Something to puzzle over is the fact we have seen computational grunt grow exponentially for decade upon decade yet economic growth has been stable over the same period.

Economic growth itself is an exponential function. "The economy grows 3% every year" is exponential growth, not linear growth. I would say that it's only happened because of exponential technological progress; we never had that level of exponential growth until the industrial revolution. And I would say that most of the economic growth the first world has had over the past 20 years has come from recent technological advancement, mostly being the twin communication and computer revolutions we've had (PC's, cell phones, internet, smart phones, and some smaller examples of both).

I don't like the differences and distinctions people find between "addiction" and "{insert all the things people call addiction besides addiction}".

As a definition, we could say addiction is the threshold of need whereby an individual will (a) die or (b) be incapacitated without an activity of substance, but even then you'd have trouble defining (b) in my mind.

To Metus' pet Everything-is-Porn Theory, I'd say at least that many more people are "addicted" to many more things than we realize, it just doesn't kill, or incapaciate them according to a broad enough definition. I wouldn't know where to begin with examples—many peoples' lives are basically controlled by many of the drives in your post.

There people who spend 15+ hours a day on Reddit—addicted? How about 5+ hours on Reddit and another 8 on WoW? Have the 13+ hour/day Reddit/WoWers who scrape together enough for rent each month (but have no savings) managed to climb above the threshold for "addiction"?

I do think economic growth will continue to be exponential over short time horizons, though the exponent itself might change over time (it's unclear whether the change will be in the positive or negative direction). My focus here was on specific technologies whose continued exponential growth for the next 30 years or so is used as an argument for the imminence of a technological singularity.

As we shift from one paradigm of advancement to another, we may still have exponential growth, but the exponent for the new exponential growth paradigm may be quite different.

Most U.S. elite colleges don't have undergraduate business majors. It's (falsely in my opinion) considered beneath them. Investment banks would much, much, much rather hire a Harvard philosophy major than a state school business major.

Most U.S. elite colleges don't have undergraduate business majors. It's (falsely in my opinion) considered beneath them. Investment banks would much, much, much rather hire a Harvard philosophy major than a state school business major.

If you can write a long paper on Greek philosophy that a professor at a good college finds acceptable you have demonstrated you have the capacity to do well in many kinds of entry level high-IQ jobs that don't require math.

People are (rightly or wrongly) less concerned about putting their best foot forward with text.

As an ergonomic matter, typing all day long, although fatiguing, consumes less energy than talking all day long.

Text can be created in fits and bursts. An audio or video needs to be recorded more or less in a continuous sitting.

Note that many people seem to prefer e.g. Skype calls over text chats because (to these people) voice chat requires less energy than writing, and feels like just having a normal conversation and thus effortless, whereas writing is something that requires actually thinking about what you say and thus feels much more laborious.

A lot of people also seem to find audio easier to consume than text: podcasts would be a lot less popular otherwise. (I never understood podcasts at first. Why not just write? Finally I realized that non-nerds actually find listening easier than reading.)

You can't play background music while having a video conversation

Headphones and a good call quality together fix this, I think? Haven't tried, though.

Hi,

First contribution here but I've been lurking since the move from Overcoming Bias. Play nice :) I think this is an important subject matter which few people are giving attention to so I thought I'd offer some comments that might assist.

My comment was deemed too long so I've Split it up. If that's bad form let me know. Considered removing quotations of the OP but it would make it too difficult to read.

If you are going to use pieces of standard microeconomics in future versions of this analysis it might be best to spend a bit more time defining them more clearly and explaining how they map to the subject. If there is any confusion in the assumptions contained in the theory it carries through to the analysis of the case in question. It may well all be clear in your mind but it doesn't seem, at least to me, to unfold clearly in the text. But it might just be me...

Some examples From #1

But the short run looks very different from the long run. A key difference is that in the short run, suppliers cannot undertake fixed costs of capital investment and research to improve technology. In the long run, they can. Therefore, if some type of good is a lot easier to produce in bulk than in small quantities, then in the long run larger demand would lead to lower prices, because suppliers have lower production costs. For goods that enjoy efficiencies of scale in large-volume production, therefore, the long-run supply curve would be downward-sloping. An industry of this sort is called a decreasing cost industry

As you point out, in the short run, producers cannot immediately alter their fixed cost inputs e.g. new factories (r&d is a subelty different in the way it reduces costs which I'll return to), but in the long run they can - all costs are variable in the long run. So, if there is an increase in demand of good A, and production of good A is characterised by constant- or increasing-returns to scale or economies of scale (these concepts are different with the same result, one referring to a fixed proportion of inputs and the other to varying proportion of inputs) over time we end up with an increase in quantity produced of A and a decrease in the price of A. But there need not be a downward sloping supply curve. In the case of constant- or increasing-returns to scale you just make more A because more A is demanded. In the case of economies of scale you just select from an envelop of possible short run average cost curves along the long run cost curve that meets the quantity demanded and maximises profit.

