Tuesday, June 28, 2011

2,000 Yrs. in One Chart: 23% of all Goods, Services Made Since 1 A.D. Were Produced This Decade!

The chart above is from The Economist and shows a "population-weighted history of the past two millennia" based on "economic output" and "years lived."  According to The Economist:

"By this reckoning, over 28% of all the history made since the birth of Christ was made in the 20th century. Measured in years lived, the present century, which is only ten years old, is already "longer" than the whole of the 17th century. This century has made an even bigger contribution to economic history. Over 23% of all the goods and services made since 1AD were produced from 2001 to 2010." 

MP: It also looks like more economic output was produced in the 20th century than in the previous 19 centuries combined.

HTs: Robert Kuehl and Steve Bartin

80 Comments:

At 6/28/2011 10:41 PM, Blogger Benjamin said...

I think the real boom is in the next 20 years--like the last 20 years (pre-recession) except even better.

Technical innovations spread globally nearly immediately today. Technical information is spread instantaneously though the web too.

There is no technical problem that is not beatable--energy, food, etc. Only man's stupidity and politics retards progress. Pollution, which does not respond to price signals, is a problem, but also beatable.

Whole parts of the globe are entering market or market-like economies.

I hope we can rid ourselves of parasitic militaries and corrupt governments in the next 20 years.



The Far and SE Asia boom will make the USA look like peanuts.

 
At 6/28/2011 11:02 PM, OpenID Sprewell said...

Benjie's right, the real information boom has not hit yet. The dot.com boom was a piddle compared to what's coming next. As for Asia leading the charge, yes and no. They are so poor and populous now that they can only go up, but to reach even Japan's level of GDP per capita will take decades (Japan may seem like a comparably rich country but its GDP PPP per capita is between South Carolina and Mississippi, two of the poorest US states). The central planning of Chinese govt holds them back, their banking sector has been a mess for decades now. India could do very well, but they need to fully liberalize and shuck all the socialism they still have. I think India could do it, I don't see China escaping a big bust.

 
At 6/29/2011 9:37 AM, Blogger VangelV said...

The Far and SE Asia boom will make the USA look like peanuts.

Going forward, yes. But there is no way that the Asian boom can compare to what happened during the 20th century because there is no access to cheap oil to push the move as rapidly. That said, because so many people are starting from such a low base the benefits to the poor will be tremendous and even more should be lifted out of poverty very rapidly.

 
At 6/29/2011 9:46 AM, Blogger Cabodog said...

I was wondering why our garage is so packed with stuff.

 
At 6/29/2011 10:15 AM, Blogger Buddy R Pacifico said...

This is truly amazing and the U.S. should be doing much better. The last decade was negative for the U.S. in a lot of categories (trade, stock values, debt). This should not be the case and cannot continue.

The U.S. was a loser on trade by design on the part of managed export nations. The greatest part of potential U.S. exports are intellectual property, BUT it is stolen at will by some of the biggest exporting nations.

Gordon Chang writes at Forbes, that one million U.S. jobs are being lost to China through theft of U.S. intellectual property.

 
At 6/29/2011 11:11 AM, Blogger Benjamin said...

Energy is a minor pothole. If OPEC and other thug states do not make oil reliable and affordable, the world will move onto other sources.

We do not need any oil for electrical production, and PHEV's are rapidly advancing, as is use of CNG and LPG cars/trucks (popular in Thailand, btw.)

The Oil Drum doomsters (a front for NYMEX speculators and sovereign wealth funds?) love fear-mongering, but only half-wits listen to that tripe.

Asia will likely leapfrog the USA in the next 20 years.

 
At 6/29/2011 11:14 AM, Blogger Che is dead said...

"The U.S. was a loser on trade by design on the part of managed export nations."

Really? Just how does the U.S. lose by having the governments of other nations subsidize their exports to us at the expense of their own people? We get much cheaper goods for which we pay in U.S. dollars. Those dollars are then used to either purchase U.S. goods or services, or invested the in U.S. creating U.S. jobs.

Dr. Milton Friedman gives a concise and lucid argument for international free trade at Utah State University in 1978.

 
At 6/29/2011 11:32 AM, Blogger Buddy R Pacifico said...

Che is ... writes "Those dollars are then used to either purchase U.S. goods or services, or invested the in U.S. creating U.S. jobs."

Che, how is that fantasy meme working out so far, after ten years of explosive growth for export nations?

 
At 6/29/2011 11:36 AM, Blogger morganovich said...

am i the only one who finds this dataset awfully suspect?

how good were records in the 4th century and who was keeping them?

how could we possibly know what the mayans were producing in 1200 or what the services economy looked like in northern china in the year 300?

this just seems like an exercise in assumptions and extrapolation that would be heavily biased toward recent periods with better data.

sure, there have been huge productivity gains and population gains and that makes a big difference, but pretending they can quantify it like this is ridiculous.

 
At 6/29/2011 11:43 AM, Blogger $9,000,000,000 Write Off said...

I don't think intellectual output is directly measured by economic output accounting. I don't accept that Livy produced less "stuff" than 25 years of Teen Beat.

(Although the larger point, that everyone says things are getting worse while they just keep getting better, is true.)

 
At 6/29/2011 11:57 AM, Blogger Mark J. Perry said...

Some of the historical data in the chart are from Angus Maddison (recently deceased), a highly regarded, well-respected, and world renowned scholar on historical economic data. He is considered to be the world's leading authority on economic history, especially for economic data, so is somebody that should be taken seriously.

 
At 6/29/2011 12:04 PM, Blogger Che is dead said...

Che, how is that fantasy meme working out so far, after ten years of explosive growth for export nations?

Buddy,

You might want to actually read the blog that you're commenting on. Here's a excerpt from a previous post on "Carpe Diem":

"A trade deficit doesn't mean that the dollars flowing abroad just disappear. They quickly return to the United States. If they are not used to buy our goods and services to export, they are used to buy American assets — Treasury bills, corporate stock and bonds, real estate and bank deposits."

"In this way, America's trade deficit is always and almost exactly offset by a foreign investment surplus. The net surplus of foreign investment into the U.S. each year keeps long-term interest rates down, prevents the crowding out of private investment by government borrowing and promotes job creation through direct investment in U.S. factories and businesses."

"In the broadest sense,our trade with the rest of the world is always balanced. In 2010, Americans bought $4 trillion worth of goods, services and assets from abroad, while foreigners bought $4 trillion worth of goods, services and assets from the U.S."

