Looking at academic salaries these days they don't look too bad when you
compare working conditions, perks (access sports centers etc.), long holidays
and the rather generous final salary pension scheme.

Yeah, I can imagine PhD students have a hard time everywhere - but I really
don't have much sympathy for salaried staff in academia (or most of the UK
public sector) complaining about wages and conditions.

------
grandinj
I don't get it - if you're on any kind of growth curve at all, you should be
getting wealthier.

The drop from a 3% curve to a 2% curve just means you're getting wealthier
slower, but you can't lose wealth unless the growth goes negative.

He's right about not being able to afford his dad's house, but that's because
when his dad bought it, it was probably a middle-income area. Now, thanks to
city growth, it's probably a middle-to-upper income area. So he's comparing
apples to oranges.

~~~
knieveltech
If inflation is higher than economic growth you get wealth destruction.

~~~
mechanical_fish
So, having found one or two glaring factual errors in the piece, I went
looking for more.

I can't easily find a chart of real GDP growth since 1950 from an official
source, but I did find the chart on this page - you have to scroll down.

<http://www.valueinvest.org/27.html>

Look for "GDP growth vs S&P 500 returns", the blue line. This should, I
believe, correct for inflation - that's what the whole "corrected for CPI"
thing is about.

Interesting things about this graph: national real GDP has been growing, and
there is no obvious discontinuity in the 1970s - sure, there was a big
recession then, but that's just a jog in the chart. Squinting at the data, it
looks like the average rate of growth is about the same immediately before and
after the 1970s; if anything the rate of growth is a tiny bit higher since
then.

So, either this chart is bogus or the OP is bogus. Having already caught the
OP citing false facts about domestic manufacturing output, I have my
suspicions. But feel free to cite a better GDP chart; it will be nice to have
in the files for when the next nonsense article comes along.

~~~
blueben
Instead of considering GDP alone, perhaps we need to be considering share of
GDP. We are significantly more people today than we were in 1950.

~~~
didroe
One of the charts in that link is GDP per capita adjusted for CPI, and it's
still shows growth at a pretty constant rate.

------
redrobot5050
>Think of all the examples of American innovation since the 1970s. How many
examples are not in the tech sector?

Um, I can think of thousands, but then again, I'm not some moron PhD. How
about all the innovation in the medical field? Better imaging technology like
the fMRI has come about since the 1970s. How about the cervical cancer
vaccine? How about Viagra? Flonaze?

How about airbags? Anti-Lock brakes? BioDiesel? Cars are safer, more fuel
efficient, more reliable, and all around better than they were in the 1970s.
It's not up for debate. Innovation is still innovation, even if cars existed
in the 1970s. By the same token, the cars coming out of detroit in the 1970s
were way better than the Model T. Why? Innovation!

On the energy front, we have new wind turbine designs. We have nuclear
batteries. We have off-shore wind. We have more efficient CO2 scrubbers. We
have LED lightbulbs and CFLs. We have hybrid drive trains in consumer
vehicles. We have shipping barges harnessing wind-power through computer-
controlled deployable sails.

On the social innovations, we see that seeking help from a mental health
specialist is no longer stigmatized. An entire generation is fighting to stay
healthy despite a lifetime diet of high fructose corn syrup. People are
attempting to return to the ways of buying locally and minimizing their
impact. Women continue to advance towards career and earning equality with
men.

Long story short, Academic prattles on long and hard about nothing.

~~~
nagrom
The key phrase is "American innovation". A lot (most?) of your examples come
from outside of America, I think. I know a lot of medical imaging and vaccine
research gets done in Europe, there's a lot of Nuclear design in the UK and
Russia, a lot of the off-shore wind stuff is done in Europe, many of the
automobile advances are German or Japanese.

He may be engaging a little in hyperbole, but he does have a kernel of a
point. Dismissing him because of his job is a little harsh.

~~~
redrobot5050
Do they? I know the American Healthcare system funds a lot of medical research
that doesn't happen in countries with socialized medicine. I'm not trying to
make a ideological point over one system being better over another, but drug
research, especially, seems to be funded by the 'vanity market' of consumer
brand name drugs. And our (arguably strong) patent system (while broken IMO)
provides a great incentive for developing and repurposing drugs.

