[extropy-chat] When will the equity risk premium flip?

[Jef Allbright]

On 2/26/06, Robin Hanson <rhanson at gmu.edu> wrote:
> At 09:19 AM 2/26/2006, Robert Bradbury wrote:
> >The perception of government security explains why government bonds
> >are yielding ~4.5% while corporate bonds are in the 5+% range. ...
> >So let us setup a scenario.  One day we have robust
> >nanotechnology.  People spend $5.00 and buy their 10 kg of
> >nanorobots and start them building their Sapphire Mansion.  Since
> >they don't have to work they aren't paying any income
> >taxes.  Government income tax revenue rapidly falls.  So there is
> >some quick reengineering of the tax code and all the governments
> >shift to VATs.  But there isn't much worth buying because the raw
> >materials for food, the mansion, etc. are as free as "air", "dirt",
> >and "seawater".
> >The point being that governments in general have little that can be
> >used as a revenue source other than perhaps a real estate tax or a
> >head tax.  People avoid those by constructing and moving to their
> >own personal yacht in international waters.  ... government backed
> >bonds become essentially worthless.  ...
> >1) When will the equity risk premium "flip" ...
> >2) Are there "idea futures" on when this will happen?
> >3) When will politicians begin selling themselves based on these concepts? ...
>
> I expect that, like me, most investors place a very low probability
> on this scenario, and so this scenario has very little influence on
> current financial market prices.   So if in fact this scenario came
> to occur, the main question would be when does information came out
> revealing this to be a probable scenario.
>

I would agree with Robin's response but extend it by suggesting that
developments in information technology will continue to outpace other
areas of development, leading to qualitatively new awareness of who we
are, what we value, and how we're doing--at all scales from individual
to global.

Such increased awareness will not inhere in the individuals so much as
in the behavior of the system, driven by human hunger for
entertainment that matches our individual preferences, information
that serves our individual needs, and coordination/planning that
facilitates our individual goals.  Such a rich information environment
will tend to promote transparency of activities, including government,
even if not by what it is made explicit, but by what is missing from
the picture.

In such an environment, politics will be reshaped from zero-sum
conflict over issues of scarcity (material resources, information,
attention) toward positive-sum interaction maximizing development and
utilization of those same material resources, information and
attention.  Politicians, as gate-keepers, power-brokers, and
controllers of information flow, will become increasingly irrelevant,
and be subsumed by a new type of change-leader, entrepreneurial,
discovering new gateways and applications of power and exploiting
broader information flow.

Idealistic?  Yes, to a large extent.  Naive?  No, I don't think so,
given the "unreasonable effectiveness" of simple self-organizing
principles that tend to ratchet forward into the future those features
of complex systems which work.  I think we can already see the
information infrastructure growing, and becoming more personalized
while it becomes more encompassing.

So to more directly respond to Robert's question about "when will
politicians begin selling themselves" based on nanotechnology flipping
much of the current social-political-economic order, I don't think it
will happen at all, because by the time we have such powerful
nanotechnology, the game will already have changed.

- Jef
http://www.jefallbright.net
Increasing awareness for increasing morality