I just saw another comment implying that immigration was good because it increased GDP. Over the years, I've seen many similar comments in the LW / transhumanist / etc bubble claiming that increasing a country's population is good because it increases its GDP. These are generally used in support of increasing either immigration or population growth.
It doesn't, however, make sense. People have attached a positive valence to certain words, then moved those words into new contexts. They did not figure out what they want to optimize and do the math.
I presume they want to optimize wealth or productivity per person. You wouldn't try to make Finland richer by absorbing China. Its GDP would go up, but its GDP per person would go way down.
I know why LWers want to say that increasing GDP is good. Historically, LessWrong is associated with transhumanism and specifically extropianism, and one of the main opponents of transhumanism is the romantic, anti-technology part of the environmentalist movement. The Extropians were strong supporters of Julian Simon, an economist who argued against environmentalists that population growth would not lead to collapse, but to lower rather than higher prices.
Growth is good. That was one of our mantras in the 1990s. And economists measure growth via GDP. So increasing GDP is good, right?
Wrong. Increasing GDP is not the same as productivity growth. Productivity makes sense either per person (when speaking locally) or per planet (or other isolated system, when looking at the big picture or the rate of technological change). GDP stands for Gross Domestic Product. It refers to the total yearly market value of the product of those people contained within some rather arbitrarily drawn border on a map, and is used for national budget planning. Both are surprisingly complex to compute, but in very different ways.
If you have a constant population, and GDP increases, productivity per person has increased. But if you have a border on a map enclosing some people, and you move it so it encloses more people, productivity hasn't increased. If instead of moving the border over the people, you move the people over the border, productivity still hasn't increased. Those people might be more productive on the other side of the border, but I haven't seen people make that argument. They just say increasing population increases GDP, so it's good.
If your population grows, your GDP will grow. That's not what Julian Simon was talking about. Simon argued that as population density rises, wealth per person will grow. He didn't say that increased GDP is a good thing, but that increased productivity is good. GDP is only correlated with productivity. (In fact, he argued against using even GDP per person as the sole measurement of growth: "Every time a human baby is born, the per capita GDP falls." Increased productivity makes prices fall, which makes wealth go up but GDP go down.)
Remember that the concepts of GDP and productivity are separate. You might be tempted to call GDP "productivity per country", but it just doesn't mean that when it's used in discussions about changing the population size or density of the country. It is invalid in that context to infer changes in productivity, and hence positive or negative valence, from changes in GDP. People would realize that if they remembered why they think increasing GDP is good, but I fear they don't--they just note the positive valence they've attached to the word and assume it's still valid in the current context.
Ha, very good point. Our current society is largely built around growth, and when growth stops the negative effects absolutely do trickle down, even to people who don't own stocks. In fact, companies were counting on those increases, and so have major issues when they don't materialize, and need to get rid of workers to cut costs.
I will mention that through most of history and prehistory, the economic growth rate has been much, much, smaller. I haven't read it, so I can't vouch for its quality, but apparently the book The End of Growth: Adapting to Our New Economic Reality suggests that economic growth can't continue indefinitely due to physics limitations, and lays out a framework for transitioning to a post-growth economy. I have no idea how gentle or unpleasant such a transition might actually be. (Also, note that I am hopeful that we can avoid resource limitations by transitioning to a space based economy, and am nowhere near as pessimistic as I think the authors are likely to be.)
China did indeed achieve massive benefits from industrialization. There's a lot of evidence that maximizing economic growth is an excellent way to play catch-up and obtain modern amenities for your population. Perhaps it's even the fastest theoretically possible way, since access to capital is the limiting factor for improved quality of life, and selling cheap stuff gets you lots of capital. I don't think developing countries should try communism or anything like that, unless for some reason they expect it to result in higher economic growth, since the data suggests that free markets are much better for them.
I would, however, suggest that the price of basic amenities appears to me to be a limiting factor in the quality of life of poor people in developed nations, and that increases in national wealth tend not to translate into proportional increases in purchasing power for them, although there is still some gain. (As I said before, I should really look into the details, though.) I see 2 basic classes of solutions:
You can try to funnel more goods and money to them. This might be done through tax structures, aid programs, education, basic income, etc. Either you try and improve their earning potential, or give them things directly, but either way they wind up with more. The end result is that they can purchase more such amenities at the same price, or perhaps a little cheaper due to more economies of scale and more competition for those items.
You can try to funnel more R&D into the sorts of things that the poor want than a free market would otherwise do. Most of the ways of doing this will cut into GDP somewhat, but maybe there are some public good type things that would out-preform the market, but where the benefits are difficult for one company to capture. A dollar spent on specific types of education, for example, may increase GDP by more than 1 dollar. However, since it can be difficult to capture a return on investment,^[1] we have a tragedy of the commons scenario, and government or some powerful entity has to step up and foot the bill for the common good, if we want things like that. (Note that I'm not sure that this is still true on the margin, just that if we cut all funding for education that the GDP would drop by more than the amount saved.)
I was being a bit hyperbolic there, but you'll note that I followed it with 2 examples of startups which might in the future actually be cheaper than what the poor currently use. (3D printing might remove labor costs from construction, and Soylent has aspirations of making food into a utility. I probably should have said so specifically.)
Walmart is a good point. I’m not sure whether the benefits from cheaper goods outweigh the cost to local jobs, but I’m sure we’ve both heard the complaints. That’s getting dangerously close to talking politics, so I’d prefer to avoid getting into details, but I’d be interested if anyone knows of any academic research or cost-benefit analyses.
Uber may be cheaper than taxis, and AirBnB may be cheaper than hotels, but the poor don't use taxis or hotels. I am hopeful that self-driving cars will make transportation cheap enough that the poor benefit, though.
My point wasn't that the poor aren't any better off decade by decade. That appears to be false. My point is that they aren't 5% better off each year, even though the economic growth rate is about maybe 7.5-ish-percent with maybe 2.5% inflation. So, most (but not all) of that growth is going into sectors which don't benefit the poor much.
[1] Interestingly, this appears to be precisely what Signal Data Science's business model is. They teach you in exchange for a fraction of your future salary. However, perhaps due to irrationality, there doesn't seem to be a wider market for this sort of thing.
True, and I think not many people want a return to those times (some do, though, mostly on environmentalist grounds).
That's the whole growing-inequality debate, a separate highly complicated topic... (read more)