Arnold Kling  

Bryan is a Pessimist

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Why Inherited Wealth is Gettin... Keep on Truckin', Stalin-Style...

He writes


How about my house?! Is that going to be "obsolete" in 18 years? Even if housing prices go down a bit and my kids are extremely successful, my house will be worth years of their expected wages.

Your house will definitely be obsolete in 18 years. Your land may retain its value or even appreciate in real terms. But I think there is some downside risk, at least if Kurzweil is correct. Location will matter a lot less, for a number of reasons.

But I think you are understating your children's future earnings. Again, assuming Kurzweil is correct, they will be rich beyond your wildest dreams. Your house will mean nothing to them. Instead of your children being nice to you in order to get your wealth, you're going to have to be nice to them so that they're willing to share theirs.

Kurzweil's view of the reduced time frame for technological innovation and economic growth suggests that your children will look at your lifestyle about the way you look at the lifestyle before World War I.


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CATEGORIES: Growth: Consequences



COMMENTS (18 to date)
anon writes:

Location will matter less? So have you figured out a way to short Oakton real estate, Arnold? :)

It seems that location today matters even *more* than it ever did, despite the advances in technology that have been made. It's counterintuitive to think that in an age where telecommuting is really quite viable that location matters way more than ever in real estate values but there you have it.

What could possibly happen-in the timeframe specified-that would reverse this trend? Cellphones? Videoconferencing? 24/7 communication? High speed internet? Blackberries? PDAs?

I see the correlation as a positive one between commute times and desiriability of proximity to job centers. That is, as long as traffic keeps getting worse(Kurzweil doesn't predict a turnaround in that trend, does he?), it will be increasingly desirable to live near job centers. And as Bryan points out, with the restriction of housing near job centers(and even far away from job centers) artificially restricted via zoning laws, the problem of skyrocketing house prices certainly won't be solved on the supply side without some changes.

Anonymous writes:

Hi, guys --

Arnold, this is a general point about why we shouldn't get too excited about Kurzweil or the peak oil guys.

If I were sure that the price of oil would triple over the next 5 years, I'd store it now. If I were sure that productivity growth would double or quadruple over the next 10 years, I'd consume more now.

Wouldn't you?

Yours,
Anon

Paul N writes:

Ugh, more Kurzweil worship, [barf]

Ivan Kirigin writes:

Why wouldn't Bryan also benefit from the Kurzweil presumed boom?

The talk of bequeathing something in a Kurzweil utopia is a bit illogical: who is going to do the dieing?

Chevalier writes:
Traffic: (Kurzweil doesn't predict a turnaround in that trend, does he?)

Actually he does. If you've read anything of his, and thought carefully about the implications--you'd know.
But, to expand, technologies like the PDA or the cellphone, would, if nanotech is realised even partially, be comprable to vacuum tube radios. There are many devices/technologies that are imagined, but, for example, the idea of Virtual Reality, minus stupid glasses and etc... might be possible.

I really don't think Arnold is doing Kurzweil worship here, and neither do I. Arnold has written critically of Kurzweil--for example his predictions for the advancement A.I. And I have the same reservations; but the arguments against the basic concepts of Moore's law haven't been very strong. And things like land values and traffic aren't exclusivly related to issues of A.I., and are more concerned with sheer engineering of nanotechnology---the part concerning Moore's law.

This is not to say that the probability of Kurzweil's predictions coming true is greater than 80 or 90 percent. I think it's somewhere there, but it's not certain. An great economic downturn for example might be a stopping factor. But there's no reason to be such a pessimist. And I'm not even a libertarian or anything.

Tim Worstall writes:

Why would the house be obsolete? As an example, I have an apartment in Bath (England). The house was built in 1793. It is markedly more valuable than houses built in 1993 in the same City (although of course exact location is impossible to duplicate) and less valuable than those in the same city built in 1773, 1753 or 1743.

Robert writes:

Of course, houses face selection pressure. Among old houses, it is the valuable ones that survive decades and even centuries, and the ones that become less valuable than the land they're sitting on that face the bulldozer.

M. Turner writes:

As someone who bought a new house 2 yrs ago and am again looking for a new house due to a job relocation, I agree with Arnold here. The land (location) is very important, and I may be forced to buy a house I would otherwise refuse simply because of it's location. But generally, there is a big gulf of houses built from 1930's to the 1980's that I'm not interested in if I have an alternative. It would suprise me if in 40 years people didn't say the same thing about houses that are being built right now.

You might be tempted to say "they don't build them like they used to", and blame this as to why I compare the older houses favorably to the newest ones, but I believe that the houses go through a survival of the fittest phase after they are 40 or 50 years old. Uninteresting mill houses were all over the place 50 years ago, and they've since been bulldozed for newer projects. Houses built prior to the early 30's (that are still standing) have a character that is hard to match nowadays, in exchange for lot's of renovating that is required to make it livable. I've done this too, and am even now looking at houses built before this time window.

