15 years on this board and you haven’t figured that out yet? 
Hey, you started the hypothetical escalation :).
I do actually think it’s useful to consider extreme hypotheticals like this to really distill ideas down to their barest elements. Economies aren’t really about money; it just happens that money is very useful in facilitating trade.
That said, it’s also useful to consider more realistic scenarios. Sampling multiple points on the abstraction spectrum is rarely a bad thing.
I’m not sure what you think “wealth” means. The value of access to a solar-powered replicator is $3,749,000 at today’s prices. If I have that and the “president” has $3,749,001 then I don’t think wealth inequality is a dominant theme in your hypothetical economy.
It’s worth a lot more than that! I would add 8 or so zeroes. But it’s worthless to them, because if someone’s replicator breaks then they just get a friend to print up another. No one can sell their replicator for any scarce good like the president’s dollar or a piece of land.
My point, I suppose, is that we need to be careful in defining wealth, and that it can be very tricky to compare across circumstances. The Star Trek society is obviously wealthy in an overall sense because they have all the stuff they want. But amongst themselves, almost no one owns anything of value.
This relates to a complaint I have about the usual metrics for inflation. By one measure, inflation-adjusted wages have hardly budged since the 70s. But has the wealth changed? I would say it’s increased massively, because much of the stuff we have–from cars to TVs to computers to dog food–has greatly increased in quality and functionality. But it’s hard to measure because it’s largely subjective.
But before we get all tied up in the concept of wealth in a world with no scarcity, let’s remember that the primary issue of economics is dealing with scarcity. If scarcity does not exist, the way we understand economics today doesn’t really apply; much like the futility of applying Euclidean geometry to solve a non-Euclidean problem.
That’s true. The basis for economics as we know it is that there are infinite wants and finite resources. If we flip that on its head to finite wants and infinite resources, the model breaks. I don’t think we’re in danger of that now or ever. Even in Star Trek, there are finite resources and I think we’d find things to want. I mean if you were to posit present day America to a Golden Age Spaniard, they would claim we were living in a utopian future. The idea that the poorest among us have wardrobes of clothes and their biggest nutritional battle is eating too much would be beyond their dreams. The whole country to them would be filled with mansions and we can all watch whatever play we want whenever we want magically would be crazy, yet here we are, our wants still exist and economic insecurity is still a thing. The replicator might change our wants, but I don’t think we’ll ever get to a time when we don’t desire what we can’t have. It’s not human nature.
Economists disagree. Further, politicians disagree and the answer will be different if you are Democrat v. Republican.
There is, believe it or not, such a thing as TOO low of an unemployment rate. To put it in really simple terms, there’s a certain level of unemployment that indicates that the economy is doing well, and that people are moving around between jobs, and the labor supply is adequate. If unemployment gets too low, it starts crimping companies’ ability to do their business due to labor shortages, and also drives wages up unsustainably.
Yup. There’s a concept known as NAIRU, the non-accelerating inflation rate of unemployment. Go far above that and it’s called a recession. Go far below it and wages will increase faster than productivity growth. That can lead to higher inflation.
If some wage contracts are automatically tied to inflation, as they were during the 1970s, you can get a “Wage-price spiral”, as prices and wages chase each other higher.
Problem: the inflation rate probably isn’t tied to just a single number (the unemployment rate). So the concept of NAIRU is probably too simplistic. That didn’t stop it from being applied uncritically for years.
Criticism of NAIRU, by Paul Krugman’s blog in 2015: The NAIRU Straitjacket and Cromwell's Rule - The New York Times [INDENT] The NAIRU is, I’d still argue, a useful concept, mainly because it’s a caution against expecting too much from monetary policy in the long run. Much as I want full employment, there is some lower bound on the unemployment rate, a rate that you just can’t achieve on a sustained basis with demand-side policies. But it’s not very useful as a guide to short- and medium-term policy, because we do not have any good idea of where that lower bound lies.
I very much hope that Fed staff remembers the 1990s. Circa 1994 it was widely believed, based on seemingly solid research, that the NAIRU was around 6 percent; but Greenspan and company decided to wait for actual evidence of rising inflation, and the result was a long run of job growth that brought unemployment below 4 percent without any kind of inflationary explosion. Suppose they had targeted the presumed NAIRU instead; they would have sacrificed trillions in foregone output, plus all the good things that come from a tight labor market. [/INDENT]
If I understand your Star Trek analogy correctly, your point is that if everyone in society has a high standard of living, wealth inequality really isn’t a huge problem.
