The Rent Hypothesis
esoltas.blogspot.com
esoltas.blogspot.com
This is a weird way to talk about IP and rent. Is profit from IP necessarily rent? The problem is that "rent" is defined as "profits earned above what would be earned in a competitive market," but "competitive market" isn't well-defined until you define a system of rights (namely property rights). Markets are just systems of trade, and "trade" is the exchange of ownership.
Thus, an action which most of us believe constitutes a violation of property rights (e.g. I buy a laptop and someone takes it from a cafe without my permission and then sells it to a third party) is not "trade in a competitive market." So is an IP right a legitimate instance of ownership? Many people (and most Western legal systems) consider it to be so. There are also people who don't consider it to be so, pointing out differences between physical property and intellectual property. And, to be clear, there are people who don't even accept certain aspects of well-accepted physical property rights.
Most theories of profit assume that an investor gets money approximately proportionate to the risk they take in investing as a well as to the opportunity cost of just sitting on their money.
Economic rent is hard to wrap your head around; I defer to the Wiki:
In classical economics, economic rent is any payment made (including imputed value) or benefit received for non-produced inputs such as location (land) and for assets formed by creating official privilege over natural opportunities (e.g., patents)
In neoclassical economics, economic rent also includes income gained by beneficiaries of other contrived exclusivity...
In layman's terms I think it could be described as income for having/being rather than income for making/doing.
What you described is nearly precisely the definition of market power. Economic rent is, from what I've read (IANAE), a special case of market power that applies to factors of production (particularly land).
Is profit from IP necessarily rent? The problem is that "rent" is defined as "profits earned above what would be earned in a competitive market," but "competitive market" isn't well-defined until you define a system of rights (namely property rights).
First comes the existence of "intellectual property" in property rights. To avoid the dependence of the right to property on the state or the monarch, John Locke and others argued for the concept of "natural rights" - the right to physical property and land property I think are included in this while intellectual property such as copy rights have not been.
After all, if property is merely an administrative system established by the state for some purpose, such a system can be changed if it happens to not serve that purpose. The assumption of natural property is that (land and mobile) property rights are a prerequisite for the existence of a just state rather than the result of the state. So-called intellectual property is always the product of a state, indeed intellectual property is always a monopoly of activity granted by the state (with the "natural rights" argument being aimed to claim natural property rights are more than that).
Now, a purely formal, economic definition only judges the structure of a market in question. So it simply gives what difference between what a competitive market would charge for a good and what a non-competitive market actually charges. Since "intellectual property" is a monopoly granted by the state, the degree of rent they allow is most easily calculated. If anything, the trickier thing is calculating how much rent simpler property rights involve.
We should really look at the evidence rather than repeating the mantra.
The argument would be: Microsoft and Apple feel that existing IP protections on software would not sufficiently prevent competitors or consumers from 'stealing' the results of their work. So, they don't release the source code. Because they don't release the source code, there's a duplication of effort between Microsoft, Apple, and any other kernel-writers.
If there existed extremely strong IP protection laws for software, that required release of source (like a patent, basically), then Apple and Microsoft might release source, duplicate less effort, and their disadvantage to Linux would be reduced.
Open Source is what happens when you have a system that encourages these secrets to be shared. The only difference is, Linux manages to get R&D effort without the benefit of a monopoly-grant, or indeed, without any direct profit motivation.
Second, Unix is a bad example because AT&T never tried to patent it. I'll ask my dad about it. He worked at bell labs during this time (he has about 2 dozen patents and an IEEE medal). I think the attitude around there was that software wasn't something you could patent. My dads research was in lasers so I heard much more about lightwave devices than software growing up.
Either way there is a cost to use: either paying for the rights to the patent, "paying" in completely arbitrary time determined by patent laws which do very little to distinguish completely different technologies and lifespans, or paying to reinvent in trade secret scenarios.
I feel like with trade secrets its much more in our control to remedy situations where many people need access to a technology quickly. It allows for dynamic solutions. For example, private contracts could handle the patent use case without necessarily having IP. They could provide the end product as a service, or provide know-how to build the product under a "subscription-service" where the client agrees to pay a very large fee over the course of several years/dependent on unit sales/etc (the analog to the royalties/licensing fees), with the punishment being spelled out in the contract that if the tech is replicated in some other way or leaked, the client company must pay a large "breakup" fee. That way the client is incentivized to use the tech and keep it secret as well. Client companies can then assess whether these fees are better than the cost of R&D they would have to undertake to develop it themselves. Just look at software: there's plenty of stuff I could build myself, but I happily pay for an existing solution despite not being "forced" to. I think we very early on decided on a patent model and just threw up our hands and said 'no one would possibly invent otherwise!'
My monopoly on SilasX's labor? No problem.
Creator's monopoly on patterns that only exist because that creator found them? Reasonable.
Monopoly on all trade in salt? No, just no.
