tag:blogger.com,1999:blog-17232051.post2665226826973101848..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: Is human capital really capital?Noah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger65125tag:blogger.com,1999:blog-17232051.post-89158114253885474832015-03-01T23:03:18.766-05:002015-03-01T23:03:18.766-05:00What is the math behind this?
It isn't even m...What is the math behind this?<br /><br />It isn't even math. GDP doesn't measure quality of life in an aggregate manner. If the increase in quality of life cannot be quantified in GDP, it doesn't matter to economists.<br /><br />Economists are living in a world of their own. It doesn't matter to us.<br />Davenoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-319009184114535652015-02-28T22:01:19.531-05:002015-02-28T22:01:19.531-05:00I know that Noah once pointed out that our current...I know that Noah once pointed out that our current measures of productivity were not very accurate, or at least that we didn't understand fully what was being measured. I think he alluded to it having to do with the service sectors.<br /><br />I think that is probably valid. However, when it comes to modern technology, there's an even bigger problem I think. The main problem is that modern technology costs decrease very rapidly as compared to older technology costs which were tied more tightly to natural resource costs.<br />Davenoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-19323030259409695912015-02-28T21:30:53.512-05:002015-02-28T21:30:53.512-05:00Ok, so here is a bit if leading premise to get int...Ok, so here is a bit if leading premise to get into the argument about IT and total factor productivity.<br /><br />IT innovation was spread across the economy fairly evenly, such that the increased efficiencies were shared by almost every industry and every company. It made many processes of businesses more efficient, and this far outweighs the size of the IT industry as a whole. IT in and of itself is a profitable business, but why would this show up in total factor productivity calculations? In order to do so, it would have to create GDP increases that weren't accountable to the industry itself. In other words, these new efficiencies would have to far outweigh the cost of supporting an IT industry.<br /><br />The problem here is that the efficiencies were so widespread and evenly spread that competition prevented any major capital extraction from these efficiencies. You either adopted these new, expensive technologies or you fell behind and perhaps went out of businesses.<br /><br />When we look at the residual calculation for total factor productivity, the primary effect we're looking for is an increase in GDP not accountable to any new capital outlays or labor increases.<br /><br />Many business processes increased efficiency enormously. Workers were displaced, they mostly found new jobs, and certainly the objective measure of productivity would show this. But is total factor productivity objective in this way?<br /><br />Only if GDP increases faster because of it. And it didn't. GDP didn't grow at an extraordinary rate. A new industry grew, IT, but that isn't what TFP is supposed to measure.<br /><br />People really need to think about this, I think.<br /><br />I'll get some numbers together to make the case stronger and more scientific in the next couple of days…<br />Davenoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-19660833004918519072015-02-27T08:42:21.359-05:002015-02-27T08:42:21.359-05:00Isn't "different than" bad English?Isn't "different than" bad English? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-24572941844721624842015-02-26T20:05:54.871-05:002015-02-26T20:05:54.871-05:00So now look at the above example and assume that p...So now look at the above example and assume that prices don't go down due to the increased efficiency of capital. Of course, if L2 is zero, sales are going to slump due to low demand, but if the people of L2 can borrow some money from the owners of K to prop up demand, and if prices keep rising according to inflation, GDP does in fact rise.<br /><br />In this case total factor productivity rises significantly due to no technological innovation, but only due to the sudden availability of cheap, foreign labor that doesn't buy many imports from the US.<br /><br />What would this productivity increase look like on a graph? It would rise from a baseline to a new level, hold as the shift occurred and then drop back to the baseline after the shift equalized.<br /><br />Precisely what the graph of total factor productivity for the US looks like in the 90s.<br /><br />No, it wasn't IT.<br /><br />The next argument, why couldn't IT create this same pattern? Next time…<br />Davenoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-85078805220506811112015-02-26T17:33:21.163-05:002015-02-26T17:33:21.163-05:00Ok, so I spent an hour on this and I wanted to giv...Ok, so I spent an hour on this and I wanted to give you a very quick way to think about this.<br /><br />Year 1 we have capital input K1 and labor input L1 and produce GDP of Y1.<br /><br />Year 2 we find that we can substitute all of L1 using foreign labor at 1/10 the cost, but due to the shipping costs of materials and resulting capital inputs, let's say it is actually 1/5 the cost.<br /><br />In year 2 we have K2 = K1 + .2(L1) and L2 is zero.<br /><br />In this case we have a huge excess of capital in year 2 compared to year 1. If that capital is not reinvested, GDP, Y actually decreases. If, however, that excess capital is reinvested, it can theoretically add a new L2 term utilizing only that new capital.<br /><br />Think about this for a while. I have to run, but it is an extreme example of the problem.<br />More later.<br />Davenoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-86900650220359226432015-02-26T16:31:12.658-05:002015-02-26T16:31:12.658-05:00It has occurred to me that I might be able to get ...It has occurred to me that I might be able to get my points across better if I didn't come off as so angry. The anger is not entirely about any particular thing but rather my predicament. So sorry for the ways it has squirted out at people. I'm working on it.<br /><br />I wan't to post something on this that will make sense as it ties into my criticism of our calculations for total factor productivity, particularly as it relates to recent technological shifts and offshoring. I hope I find enough time to make the point sufficiently well in the next couple of days…<br />Davenoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-8709488130523406612015-02-24T20:01:39.264-05:002015-02-24T20:01:39.264-05:00Capital
Do you risk failure? Yes.
