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WTF Happened in 1971? (2019) (wtfhappenedin1971.com)
808 points by dgudkov 58 days ago | hide | past | favorite | 454 comments
bryanlarsen 58 days ago
The author obviously wants you to believe that it was the abandonment of the gold standard, but there are several other theories that have more credence with mainstream economists.
The early 70's was the start of a horrible period of stagflation: stagnation coupled with inflation. Some do blame the loss of the gold standard, but the leading theory is the OPEC oil crisis. Others blame market regulations, the EPA was passed in 1970; the late 60s and early 70s saw many financial and environmental regulations passed.
I like the oil price theory. The period of growth was a period of massive decline in the price of energy. We've since had 50 years of stagnation in energy prices. But that looks to be breaking now. If solar energy & battery prices continue to decline the way they have been, we could see energy prices decline at a rate reminiscent of Moore's law.
And energy is a massive component in the price of almost everything we consume.
AndrewKemendo 58 days ago
I find the great decoupling fascinating and I don't think it gets enough study. There are a couple other things that I think contributed:
The massive increase of women joining the labor market in the US just after 1970 largely as a consequence of the widespread adoption of oral contraceptives in the young population. [1]
The People's Republic Of China was formally admitted to the UN in 1971, and following that in 1972 Nixon visited - effectively opening China as an actual labor market.
Edit: I think one of the major takeaways should be that, changes in worldwide monetary policy allowed for pent up demand for globalization to be realized and that accelerated shifts from onshore to offshore manufacturing. Basically it allowed the US to stop building, and start buying.
[1] https://dash.harvard.edu/bitstream/handle/1/2624453/Goldin_P...
rbanffy 58 days ago
> The massive increase of women joining the labor market in the US
This drives down the cost of labor. If, to make ends meet, you need two people working, they won't be able to easily move to pursue better employment unless both find employment at the same place at the same time, or that the new offer is significantly better than the previous one. As this would depress salaries everywhere, that's very unlikely.
earthboundkid 58 days ago
Unlike increasing the labor market via immigration or population increase, women mostly live in households with men, so adding them to the pool increases the number of workers, but not the number of households. Employers need to pay enough for it to be worthwhile for the household, not the individual worker. The result is lower wages per worker.
speeder 58 days ago
What is very unlikely? I do not understood what you meant.
Moving to a different geography for a substantially higher compensation. The same phenomenon depresses compensation everywhere, so chances are most people won't be able to find compensation that's enough to keep the family going.
DenisM 58 days ago
> As this would depress salaries everywhere, that's very unlikely.
This part of your comment was super confusing. So much so it seems better in reverse:
>As that's very unlikely, this would depress salaries everywhere.
The unlikely is that they'd find employment that's good enough to provide for the whole household elsewhere, because all geographies would be experiencing the same pressure.
tankenmate 58 days ago
Another big mover came just after, 1973, the oil supply shock. This in turn lead to stagflation.
Another thing I didn't see in that data set was the relative growth / decline of union membership; i.e. how that affected wage growth, indirect effect of negotiating power. It would also be interesting to see whether that was a leading co-factor or a following co-factor.
Gibbon1 58 days ago
What interesting is looking at world oil production over the last 100 or so years. Oil production follows a smooth exponential curve right up till about 1970. And then it becomes supply constrained.
chmod600 58 days ago
Unions lose a lot of power during globalization anyway. Even if they had hung on to membership, what would they do?
complexworld 58 days ago
Organized labor can negotiate with corporations and politicians to defend the interests of their members.
The way things are now in the US wasn't inevitable.
taffer 58 days ago
Until Deng's reforms in the 1980s, China remained economically irrelevant.
brightball 58 days ago
This is something I've always assumed to be true. It's incredibly interesting that so much money is concentrated on the major Pacific ports (California and Washington).
I always wonder how much of the California economic claims are due to California vs due to access to cheap overseas labor with major ports.
jasonhansel 58 days ago
I wonder if this chart is also relevant: https://commons.m.wikimedia.org/wiki/File:Global_Temperature...
crazygringo 58 days ago
According to Thomas Piketty [1], it's mainly a result of a bifurcation in education, and dramatically rising managerial compensation helped with tax cuts.
I personally also think this is the main answer. In other words, all our massive productivity increases have come from people with a ton of education, and they reap all the rewards, helped with lower taxes. The median worker isn't any more educated and hasn't reaped anything.
> ...I certainly do not believe that r > g is a useful tool for the discussion of rising inequality of labor income: other mechanisms and policies are much more relevant here, e.g., supply and demand of skills and education. For instance, I point out in my book (Piketty 2014a, ch. 8–9) that the rise of top income shares in the United States over the 1980–2010 period is due for the most part to rising inequality of labor earnings, which can itself be explained by a mixture of two groups of factors: rising inequality in access to skills and to higher education over this time period in the United States, an evolution which might have been exacerbated by rising tuition fees and insufficient public investment; and exploding top managerial compensation, itself probably stimulated by changing incentives and norms, and by large cuts in top tax rates...
[1] http://webcache.googleusercontent.com/search?q=cache:x918MB5...
jb775 58 days ago
I think events around 1971 have nothing to do with it. 1971 is simply when the impacts become visible.
If I had to guess, would assume this timetable is based around the end of WW2. 1971-1945(end of WW2)=26 years. 26 years seems like a feasible amount of time for businesses to grow to the point where business owners don't need to share profits with employees to sustain growth. It's also around the amount of time when business owners welcomed their kids into company leadership positions. The post-war and somewhat "sheltered" children probably weren't as compassionate towards their fellow American (as their war-time parents were), leading to benefit reductions, lackluster pay-raises, and overall reduction of profit-sharing, etc. If you look around, it's pretty clear this has been compounding ever since.
bsder 58 days ago
You don't even have to look that far.
Places like Johnstown, PA were declining about 2% per year from 1950 to 1970.
That means that things were already going wrong long before 1971.
bko 58 days ago
> tax cuts
Although the top marginal tax rate has changed drastically throughout America's history, if you look at federal tax receipts as a percentage of GDP, they've been remarkably stable hovering around 17% [0]
Similarly, education spending on K-12 has grown a lot per pupil (in constant dollars) since 1970 [1]. Its roughly doubled (in constant dollars) between 1970 and 2000
[0] https://fred.stlouisfed.org/series/FYFRGDA188S
[1] https://www2.ed.gov/about/overview/fed/10facts/edlite-chart....
Sure, but the entire point for inequality is the tax brackets, not the overall tax receipts.
As for education, the relevant factor here is college education, not K-12. It's precisely all the benefits accruing to people with a good college education that aren't accruing to those without.
noch 58 days ago
> For instance, I point out in my book (Piketty 2014a, ch. 8–9) that the rise of top income shares in the United States over the 1980–2010 period is due for the most part to rising inequality of labor earnings,
Rognlie(2014) points out fatal errors in Piketty's primary analysis of wealth inequality. In summary:
" Recent trends in both capital wealth and income are driven almost entirely by housing, with underlying mechanisms quite different from those emphasized in Capital. " http://mattrognlie.com/piketty_diminishing_returns.pdf
tboyd47 58 days ago
LOL, as if people actually learn productive skills in college.
arp242 58 days ago
I'm not looking forward to being treated by an autodidact dentist, but to each their own.
I'll take the autodidact, you take the student fresh out of college with no practice :)
I'd imagine there's plenty of practice in college, and it's supervised practice so that more experienced people can point out areas to improve on.
bpt3 57 days ago
Fortunately, those aren't the only two choices.
arcturus17 57 days ago
They sure do at Harvard or MIT. That's the point.
pjc50 58 days ago
The thing is, there was a lot going on in the 1968-1971 period. Everything from civil rights to the moon landings. The collapse of Bretton Woods is important, but we have to ask why and what pressures led to that point.
xfs 58 days ago
I find Yanis Varoufakis' account of the history leading up to the collapse of Bretton Woods very telling:
As the combined costs of the Vietnam War and the Great Society began to mount, the government was forced to generate mountains of US government debt. By the end of the 1960s, many governments began to worry that their own position, which was interlocked with the dollar in the context of the Bretton Woods system, was being undermined. By early 1971, liabilities in dollars exceeded $70 billion when the US government possessed only $12 billion of gold with which to back them up.
The increasing quantity of dollars was flooding world markets, giving rise to inflationary pressures in places like France and Britain. European governments were forced to increase the quantity of their own currencies in order to keep their exchange rate with the dollar constant, as stipulated by the Bretton Woods system. This is the basis for the European charge against the United States that, by pursuing the Vietnam War, it was exporting inflation to the rest of the world.
Beyond mere inflationary concerns, the Europeans and the Japanese feared that the build-up of dollars, against the backdrop of a constant US gold stock, might spark off a run on the dollar which might then force the United States to drop its standing commitment to swapping an ounce of gold for $35, in which case their stored dollars would devalue, eating into their national 'savings'.
The flaw in the Global Plan was intimately connected to what Valery Giscard d'Estaing, President de Gaulle's finance minister at the time, called the dollar's exorbitant privilege: The United States' unique privilege to print money at will without any global institutionalised constraints. De Gaulle and other European allies (plus various governments of oil producing countries whose oil exports were denominated in dollars) accused the Unites States of building its imperial reach on borrowed money that undermined their countries' prospects. What they failed to add was that the whole point of the Global Plan was to revolve around a surplus generating United States. When America turned into a deficit nation, the Global Plan could not avoid going into a vicious tail spin.
On 29th November 1967, the British government devalued the pound sterling by 14%, well outside the Bretton Woods 1% limit, triggering a crisis and forcing the United States government to use up to 20% of its entire gold reserves to defend the $35 per ounce of gold peg. On 16th March 1968, representatives of the G7's Central Banks met to hammer out a compromise. They came to a curious agreement which, on the one hand, retained the official peg of $35 an ounce while, on the other hand, left room for speculators to trade gold at market prices.
https://www.yanisvaroufakis.eu/2011/02/10/surplus-recycling-...
candiodari 58 days ago
You can summarise this argument, and several of the other arguments in this thread as: It was large-scale government spending financed by seignorage/inflation instead of taxes that did this. "Free money" for politicians, hidden from the electorate. Not just in America, but as a global phenomenon.
With GREAT emphasis on the fact that is was not the large-scale spending that did it in, but the hidden aspect of it.
You correctly identify the catch-22 for governments: once one government (arguably France I guess, or at least they forced the world to follow them, I guess they didn't start it) showed you could do this, other politicians in other governments had little choice but to follow suit.
In a way you can say that the breaking of the gold standard was the problem. But that's like saying in a heart attack the heart is the problem. It's not wrong, but it's of course not the root cause: it's (usually) the decades-long excess of cholesterol in your arteries, mostly due to unhealthy eating habits, that's where you should look to the root cause. Hiding increasing government expenditures is the root cause.
