Evolutionary Economics and the great recession

[william the wie]

Most of the rest of the developed and developing world is either depopulating or is relying on immigrants to keep population from crashing. So the Western European and developing Asia model is a total failure at the most basic level: reproductive success. Until such models are scrapped the downturn is going to continue. There are several mechanisms speeding up this process.

One of these mechanisms is automation and robotization of the workforce. One of the unstated reasons for the housing bubble is automation of construction. Labor as a percentage of cost per square foot is going down. Nail guns, truss factories and similar labor saving devices are becoming more common. Another reason that gets a lot of attention is the use of financing gimmicks to free up lending capital.

Still another reason is the use of the internet to eliminate middlemen as with Lending Tree and no doubt other linkages in other areas such as material supply for example. The use of direct linkages and containerization means that most of the wood used east of the Mississippi is from west of the Mississippi. (Temperate zone rain forests on mountains makes for fast growing cheap timber from roughly San Francisco to the Alaskan pandhandle.)

Still another factor is the use of modular construction most famously with mobile homes but also shipping containers and purpose built plug and play modules. This trend will grow as well as part of the product life cycle.

All three of these mechanisms and many more are in operation throughout the world's economy and they will continue to force change until reproduction rates get back up to at least ZPG.

 

[loosecannon]

modular has no chance in this economy. I live in an early modular prototype and aside from the mobile home modular has never gained a foothold. Never will.

But robots, the internet, cad machinery, and what can only be called advanced commodification is surely stripping labor from it's proprietary niche in the resource consumption industries.

What should scare you is what the Chinese will invent as econ pressures and inflation forces them to modernize and reinvent efficiency in their industry strongholds to retain monopoly even while their wages increase.

They may take our renditions of efficiency and automation and square them.

 

[william the wie]

modular has no chance in this economy. I live in an early modular prototype and aside from the mobile home modular has never gained a foothold. Never will.

But robots, the internet, cad machinery, and what can only be called advanced commodification is surely stripping labor from it's proprietary niche in the resource consumption industries.

What should scare you is what the Chinese will invent as econ pressures and inflation forces them to modernize and reinvent efficiency in their industry strongholds to retain monopoly even while their wages increase.

They may take our renditions of efficiency and automation and square them.

Seems likely. The countries in an evolutionary dead end getting high wage Darwin awards rather than kids and grandkids are supersizing the product life cycle are definitely on the Japanese trail of economic hell. Where I tend to disagree is at some point quality and therefore durability of goods will reach a tipping point that will transform societies worldwide in totally unexpected ways. Take the Obamacare provision to track outcomes of different treatments and equipment that at some point will intersect biotechnology and the medical field will collapse. Take a few examples

Bookstores and video rentals are being replaced by ereaders and online video, most of my TV watching is hulu online.

When the bottom is hit in real estate the average house will be selling for much less than twice annual salary.

If as seems likely social security and medicare eligibility is tied to life-expectancy expect to see research into life-extension and health to be a major item in the budget.

How long this list will become is beyond me.

 

[william the wie]

LC, new data on household formation indicates that a huge birth dearth is building.

 

[loosecannon]

in the recession plagued developed nations? Btw your previous response was excellent but I am speechless.

 

[william the wie]

in the recession plagued developed nations? Btw your previous response was excellent but I am speechless.

This is in the US the rest of the developed world has been in this same hole for a while. The disconnect between published economic data and the real world is starting to bite. I suspect that by the end of this term labor force participation rates will be worse than the 1930s and unemployment will stay below 10% for the next two years. That will create an opening for the GOP to win big with the same old, same old. This country is screwed for at least a decade.

Thanks for the compliment. The downside of a downside is the huge increase in cost cutting innovation that accompanies reduced consumption. I expect the medical and education bubbles to burst under Obama's GOP replacement which is likely to push unemployment into the low double digits. However as the low cost provider of educated workers I expect marginal improvement in labor force participation 2013-17 in the US. Partly that will be the result of much cheaper labor as the dollar dies but mostly a result of more national defaults.

 

[loosecannon]

Labor force participation is largely a function of when the baby boom actually retires out of the workforce. It looks like 2017 will be the top of that curve tho it is hard to predict how extended careers may impact that.

 

[william the wie]

Labor force participation is largely a function of when the baby boom actually retires out of the workforce. It looks like 2017 will be the top of that curve tho it is hard to predict how extended careers may impact that.

With early Social Security coming at age 62, full benefits at 67 and medicare eligibility kicking in at 65 under current law it sounds like you expect 99 week UEI and relatively humane severance packages to persist for seven years. I kind of doubt that will happen. I would expect a huge surge in social security in 2019 and a switching to derivative spousal benefits later at full eligibility.

 

[loosecannon]

I just plotted the age curve vs retirement age norms. The majority of baby boomers will retire at 2017 plus or minus a few years, provided that they retire on schedule, which is no longer a given.

Early retirement was the rage 3 years ago, now late retirement seems likely to be the norm. Tho I have no idea how many folks will draw early ss. With unemployment so high it may be most.

But the peak of the baby boom passing from the workforce will still be 2017, after that the workforce participation will spike.

 

[william the wie]

What model are you using? Live births 1955-64=41,948,000 and live births 1943-54 = 42,821,000 do make it possible for the majority of the baby boom to take early social security but how can they afford to retire? Since I am self employed I am not part of the labor force but I am not retired. While about 90% of the population have the education, intellect and resources to do what I do, only about 0.001% are emotionally ready, willing and able to do so. That same problem crops up all over the place when it comes to surviving on early social security. Mortgages, educational debts and so on make it highly unlikely that those taking early social security can actually retire.