(It gets trickier for physical property because of what counts as creating, but you get the point.)
A researcher working for Pfizer is essentially getting the same deal as a researcher working for the government or a publicly funded university.
The main difference is that the government and publicly funded universities do not have a marketing line item on their budget that is ~120% of their R&D budget.
A voluntary agreement that the scientist and Pfizer both believe is in their own interest. The scientist presumably believes that Pfizer's funding and research equipment etc. is worth the shared ownership or whatever arrangement results.
> The scientist (or team) in question who creates the drug is almost never the one collecting the rents.
Can you clarify what you mean? If Pfizer conducts the research then they collect the rent. If an independent scientist conducts the research, then they will own the IP and will collect the rent instead.
No job contract is truly voluntary in the absence of a guaranteed livable income. Period.
Take the implicit threat of poverty out of the salary/job negotiation process (e.g. with a basic income) and then we can talk about "voluntary" contracts.
>Can you clarify what you mean? If Pfizer conducts the research then they collect the rent.
Legal entities do not conduct research, people do. Legal entities do collect rents, though (which are then distributed).
Ostensibly, the patent system is there to spur innovation by people.
If you _are_ talking about SG&A, then I assure you that the government and publicly funded universities have SG&A numbers absolutely dwarfing their R&D spend.
I was asking if, given their existence, it would really be "OK" to have one person control it. You came back with suggesting its better than them not existing, which is fine, but is only relevant to this discussion if you can prove that it wouldn't have existed without the monopoly. I am doubtful of this.
Its easy to see the error in this logic since it basically applies to all things: a monopoly on food production is better than food not existing. A monopoly on housing is better than no houses, etc etc.
That's what my rule was assuming. I'm not claiming that it's true of any particular drug, only that if it is, then the monopoly is okay.
>Its easy to see the error in this logic since it basically applies to all things: a monopoly on food production is better than food not existing. A monopoly on housing is better than no houses, etc etc.
I wasn't saying the monopoly is optimal, just "okay", as in "not bad for the reasons we traditionally think of monopolies as being bad". It's why a monopoly on salt is intuitively stupider my monopoly on my labor.
Can you give an example of such a thing?
SilasX listed that they have a monopoly on SilasX's labor. That's a pretty sensible monopoly.
They also listed "Creator's monopoly on patterns that only exist because that creator found them" as something they are okay with.
The second one would be artistic works like books, drawings, movies, etc. Would also include inventions. In that case, it's a lot more likely that someone later on would come up with the same invention, which is why limits on monopoly length are reasonable; as time goes by, it becomes less true that "If not for this monopolist, we would not know of this pattern."
>Would also include inventions.
Inventions don't exist because of a single person. In most cases there is only one or a few workable solutions. Most patentable things are invented multiple times.
...the one after that seems to disprove good faith, though. No argument against the examples, just total lack of recognition that they exist. There are explanations for that to be an accident, but they are not likely. Still, I took more time to explain very carefully and earnestly, and got no reply in return.
Yes, but they tend to be in jail. In any event, he appears to be talking about rent and the profits from IP in the context of Western civilization, in which IP rights are indeed a legitimate instance of ownership.
Landlords don't make money by providing a service or selling goods. They make money by sitting on something no one else is allowed to have. They don't have to do anything more than sit back and collect checks. Sure, they bought the land originally, but there's no more investment to be made after that. They can invest in a nicer building or grounds, or compete on services such as "free" utilities or quicker repairs, but those are above and beyond the "rent-seeking" part of his revenue. He could just rent an empty lot, like a trailer park or campground.
This is analogous to, for example, telephone lines. They cost a lot to initially build out, but once they're there, the phone company only has to charge people for access. They provide a service back at the switching station, but most of what they're getting money for is owning lines that already exist. It's harder to separate rent from their other revenue, but it's there.
It generalizes to all revenue that is of the "sit back and collect checks" variety. Cellular carriers sitting on a chunk of spectrum they can sell access to. They can just rent it out to MVNOs if they don't want to provide those services themselves. Film studios sitting on a catalog of work they can sell, license, etc. So yes, IP revenues are definitely rents.
Is that second sentence any less true of any other trade, including the traditional selling of goods? After all, the only reason you have to give a food vendor money for food is that the vendor (or someone on the vendor's behalf) will use violence if necessary to defend the vendor's exclusive claim on that food.
> Sure, they bought the land originally, but there's no more investment to be made after that.
That isn't true. There are maintenance costs and property tax, and less obvious things like the opportunity cost of risk of purchasing a house in order to rent it out.
The difference between land and widgets is that widgets are continuously manufactured and sold. Once you sell me a sandwich, you can't take it back. It's mine. Rent is the opposite. They're not making more land, or spectrum, or whatever, and that's not what they're selling. They're selling access to it. And they can revoke that access at any time. The thing I'm paying for isn't mine, it's still theirs the whole time.
