tl;dr - I shop a lot on Amazon. Therefore we no longer need shops. We have the internet. Therefore we no longer need universities.
The nice thing about "in the future" kind of statements is that they are impossible to disprove - especially when it is not specified how far in the future we are talking about. However, I think we are a long way from having gasoline delivered to your door and I always need to pop out for eggs, bread and milk. I also might need a hair cut in the future. Clothes are unlikely to be optional. My wife and I like to go to the movies. The kids like all kinds of shops...
Sure, the internet is affecting retail sales and education. To what extent is very difficult to predict but it is unlikely to be as drastic as the OP suggests.
I spent last year living next door to the mall. I went there for food, clothing, and some candles and that's about it. I live 1 block from a Best Buy and still buy all my electronics online, and I am happy to replace the local bookstore which died with my kindle. Thanksgiving was the last time I went into a grocery store (Peapod). Gas is just about the only thing I can't buy online and buying an electric car is becoming tempting.
edit: I did get my replacement iPhone 4gs at the Apple store, but I got my first iPhone 4gs line despite walking past the place several times a week.
PS: I expect something like a 30% reduction in retail store sales in the next 20 years, that may or may not be huge, but it is significant.
Are you sure? I would think that malls make a ton more money off of people popping in and out looking for specific items than people who hang out there all day, look for the best deals, sales (which are probably loss-leaders), etc.
I have no numbers to back this up, so if anyone does I would be very interested in seeing it.
There's also the problem of what will you do with the millions of people working in retail economy, and with the assorted collapsed buying ability of the middle to lower class.
We don't just keep jobs because we need them. We also keep them because we need the distribution of wealth that they make possible --without a way to ensure that, everything collapses. There can't be a billionaire without millions of wage slaves.
There can't be a billionaire without millions of wage slaves
Except for where there can. Economic productivity is nowhere close to decoupling from population mass yet, but when it does, you won't need low or semi-skilled workers.
There is a careful calculus happening at every level comparing the productivity of a human versus machines (and other humans). To deny that competitive spirit, à la Greece or Italia, builds systematic inefficiencies into the economy.
At a certain point there won't be a place in the world for unskilled humans - they will be un-differentiable from a defective tool.
TL;DR This may be a problem, but will be un-avoidable. Social structures, demographics, or both will have to adapt to new realities of productivity.
It's funny, a Treasury paper from a 1994 conference in Canberra [1] looks like the oeuvre on the topic. Everything more recently has focused on rising productivity as a desired effect instead of an a priori cause.
The paper concludes that in the short-run, rising productivity decreases inflation, increases the current account balance, increases GDP, and increases unemployment (and real wages) as aggregate supply increases without a commensurate increase in aggregate demand. The system starts equilibrating as people internalise the higher productivity into their investment assumptions.
We could see falling rates on student loans coupled with rising returns on education (note: not just college education, as the OP pointed out) as increasing the incentive to invest in one's education. Given that our culture creates barriers to education the older one gets it seems like we will have a wasted generation of un-skilled workers who will just need to be worked through the system (being a cold, pragmatic macroeconomist here). Being civil to those people without incurring undue cost to the system will be the challenge.
Except for where there can. Economic productivity is nowhere close to decoupling from population mass yet, but when it does, you won't need low or semi-skilled workers.
You don't need workers to have productivity, but you need people not being rich to have riches. And those people need to be fed, clothed, etc. And they also need money, to be able to buy things and services, else you cannot sell them.
So, you either turn into a Star Trek/socialism scheme, where social wealth is shared, and rich men are those that take more share by power alone --like kings of time old--, or you have a problem or keeping people occupied.
That's only true if you define "rich" as "I have a lot more than you."
If you define rich to mean "I have way more than I will ever need" then there is ultimately no reason that everyone can't be rich. It just takes a while to get there.
Personally I'd prefer the latter. Eliminating poverty makes everyone better off.
That's only true if you define "rich" as "I have a lot more than you." If you define rich to mean "I have way more than I will ever need" then there is ultimately no reason that everyone can't be rich. It just takes a while to get there.
The problem I described is multi-faceted, and I might not have made a good job at it, or some people might not have understood me (judging from the knee-jerk downvotes).
One issue is societal wealth. As a society, everybody can be "rich" in the sense you describe, but I already addressed that in the part where I write about the "Star Trek/socialism scheme, where social wealth is shared". I am fine with that kind of a society. I just don't see that this is what we are currently approaching with automation, etc, but rather huge poor masses and an middle class in decline.
