Instead, large corporations have been accumulating historically high amounts of cash, which is just sitting on their balance sheets, idle.
It's definitely not due to lack of greed. Corporations in the US are very much driven by profit motives: whenever they identify an opportunity to make a profit from customers, they take advantage of it.
Therefore, it must be that they aren't identifying enough attractive opportunities in which to invest that growing mountain of cash.
Meanwhile, the US middle class appears to be struggling with stagnant wages and limited opportunity.
We have engine trouble, and no agreement on how to fix it.
The thing is, when you hoard wealth as numbers on a balance sheet rather than spending it, you are actually destroying that wealth. Money which is not in motion is not money.
I find it absolutely insane that we take the excess, the bounty, the benefit of the efforts of centuries of technological and industrial progress, and rather than enjoying those benefits, convert them into numbers in a ledger that one can look at and go "uh huh", which provide no benefit to man nor beast.
It's the biggest scam ever pulled, and we all willingly engage in it. Marx pointed it out as "the accumulation and destruction of crystallised labour-time by the owners of the means of production" (I paraphrase) in Kapital - and absolutely bingo has changed since then.
UBI is in my mind the way to go - tax the ever living hell out of cash reserves, which would promote re-investment and the use of cash - and use the proceeds from that tax to pay a UBI.
This money is not simply sitting under a mattress. It's being reinvested, often in low risk treasury bonds, lowering the cost of borrowing for the government. A small fraction of it might be allocated to equity, and a smaller fraction of that might be allocated to startups, etc.
Setting aside the UBI goal, even if they weren't returning the money to the investment cycle, your funding scheme is difficult to implement. The importance of cash reserves varies from company to company:
1. Some have pretty much no reserves, and when the overnight market collapsed in 2008, their ability to make payroll was suddenly in question. Otherwise productive companies had operations jeopardized by their financial arrangement. A tax on cash reserves would create additional incentive to produce more risky companies.
2. Banks have huge liabilites and cash reserves in the form of deposits. They're even required to keep certain amounts of money in liquid cash reserves. Do you propose offsetting cash on hand with liabilities owed?
3. Apple actually took out a huge loan against overseas money to fund a dividend. Overseas money is currently not taxable, do you wish to change that? Do you even need to tax reserves if you do?
4. Using the same company for another example: Apple is reputed to finance their supplier's manufacturing facilities. Do you want non-Apple companies to make investments in their company, their supply chain, etc. they currently aren't making? One has to assume boards don't approve capital investments aren't profitable. If the choices are pay a taxable dividend, hold as highly taxable cash, or invest it at a slightly negative, we may see more unproductive investments.
Note that I'm not against UBI, but we have to think about how changes to tax law results in changes in behavior.
What makes you think they would have been able to manage an even bigger stimulus any more effectively
Quite true. But if the government then takes the cheap bond-prices, turns around, and implements fiscal austerity (because it ostensibly has too hard a time paying back those low-risk, low-interest bonds!), well then we've got a very funny situation. Then we've got the situation that people are being taxed so that the government can pay for-profit firms to hold their money while producing fewer public services and goods than before.
Or, in very short, we've then got a situation in which the public is being forced to pay tribute to large financial firms.
Reinvesting cash in low return investments is not what a company should be about (unless it's an insurance company). It's basic company finance that if you can't reinvest into the company to increase earnings at a greater rate than a bond, then you should get rid of the cash (pay dividends). I'm not talking about apple here, just pointing out that reinvesting into low risk treasuries isn't much different to putting it under a mattress.
Absolutely the most important thing that can be said. My response to moralizing and angst over how the economically disadvantaged spend welfare money, or judgment about "lazy" people who wouldn't continue to work in the face of basic income is "who gives a fuck? As long as they spend the money, its moving and the economy moves with it."
Money has gravity. It will always move towards those concentrations of wealth that exist at the top and away from the bottom. Without a mechanism of some kind to remove it from the top and inject it into the bottom, it will never move in any way that provides benefit to the larger economy, and might as well be a closed system.
> "who gives a fuck? As long as they spend the money, its moving and the economy moves with it."
What they spend it on matters. The economy and thus society is shaped by consumer demand. Not just how much people want(and can afford), but what people want (and can afford).
It is insane to see this kind of basic communist rhetoric on Hackernews.
If I hide a billion dollar under my mattress for decades, it means that there's that much less dollars chasing goods and services. The effect will be as if those dollars had been destroyed : the total wealth will remain constant, but the value of all the other dollars remaining in the circulation will increase.
Let me repeat : the wealth remains constant, it is not destroyed. Cars in driveways are not going to explode. Crops will not spontaneously catch in fire. People will not forget the skills they have.
Which causes deflation. Specifically in this case wage deflation. And then because people have less money, they can't use their cars and crops and skills because people don't have as much money to pay for gas or food or the services of others.
The resulting deflationary spiral is self-reinforcing. Fear of this state is why central banks try to create a consistent level of inflation.
In fact, the system is bistable. Inflation has the same self-reinforcing spiral, and we're living it! The moneyprinters' metric (CPI) has become the goal unto itself - anything technological keeps getting ever-cheaper, so anything that can be financialized (the quickest feedback path where printed money returns to the CPI) shoots through the roof.
But you're right that the system has some bistability. A deflationary spiral with declining production and lifestyle can sustain itself for a long time. It is also sustainable to maintain a moderate inflationary spiral with ever increasing production and improving lifestyle.
Given that choice, isn't it obvious why bankers try to keep the latter option going?
But it is not actually bistable. Keeping moderate inflation going requires continual intervention. It is easy to fall off the rails into a hyper-inflationary disaster. It is easy to fall off the rails the other way into a deflationary disaster. And continued success creates the moral hazard of overconfidence in the stability of the system. This overconfidence leads to risky behavior which in the end WILL result in disaster.
We came close to that in 2008.
It is unclear to me whether it is better to have regular smaller disasters, or occasional large ones. But pushing off the next disaster is always better in the short run.
I'd say we're in the making of a hyper-inflationary disaster, as central banks continue to apply their top-down prescription of "productivity", forcing people to work full time make-work jobs (eg FIRE) rather than letting the majority slowly build up savings and create economic conditions that naturally lead to working less (as one would expect from uh, technological progress). The message just won't be received until the petrodollar has completely disintegrated though.
So it isn't necessarily a problem if you can wait a year and then buy a better computer with the same money. But it IS a problem if your best investment strategy for that year would have been to put the money under the mattress instead of loaning it out, investing in stocks, or some other activity that keeps money circulating.