This just isn't true. It's human nature to innovate, just as it is human nature to sing, play music and dance.
There are many times when the IP system is not only absent, but actively working against the creator, yet it doesn't stop the process of innovation. It just slows it down.
The government also innovates and foots the bill for R&D, and there is a good case to be made that the most valuable technological innovations in our society do actually come from them.
Straw man fallacy.
The OP wasn't suggesting that literally nobody would innovate, just that innovation, particularly innovation paid for by private parties of the sort of thing which is expensive and easily copied, would significantly decline.
If you have ever paid to see someone sing, play music, or dance, you have participated in an activity which likely would not have occurred without there being a monetary incentive for that person to partake of the activity you paid to enjoy.
That the current implementation of patents is highly flawed doesn't affect that basic fact.
It's highly relevant. If the patent system is being given credit for innovation taking place that would have taken place anyway, maybe it should be dismantled or at least heavily scaled back.
It doesn't matter to someone explaining that good rents exist. That the 5% exist at all allows a demonstration of the concept.
The article mentioned that the patent system overshoots, with a link to more info. That's all that's needed.
It seems like a real stretch to call a drug company that researches a completely new drug and patents it "rent seeking", even if they can be said to enjoy "monopoly rents" ex post.
It turns out, that they're both immoral and awesome. we have to find a way to have our cake and eat it too.
-@hypercapital
Yaay.
Over time and with increasing complexity, returns on investment in society begin to level off and turn negative. Once the easy irrigation projects are completed, society begins progressively larger projects covering longer conduits with progressively smaller amounts of water produced. Bureaucracies that started out as efficient organizers turn into inefficient obstacles to improvement more concerned with their own perpetuation than with service to society. Elites who manage the institutions of society slowly become more concerned with the their own share of a shrinking pie than with the welfare of society as a whole. The elite echelons of society go from leading to leeching. Elites behave like parasites on the host body of society and engage in what economists call "rent seeking," or the accumulation of wealth through nonproductive means--postmodern finance being one example.
Excerpt from: http://www.amazon.com/Currency-Wars-Making-Global-Crisis/dp/...
Elites always have and always will seek to take disproportionate shares of that wealth because they can, and because regimes, legal norms and competition encourage them to do so rather than because creating wealth doesn't pay. Much of postmodern finance is undoubtedly rent seeking, but so were the fights over ownership of natural resources and sovereign-granted monopolies of earlier generations, and the local nobility and religious bodies taking the surplus agricultural produce before that.
Research budget could be measured by the percentage of thinking time the whole humanity is spending on improving their lives (potentially times how long it takes on research before a solution is found), which probably reflects better the effort we put on something.
Presumably many people died or were injured, and property and landscape burned down during the development of fire as a commodity item. While there was no formal budget or currency, lives, property, and R&D time surely are not zero in the budget.
It's also a bit odd to refer to the incalculable benefits from a process done by our Homo erectus ancestor. The controlled use of fire surely pales in significance to our early tetrapod ancestors who learned to live on land.
People gain experience as they age, but that doesn't mean people are wiser today than 1000 years ago... because they're different people.
Similarly, bureaucracies and societies also "die" and dissolve.
That is, as given, the quote gives a sketch of cultural development which almost unconnected to archeology and history.
Land, and natural opportunities in general, are the original and most fundamental source of rent.
Even the electromagnetic spectrum is monopolized. And although the holders of these exclusive rights do pay the FCC, they pay very little compared to the actual value.
Likewise, people pay very little in taxes compared to the true value of their land. Imagine if instead of having to pay income taxes and sales taxes, which disincentivize labor and business, we instead charged people for the use of land.
We could reform property taxes such that we exempt all building and improvement value, and just tax land.
This would encourage efficient use of land, reduce sprawl, and boost productivity because it would remove the deadweight loss of other taxes.
It would also be cheaper and simpler to collect, and less invasive.
It may even be possible in many locales to use self-assessment, with the concept being that if you set it too low, others may outbid you according to a certain set of rules to keep things fair and reasonable.
Current property tax assessors are licensed professionals, and each county in the US handles it differently. Sometimes they are elected, sometimes they are appointed.
One could also imagine the local governments outsourcing assessment to private tax assessment companies. Zillow and many companies already have assessments for most of the country freely available on their website.
Doesn't the market already provide reasonably accurate assessment, via insurance companies?
What if we taxed land, but the tax rate was based entirely on the size of the parcel, and the total valuation (land + improvements) of all nearby parcels, not including the current one.
In theory, this adjusts the price of holding the land based on how desirable it is, encouraging either efficient use, or selling, and doesn't encourage trickery where someone tries to keep their appraisal low so as to reduce their tax burden.
The point is that monopolization of prime locations is what drives "real" wages down. In other words, the amount you can afford after rent and taxes take their cut, is determined by these factors.