So, my other argument was about what is actually happening, i.e. the continuation of the current model + automation. And what I said, is that if you believe --as many do--, that corporations, enterpreneurs, buying and selling stuff, in essence a market economy is crucial, then you need poorer people with jobs, ie. you need consumers. You cannot have a market economy AND everyone being rich in the "I have more than you" sense, and you cannot have a market economy AND the great masses out of work due to automation.
So, my argument is, automation is ultimately non compatible with a market economy. You get either sharing for everybody (i.e no market economy), or a collapse in buying power / sales (i.e a poor market economy).
(A final point, re everyone being rich in the "I have enough" sense: beyond the basics, "needs" are themselves a social construct. To a caveman, or a 17th century peasant, a man working at McDonalds with a house, tv, food, internet, bathroom, modern medicine, etc, seems as "more that he will ever need". To his contemporaries, not so much).
I just don't see that this is what we are currently approaching with automation, etc, but rather huge poor masses and an middle class in decline.
Can you support claim with some facts?
Note that in our current society, it is easily possible to be both richer than the 1970's middle class (in absolute terms) and live a life of leisure. We apply the label "poor" to people who do this, but that's just an arbitrary label.
...beyond the basics, "needs" are themselves a social construct.
Yes, this is the game played by most people who complain about the "middle class in decline" or "increasing poverty". They increase the definition of "middle class" more rapidly than the living standards of the middle class actually increased, and then whine when reality hasn't met their artificial benchmark.
Yes, this is the game played by most people who complain about the "middle class in decline" or "increasing poverty". They increase the definition of "middle class" more rapidly than the living standards of the middle class actually increased, and then whine when reality hasn't met their artificial benchmark.
It's not a game --it's how society works. Definitions change according to the social reality. Would you consider YOURSELF middle class if you only had access to what a '50's middle class family had? A 1920's one?
According to your third link, the household wealth of the bottom 40% grew by 157% between 1989 and 2001, and the middle 20% had their wealth grow by 200%.
The majority of your links focused solely on relative measures, not absolute ones (i.e., the incomes of the poor grew more slowly than the rich).
Want to try again?
Would you consider YOURSELF middle class if you only had access to what a '50's middle class family had? A 1920's one?
Hmm, ok, I'll choose my own arbitrary definition of middle class - it involves flying cars, robots and spaceships. No one meets my definition in the present era. In contrast, 20 years ago, when I defined "middle class" as stone knives and bear skins, everyone in the US was middle class.
Oh no, we are all so poor, something must be done!
The material and energy intensity of consumption, per capita, has increased exponentially over the past centuries. There is no reason to not expect it to continue to do so for the foreseeable future. Thus, you don't need an army of low-wage consumers to buy things from the wealthy.
You need people not being rich to have riches
Echoing another point made in this thread, but wealth differentials doesn't mean you need to have poor people. The least well off person in a society may not have everything they want - most people don't and probably should not, if we want aspiration and ambition to have a place in the future - but they'll have their basic human rights fulfilled (a roster that gains mass with economic development).
The material and energy intensity of consumption, per capita, has increased exponentially over the past centuries. There is no reason to not expect it to continue to do so for the foreseeable future. Thus, you don't need an army of low-wage consumers to buy things from the wealthy.
The "material and energy intensity of consumption, per capita, has increased exponentially over the past centuries" EXACTLY because of the creation first and constant availability of "an army of low-wage consumers".
People were taught to hold jobs in the way we do now, and they were taught to consume, in the way we do now. The vast masses of the people not only consumed much less, but made their own everything, from clothes and shoes, to vegetables and housing. Like an Amish community.
A decline in the middle class, e.g by migration of their jobs abroad, translate to a decline in economy, unless you can create new jobs at the same rate, which currently we can't, and the economy took a hit.
Echoing another point made in this thread, but wealth differentials doesn't mean you need to have poor people.
No, but a market economy needs people poor enough to have to work and at the same time rich enough to be able to spend money on things.
Automation can eliminate the need to have people working, but it cannot eliminate the need to have people spending --except if you move beyond a market economy.
Guaranteed income. If the economy doesn't require everyone's labor, a bunch of people just shouldn't work, so make sure they can eat and you're done. I don't understand all this American obsession with jobs for everyone.
Promise free food, and suddenly way more people are demanding it than the economy can support. Even if the economy can afford to give away food, society stagnates because there is no incentive to produce nor advance anything of value - be it making widgets, sweeping floors, or writing sonnets. Those who do produce the wealth unproductive others live on will decide to not bother (look up "go Galt"). We Americans are obsessed with jobs because we realize to not work leads to death, be it individual or cultural.
