Re: 1929 deja vu

From: Michael S. Lorrey (
Date: Fri Apr 28 2000 - 09:58:44 MDT

John Clark wrote:

> And I have said that any large change in the economy, the climate , the
> geology, the TV schedule, the stock market, the social structure or the
> architecture of a Stealth Bra is bound to be bad for somebody.
> But to get back to the original argument, the idea that the poverty of the
> 30's was caused by over productivity (not over production, a very
> different thing), the idea that the net wealth in a society declines because
> things that people want and use are made too quickly and too well is just loony.

Ok, John. I'll make this very very simple for you.

Take company A. They make flimdoodles, which are the primary product in a society, and many subsidiary
industries make parts for flimdoodles, distributing flimdoodles, selling flimdoodles, maintaining and
servicing flimdoodles, etc. and all the people employed by those industries have consumer industries that
depend on the spending of all the employees in the flimdoodle industry. The flimdoodle industry employes
1 million people, and produces 1 million flimdoodles every year. The typical usable lifetime of a
flimdoodle is 10 years, and in Country A, there are ten million users of flimdoodles, or about one
flimdoodle per family. Everybody is happy, there is an economic equilibrium of demand and supply.

Scenario 1:
Now Company B comes along with the Super-flimdoodle, or SFD for short. The SFD lasts for 20 years, it can
travel twice as far and twice as fast as regular flimdoodles, and it costs half as much, needs to be
maintained half as much, and uses half as much energy. Company B has fully automated the entire
manufacturing process and employes only 10% of the number of people as Company A to produce 1 million
SFD's per year. Naturally, everybody buys SFDs instead of flimdoodles. Company B may hire away 10% of
Company A's workforce, but once they are fully staffed, Company A is out of business, and 900,000 people
are unemployed. Unemployment goes from 0 to 9% in short order just from that one change. Then all of the
subsidiary industries and consumer industries that depended on those employed people are not making
money, and they have to lay off employees as well. Unemployment goes higher, reducing consumer spending
even more. People can't afford to buy even SFDs in the quantities that they once bought flimdoodles, so
Company B's sales drop, they have to cut prices in order to sell what they are already producing..

Scenario 2:
Company A's old flimdoodles actually only last only 1 year, but their new flimdoodle technology allows
new ones to last ten years. Within a year, Company A's flimdoodle sales drop to just 10% of what they
were a year previously. Production gets cut back, and 90% of Company A's workforce is laid off, etc..

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