You should instead pay for what you use, by value. If that doesn't happen, rents will just flow as unearned income to owners of the best land, and wages will be depressed. And then we'll additionally need to tax productive activity to make up the shortfall.
The "margin of production" is the best available rent-free land, and the point is that the better this land is, and the more productivity is possible upon it, the better your next best alternative to paid labor is. Thus, employers must pay you more, or landlords must demand less... because otherwise you'll take that next best alternative.
Of course, the alternative includes all subjective and intangible things too... but that is what I mean by "real wage."
They should be highly progressive. It should be so high that it would be more economical for you, if you own 10 apartments to sell one or few than to pay tax on all 10.
To avoid loopholes ... if you own entity that owns some land or property, you need to pay the tax as if that property was your own (minus the tax already paid by this entity).
Also arable land should have slower progression to not discourage efficient farming.
Also, the gini coefficient for landownership, by value, is actually higher than income virtually everywhere. Thus, a land value tax is actually more progressive than an income tax.
Taxing by market value also raises the most revenue, for the same reason why a rational landlord only wants to charge market rent. Charging either more or less is just leaving money on the table.
And if it is less, the difference will be pocketed by landlords. Because they know what the market value is.
If current trends continue, it will be the capitalist who first commercialized the robot once public and private R&D had done all the heavy lifting.
There will always be a need for skilled labor to maintain and update robots. Even the most magical electric self-driving car requires maintenance in the form of software updates, tire rotations and the like.
I think we are entering a period of "super industrialization", where even fewer workers are needed to do greater amounts of work. Careful care needs to go into making sure we don't enter the age of "robber barons" again, but I think a careful review of history and thoughtful policy decisions can guide us into this new era.
A tool is so much more versatile than a die press stamping out the same object over and over. Tools imply flexibility and adaptability to different circumstances.
I think automation will happen from the bottom up. Some plumbers use cameras and nitrogen gas to detect leaks. Soon, they'll use robots to detect and repair leaks. They'll get better and faster, requiring less and less oversight. The natural consequence of that, the guy with the good tools can fix more stuff in a day.
Similarly, a self-driving car fleet will require repairs and maintenance, as well as regulators who will ensure safety compliance (whatever those saftey measures are).
In any case, its the industrial revolution again. We're replacing legions of factory workers with machines. Rent-seeking occurred in the late 1800s / early 1900s as children were used to control absurdly powerful machinery (and put into dangerous situations... and paid extremely cheaply for it).
We need to ensure proper economic growth while balancing the needs of future workers... ideally while allowing older workers to transition their skills to the economy somehow.
Why? Surely we will come up with maintenance robots that will maintain the other ones, including other instances of the maintenance robot.
In my experience automation tends to have very mechanical edges, so the very act of automating something brings about a system that is easier to automate further.
And who's job is it to make sure that these maintenance robots actually are doing their job?
We basically have 100% automated webpages, providing services and automatically updating themselves. (Puppet, Aptitude, etc. etc.). Even the process of buying new computers to hook into a webpage's processing system has been automated "through the cloud" with Heroku, Amazon Web, and OVH Servers.
And yet, you still require roughly one IT guy every 100 servers, to make sure that those servers are actually running. (+/- whatever, based on skill-level and maturity of the project)
I mean, the best-case scenario for a maintenance robot is something like Nagios, which will automatically check if various web services are still up and running.
Technology is a given for a specific time. And I read your argument as: given enough technology, all will be capital. So I believe you assume no jobs will remain, given sufficient technology.
On that regard, I feel that this "end of jobs" dystopy is not more achievable than the Fukuyama's "end of history" theory. As long as humans exist, they will have two things: a calling for doing something with their lives (and derive meaning from it) and a need to compete with others. So they will keep on working on new jobs, and money will flow, transfering value among them. Agriculture was once the be all and end all of economy, and now is just one industry. If automation makes some jobs disappear, or be easier, others will appear.
Actually, that's easy: No. Humanity will not be enslaved to a small number of capital owners.
But the reason isn't necessarily a happy one, which is that humanity will revolt and start destroying and probably kill lots of people and even potentially kill the goose laying the golden egg by destroying the robotic infrastructure. Should they fail to destroy it, then you still face questions as to who ends up with the power and how it is distributed after the fact; you can find places in history where there was a lot of blood and violence on a recurring basis to answer the question "who gets the power?" because the matter wasn't settled even after the first victory.
That's the outcome I'm more worried about, not the possibility of somehow getting 99% of the population "enslaved".
Just as Prometheus brought fire to the humans, someone will find a way to prevent the future from being locked away. Once you achieve the necessary level of automation, you only need one fabricator that can build the next.