"free food" doesn't necessarily mean a communist society where everything is free - it means providing an income level that allows for the necessities of life. It probably makes more sense to give those away than it does to force people to work meaningless jobs just so we feel they aren't getting something for "free" - if the jobs don't produce value, then the workers are getting something for free, they're just also wasting their time in the process.
People would still have every incentive to work to improve their lot in life; most people on HN probably have the capability to quit their jobs and live off of welfare checks, but it's not exactly a great lifestyle, even if it doesn't require any work. In fact, people might have more incentive than they do now to try out new, interesting work; knowing that if everything blows up they won't screw up their lives and the lives of their families is a great asset.
Overall, I imagine society would progress tremendously if everyone were able to get an education and do creative work while being guaranteed the basics of life, even if that results in some freeloaders surviving on the dole.
It's amazing how many people will settle for a free "necessities of life" income. TV makes it very easy to waste time with satisfaction. Few will use the opportunity for creative productivity. Most will be freeloaders. Whatever the arguable percentages, it creates a drag on the productive by depriving them of the value of their work.
A television is not a 'necessity', and if the policy is designed correctly the income should be designed to support just the bare minimum of existence, i.e. food, shelter, and some sort of health care. This can be done providing debit cards or other payment systems that only allow the recipient to spend the funds on approved items.
Most first rate economies already have fairly extensive welfare systems in place, and you do not see people begging to get fired from their jobs so that they can get unemployment. Most people have at least some ambition to increase their social and economic status and that won't change.
> Those who do produce the wealth unproductive others live on will decide to not bother (look up "go Galt").
Has this ever happened? Has anyone at any wealth level ever simply stopped making money because he was upset about taxes? I hear a lot of small-time sole proprieters talk about it, but I've never heard reliable reports of it actually happening.
A quick summary is that yes, people probably do choose not to do certain kinds of work when taxes are too high, but not in the way that Bill O'Reilly tends to advertise it - it's unlikely that someone is going to quit a high-paying job because their marginal tax rate went up a point. However, if you're undertaking an endeavor with a 5% chance of success, and a 30x tax-free payout in case of success (relative to a safe option), your expected payout is 1.5x with no taxes; 1.35x with a 10% tax rate; and 0.9x with a 40% tax rate. Whether or not you'd take the risk in the first two cases varies from person to person, but in the latter scenario, most people wouldn't bother; you'd have better expectancy at a roulette table.
I appreciate the EV calculation. That would probably raise the marginal value at which someone like Warren Buffett would buy a company, fix its problems, and make it productive again. I doubt he'd shut down Berkshire Hathaway, or that it would even slow down people intent on creating a startup; but it would have a marginal effect.
Still a bit different from the classic "going galt," though.
Has anyone at any wealth level ever simply stopped making money because he was upset about taxes?
Yes, it happened to Ronald Reagan. When the top tax rate was 90% (he was an actor at the time), he chose to make only two movies/year. He saw little point in making more movies since he wouldn't get paid for it.
Well, fewer Reagan movies. How is this a BAD thing? He was a bad actor, and a worse president.
Meanwhile, a true artist, would make movies no matter what the top tax rate was, because he had the urge to. Artists have worked for nothing for ages, in order to create.
They will choose where they contribute and will modulate the risks they take as a function of pay-off, though. These aren't things you see hitting instantly, but it affects decisions at the margin and eventually nickels add up.
At least one prominent American, Thomas Paine (of the American revolution) advocated a guaranteed minimum income for everyone in his pamphlet Agrarian Justice, which was a real fascinating read:
Jobs provide more than income, they also help with self-esteem and prevent idleness, which in turn keeps things like crime down. I think useless make-work jobs are ultimately more feasible than guaranteed income for those reasons.
> prevent idleness, which in turn keeps things like crime down
This, this right here is exactly the kind of puritan thinking I find infuriating.
Seriously, leisure as a terminal negative term in your utility function?! Never mind the people who are going to use the time to learn, to create art and share it, to spend time with their families -- if we don't shackle people to their counters and desks, they'll be rioting in the streets!
How much theft/violence do you think is driven by need, by looking for a way to get by? If anything, I would expect violence and theft to go down.
Having been quite the slacker, I assure you there are massively diminishing returns to leisure time, unless you turn it into work. If you don't get anything done, you feel worthless. Maybe 20 hours a week is enough, but no work at all isn't good for you. Rioting in the streets is exactly what the welfare class of Britain did mere months ago.
Art and study could certainly be more heavily subsidized, though. But I would count those as types of work.
Agreed with parent that this is basically a Puritan attitude. This idea that one creates self-worth via work is not anything like a cultural absolute. One of my favorite things about Balinese culture is that they don't have the idea that poverty is vice.