Medical Imaging is a field of research that is global. I only know what is
being with people I've worked with in the past.

Vehicles, well, even if the technology was developed outside the United
States, our market was the motivation for the innovation. Audi invented "Shift
Lock" for automatic transmissions back in the 80s because they had the same
problem in the U.S. that Toyota does now -- consumers claiming of cars that
just accelerate forward and cannot be stopped. Shift Lock seemed to have put a
stop to that.

As for dismissing him because of his job, well, he brought it up 'My dad was a
professor and I'm a professor, but I'm in poorer than my father ever was".

The first thing I learned as the child of a PhD is that if you want to
actually have money to do things like travel, go on vacations, and afford
college for your children, its that you don't get a PhD unless its in
engineering or law. I went with engineering but only got a master's.

And it being my last week of finals, in my last semester for my master's, I'm
really, really tired of hearing academics drone on with little actual grasp of
reality. I apologize for the display.

~~~
nagrom
I can sympathise with it being exam week. Don't worry about it.

I think that the problem that you have with academics is that to be good at
research you must concentrate on that, and that alone. Teaching gets you
nothing, so the good researchers tend to put as little effort into it as
possible and the people who spend their time worrying about teaching are left
behind on the research front. Not always, but often. So, if someone's
interested in talking to you as a student, then they're more than likely poor
at research or really not interested in you.

If you can find the research-oriented staff on your campus and talk to them on
their own terms, I guarantee that your opinion of 'academics' will change.
You'll find a lot of interesting, dedicated people who do wonders on shoe-
string budgets, working long hours on things that they find fascinating. Of
course, these people tend not to get permanent jobs because of the amount of
hideous politics that abounds in the upper echelons of academia...

------
tokenadult
"The problem is that if you don’t build anything you cannot possibly innovate
--you cannot innovate if most of your economy is service--or anything other
than manufacturing."

Quoted for disagreement. (Was this posted for disagreement?) I think plenty of
HN participants know that innovation is possible in service industries. They
have seen it done, because they have done it themselves. That means wealth-
creation is possible in an economy based largely on services.

After edit: Upon a bit more reflection, it appears that the author of the
submitted article has had an extremely poor education in economics.

~~~
david927
You can innovate in service industries, but service industries contract when
an economy contracts, whereas manufacturing and industry expands.

e.g. Who cares if my Barista can be faster and more efficient? I just want
coffee for less.

The problem with innovation is that it's leaky. There's no national border to
it. America is a tremendously innovative country, but there's nothing stopping
that innovation from finding its way to countries where they'll produce that
same innovative product for less. (e.g. Look at the iPad and forthcoming Adam
from India.)

Economies are equalizing. Nothing, including innovation, will stem that tide.

~~~
hga
Well, more like "service industries _necessarily_ contract when an economy
contracts (unless they help others deal with the government)", "whereas
manufacturing and industry _may_ expand."

E.g. your solution to "coffee for less" may be making your own, which will
involve some equipment purchases on your part, but on the other hand the
coffee shops you and people like you used to frequent won't be buying more
equipment (in fact, new entrants/shops will likely be buying used but
serviceable stuff from failed shops).

Getting outside of the service field, lots of people including my father have
decided to drive their current vehicles much longer than they'd previously
planned. Auto companies are seeing much less demand due to that sort of thing
(uncertainty on the part of my father, others just don't have the money) and
are buying less capital equipment, tooling, etc.

------
merraksh
The author seems to appreciate the wealth produced by _ideas_ , at least here:

 _Why do I finger innovation? Because innovation defies all laws of
conservation: with innovation, you create wealth out of nothing. One day, you
have nothing in your hand. The next day you have created, out of pure
unadulterated thought, something that people want bad enough to give you money
for it. You have created a thing of value. You have created wealth.

Out of nothing._

But then he goes on and (imho) contradicts himself, claiming that
_manufacturing_ only creates wealth, not ideas:

 _We don’t build anything here anymore, outside of tech. Kitchen appliances,
power systems, washers/dryers, airplanes, raw materials, electronics, trucks,
ships, even satellites these days — nothing is built here. We are no longer
the only player in any of these markets; for nearly all we’re not even the
predominant one; for most we don’t even play. We stopped manufacturing, and
with that we stopped innovating. In industries where we still do
manufacturing, we innovate like mad, but the number of industries is
shrinking, and I fear that the economic footprint of those industries as a
percentage of the global economy is also shrinking. The bottom line: even
though we are an innovative people, our innovations are a drop in the global
bucket. Meaning that our country’s growth will largely be static, and mostly
in the downward slope compared to elsewhere._

I'm not sure what he thinks wealth comes from: ideas or manufacturing.