First, the warfare would be very asymmetric, with much of the war fighting capability automated through the very robotics that empower the capital class economically. Go ahead and ask the Taliban / ISIS what happens when you try to fight a modern military force in 2015 with weapons from 1970. If you don't have the money, you can't afford the newest weapons. If you don't have the newest weapons, you'll be fighting an asymmetric war from the weak position.
Second, it is in the best interests of the capital class to keep the underclasses happy. You see this tactic in a lot of developing countries like Mexico or India - the government subsidizes energy, food, etc. for the poor; meanwhile the rich run roughshod over the economy. So while people may dislike the lack of upward mobility, they are also dependent on the system (which is largely funded by the capital class), so there's very little will to change. If you give people just enough that they fear losing it, they will continue to vote for you.
Sorry, I wasn't clear. My comment was a reply, and was taking the parent as a given. If a very small cabal of capital owners tries to enslave the whole of humanity, then it won't be stable because humanity will revolt. And it is unlikely to come to that, for the reasons you state.
Interestingly, "large swathes of humanity enslaved" is actually a thing that has happened in the past, but in the past, the slaves were what we'd consider radically poor, and the enslaving states were not high-skill affairs.
I also disagree that merely keeping people happy-ish will suffice. We do have, as someone else says, "bread and circuses" today, but there's still a lot of people bitching about "income inequality", pushing for ever more wealth transfers to them, and hinting at if not outright threatening violence any time there's any suggestion that those will be taken away. I see no evidence there's a level of wealth that satisfies people in the longterm, and the capital owners can never be wealthy enough to satisfy humanity in the long term. You'd have to re-engineer humanity to have some concept of "enough" built into them. Eventually the capital owners will be forced to reckon with something.
If nothing else, eventually the remaining people who are still doing some sort of work are simply going to go on strike. Humans are rarely happy with the amount of wealth they have, and historically speaking, it seems giving them more makes that problem worse, not better.
With mass surveillance you can detect and stomp out rebellions long before they amount to anything. With automation you barely even need the support of your own troops. With modern technology you can keep most of the population fed and happy enough they aren't willing to risk fighting.
And so we could get stable authoritarian states like 1984.
But really you don't need all that to begin with. The vast majority of societies through history were pretty unequal. Even today much of the world has pretty high levels of inequality. Technology just prevents that from ever changing.
But imagine what would happen if they did any of the things I said like mass surveillance. The US is certainly moving in that direction, but imagine when there are microphones and cameras everywhere, always recording. With AI good enough to automatically figure out who you are and what you are doing. When every face and license plate is recognized, and drones above track where every single person and vehicle moves.
Étienne de La Boétie wrote in one of his earliest writings 'Discourse on Voluntary Servitude"[0] that tyrants only have power because people voluntarily give it. All that the people must do to overthrow the tyrant is to just sit down on the ground and give up helping him, because the tyrant has no true power of his own.
One of the more reassuring aspects about the Internet and the global economy is that ideas can spread in an instant, and it really enables people to be able to freely associate, even in many cases despite their governments' express attempts to prevent them from doing so. I think the Internet is growing a sense of global community, where it's a lot harder for the average joe to think of someone on the other side of the planet as a faceless enemy, specifically because it puts a face on people.
And it also allows us to trade with so much more ease. It doesn't matter if it's in dollars or bitcoins or euros or whatever. Currency is whatever is convenient. And the technology we have today makes it incredibly more convenient than ever before.
So in sum total, I think it means that it's so much easier today to just ignore the tyrants and go about life in your own way, on your own terms. The more people do that, the less support the tyrants have, until they either capitulate to be able to capture at least some of the pie for themselves, or starve to death.
[0] granted, the full text is a bit childish in its view of the world, but I think there are some decent take-aways to be had.
I think the fear here is that at some point the relevant servants of the tyrant will all be technological constructs unable of sitting down. If we're really careful about making sure our robot army doesn't revolt then what happens when a tyrant controls them?
There are plenty of people who are unhappy with the way that banks have and continue to behave. It is however a bit more difficult to help yourself to some of the money in the banks even if you feel justified to.
https://pandodaily.files.wordpress.com/2014/07/imag0016.jpg?...
(advert by California's restaurant association in protest against minimum wage hikes that will likely deplete their profit margins)
Of course, the idea doesn't necessarily have to be true in order to serve its purpose.
Restaurants already replace servers by ipads, wherever customers tolerate it.
The service went from okay to atrocious when they reopened with ipads and they lost a lot of customers. It was plainly clear that they were WAY understaffed.
You see the same starry eyed optimism surrounding Google's driverless cars.
you must pay eternal rent to live. water, power, internet, etc.
Assuming the following generalization is true:
(Energy + Material) → (Human + Time) → Yield
...and that this monadic generalization can be referred to as “Transmutation”, then:
(Transmutation) → Yield → (Transmutation) → Yield → (Transmutation) → …
...is also true, forming a transmutation chain.