> You can summarise this argument, and several of the other arguments in this thread as: It was large-scale government spending financed by seignorage/inflation instead of taxes that did this.
That's the angle that a lot of people want to push, but is it actually correct? What about the trade deficit angle? Especially with regards to oil imports.
Everything is connected. Since the government, despite what people seem to think these days, still represents something between 30% (only government directly) and 60% (government + contractors + fully dependent on government + ...) of the economy in the US, it can easily explain a 3% trade deficit.
But again, the actual spending is NOT the problem. Nor is the trade deficit. Using sovereignty (ie. government spending inflation) to take away normal people's ability to negotiate with accurate information (and voting) what their fair share of the economic pie is. THAT is the problem.
We could double government expenditures without causing a real problem. But if we double them and only 1% of people go to their boss "I need a raise" because they just don't know, then it'll be really bad: they'll have to compete for goods and services with the other side having double as much money as it does now.
thaumasiotes 58 days ago
> Beyond mere inflationary concerns, the Europeans and the Japanese feared that the build-up of dollars, against the backdrop of a constant US gold stock, might spark off a run on the dollar which might then force the United States to drop its standing commitment to swapping an ounce of gold for $35, in which case their stored dollars would devalue, eating into their national 'savings'.
Isn't this an inflationary concern? The problem is that there are too many dollars for the price of gold to stay low. The devaluation has already happened regardless of whether a run has occurred; there is no way to realize the value of your "national 'savings'" without performing the run and dropping the value.
The only way for this concern to make sense is if
(1) You are committed to never spending your "savings", no matter what; but also
(2) You need the paper value of your "savings" to be a particular number, even though you will never do anything with that number other than look at it.
sroussey 58 days ago
We are generating mountains of debt yet again, unfortunately.
webmaven 58 days ago
> We are generating mountains of debt yet again, unfortunately.
We never really stopped.
bwanab 58 days ago
There was a surplus during the last years of the Clinton administration. But, yeah, that was brief and a long time ago.
Izkata 58 days ago
> The thing is, there was a lot going on in the 1968-1971 period.
...which is pretty much what the charts show if you scroll through all of them instead of focusing in on the first ~1/3.
Of the 50+ on the page, 4 have to do with the price of gold. The latter half of the page is entirely alternate possibilities.
dnautics 58 days ago
> but there are several other theories that have more credence with mainstream economists
It's baffling that mainstream economists don't believe this (of course a single event with explanatory power diminishes the utility of the economist profession, and the Upton Sinclair quote comes to mind). In the words of a VERY mainstream economist:
https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...
"when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment"
In short: as a policy, we should reduce the real returns to labor in order to "keep the labor class employed". This policy choice (enabled by the end of bretton-woods) is quite well-captured in all of these graphs. This is how the end of bretton-woods pummeled the lower-income segments of society.
As for how the end of b-w benefits capital owners, inflation makes the cost of long-term borrowing lower, which means that the market price of risk is decreased; and folks with greater means are more effective at capturing arbitrage between the real cost of risk and the price of risk. For example, high finance instruments (like options, shorts, FOREX, etc) have a higher cost to execute in an environment with higher interest rates. If you go to, say, hunter's point/bayview you will not find people taking advantage of these instruments.
Some will claim "the poor are in debt so they will benefit from inflation" but in reality those debts are typically short-term, high interest rate instruments (sometimes even inflation-adjusted as in the case of some low-end home loans), and so the benefit to diminishing the real value of nominal debt is lower for them than it is for the truly wealthy.
raiflip 58 days ago
A fairly simple explanation that for some reason I don't see a lot of is the drop in union membership density around this time period. Such a drop would decrease bargaining power and therefore decrease the rate of wage increase
throwaway-8c93 58 days ago
After having witnessed dramatic declines in union membership in new European Union members, and continuing downward trend in Scandinavian countries, I feel like the drop in membership is the consequence of unions becoming powerless, not a cause. If even the large unions cannot mount any effective pressure for increasing compensation, shrug at layoffs, and are fatalistic about outsourcing, what's the point of being a member?
Anecdote from Finland: in a personal conversation, one long-term union representative bemoaned that, until mid 2000s, companies considered unions as partners, consulted difficult staffing decisions with them, or at the very least felt obliged to justify the reasoning behind companies' decisions. After the crisis, the mood all changed - spending cuts, layoffs or any changes to salaries or benefits are now presented as a done deal from higher up, any union negotiations are treated as a mere formality.
The drip is definitely correlation until proven to be causation. So it is possible the drop was a function of a common underlying cause.
The reason no other explanation makes sense to me is that any purely market based explanation, like energy or China, we would see a corresponding drop in US labor force productivity, but the whole point is that that productivity did not drop.
One question i have for you is, why didn't the union just fight the cuts? A union is not a nicety granted by the corporation, its whole reason to be is to fight corporate power when needed. It sounds to me like that union was already made powerless by the time the crisis occurred.
It's not a fair fight. In the end, there is a huge asymmetry in power, all the real power lies with the corporation. Behaving with clemency and goodwill is a privilege bestowed upon employees (and unions) that can be unilaterally revoked. If push comes to shove, the corporation can very much steamroll any resistance, especially when times are bad, and even more so once the corporation diversifies the risk by becoming a multi-national.
Eh I can see where you are coming from, but I don't necessarily agree with that. At least here in the US, corporations never accepted to unions as legitimate. It always took giant draw out strikes.
Fazel94 55 days ago
If anything goes wrong, they are getting bailed out without consequence. So why should they care?
xeromal 58 days ago
Yeah, there were a lot of key things that happened but it's hard to pin what caused everything else to blow open
TwoBit 58 days ago
Is there a chart for that?
Graph created by the Washington Post: https://www.washingtonpost.com/resizer/7IbsRIhRFbTYRuEjla6ki...
You can see union membership was on the decline since the 1950s, but it accelerated around the 70s. It is hard to see the timeline in that graph, in this one it is harder to see the acceleration, but it is easier to see the timeline: https://rpubs.com/jncohen/uniondensity
coward8675309 58 days ago
I'm very much with you on this. Increasing standards of living are directly tied to a decreased cost of energy. Aside from property absolutely everything can be decomposed into physical or mental effort — energy [omitted at suggestion of follow-up, merci!]. The industrial revolution allowed the substitution of wood or coal or uranium or PV cells for food that powers oxen, horses, and humans.
hollerith 58 days ago
>energy (or energy * distance aka work)
Your comment would be improved by omitting the words in parentheses: work is force times distance, and energy and work have the same dimensions (namely mass * distance * distance / time / time).
(I agree with the rest of your comment.)
hacknat 58 days ago
Peter Thiel (who I don't agree with on everything) had a really great take on this once (can't find it at the moment), and basically laid out a strong case on how we haven't really recovered from the oil shocks of the 1970s.
I do think that the early 1970s was the culmination of a bunch of different cultural, political, economic, and social trends meeting together and creating a very different global consensus.
BTW, the Gold Standard was already out the window with original Bretton Woods. Only certain actors (governments and certain NGOs) were allowed to redeem money for Gold. Gradually lots of caveats and weird rules were added to the system because of various structural inefficiencies. The oil shocks just toppled the system, but the financial system of the world was already untenable.
The oil shocks were a big deal, but they were exacerbated by the expense of the war in Vietnam which was really never properly accounted for.
dgb23 58 days ago
The graphs show two things: A relative increase of income for the wealthiest and a relative decrease for everyone else, specifically in the US.
The 70s and 80s mark a political shift to privatization of public service/infrastructure and deregulation of and trade-agreements for the investor market.
Zviedris 58 days ago
Yeah, liberalisation just made rich richer. All that government debt went to entrapanuer not working mass. If capital accumulation is too fast then he need to put in somewhere. If that somewhere is housing then normal working people can't compete.
I like this quote from John Locke:
> Our incomes are like our shoes; if too small, they gall and pinch us; but if too large, they cause us to stumble and to trip.
Liberalism is not at odds with sensible resource distribution. On the contrary: A free society is rooted in participation of all, both political and economical.
I don't see how your first sentence follows when looking at all the graphs.
Question is - why people where not able to save more money? From 1971 until housing crises in 2008 personal savings diminished. While top 1% earnings increasing. If you look at housing price index Vs salary then real estate rose by 250% while salary not some much. Rent increase proporsonal to housing prices. It just generates so much cash from those who can't buy it. And paying higher rent set you back from saving and buying your own. And without savings you have also limited negotiation options.
> and a relative decrease for everyone else, specifically in the US.
Actually it doesn't. The relative decrease seems to only have affected men: https://wtfhappenedin1971home.files.wordpress.com/2020/06/me...
The linked article obviously has a gold-bug agenda. That's why I think it's important to bring one more argument in favor of the root cause being some physical constraint, rather than legal or organizational:
At around the same time, the growth of GDP and standard of living dramatically slowed down in the Soviet Union, too. From venerable ~5% per year in 50s and 60s, to ~2% in 70s, to ~1.25% in 80s.
Different legal, political, financial and managerial framework, the same decline.
FrozenVoid 58 days ago
Earth reached its carrying capacity in the late 1960's
https://en.wikipedia.org/wiki/Green_Revolution
lisper 58 days ago
> The author obviously wants you to believe that it was the abandonment of the gold standard
How is that obvious? I see a lot of data, but not many conclusions. And even the data presented doesn't seem to me to present a particularly compelling case that it was the abandonment of the gold standard, among the many, many historically pivotal things that happened in or around 1971, that caused the systemic changes that followed.
notahacker 58 days ago
Because it's an article of faith for hard money enthusiasts[1] that nearly all society's economic ills can be blamed on the abandonment of the last vestiges of the gold standard, which happened in 1971, and yet anyone who pays any attention to the posted charts will notice that 1971 isn't actually the inflection point or even a partiocularly notable date on many of them. As you point out, there are many other historically pivotal things in the mid-late twentieth century that caused systemic changes, and many of those timelines better fit the data.
[1]A cursory look at the site's blog posts will confirm the site author is indeed one https://wtf1971.com/page/2/
AlexandrB 58 days ago
The quote at the end of the page is suggestive, both for its content and its authorship:
> "I don't believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can't take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can't stop." – F.A. Hayek 1984
dehrmann 58 days ago
Between 1965 and 1988, the share of women in the labor force rose from 35% to 45% and has held around 45% since then. [1]
The added labor could have pushed down the price of labor. Productivity acts as a ceiling for the price of labor, so seem those two track suggests that there was a shortage of labor.