U.S. Trade With Rest of World is Always Balanced, Carpe Diem

As for Asia's "explosive growth", how has that made us poorer? During most of this period U.S. unemployment has remained low while GDP and personal compensation has risen. We are all better off today as a result of free trade. That's not a fantasy, it's a fact.

 
At 6/29/2011 12:19 PM, Blogger juandos said...

"am i the only one who finds this dataset awfully suspect?"...

Nope!

 
At 6/29/2011 12:28 PM, Blogger Methinks said...

I don't find it that suspect when I consider how much wealthier we are today than two hundred years ago. Or even one hundred years ago. Or how much much richer we are now compared to how wealthy people were when I was born (I'm middle-aged).

The rate of technological advancement has been increasing over time and so has the population.

 
At 6/29/2011 12:38 PM, Blogger morganovich said...

"He is considered to be the world's leading authority on economic history, especially for economic data, so is somebody that should be taken seriously."

that's an appeal to authority mark. that's not a valid form of debate.

the simple fact is that these are all estimates and projections derived from assumptions.

please tell me any possible way to determine 10th century world GDP using anything other than wild guesses about population and productivity. where is the economic data or even a census?

how would you have any idea how many people there were in the world?

the pre columbian americas had, in all liklihood, greater population that europe, but we have no idea how much greater much less how productive they were.

he may be the best in his field, but his whole field is guesswork.

 
At 6/29/2011 12:41 PM, Blogger Buddy R Pacifico said...

Che is ... relates that "U.S. Trade with Rest of World is Always Banlanced, Carpe Diem"

I don't agree with the sentiment of Professor Perry on this paticular subject.

Here is the growth of U.S. trade deficit in goods and services with China since 1985. Maybe in a fantasy meme this would be irrelevant but in reality the costs are high.

Che, did you go to the link on intellectual property theft and resultant loss jobs? Is this irrelevant? How does this balance out in your accounting world?

 
At 6/29/2011 12:43 PM, Blogger morganovich said...

"I don't find it that suspect when I consider how much wealthier we are today than two hundred years ago. Or even one hundred years ago"

i don't dispute that at all.

it's clearly true.

my beef is with the idea that we can make a precise comparison like this.

there is nothing like comprehensive data from a couple hundred years ago, much less 1000.

this data is WAY too smooth to be real.

there should have been a big drop in the 1500's due to the massive die offs in the americas. we should see the effects of the plague, the dark ages, etc.

this guy is just making up productivity numbers and multiplying them by wild guess population figures.

 
At 6/29/2011 12:45 PM, Blogger morganovich said...

buddy-

have you noticed that the US trade deficit tends to widen in years of strong economic performance and shrink during recessions?

if trade deficits are so harmful, how do you account for that?

 
At 6/29/2011 12:50 PM, Blogger Mark J. Perry said...

You can check out Angus Maddison's books, research and historical data here.

 
At 6/29/2011 12:52 PM, Blogger Buddy R Pacifico said...

morganovich,

Have you noticed that the US trade deficit tends to substantially widen in years of tech and housing bubbles? And then you might notice the results of startling trade deficit growth from 2000 to 2006 -- a lost decade for America.

 
At 6/29/2011 1:00 PM, Blogger Methinks said...

I don't think so, Morganovich. Historians usually avoid making wild-ass guesses.

I'm sure their were economic effects of lots of things over this period of time, but they may not be as great as you imagine. This is neither your field of expertise nor mine.

I just started reading McClosky's Bourgeois Dignity. The entire first chapter was dedicated to the fact that humans on average consumed goods valued at $3 per day until about 200 years ago when something changed.

These are not numbers that historians and economic historians typically pull out of Benji's ass.

 
At 6/29/2011 1:05 PM, Blogger Methinks said...

And then you might notice the results of startling trade deficit growth from 2000 to 2006 -- a lost decade for America.

The last decade I've noticed a growing trade deficit between my household and Whole Foods. I export nothing at all to Whole Foods, I import a shocking amount from it and I've grown much wealthier during that time period. Oh woe is me.

 
At 6/29/2011 1:10 PM, Blogger juandos said...

"I don't find it that suspect when I consider how much wealthier we are today than two hundred years ago. Or even one hundred years ago"...

Well methinks I can't but wonder if the 'definition' of wealth has changed over the same time periods?

 
At 6/29/2011 1:26 PM, Blogger Che is dead said...

"Che, did you go to the link on intellectual property theft and resultant loss jobs? Is this irrelevant?"

No, it is not irrelevant, but you act as if such criminal activity were enshrined in the treaties that we have signed. Theft of intellectual property is forbidden under existing trade agreements and we should act to address it under the appropriate provisions of those treaties. In fact, intellectual property is safer under a free trade regime since it allows for, and provides appropriate incentives for, the enforcement of anti-theft provisions.

 
At 6/29/2011 1:49 PM, Blogger Buddy R Pacifico said...

Che is ... states "Theft of intellectual property is forbidden under existing trade agreements and we should act to address it under the appropriate provisions of those treaties. In fact, intellectual property is safer under a free trade regime since it allows for, and provides appropriate incentives for, the enforcement of anti-theft provisions."

On this we totally agree. Now, how do we enforce existing or do we stop trade until a free trade agreement is signed?

 
At 6/29/2011 1:57 PM, Blogger morganovich said...

"I don't think so, Morganovich. Historians usually avoid making wild-ass guesses."

you must know a VERY different group of historians than i do.

they do it all the time. they are not supposed to, but they do.

economic historians are the worst of the lot.

there is simply no data for 10th century north american production.

i defy anyone to produce an even statistically significant estimate that is not based on unsupported guesses about population and productivity.

there is simply no data, so they are approximating (read: making it up)

 
At 6/29/2011 2:00 PM, Blogger morganovich said...

mark-

pointing me to a $54 book and calling it data is not a terribly fair debate technique.

you are the one putting this data forward, it falls upon you to support it when questioned.

you are using a rhetorical trick favored by the global warming crowd and placing the onus of poof on the one questioning th data, not the one providing it.

that's not how it works.

and seriously, what records from the year 700 could this possibly be based upon?

it cannot possibly be anything but a guess.

 
At 6/29/2011 2:01 PM, Blogger morganovich said...

"Well methinks I can't but wonder if the 'definition' of wealth has changed over the same time periods?"

juandos-

i think you'd be hard pressed to find any reasonable measure of wealth by which the world has not improved massively in the last 200 years.

 
At 6/29/2011 2:06 PM, Blogger morganovich said...

"I just started reading McClosky's Bourgeois Dignity. "

have you read bernsteins book "the birth of plenty"?

tackles the same subject and is perhaps the most insightful economic history book i have read.

