Wealth of Humans — Part 1

My read-along to Ryan Avent’s The Wealth of Humans continues. I’ve now finished Part 1, which is comprised of Chapters 1, 2, and 3.

I have several more impressions:

Wealth of Humans, Ch 1

1. Pages 30-31: The author discusses the pace of technological change. Over the last 60 years, the pace has been slower and more incremental, unlike the rapid pace of advancements at the turn of 20th century. There are economists who pessimistically believe the slower pace is permanent because there are few easily exploitable insights (like electricity) left to be discovered.
   • I disagree with the pessimists (the author does as well on page 32).
   • Pessimism of this nature assumes there are no Unknown Unknowns. In other words, we know all that we don’t know. Otherwise, how could we assume there’s no major insight hiding in a blind spot somewhere?
   • Pessimism demands that the totality of knowledge can be–and has already been–calculated, which to me seems impossible.
   • I can imagine individuals making similar claims during the Renaissance or 1890, before major waves of technological innovation.
2. Page 34: the author discusses the term “general purpose technology: an advance that can be used to do things more effectively across many facets of life.”
   • I hadn’t heard this term before, but it makes sense that widely applicable technologies are more transformative than incremental or niche items. See Network Effect.
   • I wondered: is society more fractured today than it was previously? Could this make it more difficult to produce general purpose tech?
   • For instance, before television, only television had to be produced. Now to transform television, think of all the avenues that would be affected: cable, satellite, streaming, phone apps, etc.
3. Page 37: The author describes a process wherein society adapts to enable the application of new technologies.
   • I had a hard time following the author’s train of thought. He writes about “society” as if there is a group of planners somewhere allocating capital and people. I’m not sure who this “society” is…I do know that there are lots of people out there making decisions that come together to form society.
   • For instance, society doesn’t turn people into chemists. People choose to become chemists because they are interested in the field and/or because there is a profitable market for that skill.
   • Student demand for a career field influences the development of education and curricula, not “society’s” desire to exploit heretofore esoteric technological ideas. How many universities fund majors where no one is enrolling (or paying)?
   • The advancements in the Industrial Revolution occurred during a time when most people didn’t attend college…maybe less standardized schooling is the solution for increased innovation!

Wealth of Humans, Ch 2

1. Page 57: “…one of the troubling dynamics within labour markets over the past 15 years is the downward mobility of college-educated workers; those with degrees have often been forced to take work for which they are overqualified, in the process pushing those with less education into competition for even less skill-intensive, and less lucrative, work.”
   • If downward mobility is a problem, maybe too many people are getting college degrees. There is an imbalance between the supply of graduates and corresponding jobs.
   • Cultural and governmental guidance keeps telling people to get as much education as possible, with little thought as to the nature of the degree or projected prospects for future employment.
   • Students can get loaded up with college debt and may never be asked to explain their career plan or think about its likelihood. That’s a recipe for disaster if you’re a highly-leveraged Philosophy graduate.
   • Can you imagine a bank giving a mortgage to someone without considering income levels or employment? (OK, maybe that’s a bad example…)
2. Page 58: The author talks about wages during the Great Recession. Wages fell in Britain but not in the U.S.; however, the U.S. had more layoffs.
   •  This reminds me of the sticky wages concept. Labor can become relatively (if not nominally) more expensive in bad economies because even if economic demand falls workers are (understandably) resistant to taking pay cuts.
3. Page 58: “From the workers’ perspective, falling wages are hardly ideal. Low or falling pay is dispiriting.”
   • I agree! But is taking a pay cut worse than getting laid off?
   • With a job, at least you are still learning and polishing your skills. Also, it’s much easier to find other jobs when you already have one.
4. Page 61: The author notes that there has been wage stagnation back to at least the 1970s, meaning real (inflation-adjusted wages) have not increased much.
   • It’s hard for me not to picture a correlation between wage stagnation and increased cost of doing business from the regular regulatory barrages from the 1960s until today. Of course I have no on-hand proof of this and could be dead wrong about any relationship!

Wealth of Humans, Ch 3

1. Page 68: The author describes Baumol’s Cost Disease.
   • The disease basically says that worker wages in all economic sectors rise over time. Wages rise even if the workers in a given sector are not more productive. For instance, an orchestra violinist cannot play a song “more efficiently, with fewer notes” today than she could 50 years ago.
   • However, to keep workers from bailing to other industries, wages have to rise.
   • I was intrigued to see this concept, as I’d been first introduced to it only a couple weeks ago. Serendipity!
2. Page 70: “…higher education…cost has risen steadily and dramatically, at greater than the rate of inflation…but the returns on a degree are [not] increasing.”
   • Have fun in college all you new graduates!
3. Page 70: “Tuition and fees have risen in America and have been introduced in other countries, such as Britain, where they didn’t exist before.”
   • Just because costs are not labeled “tuition” doesn’t mean they didn’t exist previously. I doubt British professors were teaching for free.
4. Page 77: “In a very low-wage world, more people will opt out of work. That will inevitably strain the social safety net…Societies will face a reckoning: either they will decide that this dynamic is unavoidable and should be made to work as effectively as possible, or the haves will reduce aid to the have-nots, leading to intense political conflict between those two groups.”
   • I can think of a third scenario: enough people quit working, and an entitlement mentality grows so large, that those who don’t work are so numerous and demand so much relative to those who pay for benefits that the non-workers can’t be supported even with very high levels of taxation.
   • There’s a finite amount of money to pay for things. If too many people stop contributing, there’s not enough to go around anymore. No one eats for free for very long.
   • Reduce incentives too much and no one does anything. How many hours might be worth working with 50%+ tax levels? Maybe it’s better to just work 4 days a week and go fishing on Fridays. Worker gets lower blood pressure, government gets 20% less taxable income.