~~~
j_baker
> I'm not sure what he thinks wealth comes from: ideas or manufacturing.

It _is_ possible for wealth to come from both.

~~~
merraksh
While I agree with that, I thought he said the only source of wealth is ideas
and then say it's manufacturing instead.

------
mattmaroon
He's making a huge mistake by applying averages to EVERYONE. He does this
routinely:

"Bottom line: every individual in the country became wealthier over time.

I’m not talking about companies, I’m talking about individuals. This is why,
for centuries, every American child fully expected to do better than his/her
parents. Every parent’s dream of seeing his/her children do well (financially)
came true."

The problem is, that was never entirely true (clearly not everyone did better
than their parents) and it's become less true over time, especially since the
1980's.

Since then we've had a seismic shift of wealth away from the middle class and
to the upper class. The fact is that the average middle class American is
doing about the same as their parents, while the average rich American is
doing much better.

The why of this is debated. It's some combination of Reaganomics and
globalization. But the fact is that simply adding a percent of growth won't
help the problem if it all goes to the rich.

------
jshen
"In the US, it used to be that every year you could expect to be wealthier.
Your purchasing power grew over time: you could afford things you couldn’t the
year before. Your salary increase every year outpaced inflation."

I think the author is from a different socio-economic-status than me. My
parents didn't believe they were going to be wealthier year after year. My
grandfather (i lived with my grandparents) cut sheet metal for a living. I
remember my life being pretty good when I was little, then the recession of
the 80's hit, and we were on food stamps. Certainly not better year after
year.

Maybe that was a fluke, but if I go back one more generation, my great
grandmother lived through the great depression. She didn't believe she would
be better off year after year. In fact, she was super paranoid about the
opposite happening. She used to hide food around the house "just in case".

Also, no one in my family got a salary, maybe that is a give away to the
different americas we seem to have grown up in.

Sorry, I have a hard time with "essays" where the first paragraph seems false
to me.

------
tseabrooks
Interesting read. I wonder what the author thinks of personal debt. From where
I'm sitting it seems like massive amounts of personal debt are the problem. I
don't think my grandma had any credit cards a car payment or a mortgage
costing her about a third of her take home pay.

Hard to come out on top when you are spending 5 - 30% more for an item than
inflation says you should thanks to interest.

~~~
allenp
This is an interesting point - I wonder how debt also impacts individual risk
aversion and wealth accumulation and if these effects can be seen (measured)
in the post-mid-century US.

~~~
lsc
I would assume that debit would encourage risk-seeking behaviour. But, outside
of real estate speculation, which, until recently has been seen as not very
risky at all, I haven't seen it.

------
jbellis
Less hand-waving, more economics: <http://www.themoneyillusion.com/?p=4954>

------
dpatru
Investment, defined as current production used (saved and invested) for future
growth, is critical to growth. Since the federal reserve has gotten control of
the dollar, the dollar has been steadily dropping in value. This discourages
savings and investment and rewards borrowing and consumption. Also, the
government has been steadily growing. This crowds out investment. Also,
government regulation discourages investment. As investment decreases, so does
growth.

~~~
sesqu
Well, borrowing is just using future production for current growth, which is
more efficient but less reliable. Assuming the future production will be there
(and that otherwise someone will take care of it for a small fee), that's
obviously more efficient.

It's pretty clear that proper investment is the only way to get growth. It's
less clear whose wealth should be invested - that's why we have both borrowing
and regulation, and by extension consumption (if you assume ceteris paribus,
you damn well better advance entrenchment).