While the trend started in the 60's, likely in response to social changes in the 60's, it could have been accelerated by households struggling with 70's stagflation, sending more people to work to overcome stagnating wages. There'd be something like the paradox of thrift, but for labor, where people work more, but aggregate income doesn't change much.
Real household income has actually gone up 28% since 1985 [2], so there might be something to viewing this through a household lens, not a wage lens.
And as others, and even the link say. there was a lot going on in the 70's, so this is hard to tease apart.
1: https://www.dol.gov/agencies/wb/data/facts-over-time/women-i...
2: https://fred.stlouisfed.org/series/MEHOINUSA672N
tomp 58 days ago
> And energy is a massive component in the price of almost everything we consume.
Is it really? What would be different if energy was much cheaper? Would we have more advanced rockets or robots or phones? Better CPUs? More and cheaper housing built in dense cities? Cheaper education or medicine? More job security? Even more food?
I realize that energy is an important input into some industrial processes, but I don't really think we're constrained by it (or by manufacturing in general) right now...
JKCalhoun 58 days ago
It was only a single point of the OP's that you're targeting but I have to agree (I agree with other OP points though).
Would a lower energy cost bring wages up? No reason to believe that would be the case.
Would it lower the cost of goods so that at least the working poor could have a better standard of living?
Perhaps, but how much of the cost of a good is the energy, how much labor and raw materials? Would we see even more job loss due to lower cost of energy as it becomes even cheaper still to automate?
(Edit: to be clear, OP wasn't saying lowering energy costs would do anything more than lower the cost of goods. But that statement alone, coupled with the article showing declining wages, etc. suggests OP was implying lower energy costs could reverse or stop the trends shown.)
benlivengood 58 days ago
https://www.eia.gov/todayinenergy/detail.php?id=36754 claims about 5% of GDP is energy costs. It is on a mild downward trend since increasing since the 1970s.
Considering that percentage is higher than margins in quite a few businesses I'd say it has a limiting effect on the economy.
marsokod 58 days ago
Portion of cost in GDP is not equal to importance.
What is the cost of water in the GDP? Much less than the cost of the energy. What would be the GDP without water? Nil. There would be no GDP because we would all be dead.
kbenson 58 days ago
Water's cost is much less than the cost of energy because supply is high. If water was more scarce (or if water rights weren't screwy in many places), it would be much more expensive, and it definitely would be more of a limiter.
Also, you somehow equated the complete lack of a resource with a price increase. What would the effect on the GDP be without any energy? Well, we might not all be dead, but a significant portion of us might for various reasons including wars and massive world unrest because of instability. Even if you ignore all that, the economy as we know it would grind to a halt.
> [H]ow much of the cost of a good is the energy, how much labor and raw materials?
For physical goods, most of it. Raw materials in particular aren't expensive except in terms of the energy required to extract them and process them (modulo supply and demand).
For labor it's more complex, but in general falling energy costs drive capital investment in automation (displacing and lowering demand for less-skilled labor) to lower price and capture greater market share (in order to get a return on the investment of capital), lowering labor's share of the final price, and the Jevons paradox drives increased consumption of the lower priced goods (as well as the lower priced energy). Software has been driving the same sort of dynamic for a while, though the way it affects industries seems to be more contingent, 'lumpier', and less predictable (eg. in hindsight, the disappearance of the travel agent as a result of online booking was somewhat obvious, but AirBnB effectively adding a lot more inventory to the market wasn't).
Not sure what happens when software and energy both more directly affect each others' supply and consumption, but the effect on the rest of the economy is going to be... interesting. Smarter energy grids that shift the economics of energy plants and sources at different scales; vehicles, homes, factories, & data centers that can all adjust their energy use/storage to take advantage of spot pricing, energy costs driving the ROI of training machine learning models etc. and thus changing the return on investment in compute capacity (and in software efficiency), and so on. There are a lot of feedback loops, and as "software eats the world", more (unanticipated) feedback loops will be created.
spurgu 58 days ago
Some argue that the economy is directly tied to energy.
https://surplusenergyeconomics.wordpress.com/2019/04/05/149-...
Energy allows you to trade one thing against another. For instance, we have a "white sand" shortage (for making chips). (Vastly) more energy would mean more kinds of sand would be perfectly fine for production.
So energy is special: it is the universal input to industrial processes. Unlimited energy would make almost anything (more) plentiful. We'd essentially have more of what people want, whatever that is. So yes, more and cheaper housing in dense cities, but it's probably easier to see that faster and better transport options would result. That limits everything, not just manufacturing.
garmaine 58 days ago
> I realize that energy is an important input into some industrial processes, but I don't really think we're constrained by it (or by manufacturing in general) right now...
You should probably reevaluate this. Energy costs are most of the costs of production much of the time. Sometimes it is hidden in the costs of components or of the labor involved, but it's fundamentally an energy cost.
vondragon 58 days ago
What could a neural networks exponentially larger than GPT-3 could accomplish? You could probably use it to create more efficient GPUs. And then other more efficient tools in adjacent industries. Hard to say where the virtuous cycle would end... constraints in manufacturing would evaporate as the rate of technological breakthroughs increase.
shawxe 58 days ago
Who said anything about better? Cheaper energy = cheaper everything, but that doesn't mean that quality is necessarily constrained by current energy prices (although that also doesn't mean there aren't ways in which it could be).
yellowapple 58 days ago
> Would we have more advanced rockets
We wouldn't need rockets at all, or at least far less; we could power things like launch loops and railguns to get things into space (and then either settle for rockets to circularize or else use laser ablation or orbital tethers or other fancier systems to circularize).
> or robots or phones? Better CPUs?
Robots, phones, and CPUs all benefit from power being readily available. For the latter-two, power storage is a critical factor as well, but it's at least a little bit less critical when there are ample places to cheaply recharge.
> More and cheaper housing built in dense cities?
Dense housing tends to require things like elevators (unless you expect people to climb tens or hundreds of flights of stairs every day), climate control (in places naturally too hot or too cold for humans to safely live), and the very equipment and materials to construct that housing in the first place (cranes and bulldozers don't run on magic, and neither do steel mills or window factories). Not to mention the things people like to be able to do within those homes, the vast majority of which require electricity. Cheaper electricity makes these things cheaper.
> Cheaper education or medicine?
Electricity is typically required for distance education and telehealth. It's also typically required for modern education and medicine, period. Cheaper electricity makes these things cheaper.
> More job security?
Not only does energy itself tend to create jobs (especially solar, what with all the rooftops and parking lots begging to be made useful with solar panels), but so does the resulting burst in commercial and industrial opportunities when people are able to drive down or outright eliminate electricity's cost to business.
> Even more food?
Vertical farming at scale will absolutely require more electricity. So will water production; desalination is typically an energy-intensive process, but with enough energy production, it could make water shortages in places like California a thing of the past. Even traditional/flat farms have tractors and combines and other equipment that are costly to run; slash those run costs, and farming just got that much more viable for smaller farmers that can't otherwise foot the bill.
> I don't really think we're constrained by it (or by manufacturing in general) right now...
Right now the energy and manufacturing capacity we have is built on egregious exploitation of fossil fuels, particularly coal and oil. Those won't last forever; either they'll run out, or we'll end up wiping ourselves out with the resulting greenhouse gases (or probably both).
lutorm 58 days ago
I don't think the fact that we don't use railguns to launch things into space is because of energy cost. It's just not technologically feasible.
From what I understand, the main technological blocker (as opposed to various political and economic blockers) is the need for superconductors to achieve reasonable energy efficiency. With cheap energy, that's less of a pressing need (and further, cheap energy = more energy to throw at cryogenic cooling systems to induce superconductivity in less-exotic materials).
lumost 58 days ago
Superconductors are also used for thermal reasons. Generating strong magnetic fields through high current in a resistive material will put out a lot of heat.
Cheap energy = more energy to throw at cooling systems, per above.
triceratops 58 days ago
> I realize that energy is an important input into some industrial processes,
s/some/every/g
mepian 58 days ago
I guess the Mansfield amendment of 1969, which ended the golden age of research funding in the US, could also contribute to the decline.
nwah1 58 days ago
Or it could be that the stats are cherry-picked and there is no decoupling.
The concept of household income is fuzzy and not necessarily related to rewards to labor. Measuring by hours is the appropriate way to measure. Among other issues.
https://www.forbes.com/sites/scottwinship/2014/10/20/has-ine...
JJMcJ 58 days ago
> oil crisis
If the basic stuff that runs the world (energy and chemical feed stock) doubles in price two separate times in the space of 7 years, you just might expect tough times.
Interest rates lower than inflation, gold and silver not keeping pace with inflation either, general economic stagnation.
Not a good time, no it wasn't.
Lammy 58 days ago
> you might expect tough times
Unless your currency is the one the oil is required to be priced/sold in worldwide, maybe. Sounds like a great time to have USD to me.
It wasn't. There is more to life than currency speculation.
Basically everything doubled in price in 1973/1974, and again in 1979/1980.
Ericson2314 58 days ago
I don't buy this because we could have easily kept on building nuclear power plants. There was temporarily an energy shock, but the long-term issue is insufficient demand not (energy) supply.
jandrese 58 days ago
Nuclear Power Plants don't move people and goods around, at least not with 1970s battery technology.
False. Trains. Surely it is no coincidence that high speed rail and nuclear power both became common around the same time.
Most of the machines that run the world don't run on electricity, but oil.
An easy to build open-source pocket sized fusion reactor would be nice.
I think the problem with nuclear energy is that it requires prior investment and return on investment is a little bit long(more than 4 years) and doesn't create enough jobs to be a sexy political option.
Then a Chernobyl would only bankrupt households and not a bunch of countries. It would be like healthcare in the United States. Families would go bankrupt since their reactor faces problems :)
bwb 58 days ago
hmmm... dropping energy isn't going to help with the big costs families face in terms of health insurance and costs, day care, college costs, or housing.
Am i wrong :)?
rthomas6 58 days ago
Reduced transportation and shipping costs means lower cost of basically all material goods, including the material cost of building housing. And in that kind of economy, I think overall wages will be higher in terms of actual purchasing power. Not only would almost everything be cheaper, real wages would probably increase due to overall increased demand.
But I agree that health insurance, day care, and college would not get magically fixed by lower energy cost. I believe those costs have risen for other reasons.
Also I am not totally convinced by grandparent's theory that energy cost is what caused the decoupling of wages from productivity. Maybe.
avianlyric 58 days ago
This includes healthcare, day care, college costs. Even if only indirectly.