Is your money ...Capital<br /><br />Do you risk failure? Yes.<br /><br />Is your money invested? Yes.<br /><br />Human Capital<br /><br />Do you risk failure? Yes.<br /><br />Is your time invested? Yes.<br /><br />Labor<br /><br />Do you risk failure? No.<br /><br />Is your time invested? Yes.<br /><br />Welfare<br /><br />Do you risk failure? No.<br /><br />Is your time or money invested? No.<br /><br />https://medium.com/@morganwarstler/human-capital-welfare-real-d24844855adbAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-35202302330597656432015-02-24T19:49:12.201-05:002015-02-24T19:49:12.201-05:00This is getting dumb. You're missing the simpl...This is getting dumb. You're missing the simple point over and over. Human capital can only be utilized by the person in whom it resides.<br /><br />It doesn't matter if that person is doing it on another's behalf and giving all the profits to somebody else, or even if we're talking about Rome and he's a slave. The point is that human capital is inseparable from the particular human in whom it resides. Even if you could legally own him, he's different from physical capital because his capital can only be utilized by one person, himself. Even if you own the fruit, he and only he has to do the work. Do you get it finally? Geeeez.Tom Warnerhttp://globalizedblog.comnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-84371361415092680062015-02-24T13:01:09.183-05:002015-02-24T13:01:09.183-05:00Again, let us take the example of a non-compete ag...Again, let us take the example of a non-compete agreement. For the duration of the agreement, the human in which the capital resides is unable to monetize it except how their employer tells them to. If we extent the duration of the agreement to be "lifetime" then what pray tell, is the difference between the non-compete agreement and selling the capital? In both cases, the new "owner" (or lifetime renter if you prefer) is the only person who can have it monetized. It seems the only difference is how you name the agreement, the terms and outcome are the same.<br /><br />You might claim that the person in which the capital resides remains the owner, even though he has agreed to renounce all control over it, but then in what way does he have any ownership to it? If you sign agreement with someone where they pay you for a house, and you agree to never live in, use, modify, or resell the house to another party, and have no way to cancel the agreement, then in what way do you own the house?<br /><br />Indeed, let us carry the example to the extreme, and someone signs an agreement to utilize their human capital exclusivity for one employer for their entire lives, for applications of their capital, and to do so whenever the employer requests. What is the difference between this agreement and selling ones self into slavery? Only semantics, as The Donk pointed out.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-38124908106182424272015-02-24T11:33:32.402-05:002015-02-24T11:33:32.402-05:00It is a distinction. The owner of human capital is...It is a distinction. The owner of human capital is always the particular human in whom it resides. And it can't be monetized without that particular human working. You can invest in a taxi and hire somebody else to drive it. You can't invest in a law degree and hire somebody else to use your expertise while you sleep.<br /><br />Maybe you're talking about organization capital, or the sort of capital an agent has in a relationship with an actor. Those aren't the same as human capital. The agent doesn't own the actor's human capital, he just has a contract to get a cut from it. And the agent can't get that cut unless that particular actor works.<br /><br />Or maybe you mean slavery or child labor.Tom Warnerhttp://globalizedblog.comnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-64367979150235050462015-02-24T06:27:47.480-05:002015-02-24T06:27:47.480-05:00For anybody who cares, the following links to a jo...For anybody who cares, the following links to a journal article about one aspect of the CCC: http://onlinelibrary.wiley.com/doi/10.1111/j.1467-9957.2005.00467.x/abstractRobert Vienneauhttps://www.blogger.com/profile/00872510108133281526noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-51202255993248071022015-02-23T23:17:38.215-05:002015-02-23T23:17:38.215-05:00http://maxspeak.net/the-case-for-capital/ Trolling...http://maxspeak.net/the-case-for-capital/ Trolling, trolling, over the bounding main . . .MaxSpeakhttps://www.blogger.com/profile/08594964334301228571noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-81005202064180263852015-02-23T21:25:48.412-05:002015-02-23T21:25:48.412-05:00With human capital, the owner and worker can be se...With human capital, the owner and worker can be separate as well. This is not a distinction. The Donkhttps://www.blogger.com/profile/14153840277624094270noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-61013436919504573922015-02-23T21:00:58.058-05:002015-02-23T21:00:58.058-05:00Also, in many jurisdictions, "personal goodwi...Also, in many jurisdictions, "personal goodwill" is a common consideration in business valuation. The Donkhttps://www.blogger.com/profile/14153840277624094270noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-34128136592027303332015-02-23T20:58:32.467-05:002015-02-23T20:58:32.467-05:00Semantics. You can absolutely sell human capital....Semantics. You can absolutely sell human capital.The Donkhttps://www.blogger.com/profile/14153840277624094270noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-42118821853182653302015-02-23T20:45:55.582-05:002015-02-23T20:45:55.582-05:00Thank you Stephen! This debate itself