Innovation and efficiency are at odds with one another, and as we get more and
more complexity, the only innovations easily reachable are paradigm shifts.
What we might need next is a way to simulate and bootstrap scenarios further
and further from the local optimum - and that might have to be government
investment.

------
jacoblyles
Oo, fun! A populist economic screed!

A growth rate of 2% instead of 3% doesn't mean you're getting poorer instead
of richer. It means your country is getting richer at a 2% rate. And it
certainly doesn't give grandpa evidence to blame all the perceived economic
woes of the country on the things that were better back in his day.

But of course, this is not an evidence based article. This is a mindless rant.

------
Avshalom
>>an entire generation of high-school graduates went to college and learned to
loathe industry. They learned that working in the factories, in the design
houses, in the drawing rooms — they learned that type of work was beneath
them.

>>And so innovation died, ... the brilliant minds that would have otherwise
gone into industry ... went into the legal profession or the medical field or
investment banking.

This seems like a hell of a non sequitur.

------
jackfoxy
While I may be sympathetic to some of his thesis, I stopped reading when I
realized he was making up numbers, or getting them from an unreliable source.
The 80's and 90's were just fine for growth, thank you, and held for the most
part above his magic 3% growth (82 and 91 were recession years) even so
average GDP growth in both spans 81-90 and 91-2000 was 3.2%. Here are the
numbers courtesy of the Statistical abstract of the United States calculating
GDP in constant 1996 dollars:

1981 2.5% 1982 -2.0% 1983 4.3% 1984 7.3% 1985 3.8% 1986 3.4% 1987 3.4% 1988
4.2% 1989 3.5% 1990 1.8% 1991 -0.5% 1992 3.0% 1993 2.7% 1994 4.0% 1995 2.7%
1996 3.6% 1997 4.4% 1998 4.3% 1999 4.1% 2000 3.8% 2001 0.3% 2002 2.4%

------
jaekwon
I suspect that our money is not working for us.

Money is a means of accounting, a proxy for value, but money != value/wealth.

Because ALL of our money is by nature exponential-interest-bearing debt money,
it is guaranteed that in due time the debt will overwhelm the system. We've
been good for 200 years because our interest rates have been sufficiently low,
and bankruptcies have been injecting money into the system (at the price of
inflation, which is essentially just a hidden tax).

One understands this once s/he understand the nature of the National-Debt and
the function of the Federal Reserve. The personal debt per citizen is now over
$50K, and the nature of our money is such that this debt CANNOT BE PAID OFF in
full. How can we focus on creating real value when we're all chasing the
ghost?

Interest may have driven innovation in the past, but it's basically just a
slave-driver now. Any doctor can tell you.

BTW, if you get this, and you want to work on a long term solution with me,
email jae@glyphtree.com

------
tjic
> You can even see it in things like the government’s long-term programs, for
> example Social Security — who in the hell in their right mind would start a
> long-term program without an appropriate plan for funding it?

A politician trying to get reelected by spending other people's money.

------
acg
There are other forces that have a part to play in this, although having
engineering and other creative industries is important:

1, The change in the nature of money. Once money hand an intrinsic value, it
was linked to a commodity: gold or silver. I thought one of the points of fiat
money was if you put money in a teapot today, it would be worth less tomorrow.
To increase wealth don't people need to maintain the ratio of money they have
to the total money in circulation? If the government prints more money the
money in circulation is worth a little less.

2, Competition, once the world was a lot less equal. America and some European
countries more-or-less had all the technology and drove the pace of change.

~~~
natrius
There's an easy way to avoid being harmed by inflation: Don't hold cash. If
you wish the currency was backed by gold so you could put it in a teapot, buy
gold with your fiat money and put it in a teapot.

An economy in which the primary currency of trade can deflate _sucks_. We've
been there.

~~~
acg
I wasn't advocating holding money in a teapot, just that erosion of wealth is
built into the system. I was not also advocating the gold standard, just
saying there are other dimensions why some professions have not attracted
money. To reduce wages salaries just need to be static.

