A portion of the population does not get opportunities to develop these skills and were once allowed low-skilled jobs that paid "decently" but have now found themselves squeezed due to inflation and companies hoarding cash instead of spending it.
I've heard this sentiment many times but I've wondered if there's an economic fallacy there. Would the economy be better off if lots of companies stopped hoarding cash and hired lots of new employees? Or would there be side-effects like inflation, or some effect of pulling out cash from whatever it was invested in, etc.?
Serious question.
There is, it's a confusion between money and capacity. That money is an option, the possibility of getting people to do things for you. Unused money is paper.
> Would the economy be better off if lots of companies stopped hoarding cash and hired lots of new employees?
The economy is an abstraction. It can't be better off. But if the companies that have the money had productive ways to spend it they would be doing so. The fact that there aren't that many productive ways to use the money is why the interest rate is so low. The interest rate is the cost of renting money.
If we need more people consuming more and more stuff (that mostly gets put in landfill within a couple of years) then we're completely screwed. We need to start restructuring our way of life to accommodate the need to conserve resources, for one, and the need to support a basic standard of living for all people (across the world) for another.
Instead of encouraging increased consumption we need to be levying massive taxes against disposable items, requiring all goods to be largely recyclable, requiring the ability to repair before production can be licensed.
Yeah, that's the inherent contradiction of capitalism. But unless someone comes along with a different system we're probably stuck with that for a while.
They're all production with minimal consumption agree; they hardly summarise current human activity though. They don't require [many] raw materials beyond energy and humans but nevertheless they do tend to still use some non-renewable resources.
Another way to look at that is that it incentivises short-term investment in anything that brings returns above inflation, instead of allowing for capital to be saved up for more important projects.
Rules can define themselves, rules used to regulate the flow of information become information.
Standard economics defends that idea; but it is only true in a fairy-tale world where you have a magic money printing machine - like the world we are currently living in.
In the real world you actually have to have savings first and foremost in order to produce the products that others will buy.
Hoarding is a good thing since it frees the person to work on what they like, which is likely to benefit others. Also, money hoarded is usually invested in some instrument that might be benefiting other businesses.
> In a two person economy, your expenditure is my income and my expenditure is your income.
This is wrong. Imagine two people in an island. We elect that fish is money since it's the thing we all want and have a use for and can easily trade with each other. Now I fish 5 fish and put that in my savings account (a bucket of salt). As I spend this money, it does not become your income.
You might be confusing the way governments characterize the economy with how a real world economy actually works in practice.
> Also moderate inflation is a good thing. It disincentivises hoarding of cash.
And moderate tax-evasion is a good think because it disincentivizes hoarding of cash by the government. This is wrong as well. Not to say morally wrong, as it's trying to steer people's financial decisions in a definite uniform direction (ie. spending).
That sort of thinking is what had the US government almost shut down yesterday and have to inflate the money supply with $1.1 trillion more. It used to take us decades as a country to spend that much, but now it's only expected to last until September 2015.
But we still have people saying moderate inflation is a good thing.
Economic fallacy there is, but it's in standard economic theory. Standard economics claims that only sensible things to do are investment and consumption, and considers savings to be a waste. But the savings are not waste for individual economic entities; savings are a way of gaining power in economics.
Let me give a couple examples, consider two companies, company A which saves (has large quantities of liquid capital), the other B which doesn't (and invests everything into machinery, better production, etc.).
First example: A stealthy startup appears with a completely new ("disruptive") technology. Company B cannot buy it, so the company A is at advantage.
Second example: Workers decide to strike for higher wages. Company A can survive the long strike by taking hit on it's monetary reserves, perhaps pay strikebreakers, etc. Company B cannot do anything and have to give in to the strikers demands.
In other words, savings are a way to break out of the market system, and so people do it and race who does it better, because they want power (which comes from ability to react). Economy as a whole suffers; but why should the winning actor care?
For instance, you could spend your money constantly hiring more employees to do more work and to grow.
Or you could save your money, until you have enough to build a new modern factory that produces the product much more efficiently. That efficiency lets you pay your fewer employees more, but overall lets the business grow more reliably.
In your example, Company A is better for the economy because it will last a lot longer than Company B.
Companies failing does more economic damage than a company saving its profits for several years.
