Indeed, it should not. If an environment provides sufficient resources for a troop of apes to survive, it provides sufficient resources for a troop of smart apes to build a civilization and a thriving economy. The difference between us and chimpanzees is not that we have more capital resources available, but that we are smarter at discovering and figuring out how to exploit the resources that are already available to both of us. Know-how, not capital, makes the difference between rich and poor.
This is so obvious, no-one has any cause to doubt it.
You can’t just look at macro depressions and booms as the only signals of economic growth or economic health, to add another descriptive term. Any innovations that increase the division of labor, is good for the economy and society.
I have heard you say this many times. I am not “missing the point”, I am asserting that your so-called “point” is wrong. It is worse than wrong. It is absurd. It is nonsense. It is absolutely contrary to fact, and blatantly so.
Ideas are made in brains. Brains are made out of matter and energy. Brains that are capable of having useful original ideas are extremely scarce, and always have been. Making such a brain is an extremely expensive and time-consuming process. If you compare human beings and chimpanzees, you find that human beings have made considerable sacrifices in order to develop big brains. The sacrifices are so serious that if big brains were not extremely valuable, those sacrifices would have rendered our ancestors extinct. Yet, for all this expense, it happens that only a small percentage of human beings are capable of having useful original technological ideas. Furthermore, look at the chimpanzees: with their brains, which are about one third the capacity of a human brain, they are among the most intelligent animals on the planet. Their intelligence is more than adequate for feeding themselves in the jungle environment. Why would any species develop a bigger brain, given the huge cost in perinatal mortality, long childhood, reduced physical strength (calories needed to feed the brain), etc? Because that extra brain power – not “manpower”, and not capital (chimpanzees have access to the same capital, and have more manpower in the sense that they are physically much stronger) – is what gives us the ability to make sophisticated tools and sophisticated plans that make our economy possible.
There has never been a time in history, from paleolithic times until today, when capital has been more scarce than workable ideas for useful new technology. The capital required to get the industrial revolution started (i.e., to build the first steam engines, power looms, assembly-line potteries, etc.) was available for hundreds of years before the industrial revolution started. What was lacking was not capital, but ideas. People just did not know how to do these things, or realise that doing these things was possible.
why dont we all have spaceshuttles? the ideas have been there for decades, they are prohibitively expensive because our capital structure is such that it takes vast efforts to turn the idea of a space shuttle, into an actual object of space shuttle.
You misunderstand me if you think I mean that me having the idea of a space shuttle means that I personally can have a space shuttle. No. Of course, if I orginated the idea of the space shuttle, I could sell it to someone who had or could raise the capital to build it – but that is an aside. The point is this: if nobody has the idea of how to build a space shuttle, nobody can build it – absolutely no-one. If someone has the idea, then the possibility of someone building it is opened up. The inventive idea is a necessary precondition for the creation of every new product that makes our life better. No amount of hard work, and no amount of capital, will ever result in a space shuttle or any other technically innovative product being realised, if nobody first of all has the idea of the thing, and the idea of how to bring about that thing. That’s the difference between us and our paleolithic ancestors: they had all the same material resources that we have, and the same capacity for hard work, but we have an accumulated body of ideas. It is these ideas that make us, collectively, rich. The accumulation of innovative technical ideas is the essence of economic growth. Without such ideas, economic growth would hit a Malthusian brick wall, at which point it would stop entirely and permanently, and would probably go into reverse.
The idea that there can be significant, sustained, economic growth without technological advancement is what requires blind faith.
Each of the technological advances you mention (plus many others) brought about a leap forward in wealth. The fact that none of them caused an end to depression is not relevant. A depression after one of these major leaps forward does not bring people down to the level of poverty experienced by people in the era before that leap. The business cycle continues, but it continues at a higher level of overall wealth.
yes, you are right, technology, in context of ideas is a theoretical limiting factor.
im afraid that in the day to day sense of the world as is , and the world as was, technology has not been such a limiting factor , unless… and this is debateable, ‘laissez faire economics’ is an idea that was lacking until the brits thought it up centuries ago…
it is not true that the idease make us rish, it is the things that we own, that we consider to be riches that makes us rich.
the industrial revolution, makes me think of the growth of railways and such, but the ideas of steam turbines had been around many many years, (hundreds?) before they were adopted on a large scale, before they could be adopted.
so, granting that technology is a theoretical limiting factor, i think as an empirical fact there has been a constant failure to fully epxloit ideas, due to an ever present relative scarcity of capital etc. etc.
still disagree?
you are right that there is a malthusian brick wall which would be hit if there were no new ideas from tomorrow, but would the wall hit tomorrow, no way, it would take a good long time for us all to live with house robots, mega mansions, lamboughini’s and porche’s, i.e. it would take a long time for goods that we know how to make with our old ideas, to get made.