As for a hyper-inflationary disaster, the exact monetary injection you use to stave off deflation can also create inflation. This is why central banks have such a challenge on their hands. They are trying to balance the economy between nasty extremes, while trying to satisfy contradictory goals.
Hoarding causes general deflation; to capital, as well as wages. Its effect is the same as distributing the value of the hoarded money across the money supply.
Deflation causes people to feel as if they have more money, not less. Money that is more valuable (deflated), purchases more value.
And while deflation has knock-on effects that are problematic, I'll add that the government backing any fiat currency has ample tools to combat it (creating inflation by printing currency).
Eventually causes general deflation. The whole problem with deflation is that it isn't evenly distributed. If the price of everything whatsoever increased or decreased by the same percentage at the same time then there would be no trouble.
The problem is the period of time between when people start being paid less and when things start to cost less. Or between when things start to cost more and when people start to be paid more. And during that period of time, companies hoard yet more cash which perpetuates the cycle.
How is this specifically wage deflation?
That's a hell of a quantum leap.
If anything, wages are much more resistant to downward pressure than goods. (People really don't like getting a paycut.) So even if the value of dollars increase, most people keep the same wage. In extreme cases, in can even end up in layoff, because people are now paid too much in comparison of everything else in the market.
I would take deflation over inflation any day. Inflation eats away anything you try to keep for a rainy day, while at the same time reducing the value of your paycheck. This means that you must constantly negotiate (or beg, depending on your position) for a raise or you fall behind.
You're asking how hoarding cash instead of paying higher wages causes wage deflation?
> If anything, wages are much more resistant to downward pressure than goods.
Wage deflation relative to CPI. Wages remain stagnant or increase less than prices.
We would have overall deflation if The Fed wasn't printing money to offset the corporate hoarding. Which is almost certainly better than overall deflation but is still quite bad for people who are paying more for things but not getting paid more.
> I would take deflation over inflation any day.
Deflation was a primary cause of the Great Depression. Deflation is very bad.
> Inflation eats away anything you try to keep for a rainy day, while at the same time reducing the value of your paycheck.
Inflation doesn't eat the value of stuff. If you own a home or stocks then inflation causes their value to increase proportionally.
The problem is when there is price inflation without wage inflation. Which is caused by corporations hoarding cash instead of paying higher wages.
> Inflation doesn't eat the value of stuff. If you own a home or stocks then inflation causes their value to increase proportionally.
The paper-value of one's home does not matter. Everybody needs a place to live - the next liquidity event will be after they die. You're advocating the fallacy behind the continual housing bubble (and all these renovations people do for personal comfort but lie to themselves about it being financially beneficial, but I digress).
Stocks are one of the least-worst places to park savings. Which forms a bubble of dumb money "investing" in things it knows nothing about, but simply following the herd to safety (and then following it out).
Savings are what gives individuals power and autonomy. Debt creates an obligation which must be continually serviced. If one is reliant on their income, they lose the power to walk away from their job. The only bit of flexibility they have is to play different masters off one another, but given what's at stake the employers certainly know this game and compete as little as possible.
Analyze your own position. Calculate out how many months per year you have to work for previously-rare survival goods of food/clothes/electricity, versus how many simply go to paying (a bank) rent on housing/etc. Then look into how much it would actually cost to build a dwelling, versus how much of that cost is solely due to being financialized. Running from the bogeyman of deflation, we've basically recreated indentured servitude for the modern day! It's no wonder the middle class is fading - when your personal autonomy is the difference between two large numbers, the only answers are go big or go home.
It's the monetary policy that creates ever-more rope for people to hang themselves with. The debt<->collateral relationship is circular - every cut to interest rates / down payments directly increases the capital value by the corresponding amount. This has destroyed the idea of ownership, making it impossible to permanently get ahead of the treadmill.
(IMHO this economic weather is directly tied to the centralizing trend of communications technology growing the asymmetry of power that is ever-better at siphoning surplus away from individuals. Giving individuals the power to repudiate a mortgage while avoiding eviction would also correct prices)
If you make more money available then housing prices go up to consume essentially all of it. But that's how markets with highly inelastic supply behave. Yet we can build arbitrarily many housing units. So why haven't we built more? Urban housing prices have been high for many years. Plenty of time for the market to react. Something must be preventing it.
> If the monthly cost of housing actually started tending towards the amortized cost of construction, the builders would immediately stop just as they did during the last mini-crisis.
Of course they stop when it becomes unprofitable. What would you expect them to do?
The problem is this: Increasing the supply of housing can cause housing prices to fall very quickly. From a social perspective that's what we want, but from a construction company perspective the last thing they want is to pay a lot for land that loses its value while they're holding it.
The way to mitigate that risk is to buy less land and build more housing on it. But if zoning regulations don't allow that then they build nothing. Hence the problem.
No, I'm asking how deflation in general causes wage deflation. Your post was in answer to deflation caused by hiding/destroying cash.
> Wage deflation relative to CPI. Wages remain stagnant or increase less than prices.
So it's not related to the increase of value in the currency caused by hiding away 1 billion under a mattress. You used the same term but for different context/meaning. The weird thing is how you phrased it as if it was a causal relationship.
> Deflation was a primary cause of the Great Depression. Deflation is very bad.
There's many factors for the US Great Depression (such as previous inflation). There's also the relative speed at which those things occur. Both can be destabilizing in high enough magnitude. But deflation is the natural result of a growing economy and better efficiency. If it was bad, civilisations would have self-destructed every time they came up with a better way to do things. Imagine a new technique that would reduce food prices by 50%. Would this be a good, or a bad thing?
> inflation doesn't eat the value of stuff. If you own a home or stocks then inflation causes their value to increase proportionally.
Sure, I never said to the contrary. What's your point? People should stop saving money and buy everything around them instead? There's a huge cost to that, especially in real estate.
Deflation most affects the party who would otherwise have first received the money that was removed from the economy.
> But deflation is the natural result of a growing economy and better efficiency. If it was bad, civilisations would have self-destructed every time they came up with a better way to do things. Imagine a new technique that would reduce food prices by 50%. Would this be a good, or a bad thing?
Costs are different than prices. Reducing the cost of producing food is good. Reducing prices is generally bad -- it's better to increase the price of everything else by creating new money and leave the price of food constant. Because reducing prices creates an incentive to hoard currency, which is very bad for the economy. It makes currency an investment that competes with actually productive investments and reduces the speed of money which reduces economic activity.
> People should stop saving money and buy everything around them instead?
That's already what people do. Who literally hoards cash?
Please re-read the HN guidelines, which ask you not to call names in comments.