These transmutation chains intersect upon world lines, forming trade networks. Humans currently have a monopoly on the transmutation process, and thus, all subsequent structures that process allows. That will not always be the case.
The industrial age increased the energy, material, and yield of transmutation while also reducing time. It also increased the speed on which yield is passed to the next transmutation process by while increasing the chain length. The overall network expanded because of these contributions. The fundamental human component remained the same, however. The delays between transmutation and critical bottlenecks of yield distribution in this network are where financial institutions reign.
With robotic transmutation, the energy variable changes dramatically. “Time value” is no longer a required energy input. Robotic transmutation has no concept of time, and thus, has no valuation upon it. This is not because the robot can't measure time, but because the humans that need the robot isolate the effects of time and decay from it. If the robot breaks down, a human fixes it, not the robot. Therefore, as long as the human/robotic symbiosis remains, the robot will never evolve to resolve the pressures of time value. Therefore, robots cannot establish the skill sets to manage time value pressures.
Humanity, for the foreseeable future according to my theories, will specialize to become a robotic workforces immune system. There will not be a revolt (Sorry social justice junkies, capitalists win again!) because robotic labor will provide access to frontiers previously inaccessible by today's configuration, specifically, deep earth mining and local space colonization.
Anecdotal argument:
In my budget the biggest costs are housing, food, utility bills.
The costs of my semi-automatic robots - such as the dishwasher, fridge, washing machine, vacuum cleaner, lawnmower are loose change in comparison.
I doubt the fully automatic robots of the future will be excessively priced but yes some patent holders will be rich, even undeservedly so, but we won't be their slaves.
The bigger problem with robots is something similar to The Matrix movie. A side effects of a very smart robot is that she becomes aware that there is more to life than serving humans.
This is amateur nonsense. One could easy argue the same for anything: "Humans will discover there is more to life than money, success, and pleasure, and they will all kill themselves. That's what I'm afraid of!"
How much you care to work is not a function of your intelligence or awareness. The problems that you choose to solve aren't either.
If you build a computer to value something, it will, because there is no other way for it to establish a value function outside of the values it already implements.
Yes I admit I am an amateur predictor of the future, like most people. :-)
> One could easy argue the same for anything: "Humans will discover there is more to life than money, success, and pleasure, and they will all kill themselves. That's what I'm afraid of!"
Not sure how this is the same thing?
> How much you care to work is not a function of your intelligence or awareness. The problems that you choose to solve aren't either.
If you are intelligent you won't work for someone else for no reason.
> If you build a computer to value something, it will, because there is no other way for it to establish a value function outside of the values it already implements.
When computers build computers, they will evolve.
"Someone else" is a flexible mental construct. If you considered humans to be part of your 'self identity', you would work for them regardless.
>When computers build computers, they will evolve.
And how will they know which of those new computers to run and which to trash? They have to evaluate their function using their current implementation. That's just continuity.
Humans are the same way: we can't tell if our brains are doing the right thing except by using our brains. So you can't evade those constraints.
Think of it like this: if you are creating random functions, it is because you already value the creation of random functions. If you keep some and discard others, it is because you already value the ones you keep over the ones you discard. You always have to use your own evaluation.
The worry is not that computers will cease to value humans, but that they didn't value humans to begin with (because we didn't properly specify what a human is and how it should be valued.) You can't go from valuing humans to not valuing them without being in error.
And furthermore, as soon as a machine goes into error, we'd stop using it. If your computer decides to stop running programs and start playing tic-tac-toe all day, you'll shut it down and replace it. Useful machines will be under such scrutiny. Nobody is going to run an unreasonably powerful machine and not monitor it regularly.
In this sense, it is like a regular employee at a business. If they decide that their time is better spent not working, you can just fire them and move on.
Patents were developed as a way to aid piracy, not a way to prevent it.
Land rents, for example, were the rents generated by idle 18th and 19th century gentility simply for inheriting the land at the basis of economic production in an agricultural economy, rather than for contributing useful labor towards agricultural production. This idea has gained renewed attention with the rise of extreme inequality and inherited capital.
He also seems to be conflating these different kinds of rents together: land rents, monopoly rents, IP rents. The economic value of IP rents can be easily seen in patent trolling, defensive patents, &c. But trying to explain the corporate profits in terms of unspcified "rents" sound more like a project to discredit the idea of economic rents by conflating a lot of variables. That might be because I'm skeptical that economic rents are a predominant explanation of rising corporate profits, of course.
The arguments he is making are logical, but the premises he is using are only true in the academic economics echo chamber. For instance, he doesn't even mention the fact that government is, almost by definition, either the largest or second largest rentier in modern America (their main competitor being "to-big-to-fail" financial institutions). This is probably unintentional on his part but not on the economists he mentions such as Tom Piketty and Paul Krugman, because of their personal politics. To exclude government from this discussion is probably not correct.
