Future changes in technology (e.g. atomically precise manufacturing or artificial intelligence) may leave most human labour with no market value at all. In the absence of an effective existing infrastructure for the taxation of capital incomes to fund e.g. a minimum income, almost all income may then be received by a tiny number of unimaginably rich people, while an outright majority face starvation (unless fortunate enough to receive private charity).
I think this scenario deserves more analysis. As a reductio ad absurdum, why can’t the “outright majority facing starvation” run their own parallel economy with no atomically precise manufacturing or AI? Even given atomically precise manufacturing, why shouldn’t a destitute subsistence farmer in Africa be unable to continue subsistence farming and thereby avoid starvation? Perhaps a more realistic scenario is some AI trillionaire comes along and offers to buy the farmer’s land, because they’re running out of things to buy. In which case if the farmer is smart, the farmer only accepts a deal where they get enough money to live comfortably off of the dividends from that money if it’s invested in AI stocks. So then the issue is people who are in debt around the time AI gets invented and don’t have time to get out of debt before they lose their jobs, or people who manage their investments poorly or spend their nest egg. I’m not saying their is no issue here, I just think it deserves to be thought through further.
In a world where all material goods are essentially free, people who own dividend-paying AI stocks will either (a) not spend their money, which means it doesn’t matter much who owns it or (b) use it to purchase non-material goods—that is, services that only humans can provide or are better provided by humans, such as therapy, tutoring, medical care, policing, etc. Many of the jobs with the most employment seem like jobs that an AI stock owner would be willing to pay extra for a human to do.
Re: developing countries. An alternativestory I’ve heard is that many go through a flip-flopping pattern of alternately trying to attract foreign investors in order to grow the national economy, and then having the locals get fed up by the fact that foreigners own so much infrastructure and having the government nationalize the infrastructure. Obviously this scares off foreign investors, which contributes to economic stagnation until the cycle repeats. According to this story, the wealthiest countries are wealthy because they provide a stable, predictable, profitable environment for entrepreneurs and investors, and in order to make more of the world wealthy, we need to give more people the opportunity to live under such a stable economic regime.
Immigration from developing countries to developed countries is one way of doing this, but I worry that in the limit, adding immigrants from unstable regimes to a stable regime makes it unstable. I would rather find a way to create new stable regimes. If we don’t have methods for creating new stable regimes, it seems sensible to be conservative with the ones we already have.
“How does this 35% figure account for people in debt?”
It doesn’t need to—debt for one person is an asset for another. A debt for one person cancels out with the corresponding asset on someone else’s balance sheet. This is then a share of total (net) wealth.
“Perhaps a more realistic scenario is some AI trillionaire comes along and offers to buy the farmer’s land, because they’re running out of things to buy.”
Note that in this scenario the farmer owns land and so can earn money from it. However, the majority of people in the world own nothing, or next to nothing.
An accounting of net worth that doesn’t have any special treatment of debt will be misleading. As explained in the article xccf links, America has 7.5% of the world’s poorest decile but only 0.2% of the second decile. That’s because those Americans have negative net worth. But it’s definitely not true that a middle-class American with $50K of student loan debt has a lower standard of living than a villager in Kenya who lives in a thatched hut and earns $1 a day, so looking at net worth alone is misleading.
But my figure is not drawing a comparison with the bottom group (a huge fraction of which is in debt and so produces inflated figures). It is making a comparison with the total level of wealth owned (net of debts), including that owned by the rich.
That is, all the assets owned by Americans, minus all the liabilities they owe. That turns out to be a big positive number.
At the moment someone lends money to someone else, it changes none of the results here.
There is nothing misleading about it as an indication of who is earning returns on capital that can be taxed, which is where I then take it.
How does this 35% figure account for people in debt?