------
hristov
That decline of wealth coincides with American politicians finally killing off
the new deal and Keynesian economic policies and falling hook line and sinker
for the Chicago school swindle.

You can argue that economic growth was stopped before that point, but here
that is because of the fuel crisis which was of course an external event that
had nothing to do with US economic policy. If you correct for the fuel crisis,
the US growth malaise starts with Reagan and his policies. And it just keeps
on going only being very partially and temporarily alleviated by the ever so
slightly populist policies of Clinton.

------
DanielBMarkham
This is how I read this:

Yadda yadda blah blah blah -- real income growth curve used to be 3% (mostly
true)

blah blah blah -- New income curve is 2%. Changed in 1970s (think so. So far
so good)

yadda yadda yadda -- wise president Carter warned us of this but nationalistic
Reagan glossed it over and it became anathema

WTF? Is this a politics article or something about the economy?

blah blah blah -- _This is what it means to fall off a growth curve._ (a bit
extreme of an extreme judgment, at the least)

blah blah blah _I will be poorer than my father_

Okay. You get a couple of WTFs for any article. But we're done here. The
growth curve, presumably from sticking along so far, is now 2%, not 3%. I
poked around a bit, and I didn't see where you said we were on a negative
growth curve. Plus any reasonable person can see that even at a negative
growth, our kids are going to have a tremendously better life than we did. The
very poor today are much better than the richest of rich from 70 BCE

I did not finish. From the pattern so far, I would expect lots more
exaggerations and oversimplifications in order to make some quasi political
point. I'm just guessing though. Sorry if I missed a good read. I thought it
was important to show how these things are read.

Remember -- if you are going to put in a WTF, either do it at the beginning
and then support it, or build up to it and hit it as a climax. But don't
sprinkle them throughout the essay. Readers would like you to tell a story
that has some conclusion, even if they disagree. But if you fail to establish
common ground, we're out of here.

~~~
jacobolus
Inflation-adjusted wages haven’t had 2 percent growth since the 70s; they’ve
stagnated or slightly decreased. Productivity keeps improving, but wages don’t
keep up.

Edit:

Hmm, I did some googling, and there seem to be substantially divergent
charts/numbers floating around. Some numbers have real wages going down,
others have them staying approximately flat, and some more optimistic
estimates have ~2% rises. I don’t have the time to do deep investigation.

\----

The US also has an unprecedented and unique-among-western-countries
incarceration rate; people have substantially more debt (college loans, credit
card debt, etc.) than they did a few decades ago, and the laws are much less
friendly to debtors than they were between the 40s and the 70s; families are
less stable than before, and there are more working single mothers. There are
an unacceptably high (in my opinion) number of uninsured children. And so on.

In other words, we face all manner of difficult social challenges. At the same
time, US society is in many ways much more tolerant than it was 30 or 40 years
ago. We have many nifty technological tools that improve people’s lives, safer
cars, better communications infrastructure, some great medical advances, etc.
All in all, I’m optimistic about the future, but it is true that the American
working class could use help from our regulatory/economic policy.

------
rajatmehta1
Some points from the article are really good..specially innovation is more
important then cost cutting...isn't that what Apple does, they innovate and
create new products that creates a whole market altogether, imagine what would
have happened if they would have got into only services (they would have made
money still no doubt), but would they have been at the same place they are
now.

------
drblast
What the author doesn't mention is that continual 3% or 2% growth represents
exponential, not linear, growth of an economy. It can't continue indefinitely.

If my economy is growing, this year's 2% growth requires substantially more
innovation and resources than last year's 2% growth, simply because it's a
larger pie.

~~~
SapphireSun
Luckily we also have exponentially more individuals to help out.

------
huherto
Why did the US went from 3% to 2% growth?

My guess is that before it had a very low population density and a lot of
fertile land. That changed when population density increased. Check the
conclusions of this article. <http://mises.org/daily/1568>

------
Adam503
Trade unions built the middle class.

No trade unions to speak of... no middle class to speak of.

Without a legitimate threat of strikes costing business interests big money in
lost profits, there's no reason for businesses to pay workers a reasonable
wage for their labor.