Slate Star Codex had a great post a while back that touched on this:
http://slatestarcodex.com/2014/08/16/burdens/
Key pull quote: "Society got where it is by systematically destroying everything that could have supported him and replacing it with things that required skills he didn’t have."
This means that I make decisions differently to somebody who has a buffer of parental emergency capital injection. For example, I would love passionately to quit my job right now. I would love to set up a consultancy specialising in data analysis for capital management for insurance companies, and have more than the required skill set, but if I take too much risk my family could be hungry. That would be decidedly uncool.
Another thing, you need skills. But it's very difficult to get a decent education (formal or otherwise) if your family isn't able to support you during your formative learning years. It's not easy to learn programming if your family can't afford a computer. It's not easy learning financial management when the largest amount of money you ever had is $500.
Basically, if you want to do a startup, you had better not be poor or uneducated.
Robert Herjavec would disagree with you, as would Sam Walton, Andrew Carnegie, Li Ka-shing, and dozens more who overcame poverty and a lack of education via hard work and common sense (and yes, a bit of luck in some cases) to become successful businessmen.
However, I think you are falling into the trap of identifying outliers and then trying to reason about the general case from it - it's pretty hard to use that to say anything more that "it's possible for X to happen, because it happened here, and here."
I'm not denying that it is possible that an illiterate girl from a low-income family in Mali could overcome every obstacle and build a successful start-up. But how much would you bet on that happening? Do you also think that her success will negate the hardships that other folks in her position face?
Our monthly tournament is always looking for new players...
It's a simplistic idea, but it is definitely possible. I lived out of my car for months until I was able to turn it around by using my computer for something besides surfing MySpace.
Rich or poor, there are numerous people sitting in front of extreme learning resources, and they'll never do anything with it unless there's this enormous infrastructure designed to remedy issues of motivation and planning. And that's where I think the difference is between rich and poor; yes, there are networking differences, yes, there are differences in local crime rate and other environmental stressors and so on, but the biggest factor is motivation.
I've seen a peer ditch school to go to the library to use public terminals, back at the time when computers still weren't that popular, and there was no Google or Wikipedia. But even then I could see that some people have a different heart -- starting from an early age, they had a yearning to learn that surpassed the praises of parents or the soothing structure of school.
The issue isn't access. The access is already intense for rich and poor alike. Most people don't possess the psychological traits to pursue their own intellectual growth. Almost everyone I've met, rich or poor, stop learning when society stops pressuring them. They may have high or low IQ, be rich or poor, but they are not interested in self-directed learning, at least not without strong external reasons like parents or social shame.
Almost everyone is not an intellectual.
I'm doing an online python course, but works busy at the moment and I missed my last deadline; I just can't be bothered, motivation is really hard to me (perhaps it is for everyone though).
That's not to say that there can't be many people, perhaps a majority, who are poor and disadvantaged by their poverty to an extent that locks them out of opportunities. I just think you have to be careful you're not saying "well sure he's lazy but looks he's poor so he can't help himself".
I can't afford that book could you say why you recommend it; our libraries here will order any book requested for a small charge.
I also imply that most people, when placed in front of vast access to knowledge, will do nothing with it.
It's also why great online education resources have failed to achieve revolution. Giving kids access to Khan Academy isn't enough; because too many people would rather visit another website.
Access clearly isn't an issue for you, and that's good. Perhaps your peer didn't have access issues either and that's good too, but if you believe that access isn't an issue for some people, then you are inexperienced in dealing with some forms of poverty.
Perhaps in some places the library is the solution, but in Chicago, public access is limited to two hours a day. I don't know how much access you required when learning to program, but I needed more than two hours a day.
That is assuming that you can get a library card. For one, you need a verifiable address, which is easy to produce if you live in a home, but very difficult if you do not. Also, if you have violated your card in the past, perhaps due to a youthful indiscretion, you are shut out of the system unless you can monetarily recompense, which is also difficult to do when you are poor.
Not to mention that street gangs can make it challenging to leave your block to get the library in some cases.
So while access has improved, to deny that it is an issue for some people because public libraries exist is glossing over the problem.
That's an interesting thought. What might infrastructure to remedy issues of motivation and planning look like?
Exactly!