(well, until the last chapter when he really overreaches)

but think about this:

$3 a day. you are making a claim in terms of constant dollars.

how do you compare year 400 north American currency to that of year 700 or 1200?

what's your deflator? how to you estimate purchasing power parity?

i'd be very careful with such simple claims as $3 for centuries.

it's based on a mile of assumptions.

 
At 6/29/2011 2:13 PM, Blogger VangelV said...

Energy is a minor pothole. If OPEC and other thug states do not make oil reliable and affordable, the world will move onto other sources.

You are missing the much bigger picture.

First, the 'thug state' charge is just a way of avoiding the real issue. OPEC cannot meet the growing demand because most of its members are on the back end of Hubbert's Peak.

Second, our idiot politicians and progressives have done what they can to limit serious alternatives. They have diverted scarce resources to foolish wind and solar schemes that can never provide even a fraction of our needs within the next few decades while they have put up hurdles to coal, nuclear, and natural gas projects that would clearly help.

We do not need any oil for electrical production, and PHEV's are rapidly advancing, as is use of CNG and LPG cars/trucks (popular in Thailand, btw.)

You need coal and nuclear for electrical production but the politicians are getting in the way and stopping projects that make sense. PHEVs are not economical at this time and do not do much to reduce the use of total energy once the entire production process is examined. Propane and natural gas are not much of a solution because there isn't enough production to meet demand at current prices. Production is not moving up quickly enough to make a difference and is in big trouble in mature areas like the US.

The Oil Drum doomsters (a front for NYMEX speculators and sovereign wealth funds?) love fear-mongering, but only half-wits listen to that tripe.

The Oil Drum people are too optimistic as far as I am concerned. They do not account for political stupidity in most of their analysis and assume a free market with rational regulators that stay out of the way.

Asia will likely leapfrog the USA in the next 20 years.

Very possible. But it will be as much from the decline of the US than from Asia's rise.

 
At 6/29/2011 2:19 PM, Blogger VangelV said...

Really? Just how does the U.S. lose by having the governments of other nations subsidize their exports to us at the expense of their own people? We get much cheaper goods for which we pay in U.S. dollars. Those dollars are then used to either purchase U.S. goods or services, or invested the in U.S. creating U.S. jobs.

The US has lived off of subsidies for a long time and that has certainly been helpful for consumption. The problem is that the regulations make it difficult for capital formation in the US. To keep things moving forward you do not just need investment in new capital but also an investment that deals with the depreciation of existing capital. If you have driven on American roads, taken Amtrak, or been to an airport you know that has not happened. American infrastructure is getting old fast and little is being done to make the necessary refurbishments to bring it up to specification. The same is true in many industries as companies have had enough of the regulatory burden and will only do the minimum as they move new production facilities abroad.

So yes, the foreign subsidies are great for consumption. But domestic conditions are terrible for capital formation. That means that once the subsidies go away so will the good times.

 
At 6/29/2011 2:26 PM, Blogger VangelV said...

please tell me any possible way to determine 10th century world GDP using anything other than wild guesses about population and productivity. where is the economic data or even a census?

I'll make it easier than that. Tell me a valid way to determine current GDP.

 
At 6/29/2011 2:39 PM, Blogger VangelV said...

my beef is with the idea that we can make a precise comparison like this.

That is nothing. Did you get this bit from Science magazine?

1,211,287 Square kilometers of ice road-accessible Arctic lands that will be unreachable by 2050, a 14% decrease, according to a report online 29 May in Nature Climate Change.

As Willis Eschenbach points out, "they claim to know, to an accuracy of one square kilometre, both a) the current amount of Arctic lands reachable by ice roads around the globe and b) how that amount will change over the next forty years." Do you really think that anyone at Science really believes that the idiots at Nature Climate Change really can do what they claim? And if you don't do you really think that Mark believes that the numbers are as accurate as they are portrayed in the chart?

 
At 6/29/2011 2:40 PM, Blogger VangelV said...

Historians usually avoid making wild-ass guesses.

They certainly have no trouble spinning tall tales to push an agenda. If they can lie outright why not make 'wild-ass guesses'?

 
At 6/29/2011 3:58 PM, Blogger Mark J. Perry said...

Q: please tell me any possible way to determine 10th century world GDP using anything other than wild guesses about population and productivity. where is the economic data or even a census?

A: You can check Angus Maddison's books and articles to find out how he estimated output in previous centuries. My copies of his books are in Michigan, and I can't check myself. But he is a highly regarded source by the economics profession, and is frequently quoted and cited.

If you are not familiar with him or his work, then I think the burden is on you to become familair with his research and methodology, and provide specific criticisms.

 
At 6/29/2011 4:44 PM, Blogger VangelV said...

A: You can check Angus Maddison's books and articles to find out how he estimated output in previous centuries. My copies of his books are in Michigan, and I can't check myself. But he is a highly regarded source by the economics profession, and is frequently quoted and cited.

I am sorry Mark but Maddison cites a few different papers and studies that make estimates and accepts them as facts. Unless you have gone to those sources and looked at the data you will have a hard time understanding how good the data is. That means that you are taking what is given as fact on the basis of faith.

If you are not familiar with him or his work, then I think the burden is on you to become familair with his research and methodology, and provide specific criticisms.

Well, he clearly states that he is citing other authors when he is making his argument. It is obvious that you have not bothered to check those sources or evaluate them so it is hard to point to others and tell them to do the same.

I will give you an example of what I find problematic. One of the people cited by Maddison is Jan De Vries. But de Vries admits that the pre-industrial data is very problematic. While he argues that most studies show an increase in the real standard of living, which makes sense to me, that conclusion does not make the data cited correct. It still seems like there is a lot of wild-assed guessing to anyone who has been looking at material like this.

Now do not get me wrong. As someone who has looked at Fischer's, The Great Wave, and The History of Interest Rates, by Sidney Homer and Richard Sylla, I know that there is a great deal of data available for some areas of the world. But those authors are very clear about the errors and the inability to come up with a reasonable aggregate due to poor data availability.

I will tell you what really smells to me. The economy of ancient times were dominated by agricultural activity. The records show various cycles that led to times of plenty and times of shortages, mostly tied to environmental conditions. The cooling after the end of the Roman Warming Period brought lower yields, destructive wars, and declining populations. The MWP brought higher yields, growing production, and growing populations. After that ended the population of England and of much of Europe collapsed. The same cooling trends caused difficulties in China, India, and elsewhere. Yet, none of these cycles seem evident in the data being presented. This means that the uncertainty in the historians' data is larger than the variation that was recorded by ancient record keepers. Which makes the implied certainty somewhat laughable.

