[cylinder]

It seems to me that there really is no hope for developed, advanced economies. There's not a lot to be done, other than high-level technological advancement, within these countries. The high-level tech generates little tax revenue and employs negligible amounts of human labor (actually it usually eliminates jobs). So any economic gains will just be from productivity improvement (via technology and regulatory reform) and selling goods and services to developing countries.

It seems to me that the best thing these stagnating developed countries can do is band together and really push to open and develop Africa, the rest of Asia, India, etc. Adding a couple billion to the middle class is their only hope to sell more goods and services; their own birth rates are never coming back nor is immigration the answer as we've seen.

[Gravityloss]

Everywhere I look, I see possibilities for massive efficiency improvements, but there just aren't enough resources to do anything but a half assed job.

Most of it is just design. A big portion is software.

Let's take an example.

Say, if the public transportation could be improved not with brute force, but with more elegance, comfort and intelligence, then massive savings could be realized.

My country doesn't manufacture appreciable amounts of automobiles. It also doesn't produce oil. Few developed countries produce oil.

So using cars for transportation leaks out large amounts of capital.

We have trams in my city, but the network of tracks is so old and unsophisticated that the trams must drive extremely slowly in many places, to avoid slamming intersections or curves. Some foreign tram models break constantly.

This doesn't only have the effect of making you sit in the tram longer from A to B, it also means that for a fixed amount of trams and drivers, they will pass the stops less frequently, meaning you have to wait longer before you can even get on board, and the throughput capacity of the lines is less too.

And the ride is quite noisy, bumpy and can feel stressful. But the views are beautiful, and it doesn't generate exhaust. It feels like a natural part of the city. If a tram rolls by, it doesn't make an aggressive sound like a thundering bus, it rolls with a gentle rumble, sometimes ringing bells.

So you could improve the functionality of the city by fixing a lot of these problems.

Some other parts of infrastructure have even regressed. Siemens was supposed to automate the subway system. They managed to just make the arrival time displays at the stations unreliable (that had been working just fine, probably since the metro started around 1982) and waste millions before the city board finally mustered enough courage to fire them.

So we have a huge amount of medium and even very low level technological advancement ahead of us, with large payoffs. Rankine documented spiral curves for tracks in 1862.

And don't get me started on healthcare IT.

[TheOtherHobbes]

That would mean moving from a Status Economy to a Productive Economy.

Without intelligent oversight, all economies - capitalist, communist, socialist, democratic, fascist, you name it - tend towards status production and social differentiation as a primary product.

Sometimes useful stuff falls out in the way of invention and innovation, but more often it doesn't. Even when it looks useful it's likely to be driven by fetishised status display as a primary goal, and not by high-velocity deep innovation.

Status economies are fundamentally wasteful and non-productive in any practical sense, because most resources are hoarded by a tiny minority of high-status individuals.

You only get real growth when resources - including innovation and intelligence - are dispersed and farmed strategically.

This has happened occasionally in the past, and I'd like to think it could happen again.

But it's not happening now, and any path from the current system to a productive one is going to be difficult and messy.

In a status economy, basic needs are rationed to maintain and expand status differentials. So public infrastructure takes a beating, because 'the public' - by definition - are not high status, and must always be denied easy access to quality resources.

[Gravityloss]

I think that's possible to a limited extent, but it's also kind of tangential to what I tried to say.

The parent's thesis was that technology gains in productivity are small.

I work in logistics and there adding some intelligence to a supply chain saves millions relatively quickly. It happens to be ecological as well, as spoilage is reduced.

So clearly there were a lot of gains to be had. In my opinion we operate on quite rudimentary levels in many areas of life and business. We're not limited by currently known physics. We're struck down by organizational inefficiencies and lack of brain resources.

At some point the inter-city council allowed getting into the busiest bus line not just from the front door but through any door. Great, we got a free speedup! It took years to drive that through the councils, maybe because it was a new idea (new idea here).

Now, the distribution of those savings made is another matter. And some changes are perhaps more politically charged than others, true.

[CyberDildonics]

Recent history has already proved you right in many of the things you are saying. If you look at investments into healthcare, education, and urbanization, they tend to have a large and easy to quantify payoff. You can see this in the 1900-1950s in the US and the same thing in many countries. Running clean water and sanitary plumbing, electricity, affordable cars, and telecommunications have made significant impacts on economies (and don't forget adding women to the workforce, which implies training/education).

[deathhand]

These sorts of inefficiencies can only be remedied by transparency about data. This is a direct threat to cronyism which is hard coded into governments across the world.

[saganus]

This might sound stupid (and it might be), but wouldn't space exploration go a long way in helping advanced economies having something to do and growth to?

If advanced economies were to increase science and space tech research, they would practically have a limitless "market" from where to obtain wealth and productivity, no?

It's a serious question. Wouldn't this help stagnated economies start the engines again? I mean, if nowadays a lot of people are trying to catch the next startup lottery, betting on things that would seem a bit superficial compared to, say, building a moon base or even a mars one, why wouldn't these same people that control vast amounts of wealth, put it to work on something that will most likely return something of value, and probably something more than just a startup lottery winner would (in the long term)?.

