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Guest Post: Why the Job Market Will Continue Shrinking

Tyler Durden's picture


Via Charles Hugh-Smith of Of Two Minds blog,

The paradox of an advanced post-industrial economy is that the number of jobs needed declines even as the cost of living rises.

The fundamental dynamic of America's job market is simple: we need relatively few workers to provide the absolute essentials of life even as the cost-basis of the economy inexorably rises. In other words, there are fewer jobs even as the costs of maintaining a "middle class" life rise.

Let's start by observing how all the financial data in the world does not necessarily describe the primary dynamics of an economy. There are a number of factors that cause this disconnect between the primary forces at work beneath the surface and the data.

One is that economists tend to focus on situations with abundant, easy-to-interpret data. If you're only looking for roses, then you ignore everything that isn't a rose. So economists seek dynamics that can be easily explained by available data, and financial factors that they are paid to examine. Everything else is ignored, especially if the act of examining it casts a skeptical light on a self-serving Status Quo.

One key reality that is rarely if ever discussed is that the number of workers needed to provide the bare essentials of life to the 313 million residents of America is modest. Let's stipulate that bare essentials include food, heat in winter, clean water, sewage and waste disposal, public health (innoculations against pandemics, etc.), public safety and enough energy to fuel these essentials. If life were suddenly reduced to these basics, and no energy were available for anything but these essentials, then how many full-time workers would be needed?

Roughly 1% of the workforce raises the vast majority of our food, and a modest number of workers maintain the water and sewage systems, natural gas pipelines, furnaces, etc., A similarly modest number of workers maintain public health and safety and provide transport of essentials.

Of the official workforce of 154 million, how many fall into this "absolute essentials of life" category? Perhaps 10% or 15 million people? Even if we double that to include all sorts of non-essential but "critical" goods and services, then that's perhaps 30 million workers, roughly 10% of the population and about 12.5% of the real workforce of 240 million (the Federal government has relegated roughly 88 million working-age people to the zombie-status of "not in labor force" to keep the official unemployment rate low).

We all know the dynamic behind this dramatic reduction in the number of people needed to provide the essentials of life: enormous increases in productivity based on abundant fossil fuels and advanced technology.

Even well-made infrastructure requires maintenance, but this process of replacing aging transmission lines, water mains, highways, refineries, etc. requires a relatively modest number of workers because machines do much of the work.

If you doubt this, stop and count the workers on a major repaving project or the construction of a highrise building. A very large multi-story building is generally assembled by about 100-150 workers, more during certain stages and less during others. Most of the components are fabricated in factories where machines do most of the work.

Ask how many frontline police officers are on your local force. Cities of a few hundred thousand might have 200-300 officers, larger cities might have 800-1,000. It's not a large number.

On a macro-scale, the challenge in advanced economies is creating "make-work" for 80% of the working age population. This is not an issue in developing economies, as most of the workforce is non-market and does not participate much in the cash economy. For example, only 7% of India's vast workforce of hundreds of millions of people gets a paycheck. The other 93% survive via barter, raising their own food, a bit of trade or occasional labor for cash, etc.

Before industrialization, roughly 50% of the U.S. population and workforce lived and worked on farms. The surplus of their labor fed the other 50% who lived in urban areas, and that cash supplied the few essentials the rural dwellers needed.

The paradox of post-industrial economies is that the cost of living rises even as the efficiencies of providing essentials reduces the number of essential jobs. Some of this may be due to Baumol's Disease, a topic I have covered before (Productivity, Baumol's Disease and the Cliff Just Ahead, December 8, 2010).

Baumol's cost disease is named after economist William J. Baumol, who with William G. Bowen described a critical difference between goods-producing and labor-intensive work.

Baumol and Bowen noted that if productivity/wages rose by 2.2% a year and costs rose by 2%, then over time workers could buy more of everything--goods, services and government services paid for with taxes.

They also observed a critical, long-term difference between the rates of productivity growth in goods-producing industries and labor-intensive industries such as nursing and teaching. (I would also include the Armed Forces as an example.)

Goods-producing industries could achieve very high productivity growth as labor-saving automation and supply-chain efficiencies scaled up, while nursing and teaching required the same number of hours with patients or students as in years past. In other words, productivity in labor-intensive services has intrinsically lower rates of productivity increases than goods-producing industries.

Baumol and Bowen then described the peculiar result of this: as GDP increased due to goods-producing improvements in productivity, the relative share of low-growth-productivity services would rise.

Thus machine-produced TV sets and computers fall in price while labor-intensive healthcare costs rise.

While this is undoubtedly one causal factor, it is not the only causal factor. I think there is an implicit assumption being made on both a policy and cultural level that higher costs are acceptable because it "means more people are being put to work."

So when the cost per military fighter aircraft leaps from $56 million each (the F-18) to $200 million and $300 million (the F-22 and F-35), then we accept this as OK because we assume more jobs will be created as costs rise.

Gross waste and inefficiency is thus accepted as the "cost" of creating more jobs.

The problem with this implicit pact is that a rising percentage of these jobs are friction: they do not increase productivity or wealth, they merely consume wealth. In the case of fighter aircraft, the cost has leaped so dramatically that it is now apparent the nation cannot afford a fleet of these hyper-costly (and apparently troubled) aircraft.

Will 100 of these aircraft prevail over 1,000 dirt-cheap drones? How about 10,000 drones? If the future of warfare is increasingly powerful unmanned networked drones (and it clearly is), why are we spending $1 trillion+ on hyper-costly aircraft that are essentially designed for a previous era?

We're not building miltary dominance with these programs, we're sinking money down ratholes, just as we're not "buying" more health with our 17% of GDP spent on sickcare, we're simply managing more chronic diseases.

In the case of healthcare, patients being issued $1,000 a month in medications are not necessarily "getting better," rather many thousands are dying of accidental overdoses. Though the U.S. spends twice as much as other advanced democracies as a percentage of GDP on healthcare, Americans are arguably less healthy in aggregate than the citizens of Japan and Australia, nations that spend about 8% of GDP on healthcare while the U.S. spends 17% of GDP.

These are but two examples of trillion-dollar friction that is sapping the nation's wealth and vitality. Since the nation cannot actually afford to spend $1 trillion on the F-35 program or $2.5 trillion every year on a healthcare system of which at least 40% is fraud or paper-pushing, then we have been borrowing $1.5 trillion every year to maintain the illusion that these trillion-dollar sinkholes are sustainable.

The solution to the post-industrial decline of labor is not unproductive "make-work" jobs and borrowing trillions of dollars until the system implodes, it's lowering the cost basis of the entire economy and culture. The central paradox of an advanced post-industrial economy is that the number of jobs needed declines even as the cost of living rises. The only way out of that paradox is to radically reduce the cost-basis of the entire economy, which means eliminating all the systemic sources of unproductive friction.

I will discuss this further in the days ahead.


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Tue, 05/08/2012 - 15:02 | 2407706 carbonmutant
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By 2015 - one third of US fighting strength will be composed of robots

- US Department of Defense
Tue, 05/08/2012 - 15:08 | 2407727 francis_sawyer
francis_sawyer's picture

When are we going to have robot bankers?... Oh wait!

Tue, 05/08/2012 - 16:00 | 2407945 Are you kidding
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When are we going to get women out of the workforce? Most of their "work" is nothing but busywork. They belong at home raising their kids.

Tue, 05/08/2012 - 16:43 | 2408109 BigJim
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ARE you kidding?

Tue, 05/08/2012 - 16:47 | 2408120 BigJim
BigJim's picture

 The central paradox of an advanced post-industrial economy is that the number of jobs needed declines even as the cost of living rises.

Basically, this is the 'lump of labor' fallacy, and I'm surprised to see CHS make it.

Back in the early 20th century, what he says held true, yet we've seen plenty of growth since then... because people's perception of what they 'need' is infinite. Just because you have all the basics doesn't mean you won't strive (ie, work) to get a lot, lot more.

Yes, I need another car! None of my Lamborghinis is chartreuse-pink!

Tue, 05/08/2012 - 17:22 | 2408212 Dr Benway
Dr Benway's picture

You're reading this wrong. The point is that the number of productive jobs that actually has useful output will fall. That is how 'needed' should be interpreted in that sentence, perception is irrelevant. We can invent lots of unproductive jobs, no matter what we think of them they will still be unproductive.