Sorry to get on this topic so hard but I seem to be running into these kinds of claims in a lot of literature these days, including much that claims to be scientific and I am getting a bit tired of the false claims of certainty.

 
At 6/29/2011 4:47 PM, Blogger Methinks said...

Morganovich,

Besides what Mark Perry wrote in response to you, I have, in fact known a lot of historians. One of my parents is a historian, as a matter of fact. You don't get very far in academia if you're just flinging around unsupported assertions (unless you're a Princeton economist, of course). Some historians are better regarded than others, of course. Those tend to be the ones who do a lot of digging and find a lot of support for their conclusions.

I don't think it's at all unfair to ask you to offer a criticism more substantial than "it doesn't look right to me."

Using your standard, it does look completely right to me. The standard of living didn't improve much for humanity for a very long time. For most of human history even the wealthy lived in what we today would consider abject poverty. That means we didn't produce very much, on average. Compare the beginning of the 17th century with the end of the 17th century and you will find little difference. Compare the beginning of the 20th century with the end of the 20th century and it's like comparing entirely different universes.

So, for me, this absolutely passes the smell test. Beyond that, neither you nor I can comment because neither of us (at least as I read your posts) are familiar with this particular historian's work. It's fine to be skeptical, but declaring a methodology invalid before you know what it is is just ridiculous.

 
At 6/29/2011 4:54 PM, Blogger morganovich said...

"If you are not familiar with him or his work, then I think the burden is on you to become familair with his research and methodology, and provide specific criticisms."

so if i cite a source that disagrees with him, the onus is on you to go read his work as opposed to asking me to show you how he arrived at it?

that is an absurd standard for evidence. it breaks all rules of debate. you would never accept such an argument from your student "go look it up professor, i am not going to explain it to you..."

when you put forth an argument and someone asks "what's your data?" or "how did you estimate that number?", the onus is on you to be able to explain it, else you have failed to support your proposition.

that's debate 101.

 
At 6/29/2011 4:54 PM, Blogger Methinks said...

i'd be very careful with such simple claims as $3 for centuries.

it's based on a mile of assumptions.


So is every financial model you've ever used to make decisions about how to allocate your firm's capital.

If you don't like the assumptions, fine. But, you should at least know what they are.

 
At 6/29/2011 4:59 PM, Blogger Methinks said...

Morganovich,

that is an absurd standard for evidence. it breaks all rules of debate. you would never accept such an argument from your student "go look it up professor, i am not going to explain it to you..."

That is not what Mark Perry said. He gave you his source. It's your job to check the source. Have you ever read an article with citations where the citations are completely filleted for you? I haven't.

 
At 6/29/2011 5:14 PM, Blogger morganovich said...

methinks-

i am not saying "it does not look right" as my primary criticism or talking about a smell test.

i am saying that there is absolutely no hard data on which to base this sort of study until the last couple hundred years.

the whole dataset is an exercise in estimation.

neither he now anyone knows what world population was in 800 nor what their productivity was nor how it changed by 900 nor any idea what the correct discount rate is to convert it to present dollars.

it's an estimate X an estimate X an estimate.

get each one even a little wrong, and the errors compound.

i'm not saying he wasn't careful, or that he didn't try his best to use the best data he could or even that he is not the best in his field.

i am saying that the data does not exist for him or anyone to render anything more that a best guess based on a set of assumptions about unknowable data, and they he could easily be way off.

his thesis seems sensible and therefore it's easy to turn off the critical part of your brain and assume his data is good, but that's exactly the mistake so many climate modelers made.

they assumed their conclusion and tuned their estimates (and used plugs) to get it, then had no forward predictive ability.

if you want specific issues, it's simple:

how do you know world population in 200 vs 800 vs 900?

how do you know what per capita gdp or productivity was in those periods?

how can you reasonably convert that into present dollars?

seriously, stop and think about it for a minute. there is no primary source material for this. you might get a very few datapoints on population and far fewer on anything economic and god help you trying to convert the currencies (in such places as they had them).

so where does this information come from? there is simply no source. this is a model. it's based on assumptions.

it may even be close to correct, but you cannot know that and therefore you cannot treat it as hard data. guessing how many hectares of cultivation the inca had and their crop yields is not the same as knowing how many bushels the us produces.

i'm not saying he's a bad historian. i am saying that it is not possible to really know what he is purporting to. there are limits in any field. this is a best guess map, not the terrain.

it's important to remember the difference. i watch people try to estimate markets every day. they use the best information they can find and try to vet their assumptions, but they are usually very wrong about anything more than a year or two away.

this data is no different.

 
At 6/29/2011 5:20 PM, Blogger morganovich said...

"It's your job to check the source"

the source is not readily accessible.

if he sent me a link to the data, that's one thing, but to link to a book i have to order for $54 is not the same at all.

he has admitted himself that he has not checked the data. how could he, his books are not with him?

i would certainly not expect someone to take my argument seriously if i backed it up that way.

this is just appeal to authority.

it's manifestly clear that these numbers are calculations. there is not other possibility.

i have asked for the assumptions.

would you trust a black box model whose assumptions were not shared with you?

 
At 6/29/2011 5:28 PM, Blogger morganovich said...

"So is every financial model you've ever used to make decisions about how to allocate your firm's capital."

precisely, which is why i know from a great deal of first hand experience how flawed they often are, how we tend to adjust our assumptions (often unconsciously) to get the numbers we want/expect, and how making 7 small guesses about revenue growth and gross margins etc wind up making a model no more accurate than if you just took one big guess.

i think you are making my point for me.

"If you don't like the assumptions, fine. But, you should at least know what they are."

i'd love to. can you show them to me?

that said, they are still assumptions. angus may well be a much better assumption maker than i am in this field. (i would hope he is) but they are still assumptions. you cannot treat them as facts, just guesses.

neither he nor i nor anybody can rightly put a value in the Iroquois service economy in 1300.

you can make assumptions that sound reasonable, but every failed financial model i've ever built was full of those too and i had a great deal more and better quality data to work with than he did and was working under much shorter timeframes, which makes it easier.

being off on a discount rate by 20bp for 500 years makes your data all but meaningless.

 
At 6/29/2011 5:36 PM, Blogger morganovich said...

vangel-

yes. that lack of sensitivity to known global cycles makes the data look pretty suspect.

it ought to run in a sine wave with climate for the first 1500 years.

that fact that it does not makes me suspicious as well.

