{"id":248,"date":"2015-10-18T18:06:29","date_gmt":"2015-10-18T22:06:29","guid":{"rendered":"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/?p=248"},"modified":"2015-10-21T14:59:17","modified_gmt":"2015-10-21T18:59:17","slug":"capital-in-the-21st-century-review-chapter-2-part-2-of-3","status":"publish","type":"post","link":"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/2015\/10\/18\/capital-in-the-21st-century-review-chapter-2-part-2-of-3\/","title":{"rendered":"Capital in the 21st Century Review:  Chapter 2 (part 2 of 3)"},"content":{"rendered":"<p>Part 2 of Chapter 2 looks at the growth, first acknowledging that worldwide economic growth has been absolutely incredible over the past two centuries, with worldwide per capita income up more than tenfold since 1700.\u00a0 He adds some qualifiers,<\/p>\n<p>\u201cBasically, the eighteenth century suffered from the same economic stagnation as previous centuries.\u00a0 The nineteenth century witnessed the first sustained growth in per capita output, although large segments of the population derived little benefit from this, at least until the last three decades of the century.\u00a0 It was not until the twentieth century that economic growth became a tangible, unmistakeable reality for everyone.\u201d (pag e86-87)<\/p>\n<p>Here is a four minute long video by Hans Reisling which makes much the same point in a rather impressive way!<\/p>\n<p><iframe loading=\"lazy\" title=\"Hans Rosling&#039;s 200 Countries, 200 Years, 4 Minutes - The Joy of Stats - BBC Four\" width=\"530\" height=\"298\" src=\"https:\/\/www.youtube.com\/embed\/jbkSRLYSojo?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p>&nbsp;<\/p>\n<p>That said, Thomas Piketty makes an excellent point about growth:<\/p>\n<p style=\"padding-left: 30px;\"><em>Economic development beings with the diversification of ways of life and types of goods and services produced and consumed.\u00a0 It is thus a multidimensional process whose very nature makes it impossible to sum up properly with a single monetary index.<\/em> (page 86)<\/p>\n<p>In economics class I contrast our life to that of a Pharoah thousands of years ago.\u00a0 We can hear any song we want whenever we want with the press of a button.\u00a0 A pharaoh might be able to summon any musicians to his palace, but if they were elsewhere it might take over a week before they could return to Cairo and play the requested song.\u00a0 Other modern products, from computers to telephones to cars to antibiotics to chocolate, where known in the Ancient World.\u00a0 By contrast, certain things were relatively cheap, or at least cheaper, in the Ancient World:\u00a0 land, servants, wood from huge old-growth trees.<\/p>\n<p><!--more--><\/p>\n<p>Piketty continues,<\/p>\n<p style=\"padding-left: 30px;\"><em>In the short run (a few years), the problem of \u2018relative prices\u201d can be neglected, and it is reasonable to assume that the indices of \u201caverage\u201d prices published by government agencies allow us to correctly gauge changes in purchasing power.\u00a0 In the long run (many decades+), however, relative prices shift dramatically as does th composition of the typical consumer\u2019s basket of goods, owing largely to the advent of new goods and servies, so that average price indices fail to give an accurate picture of the changes that have taken place, no matter how sophisticated the techniques used by the statisticians\u2026<\/em>(page 87)<\/p>\n<p>&nbsp;<\/p>\n<p>Thomas Piketty then looks at productivity growth by three main sectors: manufactured good, food, and services.\u00a0 As a rule of thumb, industrial\/manufacturing productivity growth is higher than that of the entire economy, agricultural productivity roughly equals that of the economy, and \u201cproductivity growth in the service sector has generally been low (or even zero in some cases, which explains why this sector has tended to employ a steadily increasing share of the workforce.\u201d\u00a0 Of course, sectors are by no means uniform, with productivity in certain areas rising faster than others. \u00a0\u00a0(For example, in food, animal products and imported fruit have become a lot more plentiful\/cheap, while local vegetables have become pricier relative to these.)<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/employment-by-sector.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-249\" src=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/employment-by-sector.jpg\" alt=\"employment by sector\" width=\"862\" height=\"488\" srcset=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/employment-by-sector.jpg 862w, https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/employment-by-sector-300x170.jpg 300w\" sizes=\"auto, (max-width: 862px) 100vw, 862px\" \/><\/a><\/p>\n<p>What we are seeing here is that, agricultural productivity increased a lot, but there\u2019s only so much food people can eat, so most of that increase in productivity translated to fewer workers.\u00a0 Manufacturing of course led to far more goods purchased, but even that has its limits.\u00a0 As people become wealthier, there is greater demand for services, but since productivity growth has been slow (Think, for example, a barber or a house cleaner.\u00a0 Both are barely more efficient today than a century ago.), this results in more workers in these sectors.<\/p>\n<p>As an aside, I do wonder if we are going to see a spike in service sector productivity over the next few decades as intelligent robots do an increasingly large number of jobs.\u00a0 That\u2019s another discussion, but I wonder if we are headed toward a new paradigm, in which employment in the service sector will shrink in absolute terms, with neither other sector picking up the slack.\u00a0 I suppose we will see.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>Thomas Piketty gives a great example near and dear to my heart:\u00a0 bicycles.\u00a0 He compares the bicycle of the 1880, the cheapest one costing roughly half a year\u2019s wages for the typical worker and ways dangerous, slow, and uncomfortable to ride , with bicycles of today.<\/p>\n<p><a href=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/antique-bike.