Re: economics

Rohit Khare (
Sat, 12 Jun 1999 00:43:02 -0700

> > Like an engineered stock-market bubble papering over the rotting
>> weakness of a genuinely deflationary economy.
>I do not understand the reasoning here. If Moore's Law -- double the
>value every 18 months for the same price -- has begun to apply to
>purple Bonnevilles, why does that make you think of a rotting, weak,
>deflationary economy?
>As I said, I am economically naive. Perhaps the connection here is
>obvious to those skilled in the art.

The short version is that *everyone* has access to faster computers.
It's a stalemate in the arms race; a general heating of the pot for
oblivious frogs. Moore's Law is largely "priced into" the current
economy: we rely on it enough that we are already willing to pay for
future improvements, implicit in the price of various companies.

Thus, the question still is: can computing deliver individual market
players sustained above-trend market advantage? Wal-Mart's supply
chain is a much-ballyhooed example, as was FedEx's tracking (now not
so exclusive).

News, after all, is information that makes a difference: price
variations in an efficient market are only in response to news, not

Regarding another point: leisure increasing the supply of labor. Not
quite; it's more analytically tractable to envision labor as just
another good on the shelf, like flour or diamonds. You pay for it as
opportunity cost of forgone wages. If leisure is worth $20/hr to you,
you can buy more at wage rates of $50/hr than at $10/hr. Of course,
many earners *increase* their workload as their wages increase, since
it's the most profitable segment of their lives to save. The average
US worker puts O(100) more hours in a year than his European
counterpart, most likely due to this logic.

The point of framing leisure as a consumption good is to underline
its nonproductive nature: an hour of leisure may only be worth $20 to
you, but forgoing $50 of real income is GDP's $30 loss. Nothing
productive comes of your leisure, the model says. (sure, there's
mental health benefits, say, of $5, but that was already priced into
your $20; if you had to be locked in a room watching network TV, I'm
sure you'd only pay $15 (or less) for the privilege).