It’s the technology, stupid

I like this graph. It is a wonderful example how a theory can be conveyed.

I have trouble following the underlying assumptions though. Plotting the potential output as a straight line going up is a nice illusion. Last time I checked things don’t automatically get better. Thanks to entropy the opposite is true. It takes a certain effort to maintain the status quo and even more energy is needed to improve matters. The past certainly saw advancements in GDP. Over and over again. But assuming that this will therefor continue is equally foolish as to predict the future reign of the Pharaohs in Egypt just because they did so in the last thousands of years.

The Dow is climbing, but unemployment does not decline. It might be that a conventional analysis is under estimating the impact of structural changes that happened in the last two decades. A tempting simplification of what is going on could look like this: Progress in computers and communication technology is creating huge values without creating the jobs as it was usual in previous eras. Facebook employs one engineer per 1.2 Million users.

Quantum leaps in efficiency ( workers vs output ) did happen before. But never as radical and rapid as seems now to be the case. Since this is unprecedented nobody has the faintest idea what this actually means.

For a couple of years the housing bubble masked the effects of this technological revolution on the job market. But eventually we will have to cope with the fact that nobody needs to file TPS reports any longer. That’s done by some computer somewhere.

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