PG, what probability would you assign to the propositions "This time things are different" (empirically: the jobs won't come back 5 years from now) vs. "This time things are not different" (empirically: the jobs will come back 5 years from now)? Warning, if your probabilities are extreme enough, someone might want to bet you on it.
Presuming things are different, I see five obvious answers to the original question (and "all of the above" is also an option).
1) The amount of regulation and regulatory burden has increased sufficiently between then and now, that new business relationships have a much harder time replacing old destroyed business relationships. I.e., it's now more expensive to hire a new employee.
2) It's a novel change in the financial side of the economy. Like, capital-holders now try to make killings by investing in the right HFT funds instead of trying to go out and invest in new businesses. Implausible? Maybe, but finance has changed a lot recently, so the difference, if there is one, might be there.
3) The amount of re-education required to get a new job has increased enough to be a killer barrier to re-employment, whether because of employers having imposed an arbitrary demand for bachelors' degrees or because the jobs are actually more complex.
4) Ricardo's Law does allow individual regions to lose as a result of tech improvements, because if someone else beats your comparative advantage, people will want to trade with them instead of you. There's nothing ahistorical about the Rust Belt having a persistent recession within the US. This is now happening to the whole US; people no longer want to trade with us, but China is growing plenty.
5) The Thiel hypothesis: Recent technological developments are intrinsically more boring than past technological developments; people are trying to build web apps that will sell to Google for $10 million instead of trying to invent the next "microchip" or "electricity". It's not that the 21st century poses a novel obstacle to forming new business relationships to replace old ones; rather, 21st-century technologies that obsolete jobs are missing a wow factor or wealth-generating factor that previously increased demand or increased total wealth at the same time as obsoleting jobs.
I, too, thought that the job losses were permanent. Until there was an article posted here the other week with quotes in news outlets from several different eras since the industrial revolution claiming the same thing. Plenty of reasonable sounding explanations are offered elsewhere in this thread for why this time is different, but then lots of reasonable sounding explanations were offered in the past.
I'd say it's 95% that job losses aren't permanent, although I'm not sure 5 years is enough time to settle it. I'm perfectly willing to believe we could be in a recession/depression for the next 10-20 years. That has precedent in our and other economies. However, I'm not prepared to believe that--simply because I can't imagine what people will do--people won't end up doing something. Everyone likes to be productive, and humanity has a really efficient means of organizing labor to trade around everyone's productivity.
I am all for 95% or 100% unemployment, though, if such a fantastical reality can come to pass!
>I, too, thought that the job losses were permanent. Until there was an article posted here the other week with quotes in news outlets from several different eras since the industrial revolution claiming the same thing.
// It's like peak oil isn't it. We keep getting "we're at [or passed] peak oil" but then a new oil field or new extraction method makes this seem less likely. Thing is that oil will run out.
To me technological changes haven't converted in to less jobs because we've exploited those changes to increase resource use, and hence production. As natural resources falter then we can no longer have the increased resource use and so the removal of jobs via technological improvements can't be mitigated by the addition of jobs in new areas.
There are various resource pressures and financial problems that suggest to me that we're at the turning point. It would be nice to be wrong about that in some ways.
Oil doesn't have to run out to drastically change the economy. The new methods of extraction are more expensive than the old, and the price of oil per barrel is a lot higher. One can easily imagine a system where the equilibrium unemployment with oil (ie: energy) at $X+10 per barrel is much higher than one with oil at $X per barrel.
> PG, what probability would you assign to the propositions "This time things are different" (empirically: the jobs won't come back 5 years from now) vs. "This time things are not different" (empirically: the jobs will come back 5 years from now)? Warning, if your probabilities are extreme enough, someone might want to bet you on it.
What odds would you bet on?
I'll lay you 10:1 that world GDP continues to trend up barring WWIII or other force majeure type event.
Some nations will net lose though. The American currency trades at roughly +25% worldwide due to stability/prestige, and the recent administrations are really doing all they can to undermine both of those. So, American could net lose jobs and net lose GDP (implausible, but possible). But worldwide? Massive increases.