 
At 6/29/2011 6:19 PM, Blogger VangelV said...

Using your standard, it does look completely right to me. The standard of living didn't improve much for humanity for a very long time. For most of human history even the wealthy lived in what we today would consider abject poverty. That means we didn't produce very much, on average. Compare the beginning of the 17th century with the end of the 17th century and you will find little difference. Compare the beginning of the 20th century with the end of the 20th century and it's like comparing entirely different universes.

You are missing the point. Nobody is arguing that the trend is wrong. What is a problem is the certainty that is implied in the graph. Frankly, there isn't enough data for that and given the fact that the graph does not reflect the economic collapse in the 14th Century, when the cooling trend reduced agricultural yields in China, Europe, and elsewhere, does smell very badly.

So, for me, this absolutely passes the smell test. Beyond that, neither you nor I can comment because neither of us (at least as I read your posts) are familiar with this particular historian's work. It's fine to be skeptical, but declaring a methodology invalid before you know what it is is just ridiculous.

We are not arguing against the general conclusion. We have a problem with the make believe accuracy that is being stated given the fact that the historians whose data is being cited by Maddison admit to uncertainty. For example, Jan De Vries, who supplies the European data, admits to formidable limitations in the pre-industrial data. The data in question also include long periods during which various areas were at war and kept extremely poor records, if any.

The bottom line is that when you bring up a number like 23% you are implying accuracy that isn't there in the actual data.

 
At 6/29/2011 6:21 PM, Blogger VangelV said...

he has admitted himself that he has not checked the data. how could he, his books are not with him?

Frankly, I am a little surprised. I look at historical price and interest rate data and note that the authors make it very clear that it can be very challenging for some periods. But that data is easy in comparison to an aggregation of domestic production on a global basis.

 
At 6/29/2011 6:24 PM, Blogger Ron H. said...

"Historians usually avoid making wild-ass guesses."

Unless they are dendrochronologists.

 
At 6/29/2011 6:27 PM, Blogger VangelV said...

"Historians usually avoid making wild-ass guesses."

Unless they are dendrochronologists.


Or Lincoln 'scholars.' Or historians who create best presidents lists.

 
At 6/29/2011 6:28 PM, Blogger Methinks said...

the source is not readily accessible.

if he sent me a link to the data, that's one thing, but to link to a book i have to order for $54 is not the same at all.


Morganovich, you are being totally unreasonable.

First of all, this is not Mark Perry's graph and not his argument. It's from the Economist. So, you should take it up with them, not Mark. MP has no obligation to spoon feed you links.

Secondly, I've never ever in my life read a paper where the citations were accompanied by the work cited. I've never written a paper where I've had to submit not only the citations but the actual works cited as well. Have you? If you don't want to buy the book, make use of the library.

It's rather petulant to insist that everything be spoon-fed to you, isn't it?

 
At 6/29/2011 6:30 PM, Blogger Ron H. said...

"On this we totally agree. Now, how do we enforce existing or do we stop trade until a free trade agreement is signed?"

Stopping trade to punish a trading partner is like threatening to shoot a hole in the bottom of your end of the boat.

 
At 6/29/2011 6:37 PM, Blogger Methinks said...

i think you are making my point for me.

Not really. You and I use financial models riddled with assumptions every day and we do it successfully.

You want irrefutable evidence? You're not going to get it. Does that mean we don't know what happened in the past? No.

Our models are much worse than the methodology used to compare the past with the present. They are working with known quantities. A thatched hut with no running water, no insulation and filled with pests can be compared to today's modern home.

Our financial models are predictive - that's why they're shit. We know what happened in the past. We have no clue what will happen in the future.

 
At 6/29/2011 6:39 PM, Blogger Methinks said...

Well methinks I can't but wonder if the 'definition' of wealth has changed over the same time periods?

I dunno. Seems like "more and better stuff" has been the standard definition throughout history.

 
At 6/29/2011 6:53 PM, Blogger morganovich said...

"MP has no obligation to spoon feed you links."

i disagree completely.

if mark is going to post data and expect us to believe it, he needs to have looked at its veracity and be able to point to the data. it is clear he has not done so in this case and is merely making an appeal to authority.

angus just cites a pile of other papers which, as vangle was so kind as to point out, make much of how bad their data is and how uncertain their estimates.

i presume you have studied statistics. you tell me, what happens to error bars when you multiple uncertain data by uncertain data buy uncertain data?

never trust an extrapolation like this that does not have error bars.

"Secondly, I've never ever in my life read a paper where the citations were accompanied by the work cited. I've never written a paper where I've had to submit not only the citations but the actual works cited as well. Have you?"

yes. it's not uncommon in statistical analyses, but for the most part i see your point.

however, i think you are missing another point: when my thesis advisers asked me about references, i had to provide them. you showed them the argument and went over it with them. that's what you do defending an idea. what's more, no one is going to accept a footnote of "read angus". you expect a specific work cited and a specific page.

fially, what i'm really pointing out is that this is not a simple footnote like "methinks argues X in his treatise XXXXX, carpe dium press, 2011 p4"

this is heavily extrapolated data. i for one, would NEVER put data like this into a paper without detailing its assumptions, and certainly not without a discussion of error.

 
At 6/29/2011 7:00 PM, Blogger morganovich said...

"Not really. You and I use financial models riddled with assumptions every day and we do it successfully"

i disagree. we succeed in spite of how bad our models (and those of economists etc) are because we know not to take them as gospel.

"Our models are much worse than the methodology used to compare the past with the present. They are working with known quantities"

wow. i could not disagree more vehemently. it is we who work with relatively known quantities. how many units were sold last year at what price and margin what is going to change in the bill of materials and how big is the market.

how big was the village? how many were there? how many huts? what tools did they have? how many? how many people lived there?

there is not a single one of these for which we have more than even the flimsiest of anecdotal evidence in the 10th century.

how big was the Iroquois service economy or that of the vikings on greenland?

how many people lived in south america in 800 and how many shoes did they own?

those are totally unknown quantities.

no matter how well footnoted a claim is in this sphere, it is still a guess based on dozens of assumptions whose error bars compound.

you cannot cite data that does not exist.

 
At 6/29/2011 7:03 PM, Blogger morganovich said...

"Our financial models are predictive - that's why they're shit. We know what happened in the past. We have no clue what will happen in the future."

and these hindcasts are even more so.

just because the number of people in south america in the year 800 is a number does not mean we can know that number.

how would you calculate it?

seriously, think about it for a minute. what possible method could you use to get that number that is not based on dozens and dozens of assumptions, none of which can ever be verified?

