
Mad Max Economics - breadbox
http://bit-player.org/2015/mad-max-economics
======
lumberjack
If there is a problem with our economy it is much more likely that it is a
case of suboptimal capital investment.

It's not like we lack goals and needs.

There is some hint to this in the ridiculous cash reserves held by some of the
big dogs:

[http://americasmarkets.usatoday.com/2015/04/27/194b-apple-
ca...](http://americasmarkets.usatoday.com/2015/04/27/194b-apple-cash-pile-
hits-record/)

They are probably trying very hard to make good use of that money but it is
very likely that them being in charge of all that capital is not the most
optimal way to generate growth. Each of them is only specialized in a select
few markets so for this capital allocation to be optimal it would mean that
there would need to be exponential growth in each single market in which the
capital is currently held. That is much harder than having exponential growth
overall.

~~~
jevgeni
It doesn't really matter how specialized they are, if they hold it _in cash_.

And if it is "just" a cash position on their bank accounts, it doesn't mean
that said money isn't invested or isn't working. It means that the banks have
194 billion dollars of almost free funding from Apple for their investments.

~~~
ucaetano
That's not cash. From their 10K: Cash and cash equivalents: $14B Short-term
marketable securities: $11B Long-term marketable securities: $130B

~~~
jevgeni
Even better. Most of the so called "cash pile" is hard at work.

~~~
ucaetano
Exactly, all that cash is hard at work being invested.

The structure of the portfolio allocation is also interesting (in rough
numbers): 10% cash, 10% short term, 80% long term.

------
roymurdock
Author confuses units from step 1 to step 2 of his arguments.

Step 1 starts with an "S" shaped graph of GDP/Capita. Step 2 shows derivative
of the curve, but is labeled as dGDP/dt, ignoring dCapita/dt. Author does not
consider historical changes in demographics when GDP growth slows.

See demographic changes in Japan, Europe, US for examples of how population
growth rates change due to economic and war-related shocks. Also see
motivation for China ending the 1 child policy - they want to bring the cost
of labor back down and they need a higher pop growth rate to generate enough
economic activity to pay pensions, retirement, healthcare for expensive
retirement-age cohort where people are living longer and thus costing the
country much more.

Author should have challenged Porter's initial claim: "Anyone who believes
exponential growth can go on forever in a finite world is either a madman or
an economist."

While it makes for a good soundbyte, it ignores the symbiotic and (usually)
directly proportional but lagged/leading relationship of economic growth and
population growth.

~~~
tormeh
It also ignores the question of what economic growth is. Infinite economic
growth does not mean infinite potatoes. Infinite economic growth means
infinite increase in perceived worth of stuff we make. That's eminently
doable. I mean, growth has shifted to services long ago.

We can't make infinite potatoes, but that's not required for infinite growth.

~~~
Retric
If potatoes have value, the total economy is expressible in in some number of
potatoes. Unbound growth requires the relative value of potatoes to always
decrease. However, the same must be said for every other physical good
including gold and land etc.

Thus, economic growth is only infinite when _all_ physical goods have zero
value. That might happen, but it seems really unlikely.

~~~
tormeh
As inflation-adjusted GDP approaches infinity the value of potatoes must
approach zero, yes. Of course, were demand for potatoes to suddenly increase,
the value of potatoes would too, so it does not imply any ability to buy an
earth-sized ball of potatoes for a dollar in the near future. But the price of
potatoes, at typical demand, must approach zero, yes.

The value of potatoes have been going towards zero for a long time, anyway.
It's not hard to envisage a future with self-maintaining automated farming and
fusion energy where potatoes are basically free.

~~~
Retric
Self maintained automated farms are not going to be handing out beach front
houses any time soon. Further, an economy where everyone get's their own
complete copy of earth and can teleport anywhere is still finite.

------
11thEarlOfMar
Humanity's ability to produce sufficient food is likely capable of
outstripping population growth for a long, long time. For example, over the
last 80 years, corn yields in bushels per acre have increased 6 fold in the US
[0], where the population has less than tripled. Kansas wheat yields have
tripled from 12 to 36 bushels over the same period [1]. Granted, we eat much
more varied diet than corn and wheat, but we've also managed to bring the cost
of feeding ourselves down as the population has increased. Per-capita spending
(as a % of income) on food in the US has dropped 43% since 1960 [2], which may
indicate that the productivity of the food industry is increasing relative to
population growth. (have to factor in per-capita income, which I don't have
time for...).

What's more relevant to me is that nations with the most mature economies also
have the lowest population growth rates. 35 of 241 nations have negative
population growth, including Japan, Germany, Poland and Russia. The US has
less than 1% growth [3].

