Rolling US Economy Into The Shitbin Thread

maybe putting lazy freeloading kids to work will fix the economy?

http://www.rawstory.com/rs/2013/04/04/school-forces-25-hungry-students-to-throw-away-lunches-when-they-couldnt-pay/

MA, bastion of liberal thought

maybe to deal with the crisis, we need monetary and fiscal stimulus, to induce those who aren’t too deeply indebted to spend more while the debtors are cutting back?

http://www.nytimes.com/2013/04/05/opinion/Krugman-The-Urge-To-Purge.html?ref=opinion&_r=0

The Locust Economy
http://www.ribbonfarm.com/2013/04/03/the-locust-economy/

from the comments:

...Work tends to fall into one of two categories. Concave work means that the input/output curve– the relationship between factors like talent, skill, effort, morale, and wage level; and productivity– is concave, so the difference between noncompliance and mediocrity is large but that between mediocrity and excellence is insubstantial. It’s low-risk, mundane work where mediocrity is acceptable. Concave work built the large middle class of 1925-2000. Convex labor’s the opposite: the difference between mediocrity and excellence is huge (“10x programmer”) and that between mediocrity and noncompliance is small. It means you probably shouldn’t show up to work if you’re going to be mediocre; you probably won’t get a job in the first place. The implications for job security, education, and employment are *vast* and I really think that Convexity is *the* economic problem of the 21st century. It’s *why* we will never again see a society where everyone between 18 and 65 can get paid work at a living wage. (We’ll need to implement basic income at some point, but I wouldn’t hold my breath, given the US political climate.)

Software isn’t eating “the world”. It’s eating the concave commodity work that just happened to be 90+ percent of paid wage work in the industrial era, and 99+ percent of the work for where there’s *regular* pay. (Convex work is highly sensitive to small differences in performance that the concave world could ignore.) It comes down to this. Convex labor is work where the “saturation point” is so far out that no one has found it yet. It’s so far away to the right that the logistic (“S-curve” in what they call it in Econ 1o1 to avoid scaring future investment bankers with math, but that’s what it is– a logistic) looks like an exponential curve. The work is very hard, but if you do it well, the rewards are extreme, and no one knows yet what the upper limit is. With concave work, we know what perfect completion is. If we know perfect completion, we can specify it. If we can specify it, we’re either able to program it, or it’s a field of active machine learning research. Software isn’t eating “the World”. There will be plenty of World left. It’s just eating all of the concave labor on which the risk-intolerant middle class (who fall into poverty if a few paychecks fail) relies. We can’t compete with machines. We thought *cab driving* (concave labor that required humans until recently) would always be done by people. We’d have said the same thing about sorting mail (optical character recognition) in 1985. Yeah, about that…

what is the point of progress when progress means fewer and fewer people can afford to live?

that dude's comment is a lot better than the ribbonfarm blog itself, which is mostly just fluff

That's an excellent comment, but it leaves something out -- it's not just a matter of mediocrity and excellence, but one of access. There will continue to be jobs of the executive sort where mediocre people can thrive, but in order to have a shot at those jobs you have to have the kind of background and millieu that gives you access to them. Broadening inequality, skyrocketing education costs, etc. are raising the barriers for anyone not from a wealthy, well-connected background. The "mediocre" children of "excellent" software entrepreneurs will continue to be fine.

Also, just a question that lingers for me -- doesn't classical economics tell us that all the extra "value" generated by all that labor-saving software will ultimately create other work opportunities for less skilled people, i.e isn't all the extra money supposed to "find something for people to do" as it were? Why is this different? Is the pace of change too fast for labor to catch up? Is technology really so advanced that EVERYTHING can be done better and cheaper by it?

many economists believe that's the case, but there's not really much more behind that logic beyond 'well, that's how things have happened in the past'

yeah I'm as skeptical of that kind of claim as anyone, but otoh wouldn't part of the logic be "well what are the rich going to do with all their newfound money otherwise?" I guess they can just sell paintings and hamptons homes back and forth among themselves.

maybe the value of having all that money becomes the fact that everyone else doesn't/can't have it. as in, it represents less what you can buy with it, and more the power/position in society it gives you against what everyone else doesn't have.

