[ExI] Why Cities Keep Growing, Corporations and People Always Die, and Life Gets Faster

[Kelly Anderson]

On Sat, Jun 4, 2011 at 11:20 AM, Damien Sullivan
<phoenix at ugcs.caltech.edu> wrote:
> On Sat, Jun 04, 2011 at 09:58:22AM -0600, Kelly Anderson wrote:
>> On Sat, Jun 4, 2011 at 5:49 AM, Anders Sandberg <anders at aleph.se> wrote:
>> > Kelly Anderson wrote:
>> The rust belt, Detroit for a very good example, also has suffered the
>> effects of bad politicians and internal unionization parasitism. In
>> other words, the external competition was inevitable. The horrid reply
>> to this competition was not.
>
> I'd call it self-inflicted wounds by the corporations.  Back in the day,
> the unions wanted regional pensions and health care plans, that all
> employers would pay into -- or government plans, those would work too.
> After all, this way workers wouldn't be tied to a single employer.  The
> corporations countered with generous employer-tied benefits.  Which was
> fine when they started, but now they labor under their own miniature
> demographic transitions, one worker per retiree or whatever, when their
> overseas competitors benefit from socialized medicine and more generous
> public pensions that spread the cost over a society.

I would call it self-inflicted wounds by unions. They went for all
they could get every step along the way, creating an unsustainable
system. Yes, the corporations went along, but they didn't have a lot
of choice faced with labor strikes that would just take them out of
business sooner.

The biological analogy is that the cruft builds up over time, and the
corporation suffers the pains of old age. The problem comes when the
government steps in and says in effect "you're too important to die of
old age". (Another way of saying "too big to fail") If GM were allowed
to die, and all the union stuff went away, then it would leave room
for Tesla to grow into a new vibrant company. Instead, we have GM on
life support for a while, and Tesla can't grow so well.

The government would not let the old workers die, but they would not
enjoy the unsustainable union benefits either. The symbiotic
relationship between the unions and the Democrats creates, in effect,
a parasite on the rest of society. The investors got crammed down in
the GM restructure, but the unions came out without major losses. It's
like taking the blood out of the creature, leaving the cancer, but
being undead, cancer isn't so bad.

> (And lower cost
> too, since socialized medicine is cheaper)

You get what you pay for.

> http://www.nytimes.com/2008/12/10/business/economy/10leonhardt.html?_r=1
> http://www.fivethirtyeight.com/2009/03/gms-problems-are-50-years-in-making.html

Trading profits today for problems tomorrow, it's the American Way!
But these companies need to die to solve the problem and pass the
torch to the next generation. Perhaps this is analogous to what will
happen when we start having 500 year life spans. I hope not.

> Of course, then there's still the problem of the cars:
> http://www.nytimes.com/2008/12/10/business/economy/10leonhardt.html?_r=1

One of the bigger problems with the cars themselves is that we can't
predict reliably the price of fuel to run the cars. If we could, then
we could right-size the vehicle fleet over time.

>> >> How about something related to the tax rate? Seems that is running
>> >> into a singularity. :-)
>> >
>> > It just feels like that.
>> > https://secure.wikimedia.org/wikipedia/en/wiki/File:MarginalIncomeTax.svg
>>
>> I wonder if we are seeing a series of singularities here. That graph
>> goes up and down a lot, it's very frightening actually. Growth and
>> collapse, growth and collapse.
>
> Uh, it spikes up sharply twice.  The rest is minor wobbles over secular
> decline.  Ironically, the tax rate usually goes up *before* prosperour
> periods, like the mid-century and Clinton booms.

I don't think it's that simple. The early 1980s tax cut led to a big
boom too. If it were this simple, there wouldn't be the big argument
in economic circles about what it all means. My gut tells me that tax
cuts will create more money in the economy to invest in startups. That
is skewed by my narrow view of the financial world, my personal
experience.

>> I guess they direct production of roads, military equipment and so
>> forth. But ALL the production is actually accomplished by government
>> contractors, which are mostly in the private sector (in the US). We do
>
> Being private doesn't magically make you better.  If you have a business
> that lives in a competitive market and occasionally gets government
> contracts, that's one thing.  If you have a business that exists on
> government contracts, I don't really see how it differs from a
> government owned industry with less oversight.

You say that like less oversight is a bad thing. :-)  Oversight is
horrid. I ran into an old friend yesterday in Home Depot. He moaned
(unprompted) about how difficult it was to set up a computer server
for the government. What would have taken a week took 6 months because
of all the government oversight.

>> have GM now... sigh. It is very hard to determine government
>> efficiency, but it is easy to look at it and see that it is low,
>> however you would assign numbers.
>
> Herbert Simon thought government contribution to the economy was such as
> to justify a 90% tax rate; this might have been off the cuff.  A World
> Bank analysis was more in the 80% range, with something like 56% of US
> GDP attributed to law-and-order alone.

Now you're making me angry. :-)

Without law and order, clearly the GDP would be reduced by 56%. I'll
give you that. But you can say that about any number of things.
Without computation and IT, the GDP would be reduced by at least 50%.
Without a reasonable health care system, the GDP would probably be
reduced 25%. Then you have Transportation, Energy, Education, and on
and on. The point is that these numbers don't add up to 100%. It's
like trying to figure out what organ in the human body is most
important. The answer usually is the one that isn't working well right
now.

Any complex system is at the mercy of any number of it's constituent
complex parts. If any one of them fails, it's all over.

> Herbert Simon on social capital and 90% tax
> http://bostonreview.net/BR25.5/simon.html
> http://online.wsj.com/article/SB124165465339294011.html
> summary of the mentioned World Bank study
> http://reason.com/archives/2007/10/05/the-secrets-of-intangible-weal
> http://reason.com/archives/2005/12/16/the-intangible-wealth-of-natio
> note: the 56-57% may be % of intangible capital, not of the whole income
> the study
> http://siteresources.worldbank.org/INTEEI/214578-1110886258964/20748034/All.pdf
>
> "When we compare the poorest with the richest nations, it is hard to
> conclude that social capital can produce less than about 90 percent of
> income in wealthy societies like those of the United States or
> Northwestern Europe. On moral grounds, then, we could argue for a flat
> income tax of 90 percent to return that wealth to its real owners."

Sorry, I don't buy your argument. At all. I don't think you really
believe this either.

-Kelly