So it seems that all things being equal, the Earth's population will trend
asymptotically to some maximum due to human nature, and not out of control
into crisis, unless it is somehow self-imposed by politics. And it seems
likely to me that we'll be able to feed all those people by means of
increasing productivity in agriculture and distribution.

[0]
[https://www.washingtonpost.com/news/wonk/wp/2012/08/16/a-bri...](https://www.washingtonpost.com/news/wonk/wp/2012/08/16/a-brief-
history-of-u-s-corn-in-one-chart/)

[1]
[http://www.nass.usda.gov/Statistics_by_State/Kansas/Publicat...](http://www.nass.usda.gov/Statistics_by_State/Kansas/Publications/Crops/whthist.pdf)

[2] [http://www.ers.usda.gov/data-products/chart-
gallery/detail.a...](http://www.ers.usda.gov/data-products/chart-
gallery/detail.aspx?chartId=52216)

[3]
[https://en.wikipedia.org/wiki/List_of_countries_by_populatio...](https://en.wikipedia.org/wiki/List_of_countries_by_population_growth_rate)

~~~
Gravityloss
How much of that increased agricultural production is fueled by synthetic
nitrogen fertilizers created with natural gas?

------
rorykoehler
>Without growth, he says, economic life becomes a zero-sum game. “As Martin
Wolf, the Financial Times commentator has noted, the option for everybody to
become better off—where one person’s gain needn’t require another’s loss—was
critical for the development and spread of the consensual politics that
underpin democratic rule.” In other words, the function of economic growth is
to blunt the force of envy in a world with highly skewed distributions of
income and wealth.

The answer lies right here but the author fails to consider it. We could
evolve our economic systems to redistribute obscene wealth and build a more
egalitarian society. The ones who give in this scenario only lose on paper but
they wouldn't notice any difference in their day to day. This is especially
true once automation becomes the norm. The article is too simplistic and fails
to consider a host of important variables which are only now coming into play.

~~~
vinceguidry
> We could evolve our economic systems to redistribute obscene wealth and
> build a more egalitarian society.

There is not enough of what everyone wants. There's no way to get it. Let's
take a trivial example. There are a number of companies out there making
smartphones. What if everyone wanted iPhones? There may be enough iPhones out
there to give one to everyone in, say, New York City. There is not enough, and
there will never be enough iPhones to give to everyone in the entire world.

If you're just talking about money, then that's even worse. If you
redistributed all the wealth in the entire world among 7 billion people, every
person in the whole world would get a check for the princely sum of $8.57.
(Obtained by dividing the entire world's money supply, found on Google, by 7
billion, roughly how many people there are in the world right now) Meanwhile
every single organization, every single company doing anything useful for the
world has been completely decapitalized.

There simply isn't enough wealth in the world. And making everyone equal is
the best way I can think of to ensure that no one will ever have the ability
to make more wealth. Like it or not, we're stuck with inequality for the
foreseeable future. Either people are going to be unequal in purchasing power
terms, or in the fact that production capacities for all possible luxuries
people might want are not and will never be world-scale. You can't give
everyone on the planet a NYC penthouse. And until you do, people will complain
about inequality. We need another way of thinking about the problems of the
world than that some people have lots and lots of things that other people
don't.

~~~
rorykoehler
I never said make everyone equal. I said redistribute obscene wealth. There is
a whole greyscale between black and white.

~~~
vinceguidry
Where does that get us? Some small number of people get more wealth.
Redistribution is not a solution for anything, all it does is destroy stuff.

I'm all for the expansion of classes that aren't ultra-rich and ultra-poor.
But that process is already happening as fast as it really can happen, it's
what globalization is if you can look at it with a rational eye. Through
capitalism and markets. Big political solutions are sledgehammers that tend to
only wreck things.

~~~
rorykoehler
Globalization is a big political solution that favours only the ultra-wealthy.
Ensuring people have purchasing power is the only way to ensure the economy
doesn't become a zero-sum game. The way things are going, companies with only
a handful of employees can be worth billions. Where does that leave the rest
of us?

~~~
vinceguidry
> Ensuring people have purchasing power is the only way to ensure the economy
> doesn't become a zero-sum game.

How are you going to do this? You can't just print money and give it to them.
If you do that, then you're either just creating another, tiny, class of
people, or if you do it for everyone, then you're just devaluing your currency
through mass inflation. If you take it from people that do have it, then you
either have a huge management problem, how are you going to decide which
wealth is worth redistributing and which is worth leaving alone, or you'll
have mass chaos.