------
chegra
Most of the article, I think he is trying to connect something that isnt
there. But he is unto something with the STEM students going into Professional
Vocation.

Face it, it's just as much hardship to do these profession but the return is
greater.

------
drewcrawford
We've stopped manufacturing, but have we stopped designing? No.

The real money is made not by the people who make the stuff physically, but
the people that design the stuff that is made. In that sense, we, too, are
"making things out of nothing".

------
metamemetics
Probably bigger factors:

1) pre-1970s income tax used to be 90% for the highest tax bracket.

2) Nixon killing the Bretton Woods system in 1971.

------
RyanMcGreal
Something else happened in the 1970s: the US crossed its oil production peak
and imports started increasing as a share of total oil consumed.

------
viggity
"I can’t afford any of the houses I grew up in — and it’s not like my dad is a
millionaire or anything; he’s a professor just like me. Identical social
standing. The difference: I am poorer than he was. My children will be poorer
than me."

Bullshit. You may have less money in the bank, but that doesn't make you
poorer. Could your dad afford to buy a 65" TV when you where a kid - NO. They
didn't even exist. Can you afford a holographic entertainment system - No,
they don't really exist right now, but I bet you're kids will have one when
they're grown up.

Stop looking at money and start looking at standard of living.

~~~
starkfist
Is your argument that if your TV is big enough you won't notice your otherwise
poor standard of living?

~~~
jquery
I think he's arguing that money != wealth, and that other things contribute to
standard of living other than how big one's house is.

~~~
starkfist
Living in a $2400/m studio apartment for a few months is a good way to cure
one's self of this conceit.

~~~
CWuestefeld
Why does everyone insist on defining wealth in terms of housing?

Today, virtually everyone has air conditioning. When I was a kid, this was
quite rare.

Today , everyone has at least one telephone. I can remember families sharing
party lines, or even having no phone at all.

Today, most infections can be readily cured (yes, even for people without
insurance!). For my grandparents this was unthinkable.

Today I can store food for a long time, and enjoy a cold drink whenever I
want. A century ago, who could have that?

Today we have so much food available to us that the overriding health concern
is obesity.

Today I can listen to virtually any piece of music, or view any piece of art,
on the slightest whim, in the comfort of my favorite chair. That was
unthinkable when I was a child.

All these things are within the economic reach of virtually everyone, at least
if he's got the most basic job. Yet even a century ago they could be enjoyed
only by kings, if that.

------
pw0ncakes
That he can't afford the house he grew up in has to do mainly with two
factors:

1\. House prices are still ridiculously high, since cities and college towns
haven't hit the back side of the bubble yet.

2\. The academia job market has shit all over its knees.

The economic tone of the past 35 years isn't growth or decline but stagnation.
Some people are better off than their parents; some are worse off. This has
always been the case, but it used to be that being better off was far more
common. Now it's 50/50.

Economic growth has been decent in the past 35 years, and world economic
growth has is at record highs, but the upper class (which is better described
as a malevolent and extremely powerful interest group than any kind of formal
conspiracy; of the latter, there is none) has done an excellent job of
siphoning off all of the gains for themselves, leaving the lower 99.5% of the
American population in essential stagnation. They don't want the American
lower- and middle-classes to get poorer (they'll revolt) or richer (they'll
challenge their position) but to stay right where they are.

------
earl
So, I find this article very strange. The author seems quite intelligent, yet
he has avoided learning much of anything about macroeconomic history. Is he
really so naive to think that economists haven't noticed and thought about
this phenomena?

He could start with two simple things: first, America left WWII with
essentially the rest of the industrialized world flattened. It took everyone
else a while to rebuild, but they eventually did. The prosperity of America
post WWII is a historical outlier hopefully never to be repeated.

Second, America for a long time had policies that grew the middle class.
Without starting a political pissing match, it's pretty clear that either
those policies or their effect is gone. Wealth accruing at a disproportional
rate to particular sectors of society isn't just happenstance or the "right"
outcome in some moral scheme, but rather the outcome of specific government
policy.

If the author wants to understand these things, he could start by reading Brad
DeLong's blog and / or asking him for book recommendations.