has been an...Thank you Stephen! This debate itself has been an utter waste of human capital, although it does help us price some human capital more accurately. For example, the human capital of anyone who believes that the term shouldn't be used or that human capital doesn't exist should immediately be priced much lower. The Donkhttps://www.blogger.com/profile/14153840277624094270noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-63857551008607720482015-02-23T20:44:25.232-05:002015-02-23T20:44:25.232-05:00We do it all the time when calculating economic da...We do it all the time when calculating economic damages for insurance claims. As in, every single day. We also value the human capital of businesses through valuation of "key men," value of workforce in place, etc.The Donkhttps://www.blogger.com/profile/14153840277624094270noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-35031831740485730572015-02-23T19:14:25.374-05:002015-02-23T19:14:25.374-05:00"especially because in the future, AIs will b..."especially because in the future, AIs will be able to learn skills too."<br /><br />Really, this is true today, and it's interesting. A huge reason for the recent leap forward is the ability to learn from massive data. The new facial recognition software that's as good or better than humans (at least in some important ways), gets good by being fed millions of examples and learning patterns and ways of "thinking" from them. Same with the Google (and soon to be Apple?) car. It has been fed massive information on what occurs when driving, massive data, that it learns from and gets far better as a result.<br /><br />In a way, though, it's hard for people to think of this as skills-capital, becasue the computer does it so quickly and effortlessly. For us, years of hard work and massive money, or opportunity cost, to gain these skills. For the new AI computers, hours or day, and a relatively trivial amount of electricity.Richard H. Serlinhttps://www.blogger.com/profile/09824966626830758801noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-89026255431779948842015-02-23T18:00:55.904-05:002015-02-23T18:00:55.904-05:00He's not selling it in that case, he's ren...He's not selling it in that case, he's renting it!Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-45606848464828042712015-02-23T17:51:00.992-05:002015-02-23T17:51:00.992-05:00"'Human capital' is an option you can..."'Human capital' is an option you can't resell"<br /><br />No, that is what intellectual property is about. If I figure out a great way to do something faster/cheaper, I can patent it, and earn a fee for re-selling (licensing) it. <br /><br />If Bruce Campbell owns the process for grafting a chainsaw onto an arm, because he thought of it, he can license it for money and retire, much the way an owner of regular capital could. <br /><br />There is a special kind of human capital called technology - processes that I own exclusively, that make allow things to go faster or be made cheaper. <br /><br />The difference between human capital (e.g. skills) and physical capital is that I do not destroy human capital when I resell it or license it. Human capital probably has positive returns to scale. <br /><br />Education is the process of replicating human capital. Shouldn't teachers be paid a licensing fee? The way IP business work is that they build annuity licensing revenue. Should that be how we pay teachers (a % of the wages of your students, forever), or colleges?<br /><br />"But suppose I also had coding skills with which I could make money, but really hated to sit around coding. Well, in that case, the cost of extracting value from my human capital would be very high, and it wouldn't really represent much wealth."<br /><br />Hate to quibble here (ok not really), but the wealth of human capital is the net present value of the difference between what people [the market] are willing to pay to extract value [wages] the reservation price [disutility of coding]. <br /><br />Coding skills could represent a lot of wealth, or a little wealth, depending on wages vs dis-utility.<br /><br />In terms of your finance analogy, the strike of an option [here: disutility of coding] does not represent the value of the option [wealth]- it is a function of the difference between the market price and strike.<br /><br />dwbhttps://www.blogger.com/profile/02799793864068767226noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-18649948881782204252015-02-23T15:57:42.581-05:002015-02-23T15:57:42.581-05:00Noah,
I would really like to read a post by you a...Noah,<br /><br />I would really like to read a post by you about the ccc.<br /><br />Best, Chris Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-64421976047888887992015-02-23T15:43:52.734-05:002015-02-23T15:43:52.734-05:00Admit it: you were just dying to use an Army of Da...Admit it: you were just dying to use an Army of Darkness reference! Well played. ShaunPhttps://www.blogger.com/profile/08360992511664194043noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-87425369481157418472015-02-23T14:33:48.841-05:002015-02-23T14:33:48.841-05:00I am always amused by the breadth of my fan base.I am always amused by the breadth of my fan base.Robert Vienneauhttps://www.blogger.com/profile/00872510108133281526noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-46558273583213586872015-02-23T14:07:40.553-05:002015-02-23T14:07:40.553-05:00Gosh, if the noted and successful scholar Robert V...Gosh, if the noted and successful scholar Robert Vienneau says it, it must be true. We should all just hang ourselves now. Or, maybe, he's just an Internet crackpot. Which seems more likely?Anonymousnoreply@blogger.com