SilasX 58 days ago
I really don't think colleges were using 10X as much energy to operate since the 70s.
peterhj 58 days ago
For something searchable, see "Baumol's cost disease."
lotsofpulp 58 days ago
I don't understand how baumol's cost thing is any different than lower supply of labor causing price of labor to rise, and why it would merit a special name or Wikipedia entry.
mordymoop 58 days ago
It's not just about a lower supply of labor, really. It's not cleanly captured in terms of supply and demand. The reason a string quartet costs more now isn't because there are fewer people who can play instruments, it's because other things pay better.
In other words: if the average worker salary suddenly rose by 100% in every area except classical musicians (let's say there's some magical new productivity technology that increases productivity for every job except music, and further say that the workers capture that value) then the classical musician salary would also rise, because otherwise people would stop becoming musicians at the same rates. Nowhere in this thought experiment did the supply of labor change.
The supply of labor would have changed. See below where you wrote:
>because otherwise people would stop becoming musicians
It's about as cleanly supply and demand as you can get. The supply of musicians willing to work for $x decreases, since they now have the option to do other work that is more preferred than being a musician for $x. Therefore, you now have to pay more than $x to continue incentivizing a musician to be a musician.
Going back to your string quartet example, which I do not know if it's true or not, but let's suppose it is:
>The reason a string quartet costs more now isn't because there are fewer people who can play instruments, it's because other things pay better.
The reason a string quartet costs more now is because there are fewer people who can play instruments (relative to demand, since price is where the supply and demand curves intersect). Because other things pay better, fewer people (again, relative to demand) might choose to play instruments, causing less supply (relative to demand), causing prices to rise.
My point is that it's all still just simple supply and demand curves. If the demand for corn skyrockets, causing the price of corn to increase, and farmers choose to plant corn instead of wheat, then causing a decrease in the supply of wheat, then causing the price of wheat to increase, is that anything other than supply and demand?
All I can say is that it seems more like a second-order consequence of supply and demand, and an unintuitive one for many people. The counter factual/subjunctive "the musicians are paid more because otherwise they would have chosen other jobs" is not the way in which people usually talk about supply and demand. You could also say that the rules that govern the supply and demand of labor are not quite the same as the rules that govern supply and demand of goods, and people's general failure to realize this results in the Bamoult effect being surprising.
> You could also say that the rules that govern the supply and demand of labor are not quite the same as the rules that govern supply and demand of goods, and people's general failure to realize this results in the Bamoult effect being surprising.
I wouldn't say that because I disagree there is any difference in the application of supply and demand curves between labor and goods. If anything, Baumol's effect clearly demonstrates that price (wages) is set by supply and demand just like goods, and it's entirely unsurprising.
As you reduce the supply of laborers for labor type A because those laborers have better options, then the price for labor type A rises. That's what Baumol says. That's what supply and demand says. I fail to see the significance.
rapsacnz 58 days ago
Pretty sure that the cost of energy underpins almost everything we do or produce. I can't think of a single example that doesn't have a large energy component. For example, health insurance is made up of the cost of paying people and creating medicines - and ultimately, it comes back to food, extracting raw materials and paying down debt, all of which are affected by the price of energy. So dropping energy costs will eventually make most stuff cheaper (or make more money for rich people :( )
ya but i am not sure anyone of the things i named will drop by 5% or more... and mean while they keep going up faster than inflation...
Cheap energy is good, but i worry more about our ability to afford those things.
thehappypm 58 days ago
If gas was $.10 / gallon, everything we consume would be cheaper because every single thing we buy is transported in trucks. A huge portion of what you pay for at the supermarket is the raw cost of getting a good to the shelf from the farm/factory.
If gas was $.10/gallon, cars would be cheaper. We wouldn't need ridiculously complex gas engines tuned to yield another 1 mpg, or electric cars with $30,000 of Lithium-ion. They could be low-mpg and cheap and it wouldn't matter.
If gas was $.10/gallon, everyone's wages would, effectively, increase since every person who owns a car would spend less on gas, which for many people is a lot of money.
If jet fuel was $.10/gallon, flying would be cheaper. Importing and exporting goods from faraway places would be cheaper.
If transportation is so expensive then why a lot of stuff is made in China? How cheap gasoline would afford you to rent a flat?
Oh, lots of ways cheap gas would help me afford a flat! First of all it takes a ton of energy to build a home, so housing would be fundamentally cheaper. Then, every month, I'd be spending less money on heating or air conditioning. I'd also be spending less of my own money on transportation (either through less gas costs, or buses/trains being cheaper). Then since goods are cheaper at the store, I have more money to spend at the store.
There is one mode of transportation that is currently REALLY cheap and that's huge ships. That's why we import so much from China -- sending a huge ship across the ocean is really cheap. If all forms of transit were that cheap (trucks, flights) the world would be very different.
If shipping is cheap why does goods go from Chine to US not from US to China?
Would cheap energy lower land costs for a house or flat? Cheap energy would improve situation. But a lot of competition comes from productivity and wages. Low wages in Asia made possible to import goods cheaper from Asia rather than produce locally.
Goods absolutely do flow from the US to China -- $100B worth in 2019.
jfk13 58 days ago
And we could destroy the habitable world even more rapidly than we're doing. Sounds great.
Yes, but that's besides the point.
> And we could destroy the habitable world even more rapidly than we're doing. Sounds great.
It's worth noting that due to Jevon's Paradox, investments in energy efficiency also result in greater energy consumption.
techbio 58 days ago
Not wrong, I don't think, except that raising energy costs wouldn't help more :)
spandrew 58 days ago
The removal of the gold standard removed partial value of gold as a world standard for credit. It makes sense that "something else" would take over that hierarchy — in this case oil (as a surrogate for energy as a higher concept).
They're not wholly unrelated and pretty obviously has driven economic policy and world relations (modern colonialism at the extreme) to some degree.
arrosenberg 58 days ago
...and also legislative reforms that wound up being bad for the regular people, like electronic voting and removing secret votes in Congress. Some of the issues might have been corrected, but the lack of a secret vote meant legislators became less inclined to vote against their backers to the benefit of their constituents.
https://en.wikipedia.org/wiki/Legislative_Reorganization_Act...
...and the re-emergence of corporate consolidation and the rise of the conglomerate in the 1960s, which reduced the power of labor to negotiate for a fair share of the gains.
treeman79 58 days ago
People always underestimate the cost of regulations.
Even when good, the cost is big.
Health care is a good example. Keeping patient data private is a good thing.
However it's also absolutely crushing in its impact in the industry.
Tiny projects can take months or years.
HIPPA terrifies so many IT people. Driving away top developers.
brundolf 58 days ago
Something that surprises me is that nobody ever talks about efficiency, as a trait of a particular piece of regulation.
The goal of a regulation, like a project constraint, is to enforce some outcome. This is often a good thing. However, not all implementations of the "code" of that regulation are going to be equal. There's a huge gap between the desired outcome and the way it's articulated as law; there's a ton of wiggle-room there. And that can make a huge difference in how burdensome a regulation is to actually adhere to. And that can have a huge economic impact.
The left talks about how important regulations are, and the right talks about how inefficient they are, and both of these things can be true at the same time.
What would it look like to ask ourselves how regulations could be "refactored" to achieve the same goal in a more efficient way? Maybe the assumption is that too much political capitol would be required to actually put such changes into action. Though, we should at least be asking ourselves this question when drafting new law.
Why isn't there a whole field around "regulation engineering" (not actually suggesting this name, but it gets my point across), including best-practices, case-studies, etc?
This is also my intuition but political and market systems are extremely complex, outcomes are very hard to predict and there is rarely a one size fits all solution.
Regulation and public service work best in scenarios where the processes and data are well established and accessible.
For example transport via train / cars etc. is rather well understood and most efficient when regulated well and collaboratively/publicly owned and ran because of that. Individual competing actors only create chaos and inefficiencies in comparison. Most clear headed observers would agree to this, just by looking at current and historical examples.
But the logistics and production of relatively new goods and services still need to figure out their place. This is where a deregulated, free market makes sense as long as certain baseline requirements are met (protection of workers, consumers, the environment etc.)
A field that would be very controversial to socialize would be food production. On one hand privatized food production is wasteful and even literally toxic and a lot of countries see food production as a matter of national security, so they subsidize it. Also the logistics and needs of the consumers are well understood. But on the other hand almost nobody seems to think that it would be a good idea to put it into public hands.
mirkules 58 days ago
As weird as it sounds, inefficiency can be a feature of regulation, especially for big companies because it creates a slow and expensive hurdle for smaller competitors.
Sometimes, even as a consumer, this is desired, for ex when new drugs are coming to market. Sometimes, as you point out, it's stifling.
Government is also inefficient by design. Imagine the gov't pivoting to different laws every week - it would be completely unsustainable and would drive people crazy.
To answer your question, "regulation engineering" probably doesn't exist because it's designed to be slow.
> Sometimes, even as a consumer, this is desired
I don't understand this argument. The goal is not to be intrinsically "slow", but to be suitably "careful". If you can be as careful as needed, but execute that careful process in such a way that no time is wasted, that's a win. The two are separate questions.
To put it differently: high-security systems programmers don't move their fingers more slowly on the keyboards because "going slow is better". They put checks in place, and they take as much time as is needed to do things right, but padding that time just for the sake of "slowness" helps nobody.
> Government is also inefficient by design. Imagine the gov't pivoting to different laws every week - it would be completely unsustainable and would drive people crazy.
Speed of change has nothing to do with efficiency of implementation. I'm talking about writing laws that are efficient for companies to deal with, not streamlining the law-passing process so that legislators themselves are unburdened. It's a totally separate thing.
> inefficiency can be a feature...for big companies because it creates a slow and expensive hurdle for smaller competitors
This is true, and could be part of the reason this problem hasn't been addressed. But corporate lobbyists are just one of the many forces influencing legislation, and formalizing ideas around "efficient regulation" would only shed even more light on bad-faith attempts at making laws less efficient for the purpose of moat-building.
> To put it differently: high-security systems programmers don't move their fingers more slowly on the keyboards because "going slow is better". They put checks in place, and they take as much time as is needed to do things right, but padding that time just for the sake of "slowness" helps nobody.
"Being careful" doesn't necessarily lead to slowness directly, but making the carefulness verifiable (and making that verification, by an external stakeholder, mandatory) usually does.
This approach (regulation and inspection by a government agency) is generally how society makes actors internalize otherwise external costs, but there are other variations such as government codes and standards.
Fine-grained mandatory process specification is usually the least desirable route to safety, but that's often what companies end up asking for in return for giving them a pass when the process inevitably fails to prevent a bad outcome with a large blast-radius.