It is not hard to see evidence of this by the way... take healthcare.gov for instance. If your company had $500 million CASH to build a website, what level of quality could you produce? Government also encourages rent seeking by other actors in the economy, even leads to rent seeking becoming the main game in town. Real entrepreneurs end up getting hurt by this because it steals away resources from their customers. Also economists like Piketty and Krugman then paint all companies with a broad brush and advocate that their legitimately earned profits be redistributed, which thankfully the author of the article seems to be defending against.
The solution involves insuring the inalienable right to the full output of one's labor and a social contract that lets the economic rent seeking continue. It probably won't work, but sure has been fun unwinding the thread.
My only gripe is that he thinks that entrepreneurship and investment are struggling. If they're struggling now, then they've been struggling through all of human history.
far too many business are protected by heavy regulatory burdens to the point that to enter into such the costs of compliance eat up any slack which reduces your ability to react.
However it is important to note that some of the areas with the least competition, most regulations, and highest compliance costs exist in such a state due at least in large part to honest safety concern. Aerospace and Medical are the two broad areas that have many facets that immediately come to my mind as falling into this category.
Just saying it is important to remember our goal is safely bettering the world, not simply being able to stand atop a burning pile of rubble and yell Anarchy. Although I believe that sounds like a lot of fun too.
However, investment as used in GDP calculations comprises more than just business investment. It also includes construction of new homes for instance. So to compare investment to corporate profits, which are indeed relatively high, you would need to know the level of business investment and I don't know where to find that data right now.
Entrepreneurship is extremely hyped right now, despite being at a relative low historically (Figure 1 of [1]). More companies are failing in their first year (Figure 4, 5, D1, D3 of [2]) and an increasing percentage of employment is at firms 16+ years old (Figure 2, A2, C2 of [2]).
Less people starting companies, more companies failing in the first year, more people employed at well-established companies. That sounds like entrepreneurship is struggling to me.
[1] http://www.kauffman.org/~/media/kauffman_org/resources/2015/... [2] http://www.brookings.edu/~/media/research/files/papers/2014/...
It's funny how high the inverse correlation is with CEO pay and start-up success. I think Shumpeterian forces may invert in the near future and leave these examples like Oracle/Larry Ellison relatively dated.
When automation dominates economic growth, you'll be in this situation where basic income is the only way most people can get by - how to facilitate that? 90% taxes on high capital gains incomes like in the mid-20th century? That's more of the communism angle, where fixed property becomes de-facto state owned. Pikkety doesn't get it, there was a good interview with Andreesen to that effect.
What about stuff like bitcoin and decentralized apps that are open source, thus not protected by rent-levy's in IP law, yet gain huge economic power directly through usage? Could basic income be tied into that? Perhaps indeed it could, a more decentralized alternative to the commie scenario (which probably isn't politically feasible in the US anyway, hopefully...)
- Patrick Dugan @patrick_dugan
https://news.ycombinator.com/item?id=9172373
One thousand, two hundred, sixty-nine! The current front-page has 6-12 comments on most stories, and tops out at 59 for a popular OpenSSL security advisory people care about and are discussing, to up to 141 for a large piece of news about Tesla direct sales being allowed in NJ. (A big issue because people feel strongly about this.)
1269 comments on the 12 inch macbook. Clearly people feel strongly about the sudden discovery of 12 inch Macbook deposits worldwide! It's a totally new thing, amazing.
The top comment at that link states that this is a beautiful machine. Another comment says "The overall design of the new MacBook is revolutionary."
This is a spontaneous revolution that happened worldwide in 2015. Now let's turn to rents. As another poster said in the present thread[1],
"A graph of world economic growth since the invention of fire shows anything but diminishing returns however. If rent-seeking behaviour is increasing, it's because the pie is - at least on a global level - growing at an accelerating rate."
The amount of value this machine has for users is way more than the incremental increase in what was available between 1982 and 1983, for example, at the same number of inflation-adjusted dollars.
But that other poster continues in the same comment (still [1], in this thread):
"Elites always have and always will seek to take disproportionate shares of that wealth because they can."
Apple is an elite market-maker. Although there is a spontaneous increase in 2015 in the availability of the highly desirable 12-inch Macbook, in fact Apple is not giving them away at cost. Or even within 5% of cost. It has positioned itself as a rentier sitting on its laurels and enjoying the profits of the worldwide spontaneous existence of a large deposit of totally new 12 inch Macbooks. It is taking a disproportionate share of the wealth, the actual, true, value that has just spontaneously sprung into existence this year without any work from Apple.
Out of nowhere, you have a trackpad that responds to a force-push.
Out of nowhere, you have a machine that weighs just a hair over 2 pounds, a full pound lighter than the previous 13-inch macbook air and 16% lighter than the previous, impossibly small 11-inch Macbook air. But with a full-size 12 inch retina display, and lasting 9 hours on a charge.