If there were a constant and fixed supply of money, what you say would be true - but there is not, and therefore what you say is false.
Cars in driveways will not explode, crops will not catch on fire, but the incremental benefit from increased efficiency will never be realised in any tangible fashion.
Also, nice stoop to the ad-hominem - I'm no communist. Are you a primitive randroid?
You try to move away from "hiding money destroy wealth" and establish the ground to go to something like "printing money steals value". It is absolutely NOT the same thing.
I explained your logic was erroneous. Hiding money away does not destroy wealth.
By the way, printing money doesn't destroy wealth either, it transfers it. You can argue that it's evil all you want (and I would agree), but that's NOT the same thing as saying that destroying money destroys wealth.
Capitalist economies must continually grow to be healthy. Savings which is not invested does not create growth.
A healthy growth is a stable, slow rate. If growth is too fast, an economy should stop investing to slow things down. If growth is too slow, an economy should invest more. Unfortunately, neither of those are natural actions. People like to invest more during fast growth and invest less during slow growth. Thus boom-and-bust.
The wealthy will simply move money amongst themselves, cronyism will run rampant. By disoncentivising savings, in favor of investment,
you'll absolutely destroy upward mobility and moreover push middle and lower income folks into directly or indirectly paying for the investment capital of the wealthy (or politically connected) class, socializing the risk and privatizing the gains.
Even if you make the taxable reserves progressively scaled, the inflation brought about by your ubi scheme will creep brackets higher than legislators can respond. Any attempt to automate bracket movement with measured cpi rates will suffer from cpi fudging
Your proposal is a recipe for social stratification and class warfare hell. It's effectively what we are doing now, except taken to 11.
Companies largely don't see opportunities for improvement of the economy anymore.
The hoarding of cash is a symptom of this, not a cause. This is also a problem that can't be fixed by financial rearrangement, however creative. And we should keep in mind that improving things by meddling with financials is really hard, destroying entire economies with that same meddling is very, very easy.
We should do more basic research. That might help. Might.
When it comes to the problem you identified, I think the cause is QE and cheap loans. How do these profits work ? Well, easy : every bit of revenue coming in becomes profit and you use loans to finance everything. In some cases, they literally use loans to buy raw materials instead of revenue. In sadly more than a few cases, loans are being used directly to be paid out as profits, either directly or through share buybacks.
This seems to me a stupid deal for shareholders : you're trading equivalent value for a senior position in the liquidity chain. But it has that "money now" ring to it, of course.
This is not sustainable, and will blow wide open once interest rates rise again. And they will rise as sure as the sun will come up. Either because some central bank causes inflation, or because they simply stop pushing down interest rates.
Also infrastructure. Seriously. In much of the world outside of Europe and Japan, most people simply don't have access to very good infrastructure for basic needs like transportation, food, water, and health. Sure, it's a public good, but it's money being left on the table by the global economy since capitalism systematically under-invests in public goods.
One dollar that changes hands ten times in a year has contributed more to the economy, and created more effective wealth, than ten dollars that spend the whole year lying in a safe.
They aren't hiding it in their mattress, they're investing it.
Invested dollars absolutely do circulate through the economy.
The money we're talking about is held in banks as deposits. Big purchases means one account number is debited and another is credited, but the money remains in banks. Those bank deposits are used for lending. Money still participates in the economy.
Those bank deposits can be used for lending. That doesn't mean they are. And banks can currently borrow from The Fed at practically no interest, so the effect you're describing currently doesn't exist.
It's also entirely independent of the original money. The money would also be deposited in a bank and used for lending if it was paid to employees as wages.
People who withold their stash of money from the market cause deflation, meaning they just increased the value of money in other people's pockets (what others can buy for the same amount of cash).
So there's no loss for other people in the economy. The only loser is the company doing the witholding and its employees.
Other people had already benefited from the iPhone they bought or whatever.
Absolute amount of money in the economy doesn't matter much.
The action of the Fed is not constant; it is a reaction to the level of inflation/deflation. When the Fed is succeeding in meeting their target, any variation in inflationary/deflationary forces is cancelled.
Of course, Fed interventions are not perfect at accomplishing that goal; they don't always have the force to meet their targets, and all interventions have side effects. But to treat the Fed's actions as independent of economic conditions seems to mischaracterise its function entirely.
You're re-defining money in order to make your statement true. That doesn't make your statement true, it merely makes your definition wrong.
Money is (at least) two things: It is a facilitator of transactions, and it is also a store of value. You're saying that, if any particular chunk of money is (for a time) no longer being used for the first purpose, it ceases to be money. But it's perfectly serving the second function. You have to completely ignore that in order to reach your conclusion.
I suspect that your presuppositions are preventing you from looking at this objectively.
Also, aren't the Corp's hoarding cash because interest rates are artificially low?
Is the 'cash' really paper money or something like hard currency (gold coins, etc...). In that case 'hoarding the hard currency is not really destroying it, and when the investment options include tying up the money for some time with only a small return on investment, maybe hoarding is the best answer.
If a company is going to incur an enormous tax liability by earning the money under one taxing authority, it will make sense for them to push that revenue to a subsidiary incorporated under a different taxing authority. One with a lower burden.
If, for example, the effective tax rate in the US is about 40% and the effective tax rate in Elbonia is 25%, for a sufficiently large corporation, it makes financial sense to incorporate a subsidiary in Elbonia to handle European and Asian business transactions. If the disparity is large enough, it not only makes sense to do so, it starts to border on insanity not to do it.
As other have pointed out, these reserves aren't mountains of cash sitting in vaults. It's money that's being lent for interest and invested elsewhere.
Money != Wealth, for one.
If you hold money on a balance sheet, you are not destroying anything. In fact, you are reducing inflation since inflation is more money chasing less goods.
Except that FED will counter that effect because they are keeping stable inflation. People who don't save like you do will still be in exactly the same situation as they were before you decided to save.
If all of the rich people one time decided to spend their money on something that touches real economy (not just stock gambling) it would drive up inflation, possibly too fast for FED to counter it.
Of course not. Since the original statement was about holding gobs of money on a balance sheet, it is clear that regardless of what the FED does, you would increase inflation by spending that money rather than keeping it on the balance sheet. Therefore, holding that money reduces inflation(since the other option was to spend that money and increase inflation).
The right public policy decision is probably to drive interest rates more negative.
As a saver with cash in the bank that's not in my personal best interest, but it's probably the right macroeconomic strategy.
The real solution is to just do a UBI. If this is not an obvious call sign of how the efficiencies of recent decades are obsoleting human labor in general I don't know what is. Redistribute that money so consumers have spending power again.