Maybe it's a Puritan attitude, but is it wrong? Who cares about cultural universals; if the Balinese are happier as impoverished slackers, live and let live.
Universities will shrink to coffeshops? That's a very CS/math-centric viewpoint. How are you going to do MITx with with Chemsitry? Physics? Biology? Med School? Anything that requires specialized equipment? How will you do team projects that require people to be in physical proximity to one another (building complicated things, for instance).
Universities aren't going away. At most, some programs may become "virtualized" but even then there's a lot of value add with college. They have specialized libraries and librarians to help you find information that may not be on the internet. They can afford expensive equipment and the people to take care of them. It's often useful just to be around people in your same program to talk about projects and learn from each other. It may not be $100k value add, but that just means college will get less expensive and possibly shrink, not that it will go away all together.
I'd love it if my office could be the coffee shop, or wherever I happen to be, but so far I've found that after a certain level of complexity and team size you pretty much have to be in the same room to make constant progress. I'm not sure if this is a problem with software development in general or just in the niche that I work within.
My company does a SAAS product aimed at banks. Everybody except the office manager telecommutes... sometimes. And everybody is in the office a large chunk of the time.
It's good to be able to concentrate alone, AND it's good to be able to collaborate in person.
We have GitHub (social coding!) and now MITx (social learning?) I like the idea. It's like the whole point of the Internet -- bringing people together -- has reached brick and mortar.
The comparison between the local state university and MITx is noteworthy. One of the big arguments that I hear continuously for traditional colleges is that they provide opportunities for research and are a place to make social connections. While these opportunities are a very real incentive for top schools, there are a ton of colleges and universities that add little value on these fronts (especially relative to the cost).
This whole scenario is kind of silly. I can understand the simplification in order to debate the merits of a free mass scale online education. However it's not realistic. No two candidates will ever be the same. Everyone has different levels of communication, most will think a little differently. If they're programmers, there's probably different levels of understanding of language concepts, or OOP concepts. In the scenario of one entry level candiate from a brick and mortar institution vs the candidate from MITx. I'm going to choose the person answers my questions most coherently, and writes the better code on my sample problem.
I'm going to hire the employee who i believe will work with me better, and who will produce a higher quality product. I don't care which school he/she went to.
It's a gedankenexperiment and he's invoking ceteris paribus. It's no different than isolating the velocity of two balls rolling down a slope by opting to ignore things like friction & drag in a physics problem.
This post raises a bigger question for the US: What will we do with all of the vacant retail space that is abandoned as shopping continues to go online?
I wonder if there are companies out there working on innovative ways to fill this space. After all, not _everything_ will be a coffee shop...right?
This could turn out to be true, i just hope that as paper books turn into history, we dont lose the quality associated with something going into print. The process of having enough confidence to "Print it" is pretty intense, and therefore the quality of a printed book v's any e-book or website will not match up without a significant amount of effort (which i suspect for business reasons wont get as much attention, because for business reasons you dont want to screw up a paper book)
Its an interesting concept, i think we're just not there yet. People like paper books, the only way they'll go away is if they become unaffordable or just stop being produced (in which case i'm starting a publishing company focusing on paper books!)
This somewhat assumes that the purpose of universities is to gain knowledge useful to employers. While that might be a purpose of it, universities are also screening mechanisms.
This is something by people in educational economics. While I think the author has a great point that we're looking to get workers who can get the job done, that isn't necessarily how businesses hire. The benefits from education don't just come in the form of increased human capital. Basically, you get bonus points for having the degree regardless of what it means to your human capital (there's a term for it that I can't come up with right now).
For a long time, we've heard of jobs that don't need a college degree, but that you won't get hired for without it. In fact, that's the reasoning behind getting a college degree in many majors where one doesn't have the intention of working in that area.
College is also a place where people get sorted into social groups according to smartness - social groupings that can continue well past college. After college, you meet friends of friends you had in college who also went to schools similar to your own and you get to build a network of people like you somewhat regardless of your success in life.
Finally, the appeal of letters is great. If you're "John Smith, BS", you will always be that. You will get the respect of being a college grad for the rest of your life. In a world where things seem in flux, items that we place undue weight on are comforting. Heck, the same can be said of going to a good school. If you went to Harvard, you will always have gone to Harvard - something very few people can say. No matter how much you fail at life in the future, you have proven that you're the top by having gone there.