Perhaps ideas are. But the fact that chemical X + chemical Y = chemical Z exists independantly of any human mind.
Technology is no doubt important, as is capital. But it doesn’t follow from the former that it is all that matters, nor have I denied that it matters. But the fact of the matter is that there are countless technological ideas that we are aware of right now that are not economically feasible (and most certainly wouldn’t be without government subsidies).
As I said Robinson and Friday cannot build a professional kitchen on the island even if they know how. If you believe otherwise, answer my question as to what they will eat whilst constructing the kitchen.
There are people who would dispute that, but never mind. I’m not one of them. The problem is that the mere fact that something is the case is not necessarily of any value to me as a human being if I don’t understand that fact. For instance, the fact that petroleum is a fuel that can be used to power engines was useless to people until they understood that petroleum could be used to fuel engines. Once the fact was understood, the idea of using petroleum to power engines revolutionised the global economy.
They are on a fertile island of several square miles area in sub-tropical seas. There’s abundant resource on the island for them to feed themselves and build a kitchen, if they know how. They can eat seafood and plants, and various animals that they might find on the island. The original Robinson Crusoe was able to eat goats, drink goat milk, and make goat-skin coats, as there were goats on the island.
You’re quite correct, which is why I don’t deny the importance of technology. But, if people didn’t have the means to use the petroleum it would be useless, no matter who realised it’s potential usefulness.
But in order to work they’d need to give up some consumption beforehand in order to finance (so to speak) to construction of the kitchen. And the fact of the matter is that they could not merely use raw materials to construct the kitchen. Perhaps they’d need to build a machine to shape the wood, however in order to make this they need to make a blast furnace to make that machine.
And in order to build all of this they’d need to give up considerable amounts of consumption over time. Highlighting that it is capital that is scarce.
There are countless worthless ideas, for sure – lots of obviously useless inventions (you can find lists of hilariously useless or silly patented inventions that you just know nobody would ever use), and lots of inventions that look as if they could be useful, but don’t quite work out that way in the long run (e.g., the supersonic jet airliner). But the existence of worthless ideas does not imply that valuable ideas are also worthless. As I said before, there are vast quantities of worthless minerals in the world, but that does not imply that valuable minerals are also worthless. Many ideas are worthless but some are worth vast fortunes.
And what constitutes a “means to use the petroleum”? To use it as a fuel for heating or cooking, or as an incendiary weapon, neither sophisticated technology nor substantial capital is required. To use it in an engine, sure, an engine needs to exist, but the capital required to make a small, simple internal combustion engine is not substantially different from the capital required to make a cast iron cooking pot. What’s special is not the capital, but the idea.
No, they don’t need to give up any consumption. The food, etc., available on the island in and the surrounding waters is vastly more abundant than two people require. And Crusoe and Friday are human beings, not cows, so they don’t need to spend every waking hour eating.
They would need to make tools, as I said. But as I also explained, the resources on the island are adequate to that purpose. Stones can be used to make very good cutting tools, if you know how.
They would not have to give up any consumption. Why do you think they would? How would their eating less fish or goat-meat make any difference to, say, the availability of wood for making kitchen furniture?
But that’s the idea, without capital it would be useless. And empirically it has always been the case that capital has been scarce in relation to ideas.
And yet they still need to collect it, which takes time. In any case, they need to give up some potential consumption in order to finance the building of the kicthen.
Because time is scarce.
I don’t mean to sound condescending so I’m sorry if it comes across as so but I really think you need to read up on austrian capital theory.
Yes, and yet, building these tools takes time. Without them they can not build the kitchen, no matter if they know how or not.
Capital is useless without ideas. Technological ideas are useless without capital, but usually the capital is already available. Contrary to your repeated assertion, capital has generally speaking never been scarce relative to useful technological ideas.
