(09-11-2012, 06:08 AM)kandrathe Wrote: Well, what you say is true on the productivity side. But, it is the good news, cup is half full part of the story.
The good news seems to have worked for our whole historical experience so far. What's changed?
Quote:The other side is that the remaining 99% of the village now has nothing to do, and no way to earn the money to buy the corn of the 1% lucky farmer who owns the combine.
If this were true, why are the 99% not unemployed? Farmers are overwhelmingly more productive than they were before. Those "weren't the lucky farmer" go off and do something else - probably an easier job than farming. This isn't a theoretical claim. This is the historical experience of almost every country on earth, now even including India, which used to be the poorest of the poor.
Quote:And... prices have not fallen to match the increases, far from it. They've been forced by government manipulation to follow a 3-6% increase per year to prop up price supports so that the lucky farmer who owns the combine can afford to pay back the loan on his combine.
This is a fascinating story, but deeply confused, and entirely at odds with both historical evidence and economic theory.
On the theory side, nominal price increases are essentially irrelevant, so long as they are approximately predictable. Milton Friedman called this rational expectations. What really matters are real wages - wages/prices.
On the historical evidence side, the question is: What can I buy for an hour of labour? Real prices have been falling for almost everything that matters. My hour of labour buys more food, more goods, more luxury, more information, more of almost anything I could care to buy than at any point in the past - even 2007, by now. We are richer. Economic growth is a fact.
200 years ago, almost everyone was a farmer. Now, in the rich countries of the world, almost nobody is - despite this, food production increases year on year, even in those same rich countries. We have already gone through the process you are describing. It did not turn out the way you say it must (and, coincidentally, Marx said it would.)
Quote:Extrapolate this to all the other silliness of government intervention in manipulating the natural ebbs and flows of supply and demand, and you see the roots of the mal-investment resulting in these endless boom and bust cycles. Housing seems to be the favorite culprit, and it amazes me that they never seem to learn from their repeated mistakes in manipulating the demand for housing and removing the controls that prevent banks from taking on too much risk.
All quite beside the point. Do you have any evidence or theory to defend the central argument, that as incomes rise, people will simply become unemployed, rather than shifting their labour to other sectors? That real prices are rising, not falling? Which is the equivalent of saying people are getting poorer and poorer, year in and year out? Because this all sounds crazy to me, completely at odds with even the most basic empirical facts about economic growth.
-Jester