This article was excellent.


The author should have mentioned the increasing portion of each workday that is spent slacking off. I estimate that most office jobs the average worker puts in maybe 50% of actual work. The rest of the time is just passing the time, chatting, surfing, getting coffee, etc. And the actual work itself is purposefully inefficient in many cases, with endless selfjustified meetings. Most management positions are rewards and sinecures.


Truth is most of society is just pretend busywork nowadays, because the system required employment, and gradually employment has become more and more unproductive as unneeded jobs are invented and needed jobs filled with unproductive people.

Tue, 05/08/2012 - 17:58 | 2408330 narnia
narnia's picture

The article is pretty good.  It nibbles around the basics.

Because so much of what we pay for in the price of our products is comprised of involuntary purchases or compliance, we really have  no idea what it is really worth absent those artificial influences.

If we had no minimum wage, a subsitence level minimum income (as Milton Friedman suggested), and a limited government that had very few involuntary transactions, labor and intellect would not be idle.  I have little doubt it would flow to where it is most needed (or demanded).

Wed, 05/09/2012 - 01:32 | 2409049 gwiss
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Charles is remarking on the capacity for self organizing systems to become increasingly efficient.  We see this in nature on a grand scale.  It's how we started with a rocky planet but now have a planet covered with soil and amazing biodiversity, through the process of the excess being ploughed back into the system to create increasing complexity and depth of organization.  No waste thanks to the tireless and ruthless culling of unproductive efforts.

An economy is an ecology.  So, no surprise that it would achieve increasing efficiency.  Supposedly, that excess could be ploughed back into the soil of the economy, which would support additional organic and balanced growth.  However, Charles seems to have simply accepted that successful economies produce themselves out of jobs, without stopping to ask -- why is that excess not reinvested into the economy to produce more productive growth, such as we see in nature?  Why would this process not create a parabolic increase in standard of living rather than  producing sloth and dependence?

In a way, what Charles is talking about is a variant of two other concepts. 

Bataille had a concept called "the accursed share", in which he imagined that a certain proportion of economic spending would not be spent on "productive endeavors", which is to say endeavors which yield a net benefit of increased capital or productive capacity.  This excess proportion could be spent on patronizing the arts or on conspicuous consumption.  But, if they were not, then they would be spent on other societal level conspicuous consumption projects such as wars or ruinious social safety nets which debauch the character of the entire society.  Societies with excess success thus contain within themselves the seeds of their own destruction, and unless that excess is allowed to vent itself harmlessly and aimlessly within a society, it will be gathered up and directed by those who would commandeer it to change the society, and the gusts produced by this directed venting destroy the delicate fabric of society.

The Jevons paradox approaches this reality from a slightly different angle, in that it recognizes that any improvements in efficiency will be compensated for by increases in utilization (a variant of the Laffer curve, if you will.)  Thus increased efficiency in coal use leads to increased use of machines that use coal rather than decreased coal usage.  Or, for a more contemporary example, increases in storage density and computer processing are matched by increasing unproductive bloat of code size.  As the programs get larger and larger, efficiency per unit of code steadily decreases, but because the limit against which they are pushing is steadily moving away from them, there is no hard perimeter which forces them to prioritize and therefore become increasingly efficient.  Hard perimeters and prioritization are thus seen to be the only true protectors of efficiency.

Part of the answer, of course, is that we abandoned the guiding hand of nature by divorcing our money from physical reality.  By divorcing wealth from reality, we fostered an incomplete and fraudulent conception of reality.  When this false increasing society wealth, built upon currency debauchery, was combined with nearly limitless and nearly free energy in the form of oil and the combination was poured into our civilization, we lost our hard perimeter, and we were stupid enough to hand the bloat steering wheel to politicians rather than retaining it as individuals.  It's thus sort of a perfect storm.


Wed, 05/09/2012 - 04:15 | 2409320 Gazooks
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whoa! stunningly clear observation



Wed, 05/09/2012 - 06:58 | 2409384 StychoKiller
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Encouraging stupidity and waste does not help matters; let's change the incentives:


RICH Economy step 1:
Offer a prize of $50,000/year to any worker that designs a
machine/software/process that will replace him/her.

Offer an additional prize of $30,000/year to ALL OTHER WORKERS that get replaced.

Answering conservative objections:
1. A machine works 24/7, thereby tripling output immediately.
2. Machines do not take sick leave.
3. Machines are never late for work.
4. Machines do not form unions and constantly ask for higher wages and more fringe benefits.
5. Machines do not take vacations.
6. Machines do not harbor grudges and foul up production in sneaky, undetectable ways.
7. Cybernation was advancing every decade anyway, despite the
   opposition of Unions, government, and other Alpha males; it was
   better to have huge populations celebrating the reward of $30K
   to $50K/year for group cleverness than huge populations suffering
   the humiliation of welfare.
8. With production rising due to Cybernation, consumers were needed and a society on welfare was a society of very meager consumers.

The majority of the unemployed, living comfortably on $30k/year, spent most of their time drinking, smoking, engaging in primate sexual acrobatics and watching TV.  When Moralists complained that this was a subhuman existence, Hubbard answered, "And what kind of existence did they have doing idiot jobs that machines do better?" [/quote] -- R.A. Wilson

Wed, 05/09/2012 - 08:46 | 2409542 gwiss
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Interesting.  So -- embrace the suck of humanity and allow those with little intelligence or motivation to follow their desires to be as slothful as possible?  Certainly would produce a more peaceful existence -- bread and circuses tends to soothe the populace quite well.  Trouble is, they will breed.  Continuously and like rabbits, quickly overwhelming the capacity of the system to support them, at which point you will still have to face the necessity of allowing them to feel the hard perimeter of reality, which is the only thing which changes behaviors by forcing prioritization.  To me, this solution seems analogous to bailing out insolvent banks with more debt or trying to make a black hole stop sucking matter by feeding it more matter.  You can never satiate the appetite of a black hole any more than you can improve insolvency with more debt.

Equilibrium is only maintained when opposing forces balance.  Thus, the urge to breed or be slothful will only stop expanding when it is matched against an opposing force that is just as unpleasant as sloth and breeding is pleasant.

Of course, you can just sterilize their offspring at birth as the price for their sloth.....


Wed, 05/09/2012 - 09:18 | 2409622 blunderdog
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    Trouble is, they will breed.

Evidence doesn't bear out this prediction.  When you educate the women, provide survival security for the children, and provide no artificial incentives to reproduce,  birth rate DECLINES.  This is one of the most robust statistical observations on the subject, so I'd say you'd have to come up with some really compelling data to support your assertion.

See: every post-industrial society on Earth

That said, it is very definitely the case that many (perhaps even most) human brains are far too calcified to permit new ways of thinking about how life should be.  Although we theoretically have the ability to change our way of life overnight, there will always be a significant number of people who oppose the new way of doing things because they fear change.

Wed, 05/09/2012 - 09:50 | 2409704 gwiss
gwiss's picture

Agreed, but you have to look past the generalization to the specifics. What is very clear is that affluence is tied to declining birth rates, but the specifics of that link is not at all clear.  Is the better education of women what causes them to choose less births, or as they become better educated do they assume more responsibility and therefore choose to have less children because they are busy with other things?  In other words, if you provided a slothful existence to educated women, would they still breed less?

Figuring out cause and effect would be important, because remember that Stycho's plan was not to make everyone more affluent.  Rather, it was to allow a few to become affluent and control the whole system of robotic production, with the purpose of robotic production being to provide cheap and slothful existence for the rest of the majority of humanity.  Essentially, to intoxicate the majority of humanity into quiet consumptive sloth so that they don't complain about the disparity between their existence and the existence of others who are more affluent.  So, while I agree with you that post-industrial societies have lower birth rates, are you sure that Stycho's plan represents a post-industrial society?

Wed, 05/09/2012 - 10:57 | 2409966 blunderdog
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I'd say you have to try the experiment if you want to know anything about it.  You can speculate all you like, but it doesn't add any information to the system.

Philosophically, no one's ever REALLY answered the question of causation in the first place.

Wed, 05/09/2012 - 10:21 | 2409803 narnia
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Spending time being a good father is productive & rewarding activity.  I'd like to see any philosopher quantify that.  