Already in service industries, it seems like current companies that focus on employees more have higher reputations overall, and often have higher growth despite higher expenses on employees. Costco and Trader Joe's vs. Wal-Mart is the frequently cited example of this sort of case scenario, but there are plenty of others.
Unfortunately, I'm not sure that a large portion of the investor class is really great for evaluating long-term value, and too focused on the quarter end. (Quite a number of the better service oriented companies are not public owned.)
For the same reason, I'll be honest, while UBI is another way around increasing automation, I just can't see the same short-term oriented investor class fully getting behind this concept, at this time.
The last time we had a similar scenario (the Gilded Age), it took a lot of unrest for things to get better for the manufacturing worker class. Unfortunately I wonder if a similar future will happen for the service worker class if something doesn't change...
If I'm at a self-service gas station using the self-service pump and paying at the self-service machine, I really don't care if there's good service from the person behind the counter inside. I certainly wouldn't want to pay more for better service from a person I don't ever interact with.
A sentiment I agree with, but if the recent Yelp call center fiasco is any evidence, I don't find it terribly likely.
Let's say it: it took the Russian Revolution to get the Western owning classes sufficiently scared that they decided to buy wholesale into Bismarckism and social-democracy.
In the short-run, yes. In the long run, perhaps not. From retention to training to quality issues, it can make sense to pay more.
Universal basic income is a bandaid on the fact that the short-term, market-driven focus of capitalism under-values people and seems to be creating a winner take all game that will eventually end the game itself, if balance isn't restored.
I'm not opposed to UBI – it may well be the best option at this point, but I'd also like to figure out how to incentivize the system to look at long-term consequences as well. (Though, I recognize I'm far from the first down this line of thought).
A recent experience when trying to get a personal mortgage as a company director underscored this:
"Your profits are down! Your business must be failing!!"
"No, we opted to re-invest some of the substantial amount of cash we're sitting on, and therefore took a hit to profitability this year so as to be more profitable in the future."
"So your business is failing?"
Consider this at a grand scale and you understand the incentives within which corporations operate. Everything is about the quarterly earnings report.
Look at a typical main street business: retailer, car dealership, restaurant, etc. There is no "R&D". Profits scale linearly with revenue; it's not so crazy to jump from "profit is down" to "business is failing".
In fact, the very definition of a "high-technology company" is one that reinvests a large amount of revenue into development. The exact threshold varies, but 20-30% and most people agree you're into "high tech" land. For comparison, consumer product goods companies like P&G spend some 10% of their revenue on marketing/advertising. http://adage.com/article/special-report-pg-at-175/procter-ga...
The real issue is that "Business" doesn't yet understand the economics of software companies. They have no tangible assets, their cash cycles are vastly different from most other companies, and they grow in discontinuous, sharp, nonlinear ways. You'll see this bias all over the economy if you look.
"Silicon Valley companies are overhyped, THEY HAVE NO PROFITS"
"That company is failing, it's going under"
Amazon is the grand counterexample, look at how much of a head-scratcher that company is to Wall Street to get an idea of how puzzling this is to Joe Business Guy.
No, but people do tend to be. We seem to be wired to value near-term gains much more strongly than long-term gains -- http://www.behavioraleconomics.com/mini-encyclopedia-of-be/t...
This then drives us to create the systems that focus on near-term rewards – like the quarterly reporting and equities that can be traded at a moment's notice, etc. etc.
If you let the masses take charge, you're going to a get a more wild, dynamic, unpredictable outcome. In the stock market this new "democracy" manifests as extremely short hold times, in the political arena, as fringe candidates that party elites would never have let win the primaries, had they been in charge.
I, for one, hold stocks for a long time, and hope companies do optimize for the long term, but I realize I may be in the minority.
We talk about how the tech industry has a problem with employer / employee loyalty where you should expect to work for a half dozen companies by 35, but even moreso investors have zero loyalty whatsoever, and will jump at the first sign of declining growth.
So entrepreneurship is only half the battle - we also need to incentivize more Dells that either revert from public to private or just get more new business startups that aren't looking to just cash out and sink the business.
This implies retention. It also implies a certain level of quality or the agreement fails. So your long run argument falls flat.
Yes, you can pay more to get more quality. This is not at odds with wanting you to work for as little as you will agree to.
Depends on how consolidated the industry has been, and whether the firms that are left can collude or silently set norms to put ceilings on pay and quality.
I'm actually not sure this is true. From a short term perspective, perhaps. But longer term it is more beneficial for everyone if there is more money to be spent.
Most of the companies I've worked for I would never buy their product: either because I didn't need it, or because I knew its true quality, or both.
I think it could be a terrible PR move. If you effectively pay your employees less and justify by giving them discounts. A program that begins with good intentions could end badly. Especially if the program is conceived in an era of high profits. In low profits, management makes different decisions. Also, you often get new management.
I meant you run into problems when you end up effectively paying them less and justifying via a larger discount.
Management could end up doing this gradually as times get tough. For example, a company announces lay offs and pay cuts, but softens the blow with a larger discount.
I guess I'm recommending caution. I would avoid making a discount a major part of employee compensation. A worker deciding to apply for jobs at Walmart and Costco could end up weighing a better health plan against a higher discount on basic goods. That seems problematic to me.
Henry Ford realized just how wrong this is almost a hundred years ago. He realized that if you don't pay your workers enough they you won't have demand, and growth is driven by demand. It's a feedback loop. This is why having so much wealth concentrated at the top is so bad, it stifles growth. You end up with a stagnant middle ages type economy.
Rather, capitalism's answer is for companies to return the cash to their shareholders. This can be done either through stock buybacks or dividends.
I'm not enough of an expert to speculate on what happens next. Maybe this would just shuffle the hording problem around. But this would be a very simple first step that works entirely within the parameters of our current system.
Same way that it's better for the local economy if I were to go out to eat every night. But it's definitely not better for ME, which is why I don't do that.
You need a better solution or incentive than "macroeconomic hope".
If you want to spread the wealth around, then you need the government to perform this task.
Companies have no incentive to do that. Paying your employees more doesn't directly lead to more profit.
This might be true for many large corporations, but hard to study, since aggregate salaries are not public for any one company.
Increase wages and markets will be created. There may be some lag as people dig themselves out from under debt, but the longer we wait, the harder it's going to be.
You might even say that a rising tide floats all boats. More money in the pockets of worker/consumers, more money spent on current and future products.
Money isn't physical, it's not in a vault, in the main.
Isn't the main problem that the economy is structured to reward rentiers which is stifling wealth creation and diverting energies into pointless activity like gaming financial markets, speculating on real-estate etc.