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft wp-image-252 size-medium\" src=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/antique-bike-300x242.jpg\" alt=\"antique bike\" width=\"300\" height=\"242\" srcset=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/antique-bike-300x242.jpg 300w, https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/antique-bike-1024x827.jpg 1024w, https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/antique-bike.jpg 1311w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p><a href=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/002.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft wp-image-251\" src=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/002-259x300.jpg\" alt=\"002\" width=\"311\" height=\"360\" srcset=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/002-259x300.jpg 259w, https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/002-885x1024.jpg 885w, https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/002.jpg 901w\" sizes=\"auto, (max-width: 311px) 100vw, 311px\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<p>A bicycle from 1880 (above), and me with my bicycle (below), which is used to commute to Berklee most days. \u00a0Here are some things my bike has that the bicycle from 1880 lacks:<\/p>\n<ul>\n<li>multiple gears (7 in this case).<\/li>\n<li>Folding rear pannier bags and a front basket.<\/li>\n<li>Flashing front lights, tail light, reflectors, and reflective tape.<\/li>\n<li>Inflatable tires (much softer than the solid rubber tires).<\/li>\n<li>Form-fitting gel seat.<\/li>\n<li>Fenders to prevent filth from splashing upward.<\/li>\n<li>Front and rear brakes, versus a barely-functional front brake if that.<\/li>\n<li>Rear-view mirror and bell.<\/li>\n<li>Lower to the ground for easier mount &amp; dismount, plus less hazardous to fall off.<\/li>\n<\/ul>\n<p>Including accessories, my bicycle cost under\u00a03 days&#8217; wages. \u00a0While I make above the median salary in this country, a bicycle such as this remains affordable to a majority, and there are many cheaper bicycles available as well!<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/per-capita-output-growth-table.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-250\" src=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/per-capita-output-growth-table.jpg\" alt=\"per capita output growth table\" width=\"777\" height=\"570\" srcset=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/per-capita-output-growth-table.jpg 777w, https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-content\/uploads\/2015\/10\/per-capita-output-growth-table-300x220.jpg 300w\" sizes=\"auto, (max-width: 777px) 100vw, 777px\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<p>This section ends with this table on growth, along with a prediction.\u00a0 \u201cThe key point is that there is no historical example of a country at the world technological frontier whose growth in per capita output exceeded 1.5 percent over a lengthy period of time.\u201d\u00a0 Thomas Piketty continues that it\u2019s hard to predict the future, and he can\u2019t say whether per capita growth in advanced countries will be 0.5%, 1%, or 1.5% with a smaller chance of higher or lower. \u00a0He quotes economist Robert Gordon who believes that per capita output will fall below 0.5%\/year and justified this guess with the claim that technologies are becoming less transformative in terms of economic growth. \u00a0(I&#8217;m reminded of a chapter in the book I use in class, <a href=\"http:\/\/www.amazon.com\/Things-They-Dont-About-Capitalism\/dp\/1608193381\/ref=sr_1_1?s=books&amp;ie=UTF8\" target=\"_blank\">23 Things They Don&#8217;t Tell You About Capitalism by Ha-Joon Chang<\/a>: \u00a0&#8220;Thing 4: \u00a0The washing machine has changed the world more than the internet has,&#8221; which makes a similar general claim.)<\/p>\n<p>&nbsp;<\/p>\n<p>In economics, we talk about a \u201ccatch up phase,\u201d which can feature very high growth.\u00a0 We saw this in the United States after 1929-1932 had plunged the country into the Great Depression:\u00a0 for the next few there was double-digit growth, though this simply meant getting partway out of the hole.\u00a0 Europe recovering from the world wars is another example.\u00a0 More recently, China has been in a \u201ccatch up phase,\u201d as its economy started to modernize when it was well behind much of the world technologically, and could achieve very high growth rates simply by emulating other more developed countries.\u00a0 These high growth rates invariably end as a country catches up.\u00a0 (We\u2019re seeing the realization of this immutable\u00a0fact in China these days, as people discover that the days of 8+% growth probably are never coming back.)<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Part 2 of Chapter 2 looks at the growth, first acknowledging that worldwide economic growth has been absolutely incredible over the past two centuries, with worldwide per capita income up more than tenfold since 1700.\u00a0 He adds some qualifiers, \u201cBasically, the eighteenth century suffered from the same economic stagnation as previous centuries.\u00a0 The nineteenth century &hellip; <a href=\"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/2015\/10\/18\/capital-in-the-21st-century-review-chapter-2-part-2-of-3\/\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-248","post","type-post","status-publish","format-standard","hentry","category-capital-in-the-21st-century"],"_links":{"self":[{"href":"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-json\/wp\/v2\/posts\/248","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-json\/wp\/v2\/comments?post=248"}],"version-history":[{"count":9,"href":"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-json\/wp\/v2\/posts\/248\/revisions"}],"predecessor-version":[{"id":275,"href":"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-json\/wp\/v2\/posts\/248\/revisions\/275"}],"wp:attachment":[{"href":"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-json\/wp\/v2\/media?parent=248"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-json\/wp\/v2\/categories?post=248"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blockschwenkcollective.com\/cool_by_osmosis\/wp-json\/wp\/v2\/tags?post=248"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}