A decreasing cost industry is something different. Let's say industry (multiple firms) i produces good z. In producing z they use inputs c,d and e. Industry i is categorised by economies of scale and experiences an unexpected increase in demand for good z. Over time they ramp up with new factories and grew to a medium size industry. Their input e is a non-commodity input which, because they are now a large bulk purchaser of e they buy at a discount. All other inputs costs remain the same in real terms. The result is a lower average cost of production and downward sloping industry supply curve. They may in fact be gaining from increasing returns to scale from producers of input e. Car manufacturing is one example.

From #2

The typical explanation for why some industries are decreasing cost industries... The fixed costs of setting up a factory that can produce a million hard drives a year is less than 1000 times the fixed cost of setting up a factory that can produce a thousand hard drives a year.

This again is economies of scale and not decreasing cost industry. Also, it's just one form, not even an industry. To clarify what i wrote above a little, just because a firm experiences decreasing costs it does not make it a decreasing-cost-industry in the way that this special case is treated in microeconomic theory.

I am thinking of questions like: "What happens if demand is high in one year, and then falls? Will prices go back up?" It is true that some forms of investment in infrastructure are durable, and therefore, once the infrastructure has already been built in anticipation of high demand, costs will continue to stay low even if demand falls back. However, much of the long-term infrastructure can be repurposed causing prices to go back up.

Your meaning is not clear to me here. A lot infrastructure is durable. By "costs will continue to stay low even if demand falls back" do you mean even if demand increases once again? It will definitely stay low if demand falls, but it's not clear that that is your meaning. Why would prices go back up if the infrastructure has been re-purposed to some other market? Do you mean that because demand has decreased some firms will exit that market by re-purposing their gear and so those that remain will constitute a smaller market supply (supply curve shift) and therefore a new higher equilibrium price will emerge? I wouldn't call the airline route change a re-purpose but simply selling to a different consumer in the same market. The hard-drive to chip flash memory chips I would be more inclined to call re-purposing, but that's related to economies of scope and they'd probably be doing it already. There is already a huge body of theory on this stuff so maybe instead of using terms like 'time-directionality' and 'efficiency of scale' you could revist the theory and explain your hypothesis in very standard terminology?

Technology, particularly the knowledge component thereof, is probably an exception of sorts.

I'm far from convinced of this, if by technology you mean modern cutting edge computation tech for example. ALL goods ARE technology. From programming languages to aircraft to condoms to corkscrews. Knowledge, for a very long time, has been easy to reproduce. The fixed costs of produces a dread-tree-book is huge but the marginal cost of another one, once it is written and typeset and at first printed, is tiny in comparison.

Consider a decreasing cost industry where a large part of the efficiency of scale is because larger demand volumes justify bigger investments in research and development that lower production costs permanently (regardless of actual future demand volumes). Once the "genie is out of the bottle" with respect to the new technologies, the lower costs will remain — even in the face of flagging demand. However, flagging demand might stall further technological progress.

Again, this is simply how it goes and always has for almost all products that at any stage had any value. Where demand flags think of it as re-purposing knowledge.

Thus, people who have been in the business for ten years enjoy a better price-performance tradeoff than people who have been in the business for only three years, even if they've been producing the same amount per year.

This is often referred to as the learning curve in microeconomics. Think about a firm who's production of a good is characterised by increasing returns to scale. Their average cost will decrease as they increase production. Over that same period they get better and faster - removing bottlenecks of various kinds through optimisation of their processes because they become more intimate with their production problems via experience and find ever more partial solutions. Whilst the decrease in average cost due to economies of scale is along the long run average cost curve, the decrease in average cost due to this learning is a shift in the long run average cost curve. This is also routine as one would imagine and a good example is a potato chip factory.

Hi,

First contribution here but I've been lurking since the move from Overcoming Bias. Play nice :) I think this is an important subject matter which few people are giving attention to so I thought I'd offer some comments that might assist.

My comment was deemed too long so I've Split it up. If that's bad form let me know. Considered removing quotations of the OP but it would make it too difficult to read.

If you are going to use pieces of standard microeconomics in future versions of this analysis it might be best to spend a bit more time defining them more clearly and explaining how they map to the subject. If there is any confusion in the assumptions contained in the theory it carries through to the analysis of the case in question. It may well all be clear in your mind but it doesn't seem, at least to me, to unfold clearly in the text. But it might just be me...