What am I not seeing/considering here? is human greed that badly focused/directed that they won't see this opportunity? I know rocket science is literally... rocket science, so very very hard. But it seems like companies in this area are moving forward by leaps and bounds with comparatively little money (vs say the amount of money being traded in forex every day, or similar).

What is the nature of this blind spot?

[mike_hearn]

There is nothing to do in space. Mining asteroids is the only economically useful thing that might qualify, but that's still way not worth it compared to just digging things out of the ground here on earth. When people bet on startups, they're betting that the startup will create enormous value by doing something very useful. Not just supporting a jobs program.

[pdecker]

That's the question, right, how do we find growth?? And my thinking is that economic growth doesn't come from a rise in production, as most economists think. It comes from a rise in credit...basically people/governments wanting to buy what they really can't afford. This pushes up demand and prices and eventually production, and the economy grows. Until the debt service payments become unsustainable, you have defaults and the whole thing comes crashing down. That is why we have cycles.

But you're absolutely right, developed countries need to grow the middle class, and helping Africa, Asia and India get there will create billions of new customers. We've seen a run up in EM in the last decade, and a pull back recently. But the future is there, in Africa, Asia and India. That is where the majority of growth in the global economy is going to come from in the next 20-30 years.

[nhaehnle]

I think we're largely in agreement about the economic analysis here. However, I do have to ask:

Why do developed countries need to grow the middle class, specifically?

This is not directed at you personally, by the way. It's something that you hear a lot, but that just sounds like hollow polit-speak.

Does it mean making the middle class more well-off? If so, why not actually do something for the lower class? And if the intended meaning is to lift people from the lower class to the middle class, then are people aware that this messages is self-defeating? (Somebody is always at the low end of the income or wealth scale...)

[pekk]

Why do developed countries need to grow the middle class? I think the idea is that we want them to grow the middle class so that there are more people with disposable income and expensive appetites to sell to. Because we can't really compete with developing countries for price on most consumer goods.

"Grow the middle class" definitely implies that people are moving from the lower class to the middle class, which IS doing something for the people in the lower class.

[pdecker]

sorry, what I meant to say is that developed countries need to help grow/establish the middle class in emerging market countries.

My understanding of the situation (and to be honest, I am in no way an authority on this, and am most likely totally wrong), but population growth in developed countries is slowing, which is another way of saying that we are not producing more and more customers like we used to.

Companies need more and more people to buy their stuff so that they can grow and grow. So, if developed nations are not producing ever-larger numbers of consumers, companies have to look elsewhere.

Hence, enter emerging markets. However, and this may be totally biased or completely wrong, but from what I've read and seen, a large portion of the populations in those emerging economies do not have much disposable income and thus do not make very good consumers.

But if the economies in those countries improve, that will create better paying jobs, low income earners will rise and become middle-class earners, and become better consumers. And you will see overall economic growth, as new businesses are started, tax revenues increase, governments are able to spend more, credit levels are increased, etc.

At least, that's why I think need to grow the middle class in EM.

[xyzzyz]

Well, it's silly to expect even 2% GDP growth over extended period of time: in just 300 years, it would give us almost 400-fold growth. Increasing everyone's purchasing power 400 times would certainly look like singularity.

[ArkyBeagle]

The trend of compounded growth since 1820 has been 4%, really until some time from the 1990s to now. Many suspect the natural rate of growth still to be 4% but somehow, our policy or behavior suppresses it.

The transition to the lower rate of growth is a lot covered by Tyler Cowen under the rubric " The Great Stagnation".

We're roughly 2096 ( exp(1.04,195) ) times wealthier on aggregate than in 1820. This happens very slowly. Since 1960, the ratio is 8.6:1 - you and I are 8.6 times as wealthy as the people most like us from 1960.

Megan McArdle talks about the "Little House On The Prairie" Ingalls family not being able to afford a modest tin cup for the third daughter for a long time - apparently something noted in the books. Yet they were "middle class" by the standards of the times.

[EliRivers]

Depending on how you calculate purchasing power, it did go up by that (and more) in the last 300 years.

[xyzzyz]

Could you point me to any source where it is calculated? This seems especially suspicious, since high speed growth started only 200 years ago (in 18th century the average per capita growth in Europe was 0.1%), in 19th century the average growth was about 1%, and in 20th it reached 1.9%. This gives around 20-fold growth, which is hardly similar to 400-fold one.

For source, see http://piketty.pse.ens.fr/files/capital21c/en/pdf/T2.5.pdf

[EliRivers]

Could you point me to any source where it is calculated?

Here's one to play with http://www.measuringworth.com/ppoweruk/

I don't need it though. I have something in my hand right now that I could have sold for literally a million times as much only 60 years ago.

I can buy enough food for a year on a single weeks wages. Compare and contrast to an indentured peasant who worries if he's going to starve this year.

I can travel to the other side of the planet and come back. This is something I can purchase on about a week's wages. The cost to someone three hundred years ago to doing this was so much higher, and given that I can get there and back in less than 48 hours, it doesn't even begin to compare. My purchasing power (i.e. the things I can buy), compared to someone like me three hundred years ago, is so, so, so much more than a measly 400 times theirs.