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parallaxicality
2008-Sep-17, 02:50 PM
I've been pondering something after a discussion with a colleague:

Increased productivity requires technology

Technology requires investment

Investment requires capital

Capital requires a surplus

A surplus requires increased productivity.

Am I missing something?

sabianq
2008-Sep-17, 04:08 PM
hi there,

well, my wife is a PhD Economist, and when ever i get into a discussion with her about things related to anything in her field, i am quickly reminded that there is never only one explanation or reason for anything rather there are multiple events and/or reasons that cause any one paticular outcome.

I could suggest that "Increased productivity requires technology" is not a true statement as if i am making flint arrow head, in order to be more productive all i need to do is get my buddy to make them with me. (i am not sure if this is an increase in technology, if he does not know how to make an arrow head and i show him, is this not just a dissemination of technology or skill and not an increase? can the terms "skill" and "technology" be that same? )

when you say "Technology requires investment" do you mean investment in time, money or energy? I can move from making flint arrow heads to copper arrow heads by learning how to smelt and form copper ore into things, this endeavor can be a purely time/energy investment if my source of copper is free and all i need to do is provide the physical energy into refining and melting the copper.

so yes, new technology always requires an investment of time and energy, however, this type of investment may not necessarily be burdensome as the need to invent in humans seems to be innate.

"Investment requires capital" is not really true all of the time either, as states above, an investment in time requires no capital (money) (unless you subscribe to time=money. but in general, with the need for invention, investing time into a project may just require energy. so it really depends on what you are describing.

"Capital requires a surplus" ?? if capital is equal to money, then how can money require a surplus? and what is this surplus? in what instance are you relating this to?

information can also equal capital, say i know where a great spot to fish is. i guess you could argue that my great spot to fish is a "surplus" of fish which is why it is a great spot to fish. but in today's world, a surplus of ____ can also be a burden, who wants a surplus of salt water when they need fresh water.

only when a surplus of something is in demand is when a surplus is equal to capital.

"A surplus requires increased productivity" well, anyone can have a surplus of something without having and increase in productivity. I have a surplus of of apples from my tree because nobody wants apples anymore. my tree did not increase productivity, actually because of the frost, the tree is less productive but demand for