that is a sad and probably insightful post

money = opportunity. that is how american nepotism functions. too bad the blue stockings suck more and more at running things the more they consolidate money/opportunity

I forget if it was this thread or another but this http://www.eastbayexpress.com/oakland/the-bacon-wrapped-economy/Content?oid=3494301 article provides some good examples of how contemporary rich people consumption can create jobs w/o really creating a healthy middle class or even really 'jobs'

ie their money can go into zoning-inflated $4m 3br houses in silicon valley and to people on taskrabbit working for $4 an hour

it's the middle class who support the middle class. the wealthy aren't going to pay Joe "Sixpack" and his contracting company to build their new luxury palaces, it's going to be designed by Armando® and be built by non-union laborers. as the middle class shrinks from the top down, it's also going to shrink from the horizontal, too.

Yeah one of my big Thoughts About The Economy I Have Had is that today it takes an education from a pretty good university just to understand the cultural millieu of the wealthy well enough to cater to them. I mean maybe that was always true. But if you want to sell prodcuts/services to the very rich, you need a lot of cultural capital.

Like you pointed out upthread, it's no longer the education per se, it's the access that an education grants. Getting into, say, Stanford is arguably more valuable than the grades you get while attending.

This thread is depressing.

yep that's also related to why more access to higher education isn't the panacea that people want it to be - the vast majority of people going to university are not going to a stanford

"Getting into, say, Stanford is arguably more valuable than the grades you get while attending."

didn't realize this was a new thing

By that I mean that the internet has greatly lowered the barrier to entry for knowledge i.e. you don't have to be a student to have access to much of the knowledge that higher learning possess. That hasn't always been the case.

eh you didn't have to be a student to buy an intro anthro textbook 20 years ago either. it's the changes that are happening w/ credentialing that really matter, not the advances in 'showing a video of a guy talking / reminders to read your textbook'

interesting points. those online academies are touted as changing the face of education, but if the value of education is more about networking and class signifiers, then what value do they really have? seems like another way to protect the status quo by shifting the responsibility from the current system and onto the individuals struggling under it.

their value is mostly in that they allow people to save tens of thousands of dollars on their useless credentials

well, the value of that I guess is the value an employer gives to seeing "Khan Academy" on someone's resume.

if someone cracks the code to successful vocational training via online classes, i think that would be a genuine boon that has nothing to do with credentials.

an employer isn't gonna give any more value to khan academy than they are to south west virginia state university - but that's kinda the point, there's an opportunity for the colleges that have strong brands to cash in on them

for tech stuff, i feel like github contributions might have more of an influence on hiring than most college stamps anyway.

what is the point of progress when progress means fewer and fewer people can afford to live?

― reggie (qualmsley), Monday, April 8, 2013 4:32 AM (13 hours ago) Bookmark Flag Post Permalink

start paying them not to work, jeez, it's so easy

But when you draw back the lens, you see that this week's stock market/labor market schism isn't a new story, at all. Here's the 40-year look at the growth of corporate profits vs. GDP vs. income that goes to workers, rich and poor. I mean, holy wow.

http://www.theatlantic.com/business/archive/2013/04/the-economic-story-of-the-year-the-stock-market-vs-the-labor-market/274698/

http://video.pbs.org/video/2296684923/

Yay team!

More Than 101 Million Working Age Americans Do Not Have A Job

In other words, the Obama administration is getting unemployment to go down by pretending that millions upon millions of unemployed Americans simply do not want jobs anymore.

lol, you mean just like every administration does, because that's how the unemployment number is calculated?

Submitted by Tyler Durden on 04/08/2013 13:36 -0400

yeah it's zero hedge

lol @ calling yourself 'tyler durden' in this or any decade

tyler durden 1835-1872 rolling in his grave.

for tech stuff, i feel like github contributions might have more of an influence on hiring than most college stamps anyway.

I've filled out several job apps with a "please list your GitHub address" already.

if someone cracks the code to successful vocational training via online classes, i think that would be a genuine boon that has nothing to do with credentials.

