Re: Some Econ Pessimism?

Michael Lorrey (retroman@tpk.net)
Fri, 14 Feb 1997 18:36:01 -0500

Alexander Chislenko wrote:
>
> At 08:31 PM 2/13/97 -0500, Michael Lorrey wrote:
>
> >Do you take Moore's Law into account? Considering the amount of our
> >lives that now has to do with information and data processing, etc. some
> >of the key products to put in your basket are basic units like mips,
> >megs, bits, kilobaud, and dpi.
>
> I would agree that counting these things is better than not counting.
> This doesn't help that much though. I'll try to give two examples.
>
> 1. Let's try to compute inflation.
> Suppose the following goods were sold in the following years:
>
> 1980 1997
>
> Quantity price, Quantity price,
> sold each sold each
>
> Bicycles 1 \$100 1 \$200
> Megs 1 \$100 1000 \$0.20
> Bauds - - 56K \$0.001
>
> Suppose the quality doesn't change (ha-ha).
>
> Inflation on bicycles: about 4% a year
> Inflation on Megs: about -40% a year.
> Inflation on Bauds: ?
>
> Now, more interesting:
>
> Inflation on bicycles AND Megs.
>
> Method 1.
>
> A 1980 typical basket of 1 bike +1 meg costs \$200 in 1980
> and \$200.2 in 1996. Inflation = 0.
>
> On the other hand, a typical 1997 basket of 1 bike and 1000 megs
> in 1997 cost \$400, and would have cost \$100,000 in 1980.
> Inflation about -40% a year.
>
> So which basket should we count?
>
> - and this all for the same goods of the same quality.
>
> Now add bauds to the picture. And Netscape. And 60 million web pages
> you can look through. And ideas on architectures of complex systems that
> appeared while people were building all of these. Still, these things
> are just resources - and you can do use them to produce results that
> were not even in anybody's imagination in 1980. And those *results*
> are the things you want to count.
>
> 2. Another economic problem: a breast cancer patient had to pay \$5000
> for painful treatment and a coffin in 1980, and \$20,000 in 1997 - for a
> (painless) treatment only. The coffin doubled in price, but it is no
> longer needed, as the patient now survives.
> What is the inflation rate here?
>
Obviously you need to put a dollar sign on the intangible value of
staying alive. Perhaps this is only an apparent change. You forgot to
include the gains due to collection of life insurance. Your market
basket death benefit will range from \$10,000 up to \$1,000,000. Once
again we are dealing with material goods rather than informational
goods, so its still out of the issue.

Back to megs and bauds, you use Moore's laws to estimate what the
typical rate of consumption was for a given unit at a given point in
time. In 1990, 2400 baud modems were the norm, 18 months later, 4800,
then 9600 18 months after that, then onto 14.4, 28.8, and now 56k. Using
these rates of consumption, with the attendant cost per baud, you see
that there is significant deflation in high technolgies due to
technological advancement, and the synergies of feeding every new gain
into attaining greater gains, maintaining a 100% rate increase in
productivity every 18 months.

1990 2400baud /\$200 = \$.08/baud
1991.5 4800baud /\$200 = \$.04/baud
1993 9600baud /\$200 = \$.02/baud
1994 14,400baud /\$200 = \$.01333/baud
1995 19,600baud /\$200 = \$.01/baud
1996 28,800baud /\$200 = \$.00666/baud
1997 56,000baud /\$200 = \$.00333/baud

Given this unaccounted for deflation, it is easy to see why the only
thing contributing to inflation is COLA payments by the government union
and pension system that are based on false inflation data from the
government.

It is also easy to see why human productivity is increasing for the
first time in 30 years, graphical interfaces that are easy to use for
the majority of the population increase one's effective intelligence,
effectiveness, and overall productivity.

validity of this deflation due to the fact that they are trying to
protect their pensions? Are they afraid that if they acknowledge that
there has been real deflation in the economy, that the people will
demand that they get their tax dollars back? If it is acknowledged that
there really isnt as much inflation as they claim, then the government
will not be able to jack up taxes, which is stupid, because if they drop
the inflation rate to its true level, our budget deficit problem will
dissapear within a few years as the interest payments we make on the
debt are lowered to compensate.

```--
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Michael Lorrey
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#!/usr/local/bin/perl-0777---export-a-crypto-system-sig-RC4-3-lines-PERL
@k=unpack('C*',pack('H*',shift));for(@t=@s=0..255){\$y=(\$k[\$_%@k]+\$s[\$x=\$_
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```