Some examples From #1

But the short run looks very different from the long run. A key difference is that in the short run, suppliers cannot undertake fixed costs of capital investment and research to improve technology. In the long run, they can. Therefore, if some type of good is a lot easier to produce in bulk than in small quantities, then in the long run larger demand would lead to lower prices, because suppliers have lower production costs. For goods that enjoy efficiencies of scale in large-volume production, therefore, the long-run supply curve would be downward-sloping. An industry of this sort is called a decreasing cost industry

As you point out, in the short run, producers cannot immediately alter their fixed cost inputs e.g. new factories (r&d is a subelty different in the way it reduces costs which I'll return to), but in the long run they can - all costs are variable in the long run. So, if there is an increase in demand of good A, and production of good A is characterised by constant- or increasing-returns to scale or economies of scale (these concepts are different with the same result, one referring to a fixed proportion of inputs and the other to varying proportion of inputs) over time we end up with an increase in quantity produced of A and a decrease in the price of A. But there need not be a downward sloping supply curve. In the case of constant- or increasing-returns to scale you just make more A because more A is demanded. In the case of economies of scale you just select from an envelop of possible short run average cost curves along the long run cost curve that meets the quantity demanded and maximises profit.

A decreasing cost industry is something different. Let's say industry (multiple firms) i produces good z. In producing z they use inputs c,d and e. Industry i is categorised by economies of scale and experiences an unexpected increase in demand for good z. Over time they ramp up with new factories and grew to a medium size industry. Their input e is a non-commodity input which, because they are now a large bulk purchaser of e they buy at a discount. All other inputs costs remain the same in real terms. The result is a lower average cost of production and downward sloping industry supply curve. They may in fact be gaining from increasing returns to scale from producers of input e. Car manufacturing is one example.

From #2

The typical explanation for why some industries are decreasing cost industries... The fixed costs of setting up a factory that can produce a million hard drives a year is less than 1000 times the fixed cost of setting up a factory that can produce a thousand hard drives a year.

This again is economies of scale and not decreasing cost industry. Also, it's just one form, not even an industry. To clarify what i wrote above a little, just because a firm experiences decreasing costs it does not make it a decreasing-cost-industry in the way that this special case is treated in microeconomic theory.

I am thinking of questions like: "What happens if demand is high in one year, and then falls? Will prices go back up?" It is true that some forms of investment in infrastructure are durable, and therefore, once the infrastructure has already been built in anticipation of high demand, costs will continue to stay low even if demand falls back. However, much of the long-term infrastructure can be repurposed causing prices to go back up.

Your meaning is not clear to me here. A lot infrastructure is durable. By "costs will continue to stay low even if demand falls back" do you mean even if demand increases once again? It will definitely stay low if demand falls, but it's not clear that that is your meaning. Why would prices go back up if the infrastructure has been re-purposed to some other market? Do you mean that because demand has decreased some firms will exit that market by re-purposing their gear and so those that remain will constitute a smaller market supply (supply curve shift) and therefore a new higher equilibrium price will emerge? I wouldn't call the airline route change a re-purpose but simply selling to a different consumer in the same market. The hard-drive to chip flash memory chips I would be more inclined to call re-purposing, but that's related to economies of scope and they'd probably be doing it already. There is already a huge body of theory on this stuff so maybe instead of using terms like 'time-directionality' and 'efficiency of scale' you could revist the theory and explain your hypothesis in very standard terminology?

Technology, particularly the knowledge component thereof, is probably an exception of sorts.

I'm far from convinced of this, if by technology you mean modern cutting edge computation tech for example. ALL goods ARE technology. From programming languages to aircraft to condoms to corkscrews. Knowledge, for a very long time, has been easy to reproduce. The fixed costs of produces a dread-tree-book is huge but the marginal cost of another one, once it is written and typeset and at first printed, is tiny in comparison.

Consider a decreasing cost industry where a large part of the efficiency of scale is because larger demand volumes justify bigger investments in research and development that lower production costs permanently (regardless of actual future demand volumes). Once the "genie is out of the bottle" with respect to the new technologies, the lower costs will remain — even in the face of flagging demand. However, flagging demand might stall further technological progress.

Again, this is simply how it goes and always has for almost all products that at any stage had any value. Where demand flags think of it as re-purposing knowledge.

Thus, people who have been in the business for ten years enjoy a better price-performance tradeoff than people who have been in the business for only three years, even if they've been producing the same amount per year.

This is often referred to as the learning curve in microeconomics. Think about a firm who's production of a good is characterised by increasing returns to scale. Their average cost will decrease as they increase production. Over that same period they get better and faster - removing bottlenecks of various kinds through optimisation of their processes because they become more intimate with their production problems via experience and find ever more partial solutions. Whilst the decrease in average cost due to economies of scale is along the long run average cost curve, the decrease in average cost due to this learning is a shift in the long run average cost curve. This is also routine as one would imagine and a good example is a potato chip factory.