The story of the petrol-driven internal combustion engine is a case in point. For thousands of years, iron was available, and forges were available where iron could be forged, cast and honed into useful shapes, and for thousands of years, petroleum was available which could be used as a fuel. Yet, for thousands of years, nobody built a practical internal combustion engine. Was that due to lack of capital? No, obviously not, because lots of people had the capital needed for the making of engines. So, what was missing? Obviously, the idea of doing so. For thousands of years, the means to build petrol engines existed, but nobody built them. Then, someone had the idea of the petrol engine, and within a very short time, that engine was built. Mere coincidence? You’d have to be quite odd to think so. The history and prehistory of the internal combustion engine seems to directly contradict your claim that scarcity of capital relative to scarcity of ideas, rather than the reverse, holds back economic development.
I am still wondering about how you can respond to the argument I presented regarding human history: during the paleolithic age, the total world GDP was minuscule, and the entire globe provided a basic subsistence to mere thousands of individuals. Every resource required for building civilization was abundantly available: Clay was abundant. Iron and copper were abundant. Wood, sandstone, limestone and other materials were abundant. Fuel for fire was abundant. Land was abundant. Seafood was abundant. Red meat was abundant. Birds and eggs were abundant. Fresh water was abundant. Metals and other useful minerals were abundant at or close to the Earth’s surface. Most of the time, all these things were simply there for the taking, with no fear of conflict due to a neighbour having staked a previous claim. Yet, fewer than a million people were able to sustain themselves on this planet, and at a basic level of subsistence at that. Why? It was certainly not due to a lack of capital. Nor was it due to lack of time. A hunter-gatherer, unless they are living in a marginal environment (e.g., desert or tundra), has very moderate demands on his or her time, and has plenty of time to make tools and invent stuff. So, why did our ancestors roam the veldt for several million years before civilization got started? Could it be that small, isolated, non-literate bands of people find it very difficult to accumulate ideas? How does the early history of mankind fit your scheme whereby scarcity of capital relative to scarcity of ideas, rather than the reverse, holds back economic development?
Yes, but they are on a desert island. If they know what they’re doing, they can gather all the food they need in a very short time, and have many hours of leisure every day. In fact, the real problem if you’re marooned on a desert island such as the original Robinson Crusoe was is how to fill those long, blank hours, not how to survive.
Not on a desert island.
I don’t mean to sound condescending, but I think you really ought to apply some common sense to this topic.
Did I say it wouldn’t take time? It certainly would, quite obviously. The thing is, if you’re stuck on a desert island, time is not scarce.
I think you do need to respond more fully. Put yourself in the position of Robinson Crusoe: you are stuck on an island small enough to be circumambulated in a day, but big enough to sustain farming and hunting, located in a warm temperate or subtropical climate. The environment is benign and there are no predators. Food is abundant and easy to obtain (assuming you know how). You are fairly young and quite fit. You have good reason to believe that the island is far enough from any larger body of land that you would almost certainly die at sea if you were to attempt an escape by raft. Ships pass rarely here, so as far as you know, you may be spending the rest of your life on this island. There are no career opportunities, no social opportunities, and no entertainment other than what you can make for yourself. Theoretically, you can spend your days lounging about, but if you did so, you would become bored to the point of depression. Therefore, you must think of projects to use up your time. In what meaningful sense, in this situation, is time scarce?
time is scarce, because the services it provides(or it can be exploited for) are not infinite in extent.
if robinson did land on the island, it is beyond coomprehension that he could build an immaculate modern kitchen, with all modern appliances therein, even if he made it his lifes task, the cost of production of all the intermediate products are so great as to suppose it would take many lifetimes for him to get a bad approximation. its like the idea of him constructing the pyramids, alone. crazy.
i put it to you, that the motor car has been a widely understood and easily transferrable idea for what? 80years now at least. yet, if you live amongst the aboriginal people of some south american jungle, and you had their cooperation, (they saw you as a car-idea bringing god-made-flesh) how soon do you think it would be before you had constructed your first petrol powered car?, assuming that only the tribal members contributed their labour and capital, and that you had the immediate forestry to harvest for raw material. i think you would likely die before your time without having manufactured a single headlanp.
No, we don’t agree on the basics. You don’t seem to understand, or even be aware of, Austrian capital theory. Unless we start from the same point this discussion will not be fruitful.
Robinson just so happens to not be immortal.
Here’s the thing, if the situation you are describing were the case, it would be true that everybody would be far wealthier. Indeed, there appears to be no limiting factor other than technology according to you. Well, we know how to build many things that few people will ever own.