So anyways, what odds on what proposition are you looking for, and what timeline? We're both semi-public figures, I reckon we'd both be good for the money :)
(Rest of the comment is insightful and huge fan of your work, rationality, HPMOR, etc, etc, etc. But I'll lay favorable odds on "this time is not different")
Edit: To clarify, I'm disputing this from the article as I think PG is: "Our new economy is shrinking because technology leads to efficiency over growth." I don't think it is. World GDP continues to massively increase. I also think if America would get out of making financial fuckery the top government and private priority and get back into the entrepreneurship/production/hardwork then the USA will continue to do quite well, too.
Historically, since WWII each rapid spike of oil prices over 2006 100$/barrel for a few months is followed with a recession one year later. If the trend stays true, 2012 will be a recession year.
World GDP in a country with fast-growing economies and slow-growing economies, is not that useful a measure.
As an example, Brazil, China, India have actually been growing at rates that would be miraculous in the US, because they have labor-intensive industry and increasing oil supplies.
Old countries like the US, UK, France have barely moved the needle, and are scraping by through money-printing to finance massive deficits.
It's hard not to see bringing up GDP as anything other than an attempt to derail the discussion. The author was talking about employment. Implying that the claim was that GDP would go down (which is much less likely), and defeating that claim would have no logical bearing on whether employment will recover.
But it might confuse people into thinking it will.
1. Regulatory burden in which fields? Low-skill trades have suffered the most recently, but I can't think of any new regulations against them.
#4 is inherently untrue, as the lower US dollar entices other countries to buy our stuff. As for "made in the USA" stuff, well, the Tea Party has ignored America's position as the third-largest exporter [0].
#5 is conceptual...I cant really speak to it.
I would put my money on #2, if only bc this fits with the anecdotes I've read from the Beige Book (credit conditions are high even though banks have money to lend). This is such a relatively boring story (relative to "the Internet has consumed everyone's jobs NOM NOM") that I'm not surprised that it isn't espoused more.
Regarding 3), I would guess that re-education always seems more difficult initially and the hurdles are reduced overtime. It must seem have seemed impossible that a farmer would be able to operate a machine in a factory, initially. Also, there are always new people entering the work force that are being educated under the new paradigm.
These days it appears that a lot of effort and innovation is focused on creating services that encourage the 'democratization of software development' which allows traditionally non-technical people to more easily create software and online services. Think Heroku, dotCloud, Twilio, etc. This innovation will continue to lower the barriers of entry into the new economy and allow normals to build.
When you hear people say 'this time it's different' it almost never is.
To be fair, assuming you are a developer or an entrepreneur, your basic job description could be boiled down to either constant self re-education (coding skills transferred to platforms that did not exist when you started) or adaptability.
I feel, being in this field that requires constant learning (there are some jobs that require only static ability, e.g. COBOL mainframe), that we have a jaded view of what it takes to learn something new. Going from accounting to HR is a big leap, completely different domain (not like picking up iOS after doing server-side Java)
6) The educational level (or mean cognitive ability) of the US population has been decreasing just as the cognitive thresholds for gainful employment are steadily increasing. You'd say education if you were on the left and might say cognition if you were on the right.
Someone should plot the time series of BLS occupational statistics, with the minimum required education/IQ levels for each job. On the one hand the IQ profile of the US is trending down. On the other hand, anecdotally job growth tends to be focused on those areas requiring high IQ, like programming. Squaring this circle may mean job growth outside the US.
Environment plays a huge role in the development and maintenance of IQ. And socioeconomic status (SES) can greatly affect the conduciveness of a child's environment to fostering IQ development. Accordingly, since more and more children are being born into low-SES households, it isn't surprising to see average IQ scores in decline.
Consider the following tidbit from the most recent national census: 50% of all babies born in the country right now are born into low-SES households (as defined as households dependent on governmental assistance, like food stamps). Forty-one percent of all babies born in the country are born to unmarried mothers (single-mother households being highly correlated with low SES).
The conclusion isn't that our generations are getting dumber, per se; it's that our generations are being born into poorer and poorer households. And the deck is pretty significantly stacked against someone born into a low-SES household.
Now, there's debate about causality in all of this, i.e., whether the existing population is actually getting poorer, or whether the poor are simply outbreeding the well-off. Based on census data, it seems to be a little of column A, and perhaps a bit more of column B. Either way, the younger generations are starting off on worse footing. And that leads to lower IQ scores and decreased future prospects.