I tend to agree with that sentiment. Frankly, I think the best way to address poverty is to focus on making sure everyone has access to a higher standard of living instead focusing on how much wealth the 1% has. I think wealth distribution solely for the purpose distributing wealth is morally wrong. That being said, I do think we could do a lot more to help the both the middle class and the poor. If that means increasing the top tax, then so be it. But I think imposing a maximum income or 95% top tax rate because you think someone has too much is just wrong.
There’s little danger of that anymore, not now that the link between low unemployment and increased wages seems to be broken. Despite historic lows in unemployment, wages are up only 2.6%. Theories as to why include the higher than comfortable underemployment rate, “gig” employment, and people who dropped out of the workforce after the recession rejoining. It doesn’t look like people will be getting higher wages any time soon.
Another theory invokes overly tight monetary policy. The Fed still hasn’t quite hit its core PCE inflation target of 2% after all. Ok, it’s 1.8%. But the tightening cycle started in December 2015 or earlier if you include Fed announcements or ending quantitative easing.
I know nothing about this topic and I am very confused.
I know that every politician uses a different metric for the economy, and every political candidate always can bring up a metric that would make his predecessor look bad and hit party look good. So clearly this is completely subjective or that very few people can make an objective deduction about what is good for who.
I wonder if globalization is a big reason for continued low inflation. A service center may have several reasons to prefer $12 U.S. employees over $2 foreign employees, but reconsider their calculus if the U.S. wage rises to $13. Similarly, commodity markets are world-wide: a labor shortage in the U.S. has no effect on the prices paid for many goods. And automation also acts to inhibit wage hikes.
And is it possible that consumer price inflation is held in check because spending power is diverted to assets? :— Stocks have been booming; housing prices are rising. How’s the fine-art market doing? The Salvator Mundi recently sold for almost half a Billion dollars — it doesn’t even show up on online lists of Leonardo’s Top Ten Paintings.
I think you’re also seeing the rise of the independent contractor (ie gig economy) Companies have seen that services that used to be covered by well-paying full-time employment are now much cheaper if they use independent contractors. It started in the long-haul trucking industry where in 1980, truckers made the inflation adjusted salary of about 100 thousand a year. Trucking companies to cut costs began making employees into contractors and current wages are about 40k a year. Uber and its ilk have started to turn this mainstream. Flex is the newest assault on good employment and is turning package deliverers who make an average of 36 dollars an hour plus full benefits for UPS into independent contractors averaging about 12 an hour with no benefits. Companies have discovered they can offload risk and salary by hiring temps and contractors and it’s killing wages.
The two best measure of an economy’s performance are productivity and unemployment. Productivity shows how much workers can make and that is the point of an economy. Unemployment is important because productivity can be made to look better if the lowest productivity workers are prevented from getting jobs.
About 10.1 percent of workers were in “alternative
Employment arrangements” in 2017. https://www.bls.gov/news.release/conemp.htm
This hasn’t changed much in over twenty years. And it’s down slightly since 2005.
I don’t know… I saw a newspaper article where Buc-ees, a regional gas station/convenience store chain is offering something like 11.50 to new hires because that’s what it takes, and that it’s not unusual around here- apparently you can’t get construction workers for love or money, and wages are going up, at least on the low end of things.
Of course, the same newspaper has also had several articles in the past week about when the upcoming economic crash will happen, so YMMV.
Wages are up. They’ve been up. It’s just masked by entrants and exits from the labor force, in part driven by demographic changes.
This criticism ignores the replicators. Seriously, low unemployment drives technology. If we have really cheap labour, the restaurant hires a bunch of illegal immigrants to wash dishes at the sink. If wages are high, they put in a mechanical dishwasher - load up the rack from the bus boy’s tub, and let it run. We see this in every industry, from auto assembly line robots to the big screens in McD’s so you can take forever to order without holding up the line and tying up a wage-earner. making robots and big screen TV’s is a better job than taking McMuffin orders. (Don’t think McD’s isn’t working on burger-flipping robots too… they already have automated drink fillers.)
When discussing wages with a co-worker once, I mentioned that they couldn’t give us a big enough wage to make us realy appreciative. 5% or even 10% extra was beyond HR’s guidelines and barely noticeable on our paycheque. I said - “money isn’t a major motivator at some point.” His comeback was “yes, but money’s a good way to keep score.”