 
At 6/29/2011 7:45 PM, Blogger Methinks said...

when my thesis advisers asked me about references, i had to provide them. you showed them the argument and went over it with them.

I don't know what to tell you. Mark isn't defending a thesis. He's passing along a link to an article he thought we'd be interested in.

it is we who work with relatively known quantities. how many units were sold last year at what price and margin what is going to change in the bill of materials and how big is the market.

Yes, I can create a pretty accurate model of the past. But, since I can't trade in the past, my models have to be predictive and since a billion things we didn't predict can happen even in the near future, our models are pretty shitty. Modeling the past is way easier and we just hope past paradigms hold and nothing we haven't modeled will come along to invalidate every assumption we made.

I give up. Yes, Morganovich, we have absolutely no idea what the world was like. No clue. For all we know, the Iroquois had Facebook. Happy?

One of my parents is a historian and I spent my life surrounded by academics researching history. Not all historians are good and I certainly don't have a lot of respect for the academy. That said, I have listened to plenty of debates. There is enough evidence to piece together a picture of what the world was like and what and how much people consumed. It doesn't mean that we have a completely accurate picture, but it does mean that we have enough to make a meaningful comparison. For instance, we know what people consumed and roughly how much and how they spent their time.

Don't miss the forest for the trees - we are not only vastly more wealthy today than we ever were, but we are creating wealth at an accelerated pace. We humans are without question incredibly better off today than at any point in history. That, to me, is the salient point. Are you saying you don't think so?

 
At 6/29/2011 7:49 PM, Blogger Methinks said...

And because you are so damn LAZY, Morganovich, here's a link to Angus' website. I see a link to historical statistics.

I just googled his name, lazybutt :)

Enjoy.

http://www.ggdc.net/MADDISON/oriindex.htm

 
At 6/29/2011 9:32 PM, Blogger VangelV said...

You want irrefutable evidence? You're not going to get it. Does that mean we don't know what happened in the past? No.

I think you are making his point. We don't know enough to be able to claim that, "23% of all Goods, Services Made Since 1 A.D. Were Produced This Decade!" Perhaps it is 28%. Or 18%. The point is that we have no clue.

Our models are much worse than the methodology used to compare the past with the present. They are working with known quantities. A thatched hut with no running water, no insulation and filled with pests can be compared to today's modern home.

No, they are not working with known quantities. You have no clue what the real production was in Turkey or Ireland in the 7th century. Hell, we had no idea what the real production was in the Soviet Union in the 1960s and you are expecting good data when nobody cared to collect it? This is total fantasy and a pretence of knowledge where none truly exists. You only think that the data and methods are better because there is no way to check them properly.

 
At 6/29/2011 9:33 PM, Blogger VangelV said...

It's rather petulant to insist that everything be spoon-fed to you, isn't it?

No. When something smells, like the claim that you can have accuracy of a few percent when much of the data is troubling or missing, you do have to insist that the claim is supported.

 
At 6/29/2011 9:37 PM, Blogger VangelV said...

i presume you have studied statistics. you tell me, what happens to error bars when you multiple uncertain data by uncertain data buy uncertain data?

I think that you are still being too trusting. Yes, you get a great deal of uncertainty. But you also get it when you try to come up with an aggregate where one is difficult to do. How do you combine the production of wheat, beer, barley, bread, cows, spirits, apples, barrels, swords, etc., into a meaningful aggregate that can be compared with another number in another era? It is about as meaningful as the idea of an average temperature.

 
At 6/29/2011 9:49 PM, Blogger VangelV said...

One of my parents is a historian and I spent my life surrounded by academics researching history.

Which means that you should know better. Historians are biased just like everyone else. They take what are thought of as facts, although some are clearly lies, and spin a narrative that is filtered through their bias. This is how they can pick an idiot like FDR as one of the best presidents that the US has ever had or say that that other idiot Hoover cut spending and was an advocate of the free market. It is how they can make up all kinds of excuses for Lincoln's crimes and ignore his failings and character flaws. It is how they can call Hamilton the greatest Treasury Secretary ever. It is how anti-capitalists could spin a tale of great Soviet successes and talk about Castro's virtues.

 
At 6/29/2011 10:06 PM, Blogger Methinks said...

They take what are thought of as facts, although some are clearly lies, and spin a narrative that is filtered through their bias.

"They" is a big number. Some historians do that and other historians refute them. The historians who tend to earn good reputations do so based on solid research, not biased claptrap. Note that Krugman spews all sorts of nonsense, but did not win his Nobel Prize for nonsense.

This is how they can pick an idiot like FDR as one of the best presidents that the US has ever had or say that that other idiot Hoover cut spending and was an advocate of the free market.

Again, who is "they"? Certainly all historians do not fall into this camp - even though the academy is stuffed with left-wing nuts. And what possible political axe could historians have to grind about production statistics in the 10th century?

Why do you suddenly stop thinking critically when it comes to "them" while insisting we look at this data with a critical eye?

 
At 6/30/2011 6:20 AM, Blogger Hydra said...

But we are not affecting the environment, despite all that output.

 
At 6/30/2011 6:28 AM, Blogger Hydra said...

An estimate based on sound reasoning is not data, but it is not a guess, either.

 
At 6/30/2011 8:15 AM, Blogger VangelV said...

But we are not affecting the environment, despite all that output.

Of course we are. We have far more forest cover today than we did 70 years ago even though our output is much higher. That is what happens when countries get wealthy and progress allows for much greater agricultural productivity.

 
At 6/30/2011 8:37 AM, Blogger morganovich said...

"we are not only vastly more wealthy today than we ever were, but we are creating wealth at an accelerated pace. "

methinks-

you are the one missing the argument here.

i have never argued that we are not vastly richer today or that there are not more people.

i doubt anyone could support that argument.

my point is methodological.

these numbers are fictions.

i looked at the data to which you linked. if that's the data, then i am even more convinced.

look at the spreadsheets yourself.

it's just a stack of unfootnoted data that someone made up. i could build that too. it does not even give us sourcing, much less assumptions. hell, it doesn't even have any data between the year 1 and 1000 then 1000 and 1500.

but that's still a bit wide of the point:

no matter who footnoted it, the is just no one who could know that GDP in austria was 213 million in the year 1 and 298 in 1000.

sorry, but the is just no data on that.

you seem to be just circling the wagons around the family business and missing the fact that some things are just not knowable.

we can speak qualitatively and say the year 2000 was richer than the year 1000, but we simply do to have the data to make a quantitative claim that is X% richer with accuracy of better than maybe an order of magnitude.

his GDP and population figures are much too linear to be correct. seriously, think about it. you have looked at lots of financial models. how many posses this kind of linearity? GDP (and population) were linked tightly to climate before the industrial revolution. where is the plenty of the roman warm period and the famine of the dark ages?

this is an exercise in modeling based on assumptions, not a set of facts.

