09 April 2016

Gordonian Not

Well, at long last I've finished my slog through Gordon's book. On the whole, recommended. With reservations.

First, if you're among those who still believe not only in American Exceptionalism, but in its perpetual exponential expansion, you should read every page. Slowly. On the other hand, if you're among those who understand the limits of the physical world, then a more cursory approach, at least on first reading, will do. Read the "Conclusion" section of the Part I and Part II chapters. Then finish the rest verbatim. Go back and sample the full I/II chapters at your leisure or interest.

The book is an odd duck, in economic treatise terms: while there is a tsunami of data, it's only graphed or tabled. Not a regression or other inferential derivation to be found. Some graphs have an undefined "trend" line, presumably regressed but not shown. Nearly all of the data is macro, and thus suspect. We've been over that before. Just read through the full BLS (or BEA, or ...) report for either weekly or monthly unemployment to see how wonky that data is; variance large enough to make your eyes water. I'm no fan of Big Data, but stratified random sampling is really rock science and data collection from entities that have no interest in being honest, well... And this is 2016.

So, what's wrong with Gordon? Let me count the ways.

1) He spends most of the book describing how the consumer experience has changed over the period of interest, 1870 to 1970. Whether that's progress is a real question. Some parts of his description qualify: the notion of "networked" housing; having gas, electricity, piped water, piped sewer, and telephone is significant observation. On the other hand for instance, he attributes "progress" to changes in the nature of TeeVee, from tiny, round CRT circa 1950 to today's 40" LCD Leviathan. This isn't progress, since it's still just TeeVee. The main effect of this change is to shift entertainment dollars from cinemas and such to TeeVee. Much of what he talks about comes under the rubric of "psychic income"; the new version of a widget is smaller, more expensive, uses more power, is more automatic, etc. so it must be "better". Tell that to the vinyl junkies who wouldn't touch a CD, even to use it as a Frisbee. The notion that the PC has more "power" than mainframes of 1970 is also apples and oranges: what makes a mainframe useful isn't its cpu, but the whole infrastructure. Today's IBM mainframe cpu is built, mostly, using IBM's microprocessor tech.

2) He buys into the Moore's Law meme. Here, too, is mostly psychic income. While the PC did change work life, it didn't really change it as much as most civilians believe. Yes, the Big Three white-collar office applications (word processing, spreadsheets, and word processing) were conducted differently. Again, not as much as one might think. In a footnote, he remarks that his mother had written an entire book with MultiMate from 1975 to 1977. That's physically impossible, directly. MultiMate (an application I taught in one of those vampire squid for-profit computer schools in the late 80s) was an unauthorized clone of the Wang (mini-computer/ChUI-terminal based) Word Processing System; it didn't exist before the IBM/PC. More to the point: PC based word processing didn't really become important until PC supporting networking was created, with NetWare. To make matters worse for Gordon's thesis, studies which demonstrate that GUI-fied office software make offices more productive are few and far between. None that I can recall. More than a few reflect my experience: WYSIWYG office automation applications lead to folks worrying about the sizzle and ignoring the steak. The London Whale did his damage running an Excel spreadsheet he didn't create nor understand. "I have no idea what this memo means, but I do like the font I chose."

(aside: also in the footnotes is one where he attributes the repeal of Glass-Steagall provisions to Clinton. Wrong. The legislation was the Gramm-Leach-Bliley Act (rabid rightwingers, all) which was not from the administration, but those three. Clinton signed it, only.)

3) He pays insufficient attention to physics. The underlying tech which has driven American Exceptionalism is filling out the periodic table, the understanding of the Bohr atom (which supports how molecules are constructed from each new atom), and an unmatched level of natural resources, chief among them fossil fuels. But iron ore and the soil of the Great Plains matter just as much. As the periodic table was filled in, new elements became available. Everything from light bulbs to microprocessors could only happen with a complete periodic table. And only with fossil fuels could aluminum, for example, even exist.

4) He ignores, for the most part, that growth comes from physical capital, but all of the data he cites is fiduciary capital. Most economists make the same mistake. They're just accountants with phat heads.

5) He ignores the forced cost increase for some of these "innovations". While cable/sat TeeVee offers up more variety, if "Swamp People" et al qualifies, the cost of access is not trivial. Same for cellphones.

6) He pays too little attention to the effect of distributional decline; not that he ignores it, but he doesn't make the connection between growth and distribution. An "Economist" article:
They reckon that when growth falters, inequality is often a culprit.

Growth, by definition, has to be demand driven. Say was an ass. Trump, trickle-downer in chief, keeps harping on 20% unemployment, but his agenda is to increase income and work inequality. That would help, yeah. Even some of the so-called Progressives insist that USofA should be more vigorous breeders. WTF??? How does having ever more, ever more poor, mouths to feed help in paying for keeping old foggies alive a few months longer? It won't, of course. Growth is driven by demand, and viewed in a long historical lens, growth appears to be driven by population. When most goods were consumed broadly, and made similarly, more bodies meant more demand. But with increasingly inequality, more bodies has much less effect. And the 19th and early 20th centuries were times when much of the world's resources were not even yet known. Now, said resources are under stress, not least water; although overloaded California reservoirs is mostly about skewed distribution of the El Nino effect. For most of that time, production of stuff necessitated more humans to do the work. Not so much now and in the future. Growth can only come from a vast Middle Class, spending money on stuff. Or a proliferation of goods and services only for the 1%. Which is to say: the end of mass consumption. Which is to say, further, the end of mass production. That would not be good for capitalists who've automated most labor out of production, no matter what they may think today.

7) He pays too little attention to why real interest rates remain so low. Only physical investment creates new value; fiduciary investment (and that includes real estate) is just stealing from Peter (someone's current consumption) to pay Paul (someone else today or tomorrow). The answer, of course, is that the CxO class can't find useful ways to turn moolah into machines. The knock-on effects of that are far more significant than all the historical data and inequality arguments combined. It means that individual savings can't earn anything resembling what the insurance and banking TeeVee commercials imply. Giving moolah to corporations that already have more moolah than they know what to do with is stupid. It's just hoarding money and reducing demand by reducing consumption. That will end badly for all except the .1%. Dee Feat is in Dee Flation.

So, on the whole, worthwhile. But, on the whole, doesn't get to the nub of why progress is slowing down. And those reasons are:
1) humans know about all there is to know of the macro world; there's no more elements to discover
We wanted flying cars, instead we got 140 characters.
-- Peter Thiel
[epigram to chapter 17]
2) the failure of progress too closely tracks the destruction of the middle class to be coincidental
As mass production has to be accompanied by mass consumption; mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery.
-- Marriner Eccles

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