Tue, 05/08/2012 - 18:24 | 2408403 midtowng
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If you or the article are right then we are reaching the end of capitalism. It worked fine when people's basic necessities couldn't be met, but now...

If you only employ 20% of the population you wind up with social instability and revolutions that never end.

Tue, 05/08/2012 - 19:31 | 2408532 narnia
narnia's picture

Full time for 20% of the people or 20% of full time for 100% of the people? You aren't going to get to the latter scenario with central economic planning.

Tue, 05/08/2012 - 19:46 | 2408554 Dr Benway
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Rather, if you only pay 20% of population you wind up with unrest.


Trust me, vast swathes of society would be perfectly happy to just pull social security checks given they are generous enough.


The problem is, if 80% are on these checks they'll vote up the benefits to unsustainable levels, and so the system crashes.

Wed, 05/09/2012 - 00:02 | 2409044 MacGruber
MacGruber's picture

I think this article misses probably the largest point, which are the 1% walking black holes. If the balance of trade is negative then the U.S. economy is at best a zero sum game. So as the exponential expansion of wealth of the top 1-5% demonstrates, they are the only ones benefiting from the expansion of productivity. As productivity increases it is the capitalist (owners of capital) that benefit.

This fits into a broader mechanism that is in full swing which is the continued concentration of wealth that capitalism naturally causes. $4 gas and other forms of inflation ONLY benefit capitalists. Just look at oil company profits, and tell me that the high cost of gas isn't helping their top and bottom line. It's a systematic extraction of wealth from those that are marginally economically attached, which is basically anyone but the capitalists at the top.

Military spending is just another form of government transfer payments. Just because a guy gets shot at behind a Hesco barrier, drives a tank, or builds a ship, non of it has any productive economic value - its the same as paying a dude to eat cheesy poofs on his couch, though maybe a lot more fun for the tank driver.

Wed, 05/09/2012 - 06:52 | 2409380 StychoKiller
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How much of the cost of living rise can be attributed to the incessant inflating of the Munny supply by the Fed over the decades?

The price of finished goods should be falling over the decades as efficiency increases.  Too many middlemen raking in their cut doesn't help matters either!

Tue, 05/08/2012 - 15:08 | 2407730 Clueless Economist
Clueless Economist's picture

Who cares about jobs???

The PPT has done their job today.  Dow/S&P rallying as we speak.

Tue, 05/08/2012 - 15:21 | 2407769 docj
docj's picture

Yep - spot on. S&P is up 11 since 13:00, already erased more than half of the day's losses and still almost an hour to go.

So to recap - straight down on actual news in the morning, straight up on absolutely nothing into the close. Just another day in Fraud Street, USA.

Tue, 05/08/2012 - 15:08 | 2407731 DaveyJones
DaveyJones's picture

By 2016, two thirds of Congress will be composed of the same. 

Tue, 05/08/2012 - 15:18 | 2407757 derek_vineyard
derek_vineyard's picture

by 4pm it'll be green

Tue, 05/08/2012 - 15:09 | 2407735 HarryM
HarryM's picture

In the 70's we were told that increased productivity through automation would result in shorter and shorter work weeks, earlier retirement etc.


But then , we were also told we'd have flying cars by now.

Tue, 05/08/2012 - 15:36 | 2407835 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Michael Hudson addresses this. The incredible gains in productivity should have resulted in leisure, peace, and prosperity. What happened though is it all gets siphoned off by the financialization of the economy. Like parasites sucking the life out of a host. Check it out, great article:


Tue, 05/08/2012 - 16:05 | 2407970 El Viejo
El Viejo's picture

I love that guy. Check out his video on the 90% bracket:


Tue, 05/08/2012 - 16:26 | 2408064 GeezerGeek
GeezerGeek's picture

I believe that THE single greatest source of friction is the Federal Government. Once the Feds begain to do more than allowed in the Constitution the amount of friction, via taxes, regulations, etc., increased dramatically. Don't bother talking about replacing F-35s with drones until the human drones in all those bureaucracies are dumped. At least developing the F-35 led to technological advances.

Tue, 05/08/2012 - 19:33 | 2408537 jerry_theking_lawler
jerry_theking_lawler's picture

Agreed. WELFARE STATE has increased population size. In reality, the population should have stabilized or began to shrink thus increasing the standard of living for those that were left. With the .gov trying to buy power (ie votes) it has taken wealth from one class to give to another (thus allowing them to breed and raise offspring). Not being crazy here, just the way it is meant to be....survival of the fittest. If you have skills and can earn income, then you can have a family. If you don't have skills and can't earn income then you and your family starve.

Society will go back to the real world....and when it does, its gonna be UGLY!!!!

Tue, 05/08/2012 - 18:02 | 2408347 Milestones
Milestones's picture

Excellent post! Thanks for putting it up.                  Milestones

Tue, 05/08/2012 - 15:15 | 2407745 sushi
sushi's picture

That is a big change from the present force which is 98% drones.

Tue, 05/08/2012 - 15:03 | 2407708 kralizec
kralizec's picture

That'll bring the unemployment rate down.

Tue, 05/08/2012 - 15:03 | 2407710 El Viejo
El Viejo's picture

All together now: "Would you like fries with that sir?"

Tue, 05/08/2012 - 15:10 | 2407722 francis_sawyer
francis_sawyer's picture

Maybe humans can find a 2nd life as batteries...

Tue, 05/08/2012 - 15:19 | 2407759 El Viejo
El Viejo's picture

OK All you robots together now: "You will service us!"

Tue, 05/08/2012 - 15:27 | 2407806 Dr. Richard Head
Dr. Richard Head's picture

All your jobs are belong to us. 

Sorry, it had to be said.

Wed, 05/09/2012 - 07:01 | 2409387 StychoKiller
StychoKiller's picture

Hey meatbag, bite my splintery, wooden @zz!

Tue, 05/08/2012 - 16:28 | 2408073 GeezerGeek
GeezerGeek's picture

For far too many it would be a first life.

Tue, 05/08/2012 - 16:38 | 2408092 Seer
Seer's picture

Soylent Green is more like it...

Tue, 05/08/2012 - 15:08 | 2407728 ihedgemyhedges
ihedgemyhedges's picture

As long as someone is there to deliver your pizza and fix your cable (God forbid you miss an episode of Dancing With the Stars or CSI Miami/Las Vegas/New York), do you really care if anyone else is working??????????

Tue, 05/08/2012 - 15:17 | 2407754 Joe The Plumber
Joe The Plumber's picture

You will care when there is a huge tax added to the pizza and cable bill due to labor market barriers that cause unemployment that you have to support with lowered pizza consumption

Wed, 05/09/2012 - 01:44 | 2409161 FeralSerf
FeralSerf's picture

I won't care a bit.  I don't consume either.   Society would be better off if the pizza and cable were too expensive for the average prole.

Tue, 05/08/2012 - 15:18 | 2407758 williambanzai7
williambanzai7's picture

I have wondered why Mickey D has not pushed automation farther. If you look at what happens behind the counter, it is not so hard to imagine.

Tue, 05/08/2012 - 15:26 | 2407798 El Viejo
El Viejo's picture

I've got about 34 yrs total in automation. 10 yrs building installing and programming off-the shelf andcustom built robots. They do a lot more than just build cars. Back in the 80s you could buy a Toshiba pick and place robot for ten thousand and add a little tooling and possibly a light curtain safety perimeter and presto chango one less conveyor worker. Who knows what they do now. I've moved on.

Tue, 05/08/2012 - 15:28 | 2407809 Dr. Richard Head
Tue, 05/08/2012 - 15:33 | 2407823 El Viejo
El Viejo's picture

Of course the biggest centralized control robot: The Internet. It's time to replace politicians with an internet referendum on every bill.

Tue, 05/08/2012 - 15:39 | 2407858 Vince Clortho
Vince Clortho's picture

got my vote.

Tue, 05/08/2012 - 16:32 | 2408083 GeezerGeek
GeezerGeek's picture

Why bother? Obama just issues executive orders and does whatever he wants. Besides, we've got too many laws already. And do you really want the CIA/DIA/NSA/whoever watching how you vote?


Tue, 05/08/2012 - 15:38 | 2407856 tarsubil
tarsubil's picture

They haven't needed to with all the cheap imported labor. Now as those meheecans leave, you see more automation like with drink carousels. Or maybe it is the other way around. I remember working for a factory that saved with meheecans on the line to buy a giant automated line machine. Yes, I'm arguing with myself.