 
At 6/30/2011 9:05 AM, Blogger VangelV said...

"They" is a big number.

Of course it is. That is the nature of the study of history.

Some historians do that and other historians refute them.

You are missing the point here. The study of history began to emerge as a professional discipline in the US around 100 years ago. The was that the professional historians would be 'objective'.

Historians would strive to find and record the objective truth without any bias that would allow a false sentiment-driven picture that would obscure reality. The idea was to make history into an empirical discipline that would resemble the hard sciences. Historians would simply get the facts, lay them out, and sift them until they could arrange them until those facts interpreted themselves.

Of course that is all nonsense. First, in a chaotic system like the economic, social, and political world it is impossible to get the 'facts' that are essential to explain reality. Second, even if we ignored that inconvenient observation, it is very clear that no collection of facts is capable of interpreting itself. We are still left to biased human beings making decisions through filters acquired through experience and study.

Historians make value judgments and all such judgments are personal and subjective. That means that in the absence of empirical data points, which are not possible in dynamic systems with a large number of variables that are constantly changing, the effectiveness of a historian depends on the theory that s/he uses during the interpretation process.

The historians who tend to earn good reputations do so based on solid research, not biased claptrap.

This is not true. Historians get a good reputation by agreeing with most of their peers and using similar filters and theories when interpreting limited data arranged to resemble 'facts'.

Note that Krugman spews all sorts of nonsense, but did not win his Nobel Prize for nonsense.

True. But Krugman is loved among economists on the left, who see equality as the noblest goal.

 
At 6/30/2011 9:15 AM, Blogger VangelV said...

Again, who is "they"? Certainly all historians do not fall into this camp - even though the academy is stuffed with left-wing nuts.

They are the historians who compile the lists and choose FDR, Lincoln, Wilson and other terrible presidents as being near the top of the best presidents lists. They are all the historians that elevate FDR or Lincoln over Jefferson. Or voted Obama as the 14th best President the US has ever had.

And what possible political axe could historians have to grind about production statistics in the 10th century?

I am not suggesting that they have a personal axe to grind. All I am saying is that there is pretense of knowledge at work that is not being acknowledged by Mark.

While I am on this topic let me suggest that Mark does this many times. His bias is towards optimism (which I think is not a bad quality on most occasions) so he takes at face value all pronouncements of progress, no matter how dubious the data and sources. For example, he still argues that the BLS is accurate when reporting low inflation rates and unemployment. He still thinks that the EIA is accurate when it projects a shale gas boom even when insider e-mails and conference call confessions are showing that the companies have underestimated depletion, overestimated the ultimate recoveries, and are bleeding red ink.

All I am saying is that we have to be a lot less trusting of claims of certainty and be weary of the pretense of knowledge.

 
At 6/30/2011 10:09 AM, Blogger Methinks said...

Morganovich,

I did not look at the data at all. I just found the site for you.

In the course of my career, I've built giant financial models - starting with the economy, the industry and then companies within those industries. Then, I proceeded to make a million assumptions about how the variables in those models will change to arrive at 12 month price targets for those companies. A hilariously pretentious and futile exercise.

The models were impressively huge and the only opinion I have about those models is that they are total crap. Wildly inaccurate - mostly because I'm not clairvoyant and because one person cannot honestly even begin to pretend they know that much about a single company, let alone the entire economy. And a team of six isn't much better than a team of one.

I couldn't wait to stop wasting my time building that nonsense and move to stat arb.

The point is that all modeling is riddled with assumptions, unkowns, unknowables, and the limitations of statistical analysis. I agree that the longer the time horizon, the more assumptions, the lower the probability of accuracy. It's a drawback of modeling in general. Yet, it's the best tool we have to try to wrap our minds around the confusing world around us.

The tools are far from perfect. I think we all know that.

 
At 6/30/2011 10:13 AM, Blogger Methinks said...

Vange,

I don't share Mark's optimism, but that doesn't mean every optimistic thing he posts on his blog is wrong.

 
At 6/30/2011 11:51 AM, Blogger VangelV said...

I don't share Mark's optimism, but that doesn't mean every optimistic thing he posts on his blog is wrong.

I have never claimed that it was. The reason I read his blog is because I have a great deal of respect for a lot of what he says and the way he thinks. That said, I believe that Mark can be very naive at times because he is very trusting of data that does not pass the smell test and is demonstrably wrong.

 
At 6/30/2011 12:12 PM, Blogger VangelV said...

And because you are so damn LAZY, Morganovich, here's a link to Angus' website. I see a link to historical statistics.

I just googled his name, lazybutt :)

Enjoy.


LOL, have you looked at the links you cited? Maddison points out that his own estimates of PPP and per capita GDP for 2005 is different than that of the World Bank. He obviously has a disagreement about the methodology and comes up with different estimates during the current era. Now if there is that much trouble now what makes you confident that things will remain as inaccurate in the distant past for which there is little more than wild ass guesses for many regions?

And note that Maddison is citing his own books as sources but that those books contain data from authors who make the data difficulties much clearer than he does. What this means is that there is very little confidence about the "23%" figure being cited. The number can be significantly smaller or larger. I find it laughable that when the Chinese government misses a service economy that is bigger than the economic output of France you guys put much faith in numbers from a distant past during which there was little interest in keeping output records or reporting output faithfully.

 
At 9/19/2011 12:36 AM, Blogger OBloodyHell said...

>>> But there is no way that the Asian boom can compare to what happened during the 20th century because there is no access to cheap oil to push the move as rapidly.

 
At 9/19/2011 12:43 AM, Blogger OBloodyHell said...

>>>> But there is no way that the Asian boom can compare to what happened during the 20th century because there is no access to cheap oil to push the move as rapidly.

Vangel, this is untrue because you presume that all advances will tie to old technologies.

In reality, the "cheap oil" is more a matter of "cheap energy". The simple fact is that the boom in the FE will be driven by nuclear tech, because that's the only place it can come from which is currently known (re-direct if some massive breakthrough occurs in either storage tech or energy sources like fusion or some such -- and no, that does NOT include solar or wind, for those among its drooling sycophants).

