20 Jun 2015

Two Sumner Predictions: One Specific, One General

Scott Sumner 21 Comments

In a recent post at his blog, Scott gave the title, “Please, do buy. You won’t regret it.” He first linked to a post about bubble theories that were promulgated in 2009-11, and said they had recently been refuted. Then he talked about property values in Dubai. My question: Is Scott just saying “buy a house in Dubai, you won’t regret it?” or is he saying more generally, “Go ahead and buy the U.S. stock market and Treasuries, the alarmists have been crying wolf for years”?

(Incidentally, you can’t just say, “Bob, why not ask Scott what he meant?” The reasons are twofold. First, if a writer phrases things in a way that leads readers to believe he “surely” meant X, then he can’t get out of culpability if strictly speaking, technically he didn’t claim X for sure. [Krugman does this a lot–I think on purpose.] Second, Scott has said that–consistent with his weird post-modern view of what truth is–the meaning of a writer’s post depends on what the readers thought he meant, not what he intended to mean. Now it’s possible he was being tongue in cheek when he wrote such things, but it’s not my fault if he meant it as a joke and I didn’t get it–see how that works?)

Now for the more general Sumner claim that I find radically wrong, though it will be much harder to falsify because it is so open-ended. Here’s Sumner at EconLog:

My grandma was born in 1890 into a middle class family in small town Wisconsin. Her home probably lacked indoor plumbing, most home appliances, electric lights, telephone, TV, radio, car, etc., etc. Slightly improved from life in ancient Rome. She lived to see jet air travel, computers, atomic bombs, antibiotics, and died the week they landed on the moon.

I was born in a world of indoor plumbing, atomic bombs, jet air travel, home appliances, computers, cars, telephones, TV, radio, antibiotics. I’ll turn 60 this year, and live in a world of indoor plumbing, atomic bombs, jet air travel, home appliances, computers, cars telephones, TV, radio, antibiotics, plus the internet and cell phones. Yeah, I’d say change is slowing down, really fast.

!!! Meanwhile, back at the Hall of Justice, Scott Alexander recently had a post quoting from leaders in the field who thought that the danger of Artificial Intelligence turning against humanity was something that should be seriously studied. The U.S. military already has flying killer robots, and they’re working on ground-based ones too. We have seen the inventions of the blockchain and 3D printing. Sumner casually dismisses the internet and cell phones as not a big change during his lifetime, whereas I think future historians will mark that as a very significant milestone–especially if they phrase it as “smart phones” rather than cell phones. These things are always hard to see when you’re at Ground Zero–remember Krugman’s line about the internet?–but it’s arguable that the Arab spring uprising was due to social media.

21 Responses to “Two Sumner Predictions: One Specific, One General”

  1. Darien says:

    It’s very odd to me that Scott Sumner can be so much older than I am when our grandmothers were born so close together. Generations — what can you do?

  2. Tel says:

    Oh, and remember that house price “bubble”? Yup, just another false claim by the bubble-mongers:

    Presumably Sumner has a different idea of what a “bubble” looks like than other people, but in the graph he showed, someone who bought during the 2008 peak and then sold after it crashed could have blown away about 1/3 or perhaps a bit more of their savings. If those are nominal prices then also consider losses due to inflation, which starts to add up over a decade, might have lost 1/2 your savings in some cases.

    Admittedly, someone buying at the low in 2011 could have done quite well riding the next wave up, but no one said you can’t make money on the upside of a bubble, if you jump out at the right time. Here’s an article written in 2005, saying that a crunch was coming, he estimated it would hit around 2007, but he was wrong only by one year, the crunch really hit late 2008 (along with many correlated worldwide events).


    Lo and behold, the brutal economics of oversupply, the kiss of death for property bubbles all over the world, now begin to hit the market. There will be a collapse of rental yields in villas and apartments in the free zone. Think about it. Some poor “investor” has bought a 2 million villa. His cost of carry (bank loan) and maintenance means he has to make at least 11 per cent per annum to just break even. Yet this is impossible with the emerging economics of the rental market. What will the poor soul do? What choice does he have but to sell whenever he can?

    But if an investor had ignored Matein Khalid’s warning, purchased in 2005, and been savvy enough to get out of there early 2008 they would have done very well. That certainly does not mean there was no bubble, it just means that getting out at the right time is the key to success… i.e. offloading your problem onto a greater fool. As Peter Schiff tends to say, you have a choice when dealing with bubbles: either look like a fool before, or look like a fool after.

  3. skylien says:

    My jaw dropped recently watching Microsoft introducing Hololense, and this new Oculus Rift technology.

    I guess we are used to change now a lot more.

  4. Brent says:

    What I don’t understand is why Sumner is a permanent blogger at Economics of Liberty. His take on philosophy is basically, “Whatever”. And he just sort of rolls with that… magical central banks targeting ngdp (oh they could save the whole world if only they spent a little on ngdp futures markets!!!) and “progressive consumption taxes” of 80%… yeah, he makes me like Ben Bernanke.

    • Justin says:

      Brent – Agreed 100%. I cannot understand how he has hoodwinked so many otherwise intelligent people, including his co-bloggers at EconLog.