I think this scenario deserves more analysis. As a reductio ad absurdum, why can’t the “outright majority facing starvation” run their own parallel economy with no atomically precise manufacturing or AI? Even given atomically precise manufacturing, why shouldn’t a destitute subsistence farmer in Africa be unable to continue subsistence farming and thereby avoid starvation? Perhaps a more realistic scenario is some AI trillionaire comes along and offers to buy the farmer’s land, because they’re running out of things to buy. In which case if the farmer is smart, the farmer only accepts a deal where they get enough money to live comfortably off of the dividends from that money if it’s invested in AI stocks. So then the issue is people who are in debt around the time AI gets invented and don’t have time to get out of debt before they lose their jobs, or people who manage their investments poorly or spend their nest egg. I’m not saying their is no issue here, I just think it deserves to be thought through further.
In a world where all material goods are essentially free, people who own dividend-paying AI stocks will either (a) not spend their money, which means it doesn’t matter much who owns it or (b) use it to purchase non-material goods—that is, services that only humans can provide or are better provided by humans, such as therapy, tutoring, medical care, policing, etc. Many of the jobs with the most employment seem like jobs that an AI stock owner would be willing to pay extra for a human to do.
Re: developing countries. An alternative story I’ve heard is that many go through a flip-flopping pattern of alternately trying to attract foreign investors in order to grow the national economy, and then having the locals get fed up by the fact that foreigners own so much infrastructure and having the government nationalize the infrastructure. Obviously this scares off foreign investors, which contributes to economic stagnation until the cycle repeats. According to this story, the wealthiest countries are wealthy because they provide a stable, predictable, profitable environment for entrepreneurs and investors, and in order to make more of the world wealthy, we need to give more people the opportunity to live under such a stable economic regime.
Immigration from developing countries to developed countries is one way of doing this, but I worry that in the limit, adding immigrants from unstable regimes to a stable regime makes it unstable. I would rather find a way to create new stable regimes. If we don’t have methods for creating new stable regimes, it seems sensible to be conservative with the ones we already have.
“How does this 35% figure account for people in debt?”
It doesn’t need to—debt for one person is an asset for another. A debt for one person cancels out with the corresponding asset on someone else’s balance sheet. This is then a share of total (net) wealth.
“Perhaps a more realistic scenario is some AI trillionaire comes along and offers to buy the farmer’s land, because they’re running out of things to buy.”
Note that in this scenario the farmer owns land and so can earn money from it. However, the majority of people in the world own nothing, or next to nothing.
An accounting of net worth that doesn’t have any special treatment of debt will be misleading. As explained in the article xccf links, America has 7.5% of the world’s poorest decile but only 0.2% of the second decile. That’s because those Americans have negative net worth. But it’s definitely not true that a middle-class American with $50K of student loan debt has a lower standard of living than a villager in Kenya who lives in a thatched hut and earns $1 a day, so looking at net worth alone is misleading.
I understand the issue perfectly and have linked to that same article every year Oxfam releases their comparison of the top 1% to the bottom X% (e.g. https://www.facebook.com/robert.wiblin/posts/666590242695, https://www.facebook.com/robert.wiblin/posts/628116514355).
But my figure is not drawing a comparison with the bottom group (a huge fraction of which is in debt and so produces inflated figures). It is making a comparison with the total level of wealth owned (net of debts), including that owned by the rich.
That is, all the assets owned by Americans, minus all the liabilities they owe. That turns out to be a big positive number.
At the moment someone lends money to someone else, it changes none of the results here.
There is nothing misleading about it as an indication of who is earning returns on capital that can be taxed, which is where I then take it.
Yes, consumption (ideally including the value of public services in the relevant locale) is normally a much more appropriate metric than net worth.
Net worth might be reasonable to use if we could properly account for the value of human capital, but that seems very difficult.
Appropriate metric of what? It is a measure of how many resources can be taken away from someone that year.
But it is not of where the 1/3rd of GDP that goes as returns to capital is being paid, which is the topic of this post.
Agree with that. I should have been clear that I think your post is one of the cases where looking at wealth works pretty well.