Rent extraction has become so efficient it is able to immediately swallow any productivity gains. We are becoming more productive and seeing rents rise.
Exhibit A: Silicon Valley and hub.
There is a different possibility: anybody who has piles of cash on hand at the bottom of a recession will make a killing...with short term gains regularly exceeding 100%. Anybody who doesn't have cash on hand gets bought up at a huge discount by those that do. American companies that are stockpiling cash may see ample investment opportunities, but they could possibly be overshadowed by economic stability risks.
At least, that would be true if the banks would lend. And if the companies would keep the money in local banks and not overseas. Our tax code encourages offshoring the money!!
It's understandable private R&D spending will be low. The government has done the hard work of figuring out hard problems.
What is going to happen if we continue to spend so little on R&D? Companies waiting around for "attractive opportunities" may never come.
Now big business is ahead of its consumers (too many now under employed or unemployed), hence less opportunities to invest those cash mountains.
As Andy Grove said, we need to optimize for jobs too. Else we simply don't have balance in the overall ecosystem, as we are now seeing.
So there are a lot of critical infrastructure technologies not invested in. Take cellphone batteries for example. Imagine the market share you could get if you could double the life of current batteries? Instead the big investments are in a hundred different social, photo sharing and instant messaging apps.
It's just not true that cash on a balance sheet is idle. Corporate cash sits in bank accounts, and banks use balances to leverage their business. It feeds the banking system, and gets redeployed as debt rather than as equity.
And if there are economic opportunities waiting for equity, that just means it's cheaper to invest in which should attract more investment capital, even if it doesn't come from corporate balance sheets or banks: there are plenty of rich people and rich institutions looking for places to invest their cash (see below). You simply can't draw conclusions as you have done the way you are doing it.
But the Economist is making a good case for what they are saying. So let me try to translate it into terms that the average HNer can understand: what you all call "unicorns" (what you all strive to create) represent successful business models that are actually terrifically bad for competition, and therefore terrifically bad for the economy. We should not be rooting for them to succeed.
Bill Gates did not create the personal computer revolution, he didn't really foster it, he simply monopolized it, and inasmuch as he did, it was bad for the economy. Compare what happened in software to what happened in hardware: actual competition has wrung all the profits out of "IBM compatibles": that was a good thing for consumers and the economy.
That mantle has now passed to Apple (after Apple basically failed during the period of Microsoft hegemony). Again super premium prices supported by proprietary means. Do consumers benefit from Apple's closed ecosystem? No, not from the closed part. We benefit from Apple's positive feature contributions, but that doesn't mean we should be willingly allowing Apple to capture so much of the consumer surplus (the "good stuff" about a product, measured in dollars) using what are known to be anti-competitive tactics. Why should Apple own "network effects" of standards for music or software distribution?
[trigger warning, sexual assault metaphor] Now before all the Apple fanboys and libertarians join forces and start submitting replies to me about how morally right it is that Apple be allowed to economically rape consumers, consider simpler cases.
The Uber business is simple to grok. So is Ebay's, so is Paypal's, so is Facebook's, so is Twitter's. These businesses are based on what we used to call "protocols", stop worshipping the founders as if they did something more amazing than right place/right time. SMS is a protocol. So is HTTP. When companies don't "own" them in the sense of owning the customer, customers benefit. When companies are allowed to "own" them in the sense of owning customers, customers do not benefit anyhwere near as much as we all can.
Think back to caveman times: the first guy to invent the bow and arrow did something really cool. And he benefited from it, tremendously, by catching a lot more deer and eating better. Wasn't that enough? would it have been better if nobody could copy him without paying him a tribute?
Apple's profits from the app store, Amazon's ownership of one-click shopping (whether due to the patent or not) should be compared to Twitter's ownership of short message broadcasts: tweeting will no doubt be ruined as something fun/useful if Twitter successfully figures out a way to monetize, and Twitter itself will be ruined if they don't. But that dichotomy is a false one based on the idea that Twitter should own short message broadcast: it's a simple useful protocol, the value in it is the value people put into their tweets, not that somebody thought of it. Thank god nobody owned HTTP, so could you all stop rooting for somebody owning short message broadcast? Fuck unicorns, they suck. Sure, Twitter thought of it first. So what? It wasn't much to think of. Same with Paypal. Sure they put in a lot of work, after thinking of a fairly basic idea. Did they make something great? Do you use Paypal routinely to exchange small amounts of money? No, you don't, because Paypal sucks and has always sucked because the goal of Paypal was to monopolize a business rather than create a useful payment system.
Thinking is something humans do, and we could just as easily say that if you don't want people copying your idea, keep it to yourself. If you don't want me humming Happy Birthday, don't teach it to me. But plenty of humans will think of neat things and teach it to others because that's what we do. billg was just the greedy one of the two, compared to the creativity of paula, just as Jobs was the greedy one of the two compared to the openness and creativity of Woz.
The notion that patent monopolies (to use one example of monopoly) encourage investment is true; however, it's completely unproven no matter how widely it is believed, that they encourage "the right" amount of investment, or even a desirable amount of investment. I'll tell you this: everybody I know who is a smart PhD post-doc researcher gets paid peanuts to try to figure out how to cure cancer, so how come we've set up a system where Wall Street douchebags get rich from pharmaceuticals without even coming up with a cure?
I'm not an "anti capitalist" left wing kook, I'm actually completely opposed to left wing nonsense. In addition to being an engineer, I'm an MBA. I love capitalism, but I love the type that the Economist is proposing, the capitalism of competition. My dry cleaner works his ass off and makes only accounting profit, not economic (unfair) profit, because my dry cleaner competes. Brin and Page as starving students would have been happy to make $10 million from inventing Google, or $100 million, so why should we reward them with scads of billions?
So, am I advocating stupid European regulation, or worse, redistribution? No, not at all. The answer is simple, and I didn't invent it, it's well known. If Google was broken up into 10 little Googles, Page and Brin could own just as much of all of them as they own of the one, nothing would be taken away from them. However, the little Googles would compete with each other, and their profits would be driven down to ordinary, normal, economically stimulative levels, and not stultifying, smothering, economically oppressive levels that stop the next generation of Page and Brin's from being able to compete with their own ideas.
Same with social networking, Zuckerberg would have been happy with getting modestly rich owning one of a number of competitors, we don't have to have a system that makes him the uberlord of one worldwide, only-game-in-town social network, and consumers would benefit from having a marketplace of facebooks, just like consumers benefited from a marketplace of bows and arrows.
