The amount of consumption is largely dependent on income level. There's a recent study from Moody's that says that in the US, the top 10% income bracket now accounts for roughly half of consumer spending. As wealth inequality continues to worsen, it makes more and more sense to solely target high earners because you make the same or more as selling higher amounts of lower priced product but with less overhead.
This doesn't make sense at all. It is a bad statistical analysis of consumer spending. [1] A few things from the thread on why by Levy on why it feels wrong .
First, why does it feel wrong?
1. the top 10% get about 50% of pre-tax income
2. they get 30 to 37% of disposable income after tax&transfers (depending on source)
3. and we know the rich have a higher savings rate, so consume a lesser share of their income (US, China)
May be not top 10% but top 0.1% are good at avoiding tax using various loopholes. Like borrowing against stocks (and other appreciating assets) till death to avoid paying CGT and debt is then repaid by heirs which do not pay CGT AFAIK. So they can spend more than income stats would suggest.
> As wealth inequality continues to worsen, it makes more and more sense to solely target high earners because you make the same or more as selling higher amounts of lower priced product but with less overhead.
This is exactly why everything like Disney has moved upmarket, with pricing rising far above inflation.
It works right up until some form of revolution, either politically or violently. We are far from anything like that but I'd rather not get close to the line. I think I'm a minority view though, despite being in the top 10% myself.
It is also shocking how little my life compares to the rich people I see. I don't own two houses or a yacht. We don't take yearly vacations to a chateau in France. The gap between the top 10% and the top 1% is insane. The gap between the 1% and the 0.1% is even larger still.
But hey... not like the rich getting richer and saying "screw you" to everyone else has ever led to negative consequences right? Nothing to see here, business as usual.
Caesar was a populist reformer. The Roman Republic was long destroyed at that point, due primarily to concentration of wealth and replacement of the plebians with slaves.
Crassus amasses so much wealth because Caesar helped him.
And Crassus was the rich man who was monopolizing all of Rome with his slave firefighters + real estate scheme. When the going got tough, they seekwd power from the rich guy, no one was stopping Crassus.
I think you have the wrong end of the stick (trying to map it onto contemporary politics?).
Caesar was killed by the same people (hardline conservative ultra-wealthy 'Optimate' families/factions) who also brutally murdered the tribune of the plebs (person appointed to beg the ultra-wealthy for favorable legislation) and his supporters not once but twice. He was killed for the same reason too - land redistribution, limits on slave labor. That was called 'tyranny' by the elites.
Crassus was wealthy before Caesar and died before Caesar took power. This kind of politicking was just a necessary evil in the Roman Republic - which always was an oligarch-controlled plutocracy and never a true democracy as we know it today (e.g. Athens). It was 'pay to play', sponsorship of the ultra-wealthy was not optional.
If by Disney you mean tickets to Disneyland and similar theme parks, then pricing rising above inflation actually reflects wealth inequality getting smaller, not bigger. A lot more people in the world than in decades past now have enough wealth to consider traveling to one of the small number of Disney theme parks in the world and spending time there, and there's only so many people who can fit in the park at once. The Disney corporation could (and has) built more parks around the world, but maybe you care about Disneyland specifically, and there's only one of those today just like in the 1950s when it was built.
The issue is that there isn't economic demand from that audience for approximately 90% of companies operating today. Maybe Disney can succeed by going upmarket, but can all the animation/filmmaking/TV/theme park companies they compete with?
The number of millionaires/billionaires/etc feels low enough that there won't be demand for dozens of companies in every possible industry. The ones that have the biggest fanbase/cultural footprint maybe stick around, but the majority would presumably just go under.
Horses absolutely are consumers. They eat, they drink. They just can't manipulate their environment to get more food or drink.
The human system relies on us doing stuff for each other, mediated by "money". We get "paid" by some other human for doing stuff for them. "Stealing" is discouraged. "Being given" is rare. "Money" originates from fiat, goes where it goes.
Humans unable to do for others don't get "paid", get starved/sick etc, experience pain, cause trouble and disappear eventually. When doing stuff for people is not done by people, the pay cycle breaks. When machines do a substantial fraction of economic activity (intangibles like decision-making, writing, answering the phone, etc. as well as transport), there is no need for very many people. Absent the need, there will be no support. The farms won't give their food away, they will arm themselves against the hungry.
There will be some human work. So long as machines cannot equal human touch and experience combined, there will be medicine. There will always be sex work. But who affords it?
Possibly racial disparities will diminish. A machine might actually give equal medical care to, or equally arrest, the Black and white person. Or not, depends on the training. Look who's developing the AIs.
Economists thought that economic development means democratic development. They were wrong, see China. They thought that economic liberalization means good governance. Wrong, see Russia. Economists are right about things until they are wrong, and we can all run off the cliff with them.
When the population drops (war, starvation, refusal to bear children) to the level needed to run the machines, the system will stabilize. Pretty much the horse scenario.
Yes, we've seen that already without necessarily a technological singularity. You accurately describe the great depression in the 1920s and several similar events prior to that.
