SEC Senior Policy Advisor Rick Bookstaber is a brilliant writer, who expresses his private opinion in occasional articles at his blog.
His latest is just a bit whacky.
Considering the economic problems of an upperclass that doesn’t consume, and noting the development of awesome devices like the iPhone and X-Box, Bookstaber says we’re headed for a future where no one wants anything but the ultimate entertainment device:
The main items we demand, beyond food, clothing and shelter, are the nth generation game systems. Computer games have progressed to the point where they are approaching the level of Nozick’s experience machine. They allow us to be anyone we want in whatever world we want, accompanied by whomever we want, all with full sensory feedback. If you think you used to burn a lot of your free waking hours with your jumping between email, video games, Facebook, and HBO back in 2010….
The media industry dies next, Bookstaber says, as production becomes easier and distribution less profitable. Social networks kill the ad industry.
In this brave new world, consumer spending won’t drive employment or growth:
If you look hour by hour at what anyone is doing, it is hard to differentiate the super rich from those a few rungs above subsistence level. Given our evolved interests, most of us are spending a fraction of our income on consumption. There just isn’t a lot that we demand. What we do demand is cheap, and doesn’t require much of any labour to produce.
When rich people do consume, Bookstaber says they will buy status symbols, the kind of consumption that doesn’t fuel an economy:
Land, art, rare wines and Super Bowl tickets are being bid up to unthinkable levels. The major economic pastime that remains to differentiate the rich from the rest of us is picking new stuff to throw into the fray. The latest one is scholar stones from the Sung Dynasty. All that money has to go somewhere. But that only leads to a transfer of income from one well-to-do pocket to another without generating any production.
How do you write policy in this technophillic future? Bookstaber is utterly confounded:
I don’t know exactly how this economy works, but I can tell you that it is not working well. What are all of Reich’s workers doing for jobs now? Where is the money coming from for even this minimally consumptive society? What levers can we pull to get ourselves out of this stagnant economy, to reduce unemployment? We are approaching our second lost decade, and nothing seems to work. Not that most people care.
There used to be a lot written about the liquidity trap, where monetary policy can no longer function as a spur to economic recovery. Now it is all about the consumption trap creating similar limits on the ability of fiscal measures to push up employment and production.
Basically Bookstaber, a very smart man, is dumbstruck by everything that’s happened in tech and finance in the past 20 years. He doesn’t know if we’re on the brink of apocalypse or utopia.
So does anyone in government know what he’s doing?
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