Reply #57: The problem with your "economics" model (and nearly all others) is automation

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Nearly everything that underpins macro and micro economics (all versions) is rapidly being swept away by the onslaught of automation and the increasing velocity of information and its availability to everyone. This time things really are different, and the change is so great that we now should speak of quantum economics. We are witnessing the end of the Industrial Age and the ascendance of the Information Age; unfortunately, nothing can prepared us adequately for what will follow.

Wealth, power, value, etc. have never been based on "labor" as you describe. If a group of us use our "labor" to rob your tribe of its food, tools, and some of its women, how do you account for the value of our labor?

Several factors contribute to gaining power, wealth, and advantages compared with other people. Physical brute strength, size, and abilities as individuals (particularly males) form a core set of components for dominating and controlling others. A second component is location; if you are fortunate to live somewhere with special resources (minerals, plants, animals, natural barriers protecting from enemies), then you gain an advantage by making better weapons or by having goods desired elsewhere. The third component is special knowledge, whether how to make better swords or how to navigate long distances, or anything else. Secrets and spies.

Until very recently, information moved very slowly and those holding the information preferrred it not move at all. Knowing that Napoleon has lost at Waterloo was worth a fortune on the London markets, while not knowing resulted in the Battle of New Orleans. Today, almost nothing remains a secret for very long. Now everything is moving at nearly the speed of light and with similar issues.

A couple of quick implications before I return to bed:

1. Efficient markets have little profit for anyone, employ few people, and are highly unstable. Because of high fixed costs being offset by tiny profits on large volumes, almost any drop in volumes can quickly eliminate all suppliers before any market response is possible.

2. Any product or service that can be automated and delivered primarily electronically will quickly lose almost all its perceived value.

3. Any practice that attempts to leverage capital to significant profits will almost immediately be countered, thus removing any advantage. Too much capital will desparately chase every arbitrage or artificial advantage, but with profits evaporating almost immediately. Much of what we have seen the last few years have been a frantic effort to maintain returns on capital that previously had been derived from insider information, market access, geographic restrictions, or outright theft (legal or not).

There is a lot more involved and the implications completely change everything.

What if the robots and automation of various types eliminate most jobs? What then? If we have enough to feed, clothe, house, educate, and cure everyone, can we figure a way to make it happen before it's too late?

More from me later.