However, in some specific circumstances where you don't have another means, directly enforcing slowness in some way may be your best option for at least limiting the damage caused by a failure, even if it doesn't reduce the chances of an error (though sometimes it does that too). Vehicle speed limits are one example, rate-limits on transactions (or comments) are another. In other circumstances, requiring speed (eg. monitoring with a fast response time, quick deployment of a fix) may be the right choice for limiting the damage a failure can cause.
backtoyoujim 58 days ago
I'm OK with the "Move Fast & Break Shit" crowd staying far from my medical history thankyouverymuch.
ethbr0 58 days ago
You say that... but you'd be surprised how chaotically the sausage is manually made in the inner workings of health care.
Provider side has it semi-sorted (at least within the same facility).
Everyone else (insurance, etc) is attempting to clean semi-structured / inaccurate data passed to them, and generate a coherent result.
kjs3 58 days ago
Spouse of a medical practice manager at a mid-sized practice here. Provider data is wildly variable in quality, to be sure. But if the insurance companies are trying to clean the data, they're not using the 'result' to make the system more efficient (except maybe for them at the expense of everyone else), because "we get bad data" gives them another reason to deny the claim. My wife and all of her peers spend inordinate amounts of their time responding to valid insurance denials, quoting chapter and verse of IDC10. Some insurers are so notorious (as in 'deny every claim up front...make them work for it hoping they'll give up') my wife drafts the response to the denial along with the initial request, because she knows it's automatically coming. This makes the automation possibilities that electronic patient management systems offer less effective, because to get paid the practitioner still has to manually intercede in way too many claims.
Another bit of collateral damage is the increasing number of providers who no longer take insurance of any kind and put the onus on the patient to file (and fight) with the insurance companies.
Absolutely. But it happens on the opposite side as well. I can say that major insurance companies have to deal with major hospitals (in addition to individual practices) miscoding stuff.
Not even because they want more money! It's more wrong vs correct. And is done just because "that's the way they've always done it" (and they're used to the insurance company fixing it on their side).
The biggest benefit of the move to automated processing and electronic records is it doesn't leave room for Dr. Sue and Mr. Green to have a non-policy understanding on how to handle claims.
It got things done, but it made it impossible to scale when you were trying to untangle 1,000,000 "special cases."
DickingAround 58 days ago
If you don't mind, why exactly? You're worried the care will get screwed up? Or you worry that someone will steal that data and charge more for insurance?
I'm just wondering about why exactly the paradigm doesn't totally work here. I get that we don't want medical devices failing, but that's different than charting. And I get it that we don't want everyone to have your data. But risking that someone does a data copy vs. reducing healthcare costs seems perhaps a risk worth taking (and it's not like the insurance companies who actually charge us money don't already have it).
roywiggins 58 days ago
Because reducing health-care costs seems to always mean increasing healthcare profits. Why would they pass those cost reductions on?
Oops...last patch inaccurately reported test results, so we did the wrong treatment.
Oops...last patch didn't include all the drugs the patient was on, so we prescribed one with bad interactions.
Oops...last patch mixed up MRI images, so Patient A is being treated for patient Bs cancer.
etc., etc., etc...
Our bad...we'll get to it in the next sprint.
swalsh 58 days ago
Move fast and break things is a really unfortunate name. In my experience, the process of continous deployment, and the automation and defintion of processes to do it well bring more stability than the "move slow and keep things stable" environments. When you deploy once a month (or less!) you view deployment as a one off thing. When you deploy every day or every week. You view releases as a regular part of development. That change in mentality is critical to stable releases.
"move fast and break things" was Facebook's internal engineering motto when I started working there, but it was later (~2016) changed to "move fast and be bold"). The new motto is really just saying what the old motto meant but in a less hyperbolic way.
AzzieElbab 58 days ago
I am willing to bet you have not worked in healthcare IT
eropple 58 days ago
Hi. "Top developer" (if that can be really quantified in the way you mean, I almost certainly qualify) here.
What keeps me from returning to the medical space is not trusting other people to take privacy and data security (not HIPAA and definitely not HIPPA) seriously enough. I don't feel sufficiently aligned with the decisions of any medical company I've worked for to compromise my ethics for them.
The asks HIPAA makes are minimal, largely reasonable where they exist, and are more about responsibility and management than anything a "top developer" has to care about.
jimktrains2 58 days ago
I think you're underestimating the cost of not having good regulations. Not all regulations are bad, and not all barriers (cost or otherwise) imposed by regulation is bad -- often it's been judged that the alternative has more, often externalized, costs.
What do healtcare costs and deaths look like if we removed all our environmental regulations? What's the cost in terms of people not getting treatment for things because they don't want it to be publicly know?
983279432879432 58 days ago
Regulations usually don't do what those who advocate for them say they do. They are generally created to benefit some corporations at the expense of consumers and/or other corporations.
I'm not convinced environmental regulations are a global net benefit to the environment and I can't see how privacy regulations could possibly be beneficial as customers who want privacy protections create a market demand for them. Even in the extremely unfree healthcare market in the US, provides would improve their data security if they thought people were not getting treatment because they worried about their privacy. Regulations create a false sense of security, incentivize companies to keep data breaches and past vulnerabilities secret, and make developers spend time complying with ineffective or harmful requirements instead of actually improving security.
I think one should be very sceptical of regulations and other coercive alleged solutions from governments, especially as politicians have a very strong incentive to serve the corporations who fund their campaigns rather than the voters who rarely even get to hear the name of a candidate who is not supported by corporate spacial interest and wouldn't vote for them anyway as to not "throw away their vote".
It's spelled "HIPAA."
Supermancho 58 days ago
> HIPPA terrifies so many IT people. Driving away top developers.
I've worked in healthcare tech stacks. It's like saying the GDPR is driving away top developers. Not true in the slightest. The problems with making money in healthcare are business related, not developer related. HIPAA is just another set of rules to abide by when creating systems.
budlightvirus 58 days ago
Same. I got a lot of stress from worrying about patient safety, but HIPAA was always just another set of requirements to meet.
runeks 57 days ago
> Some do blame the loss of the gold standard, but the leading theory is the OPEC oil crisis.
The latter is a consequence of the former. The US defaulting on its gold obligation is equivalent to trading oil in exchange for paper rather than gold. Of course the OPEC countries were reluctant to sell their oil for irredeemable pieces of paper rather than something redeemable in gold.
Talking about the "oil price" as one thing before and after 1971 doesn't even make sense, as the US gold default constituted a change in the unit of measurement for USD-denominated prices (gold versus irredeemable paper notes).
Didn't the OPEC oil crisis drive the price of oil higher? But then you say that the problem is that oil prices saw a massive decline. So which is it?
When I look at the graph of oil prices between 1970 and 2020, I see it jumping around between $20 and $160, but they are always higher than they were in 1970. What exactly are you saying is the problem with oil prices? Are they too high or too low?
jrk 58 days ago
> The period of growth was a period of massive decline in the price of energy.
This is referring to the decades before 1970, not after the oil crisis.
> We've since had 50 years of stagnation in energy prices.
This is the period of 1970-2020. The price of oil has oscillated (jumping around, as you say) during this period, but the overall price of energy has not had a clear long-term trend.
The earlier poster's argument is that the stagnation in other metrics (from a period of impressive growth before 1970) may reflect this stagnation in energy prices (from a period of impressive reduction before 1970).
Thanks. I prefer the Nixon dollar float theory. The OPEC oil crisis was only 6 months. And as you say, oil prices in general have not had a clear trend. So those don't seem related to what is being presented on WTF Happened in 1971.
When the government can print money willy-nilly, it can finance any boondoggle it wants to. This free money would pull qualified people away from more productive endeavors. It makes sense that this trend would, over time, impoverish society and enrich those in Washington's orbit.
iguy 58 days ago
> The OPEC oil crisis was only 6 months
No, prices were super-high for more than a decade, before returning to let's say roughly double the pre-crisis price for the 90s, then spiking again.
Or regarding recent decades as normal, 1922-1972 was a window of steady low prices.
https://i.insider.com/58593c27ca7f0c20008b6b76?width=800&for...
jkepler 58 days ago
Free money also pulls many of the brightest into finance, as big finance's proximity to Washington and the money spigots is lucrative. There is a proper place for finance, but right now it seems everything is finance.
brandmeyer 58 days ago
> This free money would pull qualified people away from more productive endeavors.
If this was actually happening, we would see the impact in increasing labor prices, not stagnating labor prices.
We did? I mean salaries in finance from the 80s on were much higher than in the 60s. They went from being some kind of accountants to being masters of the universe.
And incomes of people near the top, in all fields, increased relative to the median too.
The argument is about government spending "crowding out" commercial spending. I have a very hard time believing that any government spending programs are affecting the demand for financiers' labor.
Oh I see. Sorry I took "This free money" to mean the money flowing into finance, largely as a result of regulatory changes IIRC, rather than direct govt. spending. But it's possible I've lost the thread of what's being argued here.
> I took "This free money" to mean the money flowing into finance
Yeah, that's a different argument. Its arguing that low-cost finance is crowding out savings. However, in this case if you look at the savings rate, its still a little too high relative to historical averages. Of course, 2020 is nuking all of the statistics. But prior to the COVID shock, both gross and personal savings were high and climbing despite constantly juicing the markets with cheap finance.
https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/GSAVE
mymythisisthis 58 days ago
Demographics.
WWII ends, you get 26 - 30 years, of a work force. The WWII generation starts to retire. Also, the factories at that point need retooling.
Boomers start to enter their 20s, and start entering the workforce.
faet 58 days ago
Their was also the greater shift to non-wage benefits. If you look at total compensation vs productivity the chart tracks much closer.
https://imgur.com/Juc8FMn
claudiulodro 58 days ago
How much of the total compensation is health insurance premiums increasing, though? It doesn't seem like it would improve a worker's situation if the chart just shows that an increasingly greater percentage of their compensation has been funneled to insurance companies over the years . . .
gpanders 58 days ago
Do you have a source for this chart?
neutronicus 58 days ago
> we could see energy prices decline at a rate reminiscent of Moore's law.
Please do not base your vision of the future on exponentially-growing energy consumption
Yes, sometime within the next decade, many environmentalists are going to start seeing solar as the enemy rather than as their friend. It'll provide cheap energy and it uses lots of land.
Cheap clean energy by itself isn't a problem, but many of the behaviors it enables certainly are. We should be attacking the problematic behaviors rather than blaming it on cheap energy. The alternatives to cheap clean energy are much worse for the environment.
taylodl 58 days ago
I've always thought moving off the gold standard was the impetus for the OPEC oil crises.
theroachesjoint 58 days ago
choosing oil as the standard - for a good reference watch the formula, by no other no-bullshit-taker than McMarlon brando.
stosto88 58 days ago
You got to be fucking kidding me...
brnt 58 days ago
A better observation would be that is the start of the ascent of power of libertarian interests through their useful idiot, Richard Nixon.
