Thursday, August 27, 2009
Does the long term real price of oil look like it is falling? Sure it may have fallen after the peak in the 70s and again recently, but overall it is up. Oil at $20 is likely gone forever. Oil at $30 is largely gone and unlikely to be seen other than briefly. Oil at $40 or $50 we should see until the next shortage drives another spike in oil prices. We have been able to extract more, but not more cheaply. We will use less, because it is more expensive. We will develop alternatives, because oil will eventually be more expensive than those alternatives. The only way it will fall in price over the long run is if it is displaced and no longer wanted.
Tuesday, August 25, 2009
The division of labor can produce higher quality output and do so more efficiently but only by a limited amount. Labor has specialized since the beginning of civilization but produced only infinitesimal growth. Only the application of scientific knowledge and the advent of powered machinery produced modern levels of growth. This has led to greater specialization but there is little reason to attribute growth to this beyond its embodiment in knowledge and technology. The real usefulness of the division of labor is not in labor at all but in gaining specialized knowledge and replacing labor with technology, automating production.
Thursday, August 20, 2009
The Growth of Real Income (real gdp per capita) in the US demonstrates the transition from an agrarian to industrial to post industrial power. Growth was slow initially but rose over the 19th century in fits and starts. It would rise sharply during booms only to stagnate or fall slightly through busts lasting a decade or more. A dramatic fall occurred over 1929 to 1933 followed by as dramatic a rise climaxing during World War II before settling back to extended consistent growth at the best rates ever. Variability has diminished somewhat over time. Most deviations are small from this upward drift over history. Growth appears to have reached an asymptote of about a factor of 10 per century or about 2.3% a year. So much for past golden ages.