Octavo Dia

Tuesday, May 14, 2013

The Two State Solution

Just a random thought: I'm pretty sure that the Two-state Solution for Israel and Palestine wouldn't work any better than the South African homelands.

Monday, May 13, 2013

Saving Services

An old macro-economic canard is that you cannot save on a societal scale.  That one person's saving must be another person's borrowing.  That production and consumption must ultimately balance.  However, the creation of capital goods clearly falsifies this assertion as, for example, building a more efficient power plant doesn't just uses present resources to provide for current consumption, but also causes increased consumption in the future.  Thus, investment allows consumption to be moved into the future, which is pretty much the definition of saving.  And there's no reason that a society need to consume its investment as rapidly as it invests.

What's old is new again, so the argument is reborn as "retirees consume mostly services, and you can't save services."  If you go back to my theory that economic growth is fueled by substitution, the problem is that services are expensive.  What can you substitute for services?  Goods.  If we can provide many of these services with computers, robots, or whatever else may appear on the horizon, then the economy can continue to grow with cheap goods replacing expensive services.  Since a society can "save" goods by investing in productive capacity, we can save to meet the needs of the future elderly by investing and innovating now.