― Philip Nunez, 08 April 2013

this imo

we have gone through the third level/college boom here, it's essentially free (or at least affordable to the vast majority) through grants. it's just led to the cheapening of the standard in and currency of a college education, now you need a phd. we have a lot of shitty third level institutions, the better ones seem to be just as elite as before.

https://threesixty360.wordpress.com/2013/03/29/third-derivatives-in-the-news-again/

http://www.investopedia.com/terms/b/biflation.asp

^ even if this were true, can someone explain to me why the price of food would go up? on one obv if gas goes up food prices will also rise, but i understood that food is heavily regulated by the government and if prices rise can't the government just allow more food to enter the market to somewhat stabilize the price?

I thought a lot of the rise in food/gas prices was attributable to greater global demand. Which is not to say there isn't "biflation," but I would think you would need some mechanism to explain how that "greater amount of money" in the system winds up actually "chasing" those goods -- if it's not finding its way into the hands of ordinary consumers, either in the form of higher wages or greater credit, it doesn't seem logical to me that the rise in prices of basic goods is a monetary phenomenon. Or if it is, there must be a more complex explanation.

does that make sense re food though? i thought we grew enough food to feed the world (and the government paid farmers not to harvest fields to keep prices stable?)?

I mean, one theory I have heard is commodity speculation. And that seems like it could actually be partly a monetary phenomenon. But I haven't heard a clear explanation of how that would work -- commodity futures are limited in terms of ability to speculate long-term, no? Maybe there are advanced derivative products that I don't even understand. Maybe there are vast hidden warehouses of stored oil.

ok but commodity speculation would be a different explanation than biflation (not discounting that there may be overdetermination going on)

well, on the most literal level, yeah, because it seems like biflation assumes the money "chasing" the goods is coming from consumers, not wall street types.

commodity speculation doesn't need long-term ability, i don't think. not when you just keep rolling your bets over.

this was a decent article as i recall: http://www.foreignpolicy.com/articles/2011/04/27/how_goldman_sachs_created_the_food_crisis

dang, paywalled

here's the key bit:

But Goldman's index perverted the symmetry of this system. The structure of the GSCI paid no heed to the centuries-old buy-sell/sell-buy patterns. This newfangled derivative product was "long only," which meant the product was constructed to buy commodities, and only buy. At the bottom of this "long-only" strategy lay an intent to transform an investment in commodities (previously the purview of specialists) into something that looked a great deal like an investment in a stock -- the kind of asset class wherein anyone could park their money and let it accrue for decades (along the lines of General Electric or Apple). Once the commodity market had been made to look more like the stock market, bankers could expect new influxes of ready cash. But the long-only strategy possessed a flaw, at least for those of us who eat. The GSCI did not include a mechanism to sell or "short" a commodity.

This imbalance undermined the innate structure of the commodities markets, requiring bankers to buy and keep buying -- no matter what the price. Every time the due date of a long-only commodity index futures contract neared, bankers were required to "roll" their multi-billion dollar backlog of buy orders over into the next futures contract, two or three months down the line. And since the deflationary impact of shorting a position simply wasn't part of the GSCI, professional grain traders could make a killing by anticipating the market fluctuations these "rolls" would inevitably cause. "I make a living off the dumb money," commodity trader Emil van Essen told Businessweek last year. Commodity traders employed by the banks that had created the commodity index funds in the first place rode the tides of profit.

...

What was happening to the grain markets was not the result of "speculation" in the traditional sense of buying low and selling high. Today, along with the cumulative index, the Standard & Poors GSCI provides 219 distinct index "tickers," so investors can boot up their Bloomberg system and bet on everything from palladium to soybean oil, biofuels to feeder cattle. But the boom in new speculative opportunities in global grain, edible oil, and livestock markets has created a vicious cycle. The more the price of food commodities increases, the more money pours into the sector, and the higher prices rise. Indeed, from 2003 to 2008, the volume of index fund speculation increased by 1,900 percent. "What we are experiencing is a demand shock coming from a new category of participant in the commodities futures markets," hedge fund Michael Masters testified before Congress in the midst of the 2008 food crisis.

huh, so it's basically old-fashioned churning + finding a bigger sucker, or am I misunderstanding? I had that thought at one point a while back, but then thought "nah, that's too simple."