All the other observations flow from that.
nathias 58 days ago
yea it's a real coincidence that it coincides with the death of representative money
christophilus 58 days ago
Another plausible explanation I've heard is that you had a massive influx of new consumers (baby boomers) entering the workforce. You almost can't avoid inflation in that scenario.
patrickk 58 days ago
Another one adding to your point is huge number of women entering the workforce all at the same time. You are drastically increasing families' spending power and discretionary income = inflation.
Of course, when you double the supply of something, the price drops, which could partially explain stagnating wages. But in the early post-WWII decades it was a big win. Nowadays the negative consequences of moving away from traditional family roles are more obvious.
> You are drastically increasing families' spending power and discretionary income = inflation.
At the cost of decreasing their mobility, which prevents them from competing in nationwide labor markets, pushing down local market labor cost.
anovikov 58 days ago
Why do you think it has something to do with production? It may be simply redistribution. Less goes to employees, more to profits. Just because they stopped fearing a Communist revolution much as Communism was more and more evidently failing.
AnimalMuppet 58 days ago
Not in the 1970s. Maybe by the late 1980s, and even more since 1990.
justinzollars 58 days ago
> "... more credence with mainstream economists"
Do you follow main stream economists today? Ray Dalio (Bridgewater), Jeffrey Gundlach (Double Line), Raoul Pal (Real Vision), and Warren Buffet (Berkshire) have made very big bets for Gold and Gold stocks because our currency is being debased at a rate we have never seen.
Those are investors, not economists.
Also: the Forbes article about Buffett buying one gold-related stock notes that: "Mr. Buffett is not a fan of gold as an investment. " (Source: https://www.forbes.com/sites/robertberger/2020/08/28/warren-... )
He has never liked it. But the fact stands he still bought it.
Afforess 58 days ago
> our currency is being debased at a rate we have never seen.
Looks at $1 gasoline. Looks at $2 eggs. Looks at $3 gallon of milk. Debased. Sure thing. (Maybe gasoline is an unfair example, but essential good prices are largely unchanged in the last decade. The point stands)
True, but when you compare the price of housing, rent, higher education, or health care, or art, you'll see a different story. The Consumer Price Index (at least in the US) excludes so many things as to not be a real measure of the dollar's buying power. If the dollar isn't debasing, how do we explain so many sectors with rising prices? Is college education today really multiple times more valuable than 10 or 20 years ago, or have dollars lost real value?
Perhaps the basic consumer goods you mentioned continue to benefit from the deflationary effect of automation and technology, thus their prices fall in real terms (assuming that the dollar has lost value during the last decade, given rising prices in the sectors I mentioned).
I think we're in a period of both dollar inflation (due to the Fed's monetary policy and government's continued debt spending) and deflation (due to technology/automation and the Eurodollar system's global demand for dollars), resulting in dollar debasement while many everyday consumer items retain their nominal price or even decline in dollar terms.
College education is probably mostly explained as being a positional good being propped up by a bubble. On the other hand, I actually agree with you that inflation may have sneaked into specific domains. Eggs are cheap, but we've also gotten much, much better at making eggs cheaply. A static egg price actually implies inflation, if it costs less to produce an egg.
Sounds like you are going down with the ship. Its completely irrational to believe you can print yourself into prosperity. I could just as easily point to Tech stocks, Tesla, gold, silver, bitcoin or any other inflated commodity as a counterpoint.
CarelessExpert 58 days ago
> Its completely irrational to believe you can print yourself into prosperity.
This is clearly a straw man.
MMT provides an alternative theoretical basis that might explain the apparent disconnect between money supply and inflation:
https://www.investopedia.com/modern-monetary-theory-mmt-4588...
> According to MMT, the only limit the government has when it comes to spending is the availability of real resources, like workers, construction supplies etc. When government spending, meaning the amount of money introduced into the economy, is too great with respect to the resources available, that's when inflation can surge if decision makers are not careful.
In between the extremes of 'hard money' enthusiasts arguing that the amount of money an economy needs to grow automagically happens to coincide with levels of worldwide gold mining and MMTers (and 1950s Keynesians) arguing it coincides with whatever the government needs to spend is basically the entire field of economics and the mechanism the money supply actually operates based on (which is central banks looking at numbers to ensure the supply of and demand for credit are in balance)
MMT promises money for nothing and the debt for free. The idea isn't modern - its just debasement with a new name. As old as humanity.
Well, that's twice, now, that you've caricatured ideas you don't agree with, choosing to knock down straw men instead of engaging in a genuine discussion, and that means there's little point in continuing.
IanDrake 58 days ago
Gold is nothing more than a bet against global currencies.
Gold producers, on the other hand, one of their biggest expenses is fuel. Fuel is cheap and Gold is fairly high. Combining those two seems like a good investment for a time.
throwaway2048 58 days ago
none of those people are economists, and that is in no meaningful way a statement on bretton woods
We have had 3 crisis in 20 years. Safe to say they have gotten some things totally wrong.
ohyes 58 days ago
This is clearly because 1970 is the Unix epoch when this version of the simulation began. It took about a year for things to get sufficiently out of whack so that stuff started to diverge in a noticeable way. I hope our implementors are proud of me for making reference to the simulation that we're all in.
RhysU 58 days ago
A coworker and I were recently indulging in dark humor about pandemics being due to load shedding required on account of unexpected simulator platform downtime.
shrimp_emoji 58 days ago
If we start defining irrational values ad infinitum (supposing that they're generated by the simulation on the fly as opposed to set, infinite constants), will that kernel panic their machines as their RAM and swap partitions overflow?
firethief 58 days ago
Apparently it was no longer enough to frequency-scale the lower-utilization human brains.
davidkuhta 58 days ago
That would be the revised simulation history, the original did actually diverge in 1971. https://stackoverflow.com/questions/11573024/when-was-unix-e...
that is a really interesting tidbit of unix lore.
qsort 58 days ago
unironically still a better theory than the op.
ehnto 58 days ago
The simulation the implementers are in doesn't allow for nested references.
0-_-0 58 days ago
Hey, don't crash the simulation! I haven't had dinner yet.
Nition 58 days ago
This explains why US GDP at the end of 1969 was right on 1 trillion. It's a default starting value.
aazaa 58 days ago
Plenty of events to choose from here:
https://en.wikipedia.org/wiki/1971
- "A new stock market index called the Nasdaq Composite debuts."
- "Starbucks, a major coffeehouse and outlet in worldwide, is founded in the U.S. State of Washington."
- "The U.S. ends its trade embargo of China."
- "President Richard Nixon declares the U.S. War on Drugs."
- "Southwest Airlines, a low-cost carrier, begins its first flights between Dallas, Houston, and San Antonio."
- "American President Richard Nixon announces his 1972 visit to China."
- "President Richard Nixon announces that the United States will no longer convert dollars to gold at a fixed value, effectively ending the Bretton Woods system. He also imposes a 90-day freeze on wages, prices and rents."
- "The United Nations General Assembly admits the People's Republic of China and expels the Republic of China (or Taiwan)."
- "Ray Tomlinson sends the first ARPANET e-mail between host computers.["
- "The People's Republic of China takes the Republic of China's seat on the United Nations Security Council (see China and the United Nations)."
- "The U.S. dollar is devalued for the second time in history."
These events can be grouped into categories:
- pro-deflationary (e.g., China rising, the first email message, Southwest)
- anti-working-class (War on Drugs)
- increasing financial speculation (NASDAQ)
- financial (end of Bretton Woods, US dollar devaluation)
- consumerism (Starbucks makes coffee cool and diverts billions from working-class savings)
I know that the site advocates the end of Bretton Woods as the main cause, but that event is just one in a spectrum of major arcs that had major emergences in the early 1970s after slow burns in the 50s and 60s.
hosh 58 days ago
I'd add that in 1970, the intermodal shipping container became an ISO standard. Containerization has been developing since 1956, and along with minicomputers, would have an impact on world trade and manufacturing for decades to come.
IMHO this could be larger than most people would think. This made it affordable to export labor overseas, starting the power imbalance between employers and employees.
I'll bet if you look this is the start of die off of Unions. Now there is an alternative to employees who start demanding living wages and benefits, you can build your factory in another country where labor has few rights. The only unions you would expect to survive are ones where the labor can't be outsourced. Service unions. Transportation. Mining in cases where the material is too expensive to ship like coal.
Yup. Labor is not as mobile for the employee.
Amazon is interesting too. They brought the global supply chain to the consumer. What consequences will that have?
The best example are Police Unions :)
Though Teachers Unions would a counter example.
proverbialbunny 58 days ago
It's interesting that the middle class started losing wealth and income stagnated in relation to the larger economy starting in 1971-1972, but most of the events from 1971 are lagging indicators. Eg, the CIA was actively keeping China from being able to obtain chips in the mid '70s. China was barely able to export anything until the late '80s - early '90s. The birth of the digital age is another good example, but tech didn't take over many jobs until the late '70s if not the mid '80s.
When analyzing wage stagnation in a finer detail: Going off the gold standard caused a rise in the stock market. Also, we have regulated food prices in the US, so the current metric we use to measure inflation isn't strongly correlated to a living wage. Meanwhile, people who are invested in the stock market and rental properties, aka the upper 10%, have seen a large boom in wealth. (Not just the upper 1% have had a rise in wealth.) Unless we have any other ideas that is being overlooked here, it does in fact look like going off the gold standard started this trend, and has only been amplified by trade and tech later on.
Could it be possible that unionized workers started shrinking in 1971? They're commonly cited by historians as a key element in the rise of working class wages, so it would be a good place to check to see if there is a correlation there.
gruez 58 days ago
>Also, we have regulated food prices in the US
Can you expand on this?
https://en.wikipedia.org/wiki/Agricultural_subsidy#United_St...
subsidy =/= "regulated"
A subsidy is a kind of regulation.
nipponese 58 days ago
Not specifically happening in 1971, but one could argue this is the start of the Information Age and subsequent "digital divide"
jim-greer 56 days ago
> "Starbucks, a major coffeehouse and outlet in worldwide, is founded in the U.S. State of Washington."
That isn't it. Starbucks didn't open its sixth store until 1984.
https://historylink.org/File/20292
russellbeattie 58 days ago
Population then was also half of what it is today. (Imagine Thanatos snapping his fingers! Huh, I guess it wouldn't really be that bad.).
I was also conceived in 1971, so maybe it was my personal existence. Sorry to everyone affected. I'll be dead within the next 50 years most likely, so be patient.