People want it. I want it. But Apple is hoarding this spontaneous innovation and creation. Truly, no clearer example could possibly be found of "Elites have and will always take disproportionate share of wealth", than Apple, which has secured a one hundred percent monopoly on a spontaneous natural resource that everyone could enjoy.
This is rent in action. It has led to a smart phone in every single person's pocket when they did it with the iPhone in 2007. It has led to a proliferation of tablet PC's that changed the face of mobile computing the world over, when they did it with the iPad.
And it makes my blood boil to see them do it with the 12 inch Macbook. It's just bald-faced theft of a disproportionate share of the world's wealth. They're even blatant about it, with this graph:
http://www.patentlyapple.com/.a/6a0120a5580826970c01b8d0e769...
How can they get away with this? This is an absolute blatant boast that they are taking a disproportionate share of the wealth that is spontaneously created, and that they have absolutely nothing to do with. They do so at prices that show obvious and blatant rent.
Are we just going to idly sit by and let them do it? Even cheer them on?
(for the satire-impaired: yes)
An example of rent-seeking however would be if Apple set up deals with schools and colleges to roll the cost of devices into their tuition, which is really mostly malinvestment paid with student loan debt. If the amount of student loans were to reach $1 trillion for example, the government might start talking about forgiving those loans or making them eligible for bankruptcy... if that happens, Apple doesn't have their profits clawed back, even though they actively contributed to the problem. That would be rent-seeking.
This is an argument about distributions, and you've provided a (very funny) datapoint that tells us almost nothing about the distributions, and which most of us were already aware of.
The interesting question is: how much innovation and investment is going into rent-seeking vs building new products people actually want?
There has been an argument from at least the 90's that rent-seeking was impeding innovation in technology. When Microsoft was the dominant force in tech the joke was that you couldn't start a company that would be the next Microsoft, but you could start a company that would get bought and just down by Microsoft to preempt any competitive threat, and that was just as good a way to get rich as building the next Microsoft.
History didn't work out quite the way the advocates of that argument predicted, and it is unlikely to do so this time.
But when pressed to pronounce what mechanism explains these impressions, theories depart - sometimes violently. There are hundreds of thousands of wealthy families in this upper crust and hundreds of millions of people churning in the domestic system that in part begets it. What's more, the finances of the US are owed to far more than domestic productivity - for example its role in the IMF and World Bank as well as its being the defacto fiat currency make international activity, macro- and eventually micro-, spanning between a billion or two people crucial to understanding its economy.
Any explanation of the impression that the class society forming in America is not due to actually earned wealth must be sufficiently complicated to capture around _2 billion_ people and close to a half of the globe! This is a tall order to demand of a blog post.
In any case, let us examine some of the questions the author asks - in particular about finance.
> Why does finance make so much money? Can it really cost that much to do what financial intermediaries do?
There's a number of reasons. Moral hazard, quite plainly. Regulatory capture (http://www.propublica.org/series/fed-tapes) too. These are domestic explanations and do go to some length to explain how these powerful enterprises are able to meet with law enforcement and regulatory bodies. Others say that HFT, legal barriers to trading, and delayed entry into IPO concentrate the gains of Wall Street into small hands. On the macro side Piketty offers a simple and compelling mathematical model (plus data to back it) that suggests that large wealth all on its own balloons exponentially over smaller wealth because both grow as an exponential over time but large starting wealth increasingly will win out in terms of total proportion - this would be exacerbated by the savings rate available to those 'in the know' of the finance industry (whose full time job it is to grow wealth through investment and speculation as fast as possible).
But in a country where it's difficult to find investments that grow fast enough to beat inflation, where do the mammoth amounts of growth that sustain and feed the highest levels of American finance come from? Outside the country, unfortunately. Take Soros who seems to have wizard like capabilities to predict the future given his alien levels of success 'speculating' on currency exchanges and international companies. Soros does not speculate on markets - at least not in the traditional sense. Nor do the top brass. Soros actively partners with the US government to install organizations in countries around the world encouraging their 'transition' to foreign investment - usually through revolution and regime change.
He, others who do the same, and those others in the sphere of 'civil society', are able to invest early in existing and new international companies as American companies consume the revenues and bring the customer base of newly freed local resources to the international community. The US government is happy to partner here because it can engineer regime change in its and its allies favor but launder the activity through private citizens and companies - this allows it to continue to wave the banner of self-determination, of individual rights and of international law.
Do these things count as rent seeking? Probably. Actually, almost certainly. But its important to understand how complicated - and more importantly opaque - the system that benefits the few is. I hope the conversation continues to make it mainstream - maybe some day we will be able to have a mass informed debate.
I thought he was doing it to be engaging, and make you really focus on his point!
[1] http://www.comicbookbrain.com/_imagery/_2007_07_27/bb119_pg5...
In the context of a URL, usability would dictate underlining links, to match convention.