The FE WILL build, and quickly, but its chief drawback is its social infrastructure, which lends itself to groupthink and not to independent thought, which is where Great Ideas come from. Groupthink leads to More of The Same. Good under certain conditions but not one in steady flux, as an IP & Services Economy MUST be.

That's why I suspect that India will kick China's butt... because though China's people are VERY industrious, India has a century or two of English colonial thought processes to build from. They will be more inventive and more willing to "play" with new ideas.

In all likelihood, there will be specialization in many areas by a unconscious national process that leads/plays to each nation's strengths.

 
At 9/19/2011 1:05 AM, Blogger OBloodyHell said...

>>> I don't find it that suspect when I consider how much wealthier we are today than two hundred years ago. Or even one hundred years ago. Or how much much richer we are now compared to how wealthy people were when I was born (I'm middle-aged).

Indeed, those of us with common sense, good memories, and good capacity for observation understand this implicitly.

Anyone here know the term "darn your socks"?

It refers to the act of taking holes in your socks and repairing them.

Anyone here under the age of forty who has lived in the USA all their life EVER DONE THIS?

Right -- we throw out old socks with holes in them.

Or we use them as rags -- whatever.

People whine about how we're always building things so cheap and shoddy that they "don't last as long"?

Really? Funny, MOST cars USED to wear out within about 100k miles. Most tires used to be good to only about 5-10k miles (In fact, until the 1970s, you took an extra set of spare tires on long cross-country trips -- because you could not rely on the four/five you normally have lasting and you also could not rely on being able to get any in your specific size at the drop of a hat).

Nowadays, any car will make it to 150k or even 200k before becoming particularly unreliable, and tires regularly make it to 40k and even 60k miles before replacing.

And no one -- NO ONE -- nowadays thinks twice about hopping in their five year old car and driving from Seattle to Miami and BACK with four tires and a freakin MINI spare!!.

Yes, some things are more shoddy than they were, but part of that is that we don't WANT to pay for "solid", and part of that is that the techs involved are in too much flux for one to care all that much if it lasts for 20 years. Who here wants a 20 yo "laptop" computer?
Hint:
20mhz 486
4Mb RAM
30Mb hard drive
720k floppy
14.4k MODEM
(CD? Why would i want music on my computer? A recorder? Are you kidding? Why would I record music off my computer? How would it get there? That sound card is fine for game noises, but the music it makes sucks! Sounds like a flinkin' video game!)
AND THE PRICE?
Ca. US$3000 in 1990 dollars.

Yes, that's the price for a machine I bought back then meeting the above description, or very close to it.

Now you can get a machine that SCREAMS compared to that, which you can carry around on your shoulder, which costs under $500 in 2010 dollars.

Furthermore, that machine has almost instantaneous access, anywhere in the USA and eventually the world, to the internet, connecting you to everyone on the planet within minutes if not seconds. And the 4g wireless signals it uses are about 10-40x faster than that 14.4k modem!

In short, we often throw away stuff that's broken not because we can't fix it, but usually because we can't be BOTHERED to fix it. Why spend 5 hours fixing something when it only costs us an hour's labor to REPLACE IT?

We're friggin' rich as Croesus' wildest, most improbable FANTASY.

So, yeah, The above numbers are not only true, but almost bleeding obvious once you think -- really think -- about it.

 
At 9/19/2011 1:09 AM, Blogger OBloodyHell said...

>>> you guys put much faith in numbers from a distant past during which there was little interest in keeping output records or reporting output faithfully


Vangel, you don't grasp that a lot of the production records don't matter because the actual growth in real assets was so marginally small that one could look at inheritance records and get a good idea of what was produced during someone's lifespan.

This sort of thing is an obvious check on those "guesstimates" you sneer at so blithely.

Now, if you can find a reliable source which disputes this analysis based on what is found in such records, then, by all means, present it.

Until then you're talking out of an orifice that one normally doesn't use for meaningful communication.

 
At 9/19/2011 1:25 PM, Blogger VangelV said...

Now, if you can find a reliable source which disputes this analysis based on what is found in such records, then, by all means, present it.

My argument stands. A claim is made but the data is lacking. There is far too much faith in guesses about historical production that took place in times when there was very little interest in reporting output faithfully.

It is up to the people making the claims, not those that are skeptical to support the validity of the claims.

 
At 9/19/2011 1:28 PM, Blogger VangelV said...

Vangel, you don't grasp that a lot of the production records don't matter because the actual growth in real assets was so marginally small that one could look at inheritance records and get a good idea of what was produced during someone's lifespan.

How do you measure production that has been destroyed by war? Or by natural disasters?

Now, if you can find a reliable source which disputes this analysis based on what is found in such records, then, by all means, present it.

The Economist is making the claim. It has to provide a reliable source for the data. If I claim that Santa's production of toys is very high I cannot say that my claim must be true because you don't have a database that proves me wrong. No, it is up to me to provide the proof.

 
At 9/19/2011 1:38 PM, Blogger VangelV said...

Vangel, this is untrue because you presume that all advances will tie to old technologies.

In reality, the "cheap oil" is more a matter of "cheap energy". The simple fact is that the boom in the FE will be driven by nuclear tech, because that's the only place it can come from which is currently known (re-direct if some massive breakthrough occurs in either storage tech or energy sources like fusion or some such -- and no, that does NOT include solar or wind, for those among its drooling sycophants).


Try living in this world rather than an imagined one. Here we rely on liquid fuels and have designed society to depend on access to cheap petroleum.

If we find a better source nobody will be happier than me but that will not change the argument. Unless you come up with liquid fuels that are as cheap as petroleum products you will have to write down much of the massive investments in capital that we have made over the past few centuries and come up with the necessary savings that are required to make new investments in capital.

It may have escaped your notice but the last time the global economy began to do very well the petroleum industry could not react on the supply side to meet the growing demand. The same is true of many base metals, precious metals, and other commodities. If demand goes up supply cannot rise quickly enough. If it falls during the contraction the marginal producers will close down forever.

All this means that future production cannot grow as quickly it did during the 20th century.

 
At 9/19/2011 5:43 PM, Blogger VangelV said...

Yes, that's the price for a machine I bought back then meeting the above description, or very close to it.

Now you can get a machine that SCREAMS compared to that, which you can carry around on your shoulder, which costs under $500 in 2010 dollars.


I do not think that anyone will dispute the claim that technology has helped improve our standard of living. But we also cannot dispute the fact that our standard of living also depended on a growing supply of cheap energy. The problems we face will come from that front, particularly now that the cooling trends are developing and more of the ordinary income of ordinary people will go towards heating in the winter.

 

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