It is clearly Ray Tomlinson's fault for sending emails. Because anybody else on the list would have an army of defenders to argue for and bring to stall any change to reverse their negative effect.
permo-w 58 days ago
economic emancipation of China + cheap flights + email + new shops selling imported coffee
Globalisation perhaps?
paulpauper 58 days ago
you can say the same for probably any year of the past 50 years
poutrathor 57 days ago
that's it, it must be pesky starbucks !
thanhhaimai 58 days ago
The biggest reason for the wage drop is the trade with China. The US and China started trading in 1971: https://apjjf.org/2013/11/24/Dong-Wang/3958/article.html
As with any economic question, it's usually not due to one reason. The combination of energy price and workforce age comes into play. But the biggest trigger of all was the trade with China. That put a serious pressure to job competition, and led to significant wage stagnation in the US. On the other hand the 1% benefited a lot from the trade.
https://en.m.wikipedia.org/wiki/China%E2%80%93United_States_...
ertian 58 days ago
Total US trade with China was vanishingly small well into the 1980s, and didn't start to become significant relative to total US trade until the mid-to-late 90s[1].
I think there's a better argument for trade at large, since ~1970 was a turning point for many _other_ Asian countries, in particular Japan, Taiwan, South Korea, Singapore, etc. There wasn't a clear, sharp line, though.
[1]https://static.seekingalpha.com/uploads/2018/2/15/saupload_c...
khawkins 58 days ago
Probably a little of the other countries, followed predominantly by China, and that the common denominator was unrestricted free trade with poorer countries. As the other countries liberalized and conditions for workers improved they became less valuable places to offshore production to. Mexico and especially China remain countries of cheap labor due to political conditions and thus the high deficits.
refulgentis 58 days ago
Many, many, many, more of "the 99%" benefited than the theoretical benefit of opening the US to competition did to "the 1%". https://ourworldindata.org/exports/share-of-population-livin...
ocommentator 58 days ago
Exactly, it would be interesting to look at the growth in real income and income equality from a global perspective.
Aicy 58 days ago
How come this graph leaves out North America?
Across the US political spectrum free trade has been embraced by economists and politicians alike, all with the idea that capitalism will force liberalism in places like China. And yet, here we are 50 years later and the CCP is as strong as ever. Instead of a growing middle class resulting in better working conditions, it resulted in an insulated and complacent privileged class who either can't or won't demand better working conditions for the less privileged, for fear that they or their families will become state enemies. China's currency manipulation and curbing of worker's rights ensures industrial equivalents in the US are incapable of competing.
So many economists have rationalized the benefits of free trade as being that the country who can make things most efficiently and with the best quality will succeed, but they ignore what goes into "efficiency". But worker safety protections (especially from litigation risk), higher wages, and better time off are all significant sources of inefficiency, from a production standpoint.
The market devotee acknowledges that the market solution to worker protections is unionization and job-shopping, but it's nearly guaranteed to put enough pressure on corporations to offshore as soon as possible. Unions help wages for those jobs which stay, but guarantee there aren't that many left. Free trade with places like China and Mexico is stacking the deck against American labor.
Conservatives have long used unions as a scapegoat for this problem, but it doesn't explain why it's more often the case that a corporation offshores operations instead of moving operations to a state without government mandated unions. There is some truth to their argument, but I don't think they understand that basic safety protections, natural market forces, and potential litigation all contribute to a significantly more costly American worker than one abroad, even if they aren't in a union.
I think that one of the central reasons this has been happening is that the American ruling class has been insulated in their ivory towers and Ivy League schools for too long. They're genuinely more concerned with "saving the world" than creating a cohesive, prosperous society. It explains why so many lives and money is used to intervene in countries on the other side of the planet, why immigration from 3rd world countries is heavily promoted despite fierce resistance from the lower class, and why they have all but abandoned the idea of low-skilled labor becoming more valuable.
In 1970, the intermodal shipping container became an ISO standard: https://www.freightos.com/the-history-of-the-shipping-contai...
As containers became adopted, shipping ports specializing as container ports came to dominate world trade in terms of shipping volume. These ports were designed to bring the port, rail, and highway together. Crane operators efficiently loaded and unloaded containers. There was a flywheel effect as, more efficient container ports were expanded to accomodate larger container ships, which in turn, had port cities investing in more container port capabilities. Traditional ports died, with shipping consolidating into a much smaller group of container ports. As long as there were sufficient rail and highway access to those ports, goods could still be distributed inland.
Along with the rise of the minicomputer (https://en.wikipedia.org/wiki/Minicomputer) to handle logistics, what we got was a world-wide logistics network that enabled things like just-in-time manufacturing.
The late 1960s and early 1970s was also about the time ecological consciousness became more prominent. I hear from the old permacuturists and ecologists living through those times when large swaths of ecosystems were destroyed to expand things commercially. With healthy natural ecosystems, you could live land-rich, cash-poor. But with the ability to ship things easily and cheaply all throughout the world, local ecosystems became exploited and overharvested (the end-consumers had no personal stake in the ecosystem from which those resources were extracted from).
As productization and monetization of ... everything, including basic essentials of living, is it any surprise that real wages have not risen?
wffurr 58 days ago
It's more like WTF happened between 1945 and 1971. I think that was an ahistorical period of low income inequality, and now we're back to "normal" such as it is.
UncleOxidant 58 days ago
> I think that was an ahistorical period of low income equality
You mean low income inequality, right?
That post WWII era in which the US was pretty much the only developed nation with it's manufacturing capability still intact. That and the GI Bill explain how that era was exceptional - a large number of folks who returned from WWII got free college educations.
drocer88 58 days ago
Do you have a source for this claim? Canada , Sweden, Switzerland, Argentina, Spain , Australia , New Zealand and arguably undeveloped India, South Africa, Brazil, Mexico and other parts of Latin America were "intact".
jholman 58 days ago
>> pretty much the only developed nation with it's manufacturing capability still intact > [some minor developed nations were intact] > [some undeveloped nations were intact]
Minor thoughts:
a) trivial quibble: Spain was not intact in 1940, I doubt they'd recovered that much by 1945? b) I was gonna say something bout Argentina not being a developed country, but I looked it up, and TIL that Argentina used to be super developed. TIL! c) most of those undeveloped countries had virtually no manufacturing, which is why UncleOxidant excluded them in a comment about manufacturing power
But more importantly...
The numbers I've seen bandied about (I don't have credible sources) say that the US was 50% of world GDP, and held 80% of hard currency reserves, in 1945. Supposing that's correct, even though you're technically right that the US wasn't "the only developed nation ... still intact", it's still almost-correct-in-spirit. US manufacturing capability in 1945 was way way way ahead of every other country. The point being that if the US economy experiences unusual behaviour in the period 1945 to 1971, one obvious factor is its overwhelming global supremacy in manufacturing in the immediate post-war period.
XorNot 58 days ago
By population the US dominates the entire list of first world countries you have there, and as you note, the remainder were underdeveloped at the time.
The US benefits a lot from simply being big. On some level success is simply about biomass - you need the largest number of brains you can, sitting around thinking about stuff.
>> You mean low income inequality, right?
Fixed, thank you.
Beyond the obvious, the Fairness Doctrine was enacted at that time. It put regulations on news reporting which allowed US citizens to be informed voters. The Fairness Doctrine was removed, and since then .. well, you can see what has happened to the country. Fighting between groups. Definitions for terminology that differs depending on what political groups understand creating misinformation. Citizens getting only half of the reporting, even if that half is truthful. People being outright lied to by the "news". And the list goes on. It's back to how it once was.
When we're unformed voters, then who we vote for and what policies end up getting enacted to not serve our best interests.
While this at first may not seem like much, it's a key butterfly effect for many of the other problems we have today. It's not the whole picture, but the root of a larger picture.
milkrocks 58 days ago
it's more like what didn't happen. Between '45-71 Europe and Asia were still rebuilding from WWII, by the seventies they were finally able to compete again.
pnathan 58 days ago
That's also a great point. The 70s have a lot of divergence vs the prior 20 years, but what if we run the clock back to, say, 1875?
(I don't know. But it has to be asked)
Piketty goes into some detail on that: https://www.vox.com/2014/4/8/5592198/the-short-guide-to-capi...
The answer is that 1875-1920 looks an awful lot like 1975-2020.
Here's a better question - how do we replicate the 1945-1971 period without a world shattering war and tens of millions of deaths?
onlyrealcuzzo 58 days ago
Yeah, A Farewell to Alms makes a pretty convincing argument that 1945 to 1971 was an anomaly. Ever since the advent of agriculture, income inequality has been on the rise. The Belle Epoch in France was the peak of that - then revolutions, World Wars, and Socialism happened. Once that civil unrest stopped, the trend continued back up.
(We might have recently passed Belle Epoch-levels of inequality - not sure this is an accomplishment we should brag about)
> Yeah, A Farewell to Alms makes a pretty convincing argument that 1945 to 1971 was an anomaly. Ever since the advent of agriculture, income inequality has been on the rise. The Belle Epoch in France was the peak of that - then revolutions, World Wars, and Socialism happened. Once that civil unrest stopped, the trend continued back up.
Its worth noting that large scale disasters (of all sorts) were always great equalizers, a countervailing force to rising inequality. In general, the more you had to lose, the more you lost.
We've been getting better at preventing or coping with a lot of these things like plagues, famines, and so on, but we've become even better at insulating accumulated wealth from being destroyed by them (including by financial crises), by privatizing gains and socializing losses.
I have a feeling that we've entered a new period of larger scale social unrest and natural disasters which may or may not significantly destroy and/or redistribute wealth to level the playing field again somewhat.
pashamur 58 days ago
Obligatory Paul Graham article about that period, since we are on HN: http://www.paulgraham.com/re.html
wyldfire 58 days ago
Some of these graphs are laughable and are candidates for "Spurious Correlations" [1]. Childhood obesity is not due to the US getting rid of the gold standard.
[1] http://archive.is/9VFmh
So many aspects of our lives can potentially be linked back to the economy. Not really trying to make the argument that it is directly related, but income and obesity are highly correlated. Cheap calories often are bad calories. If going off the gold standard impacted the distribution of wealth. It might be plausible that could impact obesity.
* again, not aruging for or against the correlation. Just pointing out that it is hardly laughable.
rhacker 58 days ago
I'd say it's a correlation.
It still falls under the title - "WTF happened in 1971?" Also, you can clearly see that obesity is a modern problem and I think it is related to a certain kind of apathy that has happened and likely related to income stagnation, as well as drug and alcohol use.
beamatronic 58 days ago
It could be related to the increase in both parents working. No mother at home to provide nutritious meals. And both parents working is due to the already explained economic factors.
gota 58 days ago
Great thinking. I googled "mother employment child obesity" and apparently it is so. The first result on google scholar has 200+ citations[1].
https://link.springer.com/content/pdf/10.1007/s11150-009-905...