But my first choice will likely be 10 yrs old or less, and that way if I have to move again soon hopefully I can sell it.

Dezakin writes:
This is not to say that the probability of Kurzweil's predictions coming true is greater than 80 or 90 percent. I think it's somewhere there, but it's not certain. An great economic downturn for example might be a stopping factor. But there's no reason to be such a pessimist. And I'm not even a libertarian or anything.

We absolutely will develop strong AI sometime this century. We have hardware to do it today (slowly, crudely) and we have full maps of nematode nervous systems to map out to find out whats necissary for simulation of brains and what isnt. Kurzweil's fault is his optimism that investors and researchers will follow the path of least resistance and do brain simulation, so the question isnt 2040 vs never, its 2040 vs 2080.

But thats no assurance that Bryans kids will be rich. What happens when mere holders of capital no longer have to pay for labor, and instead rely on robot slaves. Or what if the children of man dont like us at all?

John Thacker writes:

As an example, I have an apartment in Bath (England). The house was built in 1793. It is markedly more valuable than houses built in 1993 in the same City (although of course exact location is impossible to duplicate) and less valuable than those in the same city built in 1773, 1753 or 1743.

Does the house have the same heating, furnishings, and everything else that it did in 1793? Certainly the value of any modern changes to the house have to be taken into consideration. Once you combine renovation with the selection pressure that causes the worst old houses to be bulldozed, I think you can make a strong case that the value of houses themselves don't hold in general.

pessim writes:

I totally agree that people will be a lot richer, but that will make people care about positional goods even MORE than they do now.

Look at how much it cost (relative to people's incomes) to go to college many decades ago. Moroever, the gap between the Ivies and the lower tiered unis was probably greater in absolute terms than today. You can have an excellent education at most of the top state universities now. And yet our very wealth makes people obsess even more about tiny differences in the top tier. [I bet HYPSMC, etc could charge $75,000 a year with no financial aid and get away with it.]

My guess is that a materially prosperous future will be a future of massive status competition, with desirable land, political influence, elite education, and fame being the biggest sources of all class and economic disputes.

jaimito writes:

If productivity will improve as expected, there is no point in saving too much nor buying a house. In the long term, fixed capital is worthless and other forms of capital cannot be preserved. I first heard this concept from Prof Teller, a physicist, when weighting the hydrogen bomb (destoys real estate) and the neutron bomb (destroys only people). In fact, American people thinks like that, since much prefers to consume now and pay later.

Kerry writes:

Dezakin says:
"we have full maps of nematode nervous systems to map out to find out whats necissary for simulation of brains and what isnt."

I did a fair bit of research on C.elegans (the nematode in question), and I can tell you that a complete understanding of the action of the nervous system (which we don't have) wouldn't help AI research at all. C. elegans only has ~300 neurons. In comparison, humans have around 10^11 neurons in the brain alone, trumping the worm by at least nine orders of magnitude. Your car has more intelligence than a worm.

aaron writes:

"If productivity will improve as expected, there is no point in saving too much nor buying a house. In the long term, fixed capital is worthless and other forms of capital cannot be preserved. I first heard this concept from Prof Teller, a physicist, when weighting the hydrogen bomb (destoys real estate) and the neutron bomb (destroys only people). In fact, American people thinks like that, since much prefers to consume now and pay later."

Actually, I think the opposite is true. As productivity increases, it becomes more important to save and invest. Because we are so highly productive, very few jobs are needed to generate goods and services. A system is needed to allocate those goods and services to people not directly involved in production. Measuring wealth is our best mechanism to do this. It allows people to participate in the allocation resources and rewards them based on the effectiveness of those decisions.

Dezakin writes:
I did a fair bit of research on C.elegans (the nematode in question), and I can tell you that a complete understanding of the action of the nervous system (which we don't have) wouldn't help AI research at all.

I cant see how you arrive at that conclusion, unless you missed the point entirely. If we can simulate nematode worms in software, then its only a matter of extention to go to insects, reptiles, eventually mammilian brains and humans.

That they are simple systems is the point: its a tractible problem from which we learn how to build the bricks of intelligence.

jaimito writes:
Measuring wealth is our best mechanism to allocate resources
Is it? Have you heard about "To each according to its necessities..."
Kerry writes:

@Dezakin
My point was that we cannot currently fully simulate an organism with only 300 neurons. Perhaps you don't understand the math, but nine orders of magnitude is quite a bit of "extention". I'll be happy if it works out, but my current research depends heavily on the increase in speed of scientific computing, and things don't look so rosy.

aaron writes:

Think that one through Jaimito. What are needs, how do you identify them, how do you rank them, and how do you meet them?

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