> The way things are going, companies with only a handful of employees can be
> worth billions.

That's just, like, your opinion man. Mine is that the living standards of the
poor have markedly improved in the last 50 years and continue to improve.
Purchasing power is only one thing. There's access to food, political
stability, access to a social ladder. All of these things are more important
than how many dollars are in their pocket. Even the most autocratic nations
have in the past few years had to open up.

------
ucaetano
Funny how this article would fit right in at the apex of the Roman Empire.
Their "Mad Max" era was just the middle ages.

And how it would fit right in the middle of the "middle ages" if you're
looking at it from the perspective of the caliphates.

And for the Mongols, their "Genghis Khan" era was equivalent to our modern
era.

------
k__
I don't understand these problems.

The size of our population grows and, because of scientific advance, the
amount one person produces increases too.

As long as non of those two factors becomes negative, everything should work
fine.

The only problem I see in the future is, that we converted too much of earths
bio mass to humans before we are able to get to other planets.

~~~
crpatino
No. the amount each person produces does not increase, certainly not because
scientific advance.

You see per capita productivity increase, where "productivity" not necesarily
means "producing more". If you can cut your production in one third and get
away with doubling your prices (inelastic market), that couonts as
productivity increase: you are producing more Profits with the same Capital
investment. If on top of that you go and lay off 40% of your work force, you
get the per capita part as well: You are running the same Productive Assets
with less Labour.

That last is always a goal of Management, because of (19th century) reasons.

------
nopinsight
Economic growth does not strictly require _specific_ raw materials and natural
resources. With ingenuity and time, it is almost always possible to utilize
alternative resources or recycle/reuse existing ones (e.g. seawater
desalination).

The constraints seem to be our intelligence and perhaps energy. Energy could
probably be solved with sufficient intelligence as well--e.g. nuclear fusion.

Negative externalities, such as anthropogenic climate change, are a real
concern. We do not yet have good ways to neutralize all of those but it does
not mean we never will. It is in some sense a race between consumption and
invention.

John McCarthy, a father of AI, wrote a mini-site on this with some strong
arguments: Progress and its Sustainability: [http://www-
formal.stanford.edu/jmc/progress/index.html](http://www-
formal.stanford.edu/jmc/progress/index.html)

------
Voloskaya
Isn't the first graph erroneous (and subsequantly the others)?

How can the GDP/Capita in the Mad Max age stay the same than the GDP/Capita in
~2050?

Shouldn't it go back to the same level as the GDP/Capita during the stone age?

I'm probably missing something there.

~~~
lmm
The idea he's criticizing is that constant GDP, zero-growth, would result in a
mad-max future even if that constant was the 2050 level.

~~~
Voloskaya
Thanks, that totally flied over me.

------
Gravityloss
Let's get material. How long would an economist expect there to be exponential
growth in electricity consumption? Steel production? Indium usage?

~~~
pdonis
_> How long would an economist expect there to be exponential growth in
electricity consumption? Steel production? Indium usage?_

Irrelevant, because exponential growth of wealth does not depend on
exponential growth in any of these things, or in anything material. Wealth is
what you can do, not how much stuff you have; as technology advances, we
figure out ways to do the same things as we did before, using fewer material
resources (not to mention doing new things that no one could do before--like
posting here).

~~~
Gravityloss
I think it's a highly relevant distinction and leads to a very different view
of the future.

------
wodenokoto
with inflation, flat growth is negative growth, so at least there's that.

------
stillsut
Just remember next time you talk about the 'War on the middle class' who's
trying to give it ALL away in Paris this week.

------
oleganza
Exponential growth is needed only for keynesian economists because it keeps
their pyramid scheme called welfare state running. If you have a decent one-
digit economy growth on non-inflatable money (bitcoin), then everything Just
Works. Money does not suddenly lose all its value because no one is printing
it to extend never-ending credit that leads to inevitable collapse of inflated
expectations and reality of finite supply of resources.

~~~
harryh
This isn't a story about money and/or inflation. It's a story about goods and
services and our ability (or lack thereof) to make more and more of them.

~~~
oleganza
Yup. And my comment is about when it does and when it does not matter that you
make more and more of them. If your society is in fiat credit bubble, then you
are doomed into Mad Max Scenario when you slow down the exponential growth
(bubble collapses). But if you do not have any bubble in the first place, then
slow down is just a slow down. People make less people, consume less, wait for
better days, "time slows down" so to speak if we are talking about
technological progress. No Mad Max scenario at all.

~~~
harryh
No. That is wrong.

People are much happier and get along much better with everyone else when they
expect tomorrow to be better than yesterday.