    • Ken P says:

      I do agree with Peter that regulation is holding technology back. Picture the way the airplane was invented and how much longer it would have taken if the people working on it would have had to comply with a plethora of regulations and approval requirements before each flight attempt.

      His view that the low hanging fruit has been picked is interesting and may be true in some fields, but there are areas like biotech where there is plenty of picking to be done if there was lower regulatory burden and improvements in IP law.

  5. Andrew_FL says:

    Well, to be fair while Scott overstates his case on slowed progress, it isn’t obvious how to weight more recent advances compared to past ones.

    • Brent says:

      This is a function of some things needing to come before others are possible. Knowledge builds on itself and it is not economically feasible to do certain things until you have acquired the capital to do so. The wheel had to proceed the car. The car, the airplane. The airplane, space travel. It seems Bob is right in that Sumner just looks back and thinks, ‘Gee, that wheel was Huge! Now we only have spinning balls orbiting Saturn!’

      • Andrew_FL says:

        It’s not obvious how to compare unrelated advances either. How does the smartphone compare to antibiotics? Apples and oranges.

  6. Ken P says:

    Sumner’s thoughts on cell phones reminds me of so many people who wish they could live in the prosperous 50s. Like those people, Sumner fails to see how much he takes for granted the value added by progress that never gets rolled into the numbers in a meaningful way. I was in Canada to see my son get his Masters degree in theoretical physics a couple weeks ago (had to brag a bit very proud of him). I lost the ability to text (which has not happened on previous trips to Canada). Even though I got his family a room right next to mine there were numerous issues created by not being able to text. I remember many times in the 80s when I spent half a day driving to some library that I hoped would have a piece of information I wanted.

    I know that the numbers get ridiculous if you put a number on the computing power in your hand now vs the 80s. Something like the price of a Cray computer. However, from a practical standpoint, I’m sure I would have been willing to work 20 hours a week to have access to what I can do with my cell phone even if I only had that access for 8 hours a week.

    Time is an non-replaceable resource. There are not enough hours in the day to do the things I do with my cell phone and computer if that was all I did. Scott’s “Technology… whatever..” perspective does not carry much weight with me.

    • Andrew_FL says:

      I don’t think he’s saying we were better off in the “prosperous 50’s” he seems to be saying the difference between life in 1890 and 1969 is larger than the difference between say 1936 and 2015.

      I think he’s wrong but it’s not as much of an obvious slam dunk as whether we’re better off now than the 1950’s.

      • Ken P says:

        Andrew, my intention was to compare his perspective to people who think we were better off in the 50s. Many people believe we were better off then. This is fostered by lots of inequality and wage stagnation stories. My point is that like them, he is failing to see just how important some of the changes were.

  7. Ken P says:

    !!! Meanwhile, back at the Hall of Justice, Scott Alexander recently had a post quoting from leaders in the field who thought that the danger of Artificial Intelligence turning against humanity was something that should be seriously studied.

    I think it is possible that AI machines could turn against humanity in some manner. However, I find it amusing that people like Elon Musk (whose intellect I respect) think they can somehow appropriately plan for such a scenario and insert the appropriate algorithms to prevent such scenarios from happening.

    • Matt M says:

      Well, if you believe the potential outcome is “extinction of the human race” then surely it’s worth TRYING to prevent it, even if it seems exceedingly difficult…

    • skylien says:

      If we are truly able to make real AI that can think like we can, then we have created living self conscious beings, who obviously can do all the stuff (from a decision making point of view) that we can. In this case we have to treat them not like our machines but just as another human being, else we would just be slave masters once again.

    • skylien says:

      However I somehow doubt that we would create this just by coincidence, and suddenly out toaster would start to attack us.

    • Darien says:

      I think that, while you guys aren’t wrong per se, you’re missing the point. If I’m reading Ken P. correctly, what he’s really saying is “once robots gain sentience, they’re human-equivelent from a complexity standpoint, and anybody who thinks he can plan for that is losing the socialist calculation debate all over again.”

      • Andrew_FL says:

        If that’s the case his comment doesn’t make sense, since human equivalent AI does not yet exist and we may yet insert the algorithms into AI’s the prevent them from ever being dangerous. Of course, the very same algorithms probably prevent them from being truly human equivalent, but so what? What’s so desirable about human equivalent machine intelligence anyway?

        Also you used sentient when you meant sapient. How irksome.

      • skylien says:

        Well I was merely making a statement about AI. I didn’t criticize Ken P.

  8. Levi Russell says:

    Wouldn’t you expect things to “slow down” as things get better? Isn’t this just the marginal principle at work? Wouldn’t we expect the most important things to be solved before the less important things?

    Once you have modern sanitation and clean hospital rooms, having the collective knowledge of human history in a small device in your hands seems to be less important.

    Once the infant mortality rate is down to 6.2 per 1,000 from 30, moving it further down to 5.8 is a lot more difficult.

    On the other hand, never discount the “back in my day” factor when examining the value of technological progress. Maybe that’s why the over-50 crowd, by and large, discounts a lot of modern tech.

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