I'm sick of unicorns, I'm sick of libertarians, and
BTW, I myself am rich (well inside the 1%), well educated (economics and finance!) and smart, my money came from a slice of a monopoly, but I don't pretend that what happened in my case was either my doing or good for the economy. I'm not giving my money away, I like being rich, I'm just saying to the rest of you, stop rooting for unicorns, don't do this to yourselves. Don't advocate for a bigger slice of the economic pie for yourself, that's dumb: just advocate for competition; everybody benefits from lower prices.
I think that yours is a reasonable point of view but I do still think it's in error and that it would lead to massive rights violations in practice. E.g. how would the Google subdivisions be forced to compete if Page and Brin still owned a controlling stake of each?
Have a read of this if you want an alternative point of view (yes, I'm a randroid). http://itech.fgcu.edu/faculty/bhobbs/Capitalism-The%20Unknow...
Corporations supposedly are playing the long game. Americans should ask themselves, in my own little Smith Inc., how can I be a bit more Apple and a bit less GM?
What's the source for that number? Taken at face value, it sounds unbelievable.
However, at 62%, that likely includes a large amount of middle class.
I suspect being "Too big to fail" is another major reason for these mergers.
Eric Dash actually let out a warning in the NY Times in 2008:
"As the government makes taxpayer funds available to banks weakened by the financial crisis, the criteria being used to choose who gets money appears to be setting the stage for consolidation in the industry by favoring those most likely to survive."
Mega companies can make huge profits because they feel more confident taking huge risks.
If we succeed - we profit. If we fail - we're too big to fail.
This is commonly refered to as a Moral Hazard:
The deals always look good on paper, but the reality of trying to merge two gigantic organizations is just an unrelenting, slow motion disaster.
The last time I got gulled into believing the hype was the AOL-TimeWarner merger.
The key is that they're going through the motions of "doing big things" rather than truly pursuing the best interests of the company.
Not limited to megacorps either. Plenty of smaller companies engage in this behavior.
And, by the way, it wasn’t just to big ones then. It was to small ones as well. The only institutions that weren’t able to pay us back were the auto companies. And I don’t think — I thought it was a good idea to pay them.
As to size, the question is not just to the size, but what would happen if they couldn’t pay their debts. And that’s what people ignore. We did two things in the legislation to deal with that. First of all, we made it much, much less likely that they would get so indebted that they couldn’t pay them back.
It’s not their overall size. It’s the indebtedness that’s the threat. You could not now have an AIG, which got itself $170 billion beyond what it could pay off in derivatives, because we do not allow institutions under the law now to get so indebted without the capital to back it up.
Secondly and most importantly, what we said is this: If a large institution can’t pay its debts, it fails. It is not too big to fail. It is put out of business, by law. No federal official can advance any money to pay its debts under the law until it is dissolved.
What then happens is this: It may be that we would have to borrow from the taxpayers to pay some of the debts, not all, as the previous law required, but if we have to pay some of the debts to prevent the failure of a large institution from having serious economic consequences, the treasury secretary is mandated by law to recover every penny from large — other large financial institutions.
And, again, it’s not the size of the institution, but the size of the unpaid indebtedness. Well, we have dealt with that by reducing the indebtedness and requiring that the institution will be dissolved if it fails."
Barney Frank on PBS NewsHour.
Wow, that's profound. An industry with 600k employees made more than Google last year! Next you'll be telling me the banking industry makes more than Microsoft!
Airlines need to make big profits in good years - they lose money like crazy in bad years. I don't know if it's still true, but at one time if you subtracted all the money US airlines lost from the money they made since the beginning of the industry you'd have a negative number.
To the larger point, this is what happens when you pile on a bunch of regulations and then allow industry to capture the regulators. The barriers to entry are raised so high it's impossible to have real competition.
You can go hundreds of years back and companies and businesses were already then busy at pushing through special privileges to keep their profits high.
It isn't a matter of whether you regulate or not, but about the quality of regulation and who it is aimed at regulating. When politics can be bought by power business interests you can bet there will be ever more regulations piled on which don't actually help consumers much.
Guilds are probably the prime example. Government-enforced cartels established by the industries to keep up prices for centuries.
Oh, I agree. My point is once you set up a powerful regulatory apparatus the companies involved are going to capture it, or at least try to.
You need regulations, and you need regulators. But too much regulation is bad for consumers, because once it reaches a certain complexity only the insiders understand what's going on.
Regulation is rarely a case of being good or bad. Rather, various competing interests have valid points and some arbitration must be found between them. As the old saying goes (paraphrased), politics is about slogans. Governance is about choices.
Political systems exist for political purposes. So what happens over time in a democracy is that regulations that sound good get enacted while regulations that don't sound good are not. In addition, regulations are enacted that sound good even in cases that may not require any regulation at all.
To fix this, politicians use cartoonish slogans -- "all government is bad" or "we need somebody to protect us from corporations"
This response, while great for the political system, does nothing to address the underlying bug in the regulatory system.
What we have some control over, is the process that makes regulation. And a process that makes it easy and convenient, will be easy and convenient for the insiders who work it.
A lot of the time it's just plain bad -- just the result of monetary influence and lobbying for unfair advantages.
And that story is about making it harder to regulate. If regulations are technocratic decisions made according to vague or ever-changing rules, then lots of cosy deals are going to be done.
A lot of anti-competitive law in the US is not "big vs small". Many of the biggies are small vs small or even small vs big - occupational licensing, exclusionary zoning, agricultural laws, lots of state level regulations designed to protect (not very large) incumbents.
Sadly protectionism is a widespread plague that doesn't fit any easy narratives.
It is a disease, and it won't go away until everyone stops playing the game of trying to legislate competitive advantage. Some of the worst complainers about protectionism unfortunately are the biggest players. Example: I remember when Gibson complained about their factories being raided, reportedly for using illegal timber (an environmental regulation that some also view as protectionism courtesy of the Pacific Northwest timber industry). It got a lot of press, but my initial reaction was one of schadenfreude. Because Gibson was notorious for playing their own "protectionism" game courtesy of a lot of dubious patent / copyright lawsuits on various competitors (eg Paul Reed Smith, Warmoth, Elderly), virtual rock band games (Guitar Hero and Rock Band), Paper Jamz guitars, and probably others I can't recall at the time.
I.e. that's a large number of small political donors in your state (highly motivated to donate to your opponents) vs one big corp in another state, plus of course rationally ignorant consumer/voters.
Famously, Richard Branson once said:
If you want to be a Millionaire, start with a billion dollars and launch a new airline.
This article from November last year has more details: http://priceonomics.com/can-airlines-make-money/
> Overall, the industry has lost $35 billion since deregulation.