Have to say something. Using statistics to quantify a change in IQ based SES is similar to using statistics to show that an algae bloom is due to increased sunlight only. The drop in IQ has more to do with limiting educational opportunities and community supports for struggling families. Yes, our government has let us down in many ways but it is a generational problem of trying to give the people what they need to survive and be successful without the people really understanding what it truly is, to be successful. Mass media promotes an idea of success that is NOT successful in terms of true human success and the average Joe buys into such fallacies. It should never be a handout but a hand up to a better life, short term, look for solutions, educate, change, move on. If that is not possible for a "family" to do this, it needs to be discovered specifically why, not just surface appearances of what may truly be stopping appropriate growth and development of the human being. It is never one thing only, there is always a system involved and the system is broken somewhere along the way preventing it from working entirely successfully. Who said it takes a VIllage? It really does, a whole village of people concentrated on the development of each individual within that village to ultimate success and success does not equal money or power unless it is a means to an end for change and a better future for all.
1. topnotch prenatal care for all
2. topnotch education and services from birth, identifying potential problems in development right from the start and providing supports to prevent issues
3. Proper diet and nutrition education and availability, across the board
4. Fewer identifiers of low SES on a daily basis for growing children to prevent the stigma from pushing them into poor decision making.
5. A village for every child
It is all out there, you have to fight for it sometimes and sometimes you are treated with suspicion just because you want to fight for it, but in the end, it will always be worth it, for posterity's sake.
My disagreement was with the claim that "the Flynn Effect is in full swing". The recent small downwards trend you acknowledge is incompatible with that claim. From everything I've read on the topic, the Flynn Effect ended in the US about 20 years ago. FWIW, I administer Raven's APM tests in the course of my work.
Please speak for yourself about trolling wikipedia. I simply responded to the lazy GP's need for a citation with a google search of a relevant phrase. That said, the very article from which you quoted a sub-section has this in the header:
"Recent research suggests that the Flynn effect may have ended in at least a few developed nations"
This claim carries a citation on wp.
Your link at the bottom about educational attainment is completely irrelevant to the discussion. Intelligence and formal schooling are two different things.
If we run out of jobs, people will start wearing coats made of auditable solved captchas or something, just to prove that they commanded more human labor than the next guy.
Some people may, but especially in this specific example, there's a large societal force that would positivley squash such behavior. We call it 'fashion' (which is actually quite often linked to inbuilt, brain-hardware based ideas about aesthetics that we can't change)
In the example I linked it is exactly the opposite; aesthetics changing based on the cost/labor to produce rather than anything fundamental to the brain like symmetry, etc.
Presuming things are different, I see five obvious answers to the original question (and "all of the above" is also an option).
1) The amount of regulation and regulatory burden has increased sufficiently between then and now, that new business relationships have a much harder time replacing old destroyed business relationships. I.e., it's now more expensive to hire a new employee.
2) It's a novel change in the financial side of the economy. Like, capital-holders now try to make killings by investing in the right HFT funds instead of trying to go out and invest in new businesses. Implausible? Maybe, but finance has changed a lot recently, so the difference, if there is one, might be there.
3) The amount of re-education required to get a new job has increased enough to be a killer barrier to re-employment, whether because of employers having imposed an arbitrary demand for bachelors' degrees or because the jobs are actually more complex.
4) Ricardo's Law does allow individual regions to lose as a result of tech improvements, because if someone else beats your comparative advantage, people will want to trade with them instead of you. There's nothing ahistorical about the Rust Belt having a persistent recession within the US. This is now happening to the whole US; people no longer want to trade with us, but China is growing plenty.
5) The Thiel hypothesis: Recent technological developments are intrinsically more boring than past technological developments; people are trying to build web apps that will sell to Google for $10 million instead of trying to invent the next "microchip" or "electricity". It's not that the 21st century poses a novel obstacle to forming new business relationships to replace old ones; rather, 21st-century technologies that obsolete jobs are missing a wow factor or wealth-generating factor that previously increased demand or increased total wealth at the same time as obsoleting jobs.