But what's consistent with those events is that they end and economic development is resumed under different circumstances. I don't see any reason that the current era will be different or that current problem will be unfixable. People used to get paid to build national parks. What would be our current iteration of national parks?
This transition will be a lot slower than the shocks that produced depressions and recessions. A couple of good wars will thin the herd, which is how populations have been weeded out in earlier times.
Public works projects need funding and purpose. I'm not optimistic about what purposes the make-work funding gets applied to these days. Public beauty, cleanliness, health are not in the priorities.
Huh? The Great Depression was a cyclical event. So public works projects only needed to last until the market recovered. Technological revolutions are structural changes. There is no “national parks” equivalent program which we were willing to run to sustain the horse population at 1900 levels.
Does this result in millions of micro-businesses? All on the verge on bankruptcy, all continuously going out of business as new ones are invested in by VCs hoping to make a quick buck
More likely it results in a state of permanently doing gig jobs as any temporary work you can find is just a front to train a lower quality, lower cost automation to replace yourself.
That is one possibility but it goes against the interest of all income groups of the economy, including the ones on the very top. So a solution is in everyone's interest to be found, and nor is it a physical impossibility.
Until the ones at the top own a fully automated supply chain for their every need and luxury and all they need from everyone else is the ability to feel superior.
In this case, why doesn't the rungs of the economy below the rich just... run the way they have been? Serious question, I've been mulling over in my head what it means for a few people to own the majority of "the economy" and goods to be very cheap, but no one has any income.
What I always come back to is this: Why does it matter what the very richest do? Worst case the economy operates approximately as it does now (maybe with us knowledge workers knocked down a few rungs). But like, the rich can't eat _all_ the food.
I feel like the most likely outcome is that the quality of life of the bottom 90% is overall better than today. HN'ers quality of life is maybe worse than it is today.
They keep buying ten of the houses I want to live in, knocking them down, and building a single tasteless McMansion on the combined block, and then lobbying for building and zoning regulations that won't let me build another house.
Presumably if we're all unemployed or employed in jobs that have zero economic worth to them, they'll buy all of our houses, build a bunch of big grey boxes for us to live in like a human zoo, build even bigger and more tasteless McMansions for themselves, and pass legislation that makes it illegal to live near them or inconvenience them.
The quality of life for the bottom 90% of the world has been getting better because they were so desperately poor that they could rely on economic growth to help them. At some point they're going to be rich enough in commodities that they start looking to buy things like houses or start businesses, at which point they'll find that asset prices are rising faster than their own wealth because of growing inequality, and they will look at their big grey boxes full of shoebox apartments and start to become unhappy too.
I think if we jump instantly to a fully automated world, perhaps there's no problem, but in a normal transition from the actual world the issues are
- capital / limited goods
- allocation of labor
Things like land are a limited commodity. Concentration of ownership usually comes with rent extraction. Because you need to live somewhere, but available locations are finite (and supply can even be controlled, and is). This means that you can end up with a cartel scenario where increasingly normal peoples previously disposable income is tied up in an increasingly large % to those fixed costs of living. This is arguably well under way in some countries.
The second point is, the richest enjoy goods like personal yachts, private planes, luxury restaurants. If a lot of labor is increasingly allocated to producing highly inefficient luxuries, it's essentially wasted. You might have hundreds of businesses employing thousands of people or machines, but the productivity of their work is essentially all going into products consumed by a few people. I'd say a limited amount of this is a good thing, it's a normal part of the proliferation of choice enabled by capitalism. But taken too far you return to a historic economy where most peoples productive life is spent serving a tiny elite, while living in poor conditions themselves.
In our financial system, your income as an individual has to be significant enough to send a signal to produce the goods you want. If this ceases to be true for even a significant minority of people, you will find consumer choices and available quality decreasing for those people, which is a real problem. This is to a lesser extent happening in some segments of the economy.
Yes, though I'd say that rent extraction and labor being directed to the whims of a small number of people is essentially the same thing. And even under a step jump to full automation, the owners of fixed goods can still extract monopoly rents.
This is also largely the conclusion of classical economics (i.e. Adam Smith) and the argument was developed in great detail by Riccardo, George (who explicitly considered the no-labor-required case in 1800s), and many others.
Narcissism and psychopathy are why. The richest people stopped needing to care about money to fill their lives with endless luxuries billions of dollars ago. They enjoy being richer and more powerful than others.
The rich will buy all the scarce resources and charge the maximum possible price to extract all of the value you can provide. You will be unable to accumulate wealth. Dynamic pricing of fast food will extend to all food and even to e.g. plumbing fittings - you don't own a copper mine, so you can't go make your own. You will do hard and degrading work for a subsistence living despite the ample resources and technology required to improve your condition.
This is history, not a random hypothesis. Feudal serfs had the ways and means to bootstrap, but in fact lived worse than their pre-feudal ancestors.
I actually have a random thought that it is this innate human drive that causes society to be mostly employed despite massive differences in technology and productivity across geography and time.
What if the driver of employment is not efficient return of capital, but satisfaction of human mind?
Jobs are a mean to make people consumers, not the only mean, but a significant one.
The ability to create more economic activity require both sides to catch up, so we will find a way to do so.