Not using up one of my economist.com free articles per month, but I think this is what happens when an industry has the cost of their biggest variable expensive crash: http://www.macrotrends.net/1369/crude-oil-price-history-char...
Note that they'll tend to hedge their purchases, which protects them for a while from fuel cost increases while also delaying the benefit of decreases.
Out of curiosity, what does the landscape look like if you excluded carriers that went outright bankrupt?
Also, how are dividends considered?
For the purposes of assessing the industry's profitability though, we cannot exclude them - if losses are because they were badly run and lost market share to other players, then their losses will be offset by the survivals (who then buy them out).
But it does not properly assess the profitability of the industry - unless you think you can pick in advance who the survivors are going to be.
If you systematically ignore the companies that go bankrupt, you will have a picture of the industry that is far healthier than the reality.
Further - especially in the airlines industry - you can't even go back too many years with the examination of the current companies - because they are the results of many mergers. So you should also be including the companies that used to be, but got merged in the existing ones.
Also, even a 24 billion profit in a good year isn't exceptional given the industry has $160 billion in revenue. Google in 2015 made 23 billion in profit on only 75 billion in revenue.
"But a new paper by Jose Azar, Martin Schmalz and Isabel Tecu argues that trustbusters now need to look in a new direction: at concentrated ownership. If, for instance, a mutual fund owns shares in two rival companies in the same industry, it would not be in their best interest as shareholders to encourage them to act in a competitive way. The boss of Delta Airlines might propose a price war to boost his business. But would a mutual-fund manager who also owned shares in United Airlines be supportive? And would company managements be as keen to cut prices and fight for market share if they knew that their shareholders did not want them to?
Mssrs Azar, Schmalz and Tecu find evidence for exactly this in the airline industry. Including levels of common ownership in conventional measures drastically increases market concentration to more than ten times the level authorities say would be "likely to enhance market power"."
Bottom line: it looks like there should be competition, but maybe there isn't due to ownership structures.
⁰ I actually recently bought a roundtrip to Denver for $32 fully inclusive of taxes and fees. Granted, it's on Spirit, which is only marginally better than the bus, but can't beat the price.
- there are ~ 6 major airlines for a country of 320 million people. In Europe, there are many more (all the national carriers, plus lots of low-cost airlines)
- where are the low-cost carriers (like EasyJet or RyanAir)?
JetBlue or SouthWest are not really low cost, they just have marginally better service than the old guard.
- customers are treated like dirt. Not just the ever-smaller seats and lack of any free food on domestic flights. It is even worse than that - they can change the agreed-on contract at any time, example: I paid extra $$ for a non-stop ticket LAX-BOS in June. A few days ago, I received an email form the airline apologizing for changing my ticket to a non-direct flight (which will take 3-4 hours longer), but there is no mention of any refund whatsoever.
I also had to book return tickets from DC to Denver. Fewer choices domestically, but still Southwest, United, and Frontier.
once again the government is responsible for it.
don't worry though, im sure somebody will call for the government to 'reform' the industry and make all the problems go away.
Thus regulation always does the opposite of what it is supposed to do in the long run. This is a common theme with interference with the free market.
I truly can't imagine an industry that would be more difficult to run a company in:
* Everything is highly regulated.
* The dominant expense is a highly-volatile commodity controlled mainly by unpredictable/hostile countries.
* Your product has been totally commoditized by airfare-pricing websites.
* People get angry at your company when the weather is bad.
* Use of your product is inextricably linked to the abhorrent process of airport security.
* There is the continual potential of a terrorist attack decimating your sales overnight.
Any decently smart airline is hoarding some profits, because if they don't they will go bankrupt the next time fuel costs spike or something scary happens during a U.S. flight.
For instance, the high degree of regulation has costs, but it also makes it far more do difficult for competitors to enter the market. Regulation is especially profitable in an industry like aviation where the major airlines are known to exert a great deal of control over their regulatory body, even compared to other industries.
Commoditization can also increase profits, by providing another barrier to entry; when flights are compared (automatically) by price, new firms have less opportunity to distinguish themselves and the economy of scale and start-up costs are especially painful for a hypothetical new airline.
In a working economy, competition is the check against profiteering; all of these factors making it difficult to run an airline ensure that nobody else can start, regardless of how profitable it would be to do so.
Commodity futures are a healthy market. It's easy to hedge the price of oil and take that completely out of your profit/loss calculation. Any airline who chooses not to is speculating on the price of oil, much like a hedge fund.
> the continual potential of a terrorist attack decimating your sales overnight.
They can probably buy insurance against that as well. The lease-holder of the WTC had an insurance policy that paid $3.5 billion per event. I forget if the attacks were considered one event or two.
That American made $24 billion last year without passing on anything to consumers shows that that is wrong. Pricing websites are under full control of the airlines at this point.
You misread the article. That actual quote:
> The profit bit of the picture, though, has changed a lot. Last year America’s airlines made $24 billion—more than Alphabet, the parent company of Google.
Which is a ridiculous comparison. They're seriously comparing an entire industry to one company? If anything, the complaint should be that Alphabet makes too much money.
Money is not moving, that is bad for the lower, middle and most of all upper class and corporations.
Consumer driven economies with policies that kill off consumer buying power is a bad mixture. Wage stagnation and money that moves like molasses isn't a recipe for growth. Companies can only do buybacks for so long.
The trend is not good and CEOs don't see that changing .
About a third of respondents expect corporations to become more competitive within three years. Assessments of every element of the U.S. business environment improved between a 2011 survey and this latest one. The growing optimism "seems to reflect the cyclical rebound of the U.S. economy," the report said.
But what do business leaders see coming for workers in the next three years? Only 27 percent expect workers to enjoy higher pay, while 41 percent said wages and benefits would be falling.
Destruction of lower/middle consumer class since the 70s clearly charts in the shares of gross domestic income to persons , the long slide.
I read this, and I am at ease, because it means that the end is in sight. Eventually, the system will collapse under its own horrid weight, and we can have another go at making a good society.
Fwiw though, there are online-only mattress brands that bypass the establishment by delivering directly to the consumer.
> Fwiw though, there are online-only mattress brands that bypass the establishment by delivering directly to the consumer.
Yeah and there's one online-only mattress firm that is now shifting to making their own mattresses and selling them as "Anti-Cartel Mattress" and promptly the firms that tried to prevent them earlier from selling their products cheaper than fixed have been trying to sue them for the product name.
In German: http://www.tagesspiegel.de/wirtschaft/streit-um-eine-matratz...