Getting a certificate of completion from MITx isn't the same for many of these things. The fact that there aren't entrance requirements or limitations means that it isn't a certification that you're the top rung of society - just that you've learned some knowledge. Because it's so broadly available, it isn't sorting you into a social grouping. If universities are for knowledge transmission, the author is right - that these new offerings are wonderful. While maybe they should be for that purpose, I think that universities play a broader role in our society (I'm not saying it's a good or desirable role, just a role). They prove to others that I was accepted as not just someone they could transmit knowledge to, but a really smart person well above what would be needed to pass the courses. They connect me to other smart people who will become my social group as well as professional networking group. They make sure that no matter what I do in the future, I've proven that I'm one of the smart ones - one of the elite. My neighbor with a high-school diploma may make millions as a real-estate agent, but I'm a college grad! I can still feel proud (and maybe a little smug) because someone has certified that I'm part of the top of society - and no one has done that for him!
This is something by people in educational economics. While I think the author has a great point that we're looking to get workers who can get the job done, that isn't necessarily how businesses hire. The benefits from education don't just come in the form of increased human capital. Basically, you get bonus points for having the degree regardless of what it means to your human capital (there's a term for it that I can't come up with right now).
You are right, Universities provide that "appeal" but going forward, that won't matter anymore. Things just will change as people start realizing that that is shallow and start placing importance on gaining knowledge itself. The appeal then would be, how much you know, your expertise rather than where you went to school at. It is evolving and will continue to accelerate and the state of the economy will act as a catalyst. IMO.
Could this be extended to a need for startups or meetups that focus entirely on internet-based education?
Something akin to a formal book club with paid/volunteer instruction. I'm thinking about events like, "MyAwesomeEduStartup sponsors instructor [someone]'s coverage of [some MIT xCourse]."
It would definitely be cool as a community service or meetup event. I think it would be hard to get people to pay for this just yet, but maybe in the near future.
Currently there is a complex and non-transparent pricing for phones purchased bundled with a service. This is used maximize profit share, disguise cost and create market power etc.
Google tried to challenge this model. This has nothing to do with whether people buy from brick and mortar stores or online.
I bought my phone online disentangled:
http://www.clove.co.uk/
But I could have bought it online entangled:
http://www.virginmobile.com.au/shop
There are many things where I currently prefer buying online. And others where I prefer brick and mortar. The online stores are getting better more quickly than the brick and mortar stores.
It may be an issue of timing. Online shopping only took off in the last decade; the batch of consumers born after 1990 will have been exposed to internet shopping since childhood and will need much less convincing of buying anything online (than those who grew up used to buying things in stores).
There are two candidates: one from the local state school with an appropriate college degree, a second with relevant MITx certificates of completion. Let’s say all other things between the candidates are equal. Which should be chosen? It’s true that an online education is not the same as the college experience. The candidate who went to college probably enjoyed his experience more, but how much is that experience worth to a potential employer? Unless he’s a member of the same fraternity, probably not as much as the college candidate would hope. And here’s the reality: the student debt of the college candidate controls, to some extent, his salary requirements. Since the MITx candidate appears to have the knowledge required, and has no student debt, he probably can be hired cheaper.
Actually it's the inverse. The student debt accumulated will make the college graduate more desperate to accept any wage offer, and more fearful of keeping the job once there.
The debt burden makes the college graduate more desperate to work, but not for any wage. There is a hard line below which the student is unable to make payments and a softer line above that allowing for various qualities of life. The key in the analysis is if the non-grad can under-price the college grad near (or even below) that hard line for long enough to get entry level experience and thus be treated as another experienced hire.
There is also something to be said for a self-starter who drives himself through an online programme and comes out with a working understanding of a topic.
If you have two candidates who appear to have the same skill levels and only one of them has had the distinct advantage of being to a top university and then it's surely the one with the more modest education who is likely to be most talented?
Could you explain what you mean? I've done my best work in coffee shops, hands down. I've also had the most enjoyable time doing it. It's way nicer than a library or an office or a chair at home. When you have a collection of other caffinated people working near you on different projects, you are often more motivated to work yourself. The atmosphere is ambient and doesn't offer much distraction, unless you want it to.
I only get to spend about 3 or 4 hours / week in cafes these days (I have an office job) but those are some of the best work hours I get. I wish I could transition full-time to coffeeshops, and if I get a startup going I might try it.
The nice thing about "in the future" kind of statements is that they are impossible to disprove - especially when it is not specified how far in the future we are talking about. However, I think we are a long way from having gasoline delivered to your door and I always need to pop out for eggs, bread and milk. I also might need a hair cut in the future. Clothes are unlikely to be optional. My wife and I like to go to the movies. The kids like all kinds of shops...
Sure, the internet is affecting retail sales and education. To what extent is very difficult to predict but it is unlikely to be as drastic as the OP suggests.