The cheapest foods are the highly-processed terrible-for-you ones. There's a reason obesity rate tracks income.
JackFr 58 days ago
And another good trick used is showing exponential growth on a linear scale and managing the time domain to make 1971 look like an inflection point.
OliverJones 58 days ago
Uncle Milty (Milton Friedman) published, on Sept 12, 1970, The Social Responsibility of Business is to Increase Its Profits. https://www.nytimes.com/1970/09/13/archives/a-friedman-doctr...
This doctrine of irresponsibility was gobbled up by businesses. It gave them (us) permission to switch from the post-WW2 cooperative way of doing business to an extractive model: get the most you can from workers, suppliers, host communities and other stakeholders without shares. Externalize all the costs you can get away with fobbing off on others.
The Hayek / Friedman / Chicago School fanbois need to address the biggest externalized cost of all: disposal of CO2, methane, and other greenhouse gases. If the social responsibility of business were to increase its profits a century from now, maybe the Friedman Doctrine would be helpful. But, yeah, no. As it is, the Friedman Doctrine means "take all the money and run."
Lots of plutocrats argue for a guaranteed basic income. Why? if Amazon / FB / Doordash / Uber impoverish everybody, nobody will have any money to spend on Amazon / FB / Doordash / Uber.
That's all a consequence of the Friedman Doctrine.
The social responsibility of businesses is to increase its profits because businesses shouldn't have social responsibility, people should.
People complain that corporations and businesses have too much impact and control over our society (which I agree with) and then in the same breath complain that they don't take on enough social responsibility. These are incompatible statements. Businesses should not have any social responsibility other than doing the thing for which they exist: make money. All other social responsibilities, such as ensuring we live in free, fair, and just society, fall to the people and their representatives.
Unfortunately, in our current situation, the people's representatives have spinelessly kowtowed to businesses and corporations and are completely unwilling to embrace any such social responsibility. But the blame and fault for this lies solely at the feet of these representatives and their governments (and, to an extent, the people who continue to elect them).
TOGoS 58 days ago
Friedman may have written them a nice excuse, but capitalists have always behaved this way. Look at the behavior of the robber barons around the turn of the 20th century for example.
The question is not one of motivation, but what allowed them to get away with it? So I would like to combine your comment with the root from another thread: "Business managed to exploit a number of crises to break the power of labor unions. The gold standard had nothing to do with it: sticking with gold would not force management to share productivity gains with labor."
Among the 'number of crises' being that the boom from rebuilding after WWII was basically over, which has also been mentioned in other comments.
EricE 58 days ago
"Friedman may have written them a nice excuse, but capitalists have always behaved this way"
And communist don't?
People behave this way if left unchecked. Greed is hardly something unique to capitalism.
renw0rp 58 days ago
Good that you have your scapegoat. Looks like he has invented greediness
not2b 58 days ago
Business managed to exploit a number of crises to break the power of labor unions. The gold standard had nothing to do with it: sticking with gold would not force management to share productivity gains with labor.
One can argue that strong money places limits on the finance sector and non productive speculative investment.
ZacharyPitts 58 days ago
Amazed that the site does not call out Nixon completely abandoning the gold standard in 1971. Financial investments thusly did not need to be backed by actual assets anymore, to the point of today where the whole of money is loans against loans against loans.
lokar 58 days ago
That theory would explain financial gains going up faster (eg the pie getting bigger, more return to capital), but not a stall in wages for workers. Worker productivity went up, but wages for workers did not.
~1970 is about when the % of workers in unions really started to fall in the US.
topspin 58 days ago
~1970 was the beginning of the rapid growth of commercial intermodal containerization. A couple of WTO charts in this[1] document show the trend. The US military pioneered standardized containers (for shipping supplies to S. Vietnam) in the late 1960's and the commercial world caught on very quickly.
Since then the captains of industry in the West have been able to arbitrage labor world wide. Thus labor unions in developed nations, a symptom of labor scarcity, lost their leverage.
[1] http://minotusa.com/uploads/40/NorthDakotaIntermodalInitiati...
gen220 58 days ago
The shipping container was the self driving truck of the 20th century. That one invention eventually put so many people out of work, it's difficult to fathom.
We live in Brooklyn near the water. The entire coastline from Red Hook to Greenpoint was once dedicated to the loading, unloading, and storage of pre-shipping container cargo. This industry employed many thousands of people. It was a dangerous job but it sustained families, and it was a bootstrap to a career in the shipping industry. (There are analogies in textiles and meatpacking, in this same city).
Now, the warehouses have been converted into housing, coffee shops, art centers, and the like. The working class job is the service industry (waiting, serving coffee, delivering food), and it's a very different culture from the working class job of the 60s.
I'm not at all saying the technological innovation was a bad thing. But it did have a huge impact on the local economies of every seaport in the world (Bay Area included, for those that live there).
If you're interested in learning more, there's an 8-part audio documentary on shipping containers. You can listen to episode 7 about automation here: https://soundcloud.app.goo.gl/AfzxGaUKuceh4W9W7
> ~1970 was the beginning of the rapid growth of commercial intermodal containerization. A couple of WTO charts in this[1] document show the trend. The US military pioneered standardized containers (for shipping supplies to S. Vietnam) in the late 1960's and the commercial world caught on very quickly.
I have a feeling that use of expanded polystyrene foam (colloquially styrofoam, which is actually a brand name for a different material), as a packing material had a great deal to do with the trend as well. Loose foam packing peanuts were patented in 1965, I'm not sure when foam cushioning blocks were introduced.
nemo44x 58 days ago
I think we need to look at the bigger picture though. Working class wages haven't kept pace but interest rates have gotten much lower making it "easier" to borrow money. In addition, because of increased productivity (in part because of out sourcing work which unions can't easily defend against), consumer goods are far cheaper than they used to be.
We've also seen a great domestic expansion in the upper middle class and a reduction in the lower class since then. More people are "middle class" than ever before with a larger percentage being "upper middle class". However, the middle class feels further away from the upper middle class in large part because there are simply many more upper middle class people than ever before (and more upper class for that matter).
I'm not trying to make a counter argument or anything but just trying to make an argument that we can't do an apples-to-apples comparison between today and 1971. Relative wages are less for a group of people, but consumer goods are relatively cheaper as well. Home prices are relatively higher but interest rates are far, far lower. The middle class has grown and poverty has been shrunk to record low levels (people often forget how many people were impoverished in this country not too long ago) but a lot of that growth has been in new upper middle class people.
We've seen union participation fall, yes - but have we asked "why" it has fallen?
quickthrowman 58 days ago
You can blame Milton Friedman's Shareholder Theory of Value, proposed in ... 1970
Proof: look at stock returns when management pays more wages vs cuts wages/jobs
> but not a stall in wages for workers
see: https://news.ycombinator.com/reply?id=25189476&goto=item%3Fi...
trixie_ 58 days ago
Productivity went up, but not necessarily worker productivity. If the machine is automated, or partially automated to the point where you just need someone to push a button, then the skill required by the worker falls and so does the wage.
mason55 58 days ago
That's the point of the site. It doesn't say it explicitly but leaving the gold standard is the answer to the question in the URL
definetheword 58 days ago
Ya, I recognized that it guides you to the conclusion:
- read first three graphs... "oh, yes, that looks like a problem"
- scroll next 5 graphs... "oh, looks like lots of evidence correlates to that year... what happened that year?"
- scroll next 5 graphs ... "oh, wasn't it the gold standard that year?"
- scroll to the end.. read quote .. "is this a bitcoin quote? No, someone else... wait, but who is River Financial and why do they want me to care"
Trade with China also opened at around the same time. A plausible explanation for the decoupling of wage growth is competition or the threat of competition with international labor.
addicted 58 days ago
Alternatively, whatever forces led to the government taking as major a step as leaving the gold standard is responsible.
Blahah 58 days ago
Not alternatively. Leaving the gold standard may have been one proximate cause, while the desire of the government to have simple tools to provide short term economic relief in the face of complex socio-economic problems is one ultimate goal.
While I'm sympathetic to strong money and therefore explanations like that, it could just as well be that another factor has more explanatory power -- i.e. something else put the US into such dire straits that officials didn't find it feasible to honor the peg.
So, what about the (perhaps too simple) explanation that 1971 is when the developed world finally caught up from the destruction of WWII and investors recognized this? That would mean an end to free wealth for the US, as factor productivity is no longer the highest in the world.
I'm curious about the mechanism. It seems important, but can you elaborate on the effects?
flurben 58 days ago
The mechanism for U.S. currency creation and management is constantly evolving, and its effects are as well.
Effectively what we're talking about are central bank operations, which is a dry and boring subject within economics, that is both misunderstood by mainstream economists and misused (for political reasons) by heterodox economists (many of whom are charlatans).
Generally speaking though, everyone tends to agree that central bank policies became looser over the 20th century, and IMHO that's really the only relevant kernel of truth in the OP link, who seems to be a promoter of fringe economic theories.
The best place to read about the topic is at the Federal Reserve Bank's website. Alternatively, I would recommend reading any of this :
https://orcamgroup.com/understanding-money/
tobmlt 58 days ago
If you are curious for the theory behind this mechanism, a good source is "what has government done to our money" by Murray Rothbard.
It's freely available here:
https://mises.org/library/what-has-government-done-our-money
xyst 58 days ago
[flagged]
zeroxfe 58 days ago
> since money has no actual value
Ah, the intrinsic value debate (which your entire argument hinges on) never gets old.
Setting that debate aside, money has market value -- it's not backed by gold, but it's backed by the power of the government, by the trust of the citizens, and by very strong social expectations. A storekeeper is more likely to accept your money than your gold.
35fbe7d3d5b9 58 days ago
This holds true not just of a storekeeper in the US, but in many other countries as well.
The US invested a great deal of both soft & hard power ensuring this is the state of the world.
jeffasinger 58 days ago
If dollars have no value, you should be willing to give away any dollars you have to anyone, no matter how they are using them, right?
Dollars don't have a direct value in gold, but there are people willing to take your dollars and exchange them for gold, it's just a ratio that varies over time, along with the value of gold and dollars.
Exmoor 58 days ago
> but since money has no actual value was it really stolen?
I assume you wouldn't mind sending me your bank account details via email to prove your belief that "money has no value?"
The fact that 'stealing money' is harshly prosecuted is just one factor that contributes to its value as a currency.
mark-r 58 days ago
As long as you can still buy things of real value using money, the money itself has value.
ploika 58 days ago
US dollars clearly do have value though. It's foolish to claim otherwise.
novia 58 days ago
Not only that, but the war on drugs was started in 1971 as well.
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