I'm not sure abolishing the concept of IP (patents, copyright, etc.) is the right way to go about it - but I'm 100% certain that there are hideous abuses of the current IP laws and they need to be rewritten with a much more liberal and modern foundation.
Having software patents is questionable, having software patents last 20 years is straight out retarded - even if you could argue that some edge case software R&D would not get funded without patents (which is hard to believe because most of the time when something is patented people come up with alternatives and give them away for free simply to avoid patent issues - and that's arguably even more work because the solution space is smaller). A far more realistic software patent would be between 5 and 10 years.
Likewise for copyright - copyright claims should expire waaay before the 95 years.
But a lot of tech profits are just "network effects" and vendor lock-in and not really a result of any kind of government privileges.
Yet, if we had policies which fostered competition and open standards then we'd have less vendor lock-in.
Things like mental and physical health, addictions and substance use, thought manipulation and mind control, the fears and desires, sexual fantasies, even popular movies and music affect the economy greatly.
Not just a little bit, but greatly. A CEO's addiction to cocaine or promiscuity will have an impact on his company's bottom line. A young man starts a disrupting startup because he got inspired by a sci-fi movie a couple of years earlier.
Adam Smith's "invisible hand" is "invisible" because those forces can't be explained by the mechanistic rules of economics or mathematics.
We just need to look elsewhere for a comprehensive picture.
What makes customers choose a product over the other ? Why do some companies retain great talent better than others - and hence reap greater profits ? How does pop music affect industrial design ?
Of course, human behavior and psychology is hard to quantify, that is why it's being left out, but I think we can start to make these connections now that we have the tools and information available.
Take Google and Facebook - these companies make their profits from advertising.
Tens of billions. Add the profits of the media market - print, tv, radio.
Now consider how all that advertising affects the demand curve in all the other industries.
And it's not just the quantity, it's also the quality of advertising - today's ads are scientifically designed to drill their way into our subconsciousness. The colors, the sounds, the motions, the emotions - all of these are carefully weighted so as just to make you want a certain brand over the other.
And now my favorite part - is there a connection between advertising, corporate profits, pollution and climate change ?
I think there is and it's a great one. To conclude, I think regulators should look at all these factors much deeper, determine the connection between mind and economy and exercise their influence by tuning other parts of society, not just traditional economic levers.
Of course this is a monumental task for humans, but AI might just be perfectly suited for this type of analyses.
In many cases what motivates a particular individual provides little insight into what happens in the economy as a whole. For example, a model of start-up success that included founder education level and sci-fi movies watched by founders would provide little, if any, greater insight than a model the model that looked at just education level. It's similar to over-fitting in machine learning – the extra parameter is probably harming the usefulness of the model by making it less general.
On the other hand, CEO cocaine addiction might be a very good predictor of company profits, but you would have a hard time getting accurate data for that regardless of how good your AI is. Furthermore, I could reasonably hypothesize that some CEO's would respond to cocaine by out-performing non-cocaine users while some would under-perform depending on physiological factors. Again, without massive invasions of privacy, economists will not be able to factor this into their models.
Psychology, especially social psychology, is an epistemological disaster area and everyone would be better off ignoring its "findings", not just economists.
As someone who studied psychology, I've always recognized a lot of it is a bunch of wankery (as everyone should). That doesn't mean you toss it out, it means you think critically about any findings. This is the same reason I'm wary of a lot of economic talk: it's another social science studying something possibly even more complex. People seem to often carry a definitive tone
Human weakness, bias, ignorance etc are like software bugs in systems that mostly can't be patched.
We have got so good at detecting and exploiting these bugs at speed and scale that all I see happening is another Greenspan type moment, where a future Google\Facebook CEO is sitting before a committee wondering how everything imploded.
I mean Google\Facebook\Twitter etc benefit from the traffic Porn, Trump and ISIS pay for and generate much more than anyone else does. It's ridiculous.
Just because it can be taken advantage of doesn't make it a bug. There are reasons these features developed, they were/are evolutionary advantageous. Things like bias are important because they help make us more efficient. They create blind spots, but they also allow us to more wisely spend our limited processing power. We have to compartmentalize things to understand them, we have very limited capacities. We have to do mental rounding in order to make sense of the world around us, there's simply too much information.
I'm sure that hedge funds do exactly this and reap great returns as a result.
And political science isn't concerned with the behaviour of people or groups?
>benefit greatly from a more unified theory.
Economists are generally concerned with things that can be measured. As others have pointed out, psychological findings are often irreproducible. So what's the point in incorporating them into models?
And this all ignores the fact that behavioural economics is a popular and growing field...
How? AI doesn't magically solve problems, it still has to be programmed by a human, and as yet we really have no good models to assess exactly how, for example, cocaine abuse affects a CEO's performance.
See people's music listening trends on Spotify (or torrents or whatever).
Examine the lyrics (or lack of lyrics) of the songs.
I would guess that an AI could find patterns and relationships between what songs people listen to and their emotional or mental heath (plus many other indicators).
Are people falling in love or are they breaking up, are they having more or less sex ?
Are people using more drugs, partying or drinking more ?
Now you have some macroeconomic indicators - vectors - which affect a wide range of industries - from contraceptives to baby cribs to concert tickets.
Again, a wild guess, but I think AI could be applied to this kind of fuzzy analyses and probably be quite effective at predicting economic trends.
> To conclude, I think regulators should look at all these factors much deeper, determine the connection between mind and economy and exercise their influence by tuning other parts of society, not just traditional economic levers.
Can you clarify? I'm probably just misreading you, but it sounds like you're implying that we should be "regulating" culture -- or even thought itself ("thought manipulation and mind control") -- in order to improve the economy. Just wanted to make sure I was reading that correctly.
If that is what you meant, could you give some kind of hypothetical example? Would this be like banning certain themes because they cause social unrest? Requiring shows to carry certain messages? Eliminating styles of music that lead to "unproductive" activities? Bonuses for creators of films that cause a jump in profits? I'm legitimately baffled.
Culture and the economy are in a constant feedback loop and we should look at both components when building our theories.
There is this fallacy that companies offer customers what they want, when in fact companies do everything possible to suggest to people what they want or need by using all kinds of mind manipulation techniques.
And the theory doesn't address this at all.
I don't know about regulation of culture - that never works as expected, but some activism is always welcome. Facebook or Google could potentially alter the whole global economy and ecology, just by carrying certain messages on their websites or apps.
Like "plant trees and recycle" ! Or .. "be generous, help the needy" or something like that.
Sure, unless there is real popular pressure for change, they the all increase together ad maximum, reinforcing one another...