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Comment by dsheets | Hacker News Reader

If you redefine everything as deriving value from labor and labor alone, OK. Government intervention is not a given, is not universal, and its impact on labor isn’t unique.

There are other investment vehicles besides equity and other ways to take value from past into future that are neither garnishing the wages of children and grandchildren (most current state systems) nor investing in artificially inflated markets.

Just as a thought experiment, consider if all state pension contributions were just used to immediately purchase gold on the open market that was then put into a vault labelled with the year of birth of the contributor. Please explain how this (obviously naive) strategy is dependent on future labor. As far as I can tell, this system would be completely market-based and future labor would likely benefit as their “gold” might be cheaper as there would be less demographic demand.

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> If you redefine everything as deriving value from labor and labor alone

"Alone" seems to be an unnecessary addition for the problem to exist.

And until the AI really can take all our jobs, it's not a redefinition, labour is one of several pillars alongside capital, though specifics vary depending on your school of economics: https://en.wikipedia.org/wiki/Factors_of_production

> Just as a thought experiment, consider if all state pension contributions were just used to immediately purchase gold on the open market that was then put into a vault labelled with the year of birth of the contributor. Please explain how this (obviously naive) strategy is dependent on future labor. As far as I can tell, this system would be completely market-based and future labor would likely benefit as their “gold” might be cheaper as there would be less demographic demand.

Consider this experiment on an island with just yourself.

You bury the gold. You reach pension age, and stop working. You dig up the gold. You now have gold. What do you spend it on? There's nobody offering services, regardless of how much you offer, therefore cost of goods, services, and other assets has a divide by zero error and inflation is asymptotically infinite.

Similar arguments work when the working population shrinks even if not becoming literally zero: unless technological improvements happen faster than the workforce shrinks, which is complex because tech affects different products at different rates, shrinking populations cause your model to get inflation even with gold as a currency.

In your simplification, you have removed everything that isn’t labor (i.e. demand for commodities) as well as labor. It is unsurprising that working to bury gold is a bad investment in this scenario. Instead, you should have invested in a farm and some robots. Sorry, there’s no free lunch if you can’t steal it from younger generations.

Edit: you’ve revised history and now added a bit about “similar arguments” and inflation. The answer is simple: yes, you might get back less real value than you put in. Yes, there might be inflation. This is fine and normal and would be preferable to the present system and is not dependent on future labor in the same way as direct redistribution. There are no guarantees. ‘Enforcing’ guarantees is a recipe for disaster as we are now seeing unfold.

> In your simplification, you have removed everything that isn’t labor (i.e. demand for commodities)

Incorrect, I'm definitely including demand in there.

I'm saying there's no supply.

It's n/0, not 0/0.

> Instead, you should have invested in a farm and some robots. Sorry, there’s no free lunch if you can’t steal it from younger generations.

(1) OK, but that's not what you were saying before

(2) (a) The AI to control those robots does not yet exist, (b) when that AI does exist, we can set the pension age to zero — doing so is called "UBI", and AI is often suggested as both a mechanism to enable it and as an economic transition requiring it.

> Edit: you’ve revised history and now added a bit about “similar arguments” and inflation.

It was intended for clarification, not to "revise history"; FWIW, the para in which you wrote this edit was not present when I clicked "reply".

> This is fine and normal and would be preferable to the present system and is not dependent on future labor in the same way as direct redistribution.

You asked "Please explain how this (obviously naive) strategy is dependent on future labor." — I believe I have demonstrated that it is.

You have demonstrated only that the thought experiment is dependent on the future market for a commodity and not on some future labor being exploited. Value in the future is dependent on demand and not on extraction from labor.

I demonstrated: without labour there is no value to be exchanged.

I did this by showing that your own suggested commodity asymptotically approaches buying zero of the available zero goods, services, and assets as the production of those also becomes zero.

You can buy all of the nothing being made.

Yes, a nonzero quantity of labor is necessary to avoid a pathological economy? This is not debated.

The question is how the future value is priced. The original assertion was that future value must come from labor and there is no difference between direct redistribution and private transactions (of which only rent extraction was given as an example). My counter is that there are alternatives that are neither taxation nor rent-seeking. In particular, the holding of assets to be later sold is a store of value that notably does not depend on future labor any more than any functioning economy depends on labor as an input.

We have pretty robust systems for deciding what (most) things are worth via supply and demand. Claiming that future value must be extracted from future labor is just false — a system with some backpressure on the payouts to retirees is much more sustainable than one without backpressure. In your simplified thought experiment, you must agree that there is no dependence on future labor as none exists! The pension is also not effective, of course, but that is to be expected — essentially no pension is effective when stranded on a desert island.

(To be clear, I don’t advocate storing gold by birth year as a practical way to run a pension scheme.)

I thought your basic argument was sound, but having read through the conversation twice, you might not be putting it in the best light. Your point seems to be that value can be extracted from capital and that is a substitute for value from labour. Seems good to me. But you then went with a gold-based example. Gold is money which is not really a productive form of capital because there is almost literally no way to extract value from gold. It is inert.

The value of gold is it makes the holder indistinguishable from someone who had enough resources to procure yea much gold. A useful signal in a healthy economy. But it was asking for the literal on-an-island example where there was no otherwise healthy economy. Since your argument depends on productive investment of capital IMO you should have hammered on that a bit more rather than trying to bring gold into the picture.

I'm seeing a lot of misconceptions about debt in this thread. It isn't possible to "burden" "unborn generations" with debt, they can always just renege on paying. The problem is what we see in the US, where the debt in financial markets is reflected in the real world by ... massive capital formation overseas in China. So the damage has already been done, unborn generations won't have access to the capital needed to live the lifestyle of their debtor parents. This is because the parents never built the capital to sustain their own lifestyle and eventually the capitalists will stop donating free stuff to debtors. IE, debt isn't a future problem to be paid back. The problem is always in the capital formation of the present and past. It is the future consequence of what capital got invested in, where & why. In that sense high debt can be good or bad depending on how much went in to capital formation and whether the capital is productive. But typically high debt matches to poor choices deploying capital.

I agree with you. The island simplification came later. If the economy is broken, gold is not a good investment. This doesn’t change the fact that it is also non-extractive of future labor, though, which was the purpose of the thought experiment.

The problem with productive assets or non-inert commodities in this thought experiment is that they are much more dynamic — inert commodity prices are much easier to reason about.

You are fundamentally correct about capital accumulation, though. If you want future value, you should accumulate something (dynamic or static) that is valuable in the future — extracting rents or expropriating labor via force in the future are not pro-social behaviors.

The future labour must be willing to accept that gold for their labour. And likely they would ask more of it as there is more demand for their labour and less supply.

It could be that as labour is constrained the inflation in price of labour is higher than investment gains.

Yes, it could be! Life is risky. Nothing is guaranteed. I’d rather have the market set the rate of redistribution than have it done by fiat in a completely unsustainable way.

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