The economic growth rate is normally a lower bound to the market interest
rate because if the interest rate were lower, it would be profitable to
borrow to finance more investments. People who would be willing to settle
for a 1% return will demand a 30% return if the growth rate is sufficient
to use up all the capital that is available at 30% interest rates.
>> >I would expect the financial explosion to occur a few years to perhaps a
>> >few decades before the productivity explosion, depending on how farsighted
>>
>> What would cause the value of labor to decline relative to capital
>> years before the cost of duplicating human-level intelligence is
>> reduced?
>
>I don't understand what you are getting at here. I argued that the
>value of productive investments is more than commonly recognized, and
>that eventually the value would therefore increase. This would imply
>that the value of labor will decline relative to capital, not because
>labor is less valuable, but because capital would be more so. To take
Unless you have discovered some absolute unit of value, this distinction
is unclear to me.
>an exaggerated example, spending your money on a robot which will build
>a million more for free would be better than spending it on a hairdresser.
It isn't obvious that building the first such robot will require a
different mixture of capital and labor than today's products require.
Once we get robots smart enough to reproduce with zero human intervention,
I don't know what will happen. I was assuming that required human-level
intelligence, but I admit I can't justify that assumption.
Your robot example still doesn't explain why you expect the capital /
labor ratio to rise years before the productivity explosion.
>> What would cause the value of cash and cash-like assets to decline?
>> One of the reasons that these assets have value is the ability they
>> provide to quickly move one's assets into new (unanticapted) investments.
>> Since my intuition is that the period you are talking about will
>> produce enormous uncertainties about which companies will produce
>> or benefit from breakthroughs in nanotech or AI, I expect I will
>> value cash fairly highly.
>
>Cash is not a productive asset, so to the extend you hold it you
>are foregoing the income that you could have made by investing it.
>If investments are growing much faster than today, then holding cash
>will be more costly.
Cash is a productive asset. It produces flexibility.
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