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TiB 120: How to build a culture of building; 12,000 years of economic growth; coronavirus and inequality; and more...

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This week: In praise of building (and bad poetry); the global economy since 10,000 BC; the distributi
 
June 23 · Issue #120 · View online
Matt's Thoughts In Between
This week: In praise of building (and bad poetry); the global economy since 10,000 BC; the distributional effects of coronavirus; and more…

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In praise of building (and bad poetry)
A couple of months ago we discussed Marc Andreessen’s essay, It’s Time To Build, which made a big splash in Silicon Valley and beyond. This week, Tanner Greer (see previous coverage) published one of the most interesting responses so far, “On Cultures That Build”, which looks at why America has apparently regressed in its ability to get big things done. It’s a must read.
Several commentators locate the problem in politics (I linked to this excellent essay at the time), but Greer sees a broader challenge: the decline of a builder culture. Americans, he says, have lost the habit of making things happen and now see “get[ting] management to take our side” as the best lever for making progress. He draws a contrast with China, where the “anarchic” economic reforms of the last 30 years forced a culture of (often chaotic) building.
How, though, do you get a culture of builders without anarchy? For Greer, people need to be exposed to ambitious building (His notes on why the US response to the 1918 flu pandemic was more effective than the response this year are particularly interesting in this respect). Above all, it’s necessary to change the status of building - and not be too concerned that this means some will be low quality:
To consistently create brilliant poets, you need a society awash in mediocre, even tawdry poetry
I’m sympathetic. Another reason, perhaps, that it seems absurd to panic that there might be too many entrepreneurs
The past and future of the global economy
David Roodman has an extraordinary new post - and accompanying technical paper - that presents a whistle stop tour of the last 12,000 years of global economic history. He looks at “Gross World Product” (GWP) over time and builds a model that explains its slow growth over millennia - and then its sudden explosion around the time of the industrial revolution, arguably the most important event in human history. It’s long, but superb.
Roodman shows that GWP grows super-exponentially over time - that is, the rate of growth has actually increased as the economy has grown. The explanation is technology: once discovered, technology can be reused without being expended - and as we become more prosperous, the rate of discovery of new technology can increase (Paul Romer won the Nobel prize for incorporating this insight into economic theory).
Of course, this can’t go on forever - and, as we’ve discussed before, looks like it’s already stopped: growth has slowed in recent decades. What’s especially fascinating about Roodman’s approach is that it allows us to simulate global economic history and ask how (statistically) unusual is the situation we find ourselves in. The answer is that we were in an improbably prosperous timeline until around 1960… and then something went wrong. Even more troubling, Roodman shows that if you modify the model to take into account resource depletion - or environmental degradation - GWP can implode just as rapidly as it exploded. Time to get back onto the better timeline… 
Coronavirus and inequality
An important stylised fact about Western economies over the last few decades is the “hollowing out” of middle income jobs. High-paid and low-paid jobs have grown, but the middle has declined. One big driver at the bottom has been the rise of what some commentators have called “wealth work” - that is, personal services for the well off. For example, “manicurists and pedicurists” has been one of the fastest growing job categories of the last decade.
Some have long seen this trend as dystopian - see, e.g., this piece from 2015 - but it’s come under particular pressure in the coronavirus era. As this new piece in the New York Times (based on this superb COVID economic tracker) shows, the richest quartile of society has cut spending most during lockdown - by more than 25%. This isn’t because their incomes have been hit hardest, but because so much of their consumption is on discretionary services. It’s therefore having a devastating effect on the people who served the pre-pandemic needs of the best off. 
The important question is whether that spend is coming back - and, if so, when and where it does. Manicurists may not be vulnerable to off-shoring, but other “wealth work” services are, particularly after three months in which knowledge workers have learned to meet their every need online. If past spending patterns don’t just bounce back (see here for a case that they won’t and here for some evidence from China), one of coronavirus’s lasting legacies is likely to be higher inequality. 
Quick links
  1. Open source is eating the world. Stunning visual effects demo, apparently created by a single person using open source software
  2. Software is eating the (physical capital) world: Interesting chart of corporate software vs industrial equipment spend - note the crossover year, and no sign of slowing down.
  3. How to travel to the stars. The surprisingly comprehensive plan (from 1989) for building an interplanetary civilisation before 2100.
  4. How to get out of a recession. Excellent charts from Giles Wilkes on the UK’s paths out of previous downturns.
  5. Twitter saving science? What happens when academic papers are tweeted at random?
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Until next week,
Matt Clifford
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