Tue, 05/08/2012 - 15:28 | 2407804 Blotsky
Blotsky's picture

Depressing, but that is exactly what I was thinking from beginning of the article...


As Obama said "We're just going to have be service sector society".  Riiiggghht. Down she goes...

Tue, 05/08/2012 - 16:22 | 2408047 aerojet
aerojet's picture

Lattes and dog grooming.  What could go wrong?

Tue, 05/08/2012 - 15:10 | 2407725 DaveyJones
DaveyJones's picture

"We all know the dynamic behind this dramatic reduction in the number of people needed to provide the essentials of life: enormous increases in productivity based on abundant fossil fuels and advanced technology."

aye there's the rub. A lot more will have to be produced closer to the point of consumption. Cheap labor will no longer be the overwhelming factor. It could be more fundamental than the "labor force." "Labor" may, once again, become an unpaid necessity to provide day to day necessities that were previously cheap and abundant.    


Tue, 05/08/2012 - 15:31 | 2407817 duo
duo's picture

The future as Donald Fagen had me believe:

On that train all graphite and glitter
Undersea by rail
Ninety minutes from New York to Paris
(More leisure time for artists everywhere)
A just machine to make big decisions
Programmed by fellows with compassion and vision
We'll be clean when their work is done
We'll be eternally free yes and eternally young

What a beautiful world this will be
What a glorious time to be free

Tue, 05/08/2012 - 15:40 | 2407863 GMadScientist
GMadScientist's picture

And if you dramatically reduce the number of people, you need even less of the essentials of life in the first place.

Enormous reductions in energy use and waste with incredibly rare survivor technology.

Less mouths, more cake!

Tue, 05/08/2012 - 16:37 | 2408089 GeezerGeek
GeezerGeek's picture

So you read a copy of their 'secret plan', too?

Tue, 05/08/2012 - 16:48 | 2408119 Seer
Seer's picture

But... their positions come about by large-scale selling.  It's economies of scale that allows them to sit high upon the roost.  Somewhere along the line they failed to ask what would happen if that scale were reversed...

There's that island scenario with the three rich folks (an no one else).  Who is going to do the work?

Tue, 05/08/2012 - 15:08 | 2407732 Carl Spackler
Carl Spackler's picture

The solution to the post-industrial decline of labor is not unproductive "make-work" jobs and borrowing trillions of dollars until the system implodes, it's lowering the cost basis of the entire economy and culture.


Yeah, good luck with that.

Great idea in principle, BUT as Governor Scott Walker has facilitated the proving out of in Wisconsin, it is that the "make work" types will waste vast amounts of resources of all types to protect the "make work" mentality (namely, their power over a controlled subset of people)...and the "make work" mentality has a vast number of paid for supporters in government called the Democratic Party.

The system will continue to head toward implosion.

Wed, 05/09/2012 - 01:57 | 2409172 FeralSerf
FeralSerf's picture

There seems to be a large number of "make work" supporters in the Republican Party as well.   The two parties are about equal in total representation.  What is the U.S. military if not the largest "make work" operation the world has ever known?

You have made the assumption that providing for the existance of large numbers of "make work" types of people  is a waste of vast amounts of resources.  Have you ever considered that providing for any h. sapiens on Planet Earth is a waste of resources?  Have you ever considered that other people may think that providing for your existance is likewise a waste of resources?

Tue, 05/08/2012 - 15:09 | 2407733 insanelysane
insanelysane's picture

All of the Americans are becoming disabled so it is a good thing we can use robots. <sarc>

Tue, 05/08/2012 - 15:23 | 2407780 Whiner
Whiner's picture

I just want to be a consumer.

Tue, 05/08/2012 - 15:41 | 2407864 GMadScientist
GMadScientist's picture

Open wide.

Tue, 05/08/2012 - 16:23 | 2408055 aerojet
aerojet's picture

Prepare your anus!

Wed, 05/09/2012 - 01:59 | 2409174 FeralSerf
FeralSerf's picture

I consume therefor I am.

Tue, 05/08/2012 - 15:12 | 2407737 carbonmutant
carbonmutant's picture

Some assembly required...

Tue, 05/08/2012 - 15:13 | 2407740 HurricaneSeason
HurricaneSeason's picture

Systemic sources of unproductive friction.  You think the gooberment can find those? How about a picture or something with a diagonal line though it.

Tue, 05/08/2012 - 15:14 | 2407742 Joe The Plumber
Joe The Plumber's picture

I am not taking a position on whether regulation is good or bad, but all potential productive assets including labor have some value.

No one would leave a hundred dollar bill on the ground unless its use were so restricted and regulated as to make it not worth the effort.

When barriers are created to the employment of labor less will be employed. There is never such a thing as labor surplus. Demand for consumption is infinite even if that consumption takes unexpected forms.

Perhaps we could end the minimum wage and other labor restrictive measures such as minimum benefits , but collectively subsidize low wage workers so they can maintain a minimum level of health and living standards. Then everyone even the disabled could provide some useful output no matter how minimal

Tue, 05/08/2012 - 17:58 | 2408332 Bohm Squad
Bohm Squad's picture

re: Joe

Collectively subsidize workers - Not so much.  You were on a roll, though!  Minimum wage is essentially a subsidy that is paid by the unemployed in the form of an inability to find work.  Remove minimum wage and lower the barriers to entry for start-up companies and the unemployement rate will shrink to almost nothing.

All minimum wage does is legally price people out of the labor market - it's a price floor, there's bound to be surplus created.  So when you say there is never such a thing as labor surplus, you're only kinda right.  When we don't allow "market clearing" prices to occur, there WILL be a surplus in labor...just like there would be a surplus in Pet Rocks if we put a floor under them, too.

Lastly, intrinsic value of "potential productive assets" is not real.  Only subjective value is real...intrinsic value does not exist; it's an illusion.  

I've gone on longer than I meant to, but I've read your posts before and thought you were worth the time in order to explain where your logic left the playing field.


Tue, 05/08/2012 - 15:14 | 2407743 roadhazard
roadhazard's picture

Guess what happens when you send all the jobs overseas.

Guess what happens when you pay shit wages. No one has the money to go ANYWHERE or do ANYTHING anymore.

I love listening to talking heads go on about companies not being able to find skilled labor. Well, two things happened, you sent there jobs overseas and then fucked the people With skills ability to move to where a job might be because they can't sell there now cheap ass house where there are no jobs. yeah, it's the workers fault for having no skills.  Jesus H. Christ on a stick.


Tue, 05/08/2012 - 15:18 | 2407752 JustObserving
JustObserving's picture

Can we get rid of half the brokers, the SEC, the CFTC and 99% of the lobbyists and half the so-called journalists in the US of A?  And 100% of the telemarketers.  And 100% of CNBC.  


Tue, 05/08/2012 - 15:23 | 2407787 Let them eat iPads
Let them eat iPads's picture

Just get rid of 100% of the FIRE economy.

Never has there been a more useless bunch of parasites in world history.

Tue, 05/08/2012 - 15:19 | 2407753 mayhem_korner
mayhem_korner's picture



Here's a list of real jobs:

plowing...weeding...schucking...tying(flies)...composting...drying...salting...pickling...canning...shooting...dressing (game) (guns)...mending...hammering...fencing...

Tue, 05/08/2012 - 16:42 | 2408108 GeezerGeek
GeezerGeek's picture

Damn, I thought I was retired. Then you go and tell me that weeding, fermenting, mending, etc. are real jobs. Next thing I know, the Infernal Revenue Service will be trying to collect taxes based on my inferred income-equivalent. No good deed goes untaxed.

Tue, 05/08/2012 - 15:18 | 2407755 cossack55
cossack55's picture

Scrap the crap fighters. Bring back the P-51 and the P-47 (ok, the P-38 too).

Tue, 05/08/2012 - 15:58 | 2407936 besnook
besnook's picture

yea, don't forget the p-38. that was my favorite.

Tue, 05/08/2012 - 16:00 | 2407947 roadhazard
roadhazard's picture

Pilots are now refusing to fly the F-22.

Tue, 05/08/2012 - 16:24 | 2408061 aerojet
aerojet's picture

Because the damn exhaust coming into the cockpit is so freaking toxic!

Tue, 05/08/2012 - 16:46 | 2408115 GeezerGeek
GeezerGeek's picture

Imagine: a Thunderbolt mounting Hellfire missiles.

Back then, the pilots were more valuable than the the planes.

Tue, 05/08/2012 - 15:18 | 2407761 Walt D.
Walt D.'s picture

The problem with this argument is that what are considered "bare essentials" changes over time. Not having a cell phone, a car, a flat panel TV, cable or satellite dish would be considered living in poverty.We don't need things like cell phones or Facebook or Google. However, these "unnecessary" industries employ people. As farms became mechanized, farm workers moved into other areas. The market decides how many Starbucks we need in LA and as more open up more people are employed there. If Walmart opens a new store it needs workers. Consumers decide what product and services they want and businesses spring up to fulfill these needs, and these businesses require people.

Tue, 05/08/2012 - 16:46 | 2408118 GeezerGeek
GeezerGeek's picture

Careful how you answer this: is ZH one of the essentials? I vote in the affirmative.

Tue, 05/08/2012 - 17:03 | 2408164 Seer
Seer's picture

"Consumers decide what product and services they want and businesses spring up to fulfill these needs, and these businesses require people."

Ever hear of Edward Bernays?

BTW - I don't have a TV or a cell phone.  Too busy doing farming...  I KNOW what the future will be.

Tue, 05/08/2012 - 15:27 | 2407762 cranky-old-geezer
cranky-old-geezer's picture



The fundamental dynamic of America's job market is simple: we need relatively few workers to provide the absolute essentials of life 

because manufacturing and high tech jobs are being sent overseas.

even as the cost-basis of the economy inexorably rises.

because massive currency printing is debasing the currency.

The author's conclusions are correct, the job market will continue shrinking for Americans (while growing for foreigners), and prices will continue rising (due to currency debasement from ongoing currency printing).

But his reasons for it are bogus. 

It doesn't take long articles to explain what's happening in America.  It's quite simple really.  I explained it in a few sentences.

They're trying to wipe out the American middle class.  I don't know why.  But everything they do is against the middle class.  Sending middle class jobs overseas.  Keeping interest rates at all time lows, which hurts middle class Americans most.  Debasing the currency, which hurts middle class Americans most.

Tue, 05/08/2012 - 16:51 | 2408125 GeezerGeek
GeezerGeek's picture

See above for a possible explanation: =>  2407863

Tue, 05/08/2012 - 17:12 | 2408189 Seer
Seer's picture

"They're trying to wipe out the American middle class.  I don't know why."

You're wrong.  I don't know why... </sarc>

I disagree with the premise that "they" are wanting to cause massive upheaval.  They're just as caught up in the trap that the rest of us are (not arguing that they may have "escape hatches," which many here also feel they have, and MANY MANY don't).  Fostering perpetual growth was the ONLY game they know.  It was always destined to go over the cliff, and there was NOTHING that anyone could do about it, lest there be some sort of MASSIVE reprogramming.  Lots of people have made their [elevated - majority of humans live on $3/day or less] positions tossing out "fixes," but these "fixes" still operate on the flawed premise; whether these "alternative 'thinkers'" believe what they're pushing I don't know, though they're little different than the tv evangelical preachers: only through a cataclysm would we find out- takes a cataclysm to avoid one?

Resource base is decreasing.  TPTB are learning that all their wealth cannot get science to create something from nothing.  Hm... isn't this the same old story (alchemy)?

Tue, 05/08/2012 - 15:21 | 2407765 thismonkeydoesn...
thismonkeydoesnotdance's picture

I am far from smart, I happen to own a profitable small business, I never went to college, but even I can see the writing on the wall, and all I can surmise is: all that one can hope for is a position as either CEO or janitor. And the middle class thinks it rough now. all those dirty hipsters are gonna be fucked when mommy and daddy's credit dries up and they are forced to mop floors to buy PBR and pay off those photography degrees. this is priceless. maybe foxconn can open a factory in the states and save on shipping costs of the next Igadget. boy am I glad the only "investment" I own is bars upon bars of shiny metal. unfortunatley it's a little tough to buy handguns and ammo up here in Canada.

Tue, 05/08/2012 - 16:29 | 2408077 aerojet
aerojet's picture

I don't know about that.  It seems like the ability to do real work is never going to go away.  What is real work?  Writing software, maintaining complex business systems, accounting, marketing, sales, raising food, fixing things that break, cleaning things.  What young people don't get, and what you hit on is that nobody is going to pay you to be a schmuck and write poetry or take pictures all day long.  For 99.999% of practitioners, those are hobbies.  Science, too, is mostly a hobby. 

Tue, 05/08/2012 - 17:45 | 2408284 Iwanttoknow
Iwanttoknow's picture

Science is a hobby?Writing software is real job? Really?

Tue, 05/08/2012 - 20:29 | 2408623 John_Coltrane
John_Coltrane's picture

Indeed, science is the most important and vital "hobby" of the industrial/electronic age.  Its the basis of everything of material worth in the modern era, from food production, to all of chemistry and modern medicine.  Those who don't get this fundamental idea should watch, "the history of science" on PBS.  Try imagining what life would be like without Archimedes, Galileo, Newton, Einstein, Feynmann etc.  Now imagine what life would be like without organized superstition also known as religion.  Quite a contrast isn't it?

Wed, 05/09/2012 - 07:23 | 2409408 StychoKiller
StychoKiller's picture

So, you "think" your computer is smart enough to do all it does without someone programming it properly? (Mebbe you're running the Windoze OS! :>D)

Tue, 05/08/2012 - 15:20 | 2407766 Elwood P Suggins
Elwood P Suggins's picture

Fantastic news!  When no one has a job they can spend all day shopping.  Just think what a boost to the economy this will be since consumers make up the biggest part anyway.  And whenever you run out of money just give Ben a call.

Tue, 05/08/2012 - 15:22 | 2407767 q99x2
q99x2's picture

"stop and count the workers on a major repaving project"

10 and 1 working so about 10% needed to do the job.

Great article. Level wall street. Get rid of the 40% financial leeching services industry and take a vacation already.


But maybe it is like the time machine movie where the Morlochs ate the elite or I mean Eloi.

Pass the Bernanke Please. 

Tue, 05/08/2012 - 17:48 | 2408297 Dr Benway
Dr Benway's picture

Haha I actually love observing roadworks. At least two people on smokebreaks at all times.


I also love the signholders. Near where I live around ten workers are doing some roadworks in a very quiet sidestreet. Of these, two workers stand holding signs telling cars to go slow.


Human signholders.

Tue, 05/08/2012 - 15:21 | 2407771 manhunter
manhunter's picture

Isn't Charles a believer in peak oil? I believe his screeds in the past included that. If so, he should know 1% of the population won't be growing all the food in the future. That's just one example, so no, we won't all but sitting around watching robot-made TVs, in the future.

It sounds like Charles is going to say something typically extremist, like 'fire the government, who needs cops, pave your own street'. We will see.


Tue, 05/08/2012 - 15:54 | 2407928 dolly madison
dolly madison's picture

If you believe in peak oil, we won't be needing paved streets.

Tue, 05/08/2012 - 16:30 | 2408071 El Viejo
El Viejo's picture

If you believe in abiotic oil your gonna need more asphalt.

 Course we'll need more oxygen too.

Wed, 05/09/2012 - 12:53 | 2410336 FeralSerf
FeralSerf's picture

Abiotic oil will provide more asphalt.  You can get all the oxygen you want from plentiful carbon dioxide, silicon dioxide and iron oxide.

Tue, 05/08/2012 - 15:21 | 2407772 williambanzai7
williambanzai7's picture

Let the rat baiting game begin...

The more I think about it, the more that analogy seems applicable.

Tue, 05/08/2012 - 15:21 | 2407776 azzhatter
azzhatter's picture

they keep talking about manufacturing coming back to US. But it's all non labor intensive stuff. The people like GE evade taxes anyways so they don't care about taxes and they can save a bundle on shipping and lead times if they move back. More hollow companies. Only jobs will be security guards and janitors cleaning up after the pigmen in the office

Tue, 05/08/2012 - 17:20 | 2408204 Seer
Seer's picture

The majority of "lost jobs" were to "robots."  One of the big reasons for the shift was that a lot of those places where manufacturing went to could fuck up the environment w/o the locals complaining (or if they did they just get shot).

Tue, 05/08/2012 - 20:31 | 2408626 John_Coltrane
John_Coltrane's picture

We're still the largest manufacturer in the world-just more efficient.   

Tue, 05/08/2012 - 15:21 | 2407777 Lazarus Long
Lazarus Long's picture

do robots dream of electric sheep

Tue, 05/08/2012 - 15:22 | 2407779 Joe Davola
Joe Davola's picture

Where's the Ghost Shirt Society meeting?

Tue, 05/08/2012 - 15:25 | 2407791 azzhatter
azzhatter's picture

We should outsource congress to somewhere like Greece. They couldn't fuck it up any more than it already is and it's more fun to watch than the current pasty faced old white dudes

Tue, 05/08/2012 - 15:27 | 2407800 debtor of last ...
debtor of last resort's picture

It's great when robots can do all that work en we all can live our middle class lives.

Tue, 05/08/2012 - 15:32 | 2407819 Aductor
Aductor's picture

My question is, when will CNBC be run by robots?

Tue, 05/08/2012 - 15:35 | 2407829 Pantafulius
Pantafulius's picture

They already are.

Tue, 05/08/2012 - 15:38 | 2407854 Aductor
Aductor's picture

I doubt it. Even robots can't be that dumb.

Tue, 05/08/2012 - 17:23 | 2408216 Seer
Seer's picture

Just like with doctors, programmers also have a "50% graduated at the bottom of their class" rule.  But, given that they continue to keep TPTB propped up I'd have to say that they're really not as dumb as you might think. (dumb would be those who would follow them)

Tue, 05/08/2012 - 15:43 | 2407822 Mercury
Mercury's picture

The paradox of post-industrial economies is that the cost of living rises even as the efficiencies of providing essentials reduces the number of essential jobs.

No, this is the non-paradox reality of mega-government.  The three examples of military, teaching and healthcare are all areas dominated by the government.

Unproductive friction? You don't say...

Tue, 05/08/2012 - 17:25 | 2408220 Seer
Seer's picture

Has more to do with declining resources and increasing populations.  I don't see the "private" sector being any more smart about this than the govt...

Tue, 05/08/2012 - 15:34 | 2407827 cougar_w
cougar_w's picture

All true and correct. But it is a situation made possible only by abundant cheap oil, and to a degree by cheap coal.

And so I predict that very soon all those hands made idle by technology will be very busy indeed.

We can stop fighting this battle now. Nature has decided, and "modern men" are not going forward.

Tue, 05/08/2012 - 17:28 | 2408229 Seer
Seer's picture

And those idle'd hands will be all fucked up from texting.  Our most defining gift -opposable thumbs- and we go and fuck them up...

Tue, 05/08/2012 - 15:34 | 2407828 Arnold Ziffel
Arnold Ziffel's picture

How do you lower the "cost basis" if labor costs $60 /hr?

Tue, 05/08/2012 - 15:45 | 2407884 Bartanist
Bartanist's picture

I think what CHS may be implying is that even with much higher labor rates, the cost of labor in any product might still be less than 10% of the total costs if sufficiently automated. It is the additional costs in overhead, regulatory, taxes, inefficiencies, benefits and increasing proft etc. that change the economy from a self-sustaining one to an imbalanced one.

However, IMO, the first thing that would have to go is the growth paradigm.... getting rid of the growth paradigm allows us to get rid of inflation and interest, two additional sources of friction in the pipe that make mature economies self-limiting. There can still be investment and capital formation, but the payback would be in dividends, not interest.... which makes savings critical or makes the government the source of all money (spend money, lend money and then tax to get it back as necessry).

Tue, 05/08/2012 - 15:35 | 2407840 Bartanist
Bartanist's picture

A couple of points.

1. The US would require many more workers to supply its goods if businesses were not involved in profit (and hence GDP) inflation through labor arbitrage.

2. I am thinking that if we took all of the nonproductive friction out of the pipe, we could afford to pay those value adding jobs that were brought back here producing useful value adding goods a living wage and still decrease the total cost of living, overall.

Globalization is both the source and solution for a whole bunch of issues. How can buy yatchs and useless items while there are hundreds of millions of people living below the subsistance level all over the world. Does sending value adding jobs to China change that?

Of course, I do not see any evidence that those who believe they are running the planet have any believe that it is good, right and fair.

Tue, 05/08/2012 - 16:09 | 2407981 Joe The Plumber
Joe The Plumber's picture


Tue, 05/08/2012 - 15:36 | 2407846 Goatboy
Goatboy's picture

Finally an article which deals with reality.

Tue, 05/08/2012 - 15:39 | 2407848 ejmoosa
ejmoosa's picture

Yet the correlation between the rate of profit growth and the rate of job creation is higher than it has ever been, with an r value of .91 for the data over the past 11 years.  This implies that 81% of job creation or loss is directly related to the rate of profit growth.

So if you really want to see more jobs, you need to see more profit growth.

Tue, 05/08/2012 - 15:39 | 2407857 MiniCooper
MiniCooper's picture

When I think about my lifetime this phenomenon is writ large.

I grew up on a farm in the UK where 3 workers worked (including me). Now only one man works there and I left the land and now trade stocks by computer. The farm is owned by a man who only has it as a tax shelter and he made his money out of property speculation.

Had a chat with a friend today about a similar topic. He noted that we spend more money and time now watching things like football and TV shows and playing with gadgets that provides nothing 'real'. Nothing that we actually 'need' for survival just purely enjoyment. Its really bread and circuses and I honestly feel a fraud telling my kids to work hard at school when all their friends dream of being football (soccer) stars or X Factor stars. Maybe the kids have worked this out for themselves and they are right. Why work hard to pay taxes to keep a rotten system going a little longer?

Tue, 05/08/2012 - 18:19 | 2408391 Seer
Tue, 05/08/2012 - 15:44 | 2407865 Maos Dog
Maos Dog's picture

I completely and totally disagree with the premise of this article.

What you are seeing is not the "success" of disruptive technology putting people out of work, and the "success" of increasing productivity requiring fewer people to support infrastructure, but the complete abject failure of our culture, regulation environment, and education system to prepare people for the new realities and to take advantage of the vast opportunities this new technological environment creates. 

The culture of innovation is gone, killed by regulations and high barriers to entry, venture capital goes to groupon, facebook, and iApplications, and smart kids going into law and finance for the "quick and easy" buck instead of STEM.

All these mis-allocations add up and make it impossible to respond to a changing technological environment.

Tue, 05/08/2012 - 15:49 | 2407907 ejmoosa
ejmoosa's picture

I agree Maos Dog.


We have allowed government to continue to define the playing field from the board room to the reearch lab.  Every aspect of business has been penetrated by rules and regulations that limit what can and cannot be done or tried.  


In the past, businesses experimented and found the best practices.  Today, government tells us.


If the only sports we could play in the US were on a basketball court, our options for activities would be certainly limited.  Yet because so many thought outside the box, we have dozens of new sports activities, some that even pay athletes to perform them.

Our government is our single largest restriction on what we are capable of.  At some point, one would think business leaders would begin speaking out on this.


Ayn Rand referred to this as the "Sanction of the Victims".  They are doing this with our permission and our own money.


It's time we revoked that permission, before it is too late.


Tue, 05/08/2012 - 17:13 | 2408188 blunderdog
blunderdog's picture

You moron.  There was never a culture of innovation.  "Barriers to entry" are created (and eventually cemented into legislation) by the successful businesses of the previous generation.

Given that you're so on top of this, what's the pitch? 

What's your vision of the next successful business, enabled by the vast opportunities created by our current technological environment?  These are so vast, it shouldn't take more than a few seconds to list a few.

Tue, 05/08/2012 - 17:41 | 2408259 Maos Dog
Maos Dog's picture

Are you out of your mind?

"There was never a culture of innovation."

No culture of innovation?

The early automobile industry?

The early areospace Industry?

The early computer industry?

The early software industry?

You know these industries were started by small companies and garage-based businesses?


Who is the moron???


"Barriers to entry" are created (and eventually cemented into legislation) by the successful businesses of the previous generation"

Thanks for making my point here about regulations!!

" These are so vast, it shouldn't take more than a few seconds to list a few."

Just off the top of my head:

Alternative Enegry / Micro-Fabrication / Micro-Engineering / Supercomputing / Medical Devices

Alt-Energy is a pet-peeve of mine, the regulation required to just get a small lab going is insane. It is illegal to even grow the tree that gives the best oil per acre in this country. I detailed this in an older post. 

Tue, 05/08/2012 - 17:53 | 2408315 blunderdog
blunderdog's picture

The "success stories" you mention don't have anything to do with a "culture of innovation." That's just fairy-tale poetic license.

There's INCREDIBLE innovation going on today--in the past 10 years, there have been a greater number of important technological developments than there were between 1900 and 1970.  If ever there was one, TODAY would be the example of "culture of innovation." 

(Except there never was one, and there isn't today either, because most people still aren't that clever or creative when it really comes down to it.  Most folks just want a comfortable routine.  OK, so there's that.)

   Alt-Energy is a pet-peeve of mine, the regulation required to just get a small lab going is insane. 

A small lab?  I haven't done much with that stuff lately, but back when I lived upstate, I HAD a small lab in alt-energy going.  I didn't try to make a living with it, of course, because no one was looking for the products.  But the same Algers heroes are working from the same garages as the guys in the 20th century. 

Maybe you can't get a loan for speculative technology (because finance is inherently pretty conservative), but you're absolutely nuts if you think today is WORSE.  In fact, with so many folks out of work, this is the ideal time to see those garage-heroes changing the face of the planet.

And ya know what?  They're doing it.  Go take a look at virtually any "gee whiz" tech website and tell me where the problem is.  It's absurd.

  It is illegal to even grow the tree that gives the best oil per acre in this country. I detailed this in an older post.

Someone clever might be able to come up with a different plant to use.  You know....innovate a different approach. 

And someone bold would grow the trees anyway, because entrepreneurship involves some risk.

If you're really worried the Feds are going to come arrest you for trying to find a better source of biodiesel, you don't have the cojones for this shit, so don't kid youself.

Tue, 05/08/2012 - 18:25 | 2408405 Maos Dog
Maos Dog's picture

First, you hand-wave away the major technological advances of the 20th century, Then say there is no culture of innovation, then say wait we are actually in the greatest culture of innvoavtion, but of of course without giving any examples, which you had compelled me to provide.

You really think that SOX, cronyism, and regulations are not impacting availability of risk capital to new firms and hurting innovation?

Then there is this:

"Someone clever might be able to come up with a different plant to use.  You know....innovate a different approach.

You are kind of making my point here again. I would be starting a venture with one arm tied behind my back, due to regulation I can't use the best available resources to start my project.

Then, you talk about "risk"

Risk of a new venture, in the old days, was about lossing your sweat equity, and your capital invested. Nothing ventured nothing lost.

The "risk" we are talking about here, running an alt-energy lab, is the risk of Fed's comming and raiding my property for the un-licensed equipment which is now a Felony (Maybe it wasent when you did your lab?), with USDA guys in tow to poison and / or burn down my trees, after of course shooting my dogs to gain access to my property (Killing family dogs is standard raid pratice now). I think a lot has changed since you had your lab.


Tue, 05/08/2012 - 19:10 | 2408496 blunderdog
blunderdog's picture

I know what I wrote, you don't have to tell me, but fine, I'll list a few items.  You may not think they're that important, but it might help to start somewhere.

A few quickies from the last decade:
We've built a data-monitoring infrastructure that captures data about every piece of electronic information transmitted between billions of users on a global network. 
We've designed and implemented computer hardware and software which can translate human thought directly into commands.
We've grown replacement human organs and blood-vessels in vats from tissue samples from individuals.
We've built a dirt-cheap water filtration system which can be carried by any normal individual and will provide adequate potable water for that individual for at least 20 years assuming dirty/contaminated water is available.
We've found a way to index huge datasets across multiple computer networks to construct "virtual reality" environments from a degenerate sample of independent images published on the web.
We've sequenced the human genome.
We've built thousands of completely artificial life-forms which perform specific chemical operations. to this:

   You really think that SOX, cronyism, and regulations are not impacting availability of risk capital to new firms and hurting innovation?

My answer to you is an emphatic NO.  Availablility of risk capital has always been a product of social connections, not brilliant ideas, and the government has very little control over where that money goes.  In the current economic model, venture capital is available in effectively unlimited quantities to anyone who offers a low-risk financial return. 

Low-risk financial return has nothing to do with innovation.  The dotcom bubble was a perfect demonstration of why pouring money into new technology doesn't result in true breakthroughs in technology--everyone wants to buy last years breakthrough, but it's not a breakthrough any more, and someone who actually has a real insight is not aided by the set of constraints that come along with building a major corporation. 

The "risk" we are talking about here, running an alt-energy lab, is the risk of Fed's comming and raiding my property for the un-licensed equipment which is now a Felony (Maybe it wasent when you did your lab?), with USDA guys in tow to poison and / or burn down my trees, after of course shooting my dogs to gain access to my property (Killing family dogs is standard raid pratice now). I think a lot has changed since you had your lab.

As I mentioned, if you can't stand the risks, you're not cut out for that sort of work.  I'm sorry, it's always been that way.  You think you'd have flown on the first plane?  Dream on.  You want it easy.  It's not easy.  If it were, everyone would do it.

I'm not saying you SHOULD build an alt-energy lab.  I'm saying you disqualify YOURSELF from any kind of accomplishment if you're expecting someone else to greenlight you, and finance you, and promise to keep you out of TROUBLE.

What do you think? Henry Ford would listen to your sob-story and say, "Yep, it's real rough Maos Dog, you know, I wouldn't try to start a car company amid all this shit either.  Back in 1903 it was easy."

Tue, 05/08/2012 - 19:40 | 2408546 Maos Dog
Maos Dog's picture

Thanks for the examples. However, some of the examples you listed are big corporate science projects, which is not what I am discussing. 

This statement:

My answer to you is an emphatic NO.  Availability of risk capital has always been a product of social connections, not brilliant ideas, and the government has very little control over where that money goes.  In the current economic model, 

Is an example or cronyism, which is one of the points I am complaining about.

About this:

venture capital is available in effectively unlimited quantities to anyone who offers a low-risk financial return

"Low-Risk" financial return is not venture capital, venture capital is "high-risk high-return" by definition.  This also is only addressing one half of the issue I raised, which is government regulations hurting innovation, of which I provide one example from personal experience, however there are many more that can easily be found all over the internet.

Regarding risk:


"I'm not saying you SHOULD build an alt-energy lab.  I'm saying you disqualify YOURSELF from any kind of accomplishment if you're expecting someone else to green-light you, and finance you, and promise to keep you out of TROUBLE.

What do you think? Henry Ford would listen to your sob-story and say, "Yep, it's real rough Maos Dog, you know, I wouldn't try to start a car company amid all this shit either.  Back in 1903 it was easy."


Basically, your argument is "suck-it-up" followed by pretty much calling me a coward. I really don't think Henry Ford, or any other innovator I can think of, faced risk of arrest and thousands of dollars of legal trouble and jail time for trying to open a lab. I would love to see a list of these brave heros carring out research in the face of major jail time that you believe exist. I really can't believe this argument from you is serious and think your just trolling me at this point.


Tue, 05/08/2012 - 20:28 | 2408618 blunderdog
blunderdog's picture

This is a very simple disagreement.  You think you're prevented from doing incredible stuff because of the obstacles before you.  I think you're not even trying to do this incredible stuff because very very few people are actually suited to it, and you ain't one of 'em. 

You've got some very compelling excuses for why you can't do what you say is so important to you.  I'm telling you it's ever been thus.  Not much has changed.  Your idea that there was some golden historical period is FALSE.

"government regulations hurting innovation" have ALWAYS been there.

"cronyism" has ALWAYS been the biggest factor in financial opportunity.

When I used to sit in meetings with the VCs, all I *ever* saw were guys with literally more money than they could ever use trying to find the easiest way to fob all the risk off onto the customers.  For me, it was only 6 meetings--if you've been through the process a lot more often, obviously it's your own judgment.  I was in 3 between '99 and '02, and 3 more between '04-'07.

Maybe you're right, and you'd be a superstar with a brilliant alternative energy solution if there weren't a big bad government all over your shit.

The obvious solution is to join me and become an anarchist.  But don't half-ass it, please. 

Tue, 05/08/2012 - 18:38 | 2408439 Seer
Seer's picture

Ah, another "technology will save mankind" type.

Technology is a PROCESS, it doesn't create anything (it only re-arranges things). Without physical resources and energy your beloved "technology" is no more than a cookbook in an empty kitchen.

Tue, 05/08/2012 - 15:45 | 2407875 besnook
besnook's picture

this is one of the great economic discussions of all time.


one can argue that one of the factors that made the great depression worse was the automation of goods produced and agriculture displaced millions of labor intensive old jobs from blacksmiths to sharecroppers. it wasn't until the massive capacity destruction(and human capital destruction) of ww2 that labor capacity could catch up providing the income for consumption that provided the need for more capacity.  as the capacity build out reaches a maximum labor wages also top out requiring a financialization of an economy to increase the need for more capacity to improve or maintain current living standards. eventually the minsky moment arrives and the whole thing comes crashing down so it can start over again. that is where we are now.

what the hypothesis doesn't include is the reaction to industrialization has been a drop in baby making because babies are liabilities in industrial economies and not assets as they are in primitive agrarian, poor healthcare economies. unless a country allows huge numbers of baby making immigrants to maintain population growth(population growth equals economic growth in the old school) an industrialized country could theoretically naturally adjust population to the demand for labor as is happening in japan. the population in europe is falling also but they are importing baby makers as is the usa.

all of this could be fleshed out in a coupla hundred pages of boring text and pretty colored charts but that is the gist of it.


of course, the easiest and swiftest way to achieve this adjustment in demand for labor is to destroy capacity and kill a huge number of people. that is the usual course of action.

Tue, 05/08/2012 - 16:16 | 2408016 Joe The Plumber
Joe The Plumber's picture

That is the broken window argument

Even krugman admits that it is a fallacy that capital destruction improves the economy

Look at the video on you tube. The Fallacy of the Broken Window and u will see in multimedia form why capital destruction does not improve the economy or promote labor gains

Tue, 05/08/2012 - 16:19 | 2408040 besnook
besnook's picture

bastiat is not applicable in a fiat money system, there is money for everything because the resource is unlimited. it is financial utopia.

aside from that you missed my point.

Tue, 05/08/2012 - 16:25 | 2408063 Joe The Plumber
Joe The Plumber's picture

Money for everything lol how is that working out?

You are arguing for capital and labor destruction as a solution. I did not misread you

Tue, 05/08/2012 - 16:41 | 2408103 besnook
besnook's picture

i am not arguing for capital and labor destruction. i am a realist. that is what will happen. anyone who thinks differently didn't pay attention in those "worthless" history classes.

Tue, 05/08/2012 - 15:44 | 2407880 JLee2027
JLee2027's picture

To correct the problem is simple. Women will revert to their historical role, leaving the workforce.   What are seeing today - two earner families - is a distortion of how things should be. 


Tue, 05/08/2012 - 16:03 | 2407957 besnook
besnook's picture

actually the two earner family was the norm in agrarian economics. the one earner family was a brief luxury.

Tue, 05/08/2012 - 19:04 | 2408482 Seer
Seer's picture

I think that "earner" needs to be defined. Seems that this term is highly biased toward employer-employee paradigm.

Tue, 05/08/2012 - 15:44 | 2407883 Vince Clortho
Vince Clortho's picture

As the parabolic advances in technology increase, we are now within reach of a utopian society where autobots will be able to produce every conceivable amenity for a population of zero consumers.

Tue, 05/08/2012 - 15:46 | 2407890 blunderdog
blunderdog's picture

   So when the cost per military fighter aircraft leaps from $56 million each (the F-18) to $200 million and $300 million (the F-22 and F-35), then we accept this as OK because we assume more jobs will be created as costs rise.

What?  Tut, tut, Charles, NO ONE believes that.  Even BIDEN isn't stupid enough to believe such a story. 

Defense contracting doesn't create jobs.  It maintains *overpaid* jobs and taxable earnings for the states in which the businesses reside.

The central paradox of an advanced post-industrial economy is that the number of jobs needed declines even as the cost of living rises. The only way out of that paradox is to radically reduce the cost-basis of the entire economy, which means eliminating all the systemic sources of unproductive friction.

Could it it?  YES!  We're approaching awareness of 19th-century economic philosophy around these parts.  Yay, progress! 

If the crowd here has a clue, CHS should become persona non grata pretty quick.

(You can save time and learn this stuff by reading other people who were smarter than you and wrote books in the past.)

Tue, 05/08/2012 - 15:52 | 2407922 ussa
ussa's picture

Smith is incorrect that we are experience these problems because of the post-industrial nature of the economy.

He cites the real problem-frictions or gross misallocations of human and physical capital into nonproductive and even net loss activities.  To make matters worse, those rewards to nonproductive activities go to an elite class disproportianetly.

Cost are increasing because of cost shifting-healthcare, financial and energy sectors are masters of this domain.   Private profits and public losses or concentrated benefits and distributed costs define many of these markets. 

In the end the problem for the world is FASCISM, the marriage of the corporation and the state. 

At a minimum, the US turned to favor a form of fascism in 1913 with an acceleration in 1973. 





Tue, 05/08/2012 - 19:11 | 2408499 Seer
Seer's picture

"Cost are increasing because of cost shifting-healthcare, financial and energy sectors are masters of this domain."

Always it's "them," right?

No mention of the FACT that the earth can only spew out so much that can support humans' growth?  Sounds like denial to me...

Tue, 05/08/2012 - 15:59 | 2407941 Abiotic Oil
Abiotic Oil's picture

The only way out of that paradox is to radically reduce the cost-basis of the entire economy, which means eliminating all the systemic sources of unproductive friction.


My vote is for eliminating the Federal Government as the main source of friction.

Tue, 05/08/2012 - 16:13 | 2408008 Hobbleknee
Hobbleknee's picture


Can't vote you up because you used the Quote style.  Use quotation marks instead, if you want votes.

Tue, 05/08/2012 - 16:10 | 2407993 Stuck on Zero
Stuck on Zero's picture

Poo!  This an old Capitalist piece of crap: 

The paradox of an advanced post-industrial economy is that the number of jobs needed declines even as the cost of living rises.

In a free market there is no surplus of anything anywhere at any time.  If there are too many workers you suddenly find yourself hiring more gardeners, car washers, maids, nannies, and handymen.  The invention of the plow didn't send 400,000,000 workers to the unemployment lines.  Unemployment is caused by the government pricing labor out of the reach of the consumer.

Tue, 05/08/2012 - 16:22 | 2408054 Joe The Plumber
Joe The Plumber's picture

Lol a friend of mine observed that in G7 economies we put our servant class on disability

Tue, 05/08/2012 - 18:02 | 2408344 Precious
Precious's picture

You are actually completely stupid.  Of course there are surplusses.   Otherwise why would the word "surplus" even exist.  The equalibriums you describe take time to reach.  In the job market this can mean YEARS.   In the meantime there certainly are shortages and surplusses.

Tue, 05/08/2012 - 19:13 | 2408503 Seer
Seer's picture

"Unemployment is caused by the government pricing labor out of the reach of the consumer."

Consumption of slave labor???

Tue, 05/08/2012 - 16:21 | 2408027 epwpixieq-1
epwpixieq-1's picture

"If the future of warfare is increasingly powerful unmanned networked drones (and it clearly is), why are we spending $1 trillion+ on hyper-costly aircraft that are essentially designed for a previous era?" - an excellent question

There ONLY 2 REASONS a when money are spent , when one can not afford to spend it. Either the money do not belong to this person/entity or he/she/it is stupid/negligent/corrupt and so on ... enough to do it.

Aren't you going to spend money that are not yours, and you will not be responsible for paying them back?

I will do, with pleasure, if someone else has to pay for the party. But surely I will feel very good playing along to I build/make/sell things that are needed for the common "good". Everyone enjoys parties, right?

All good things in live do not cost a dime or very little ( compared with all bull sheet crap around ). The only trick is that one has to be knowledgeable enough to get/have/make them.

Tue, 05/08/2012 - 16:34 | 2408086 emersonreturn
emersonreturn's picture

in a nation where a small minority subsidizes the majority (a seemingly naive fifties sci-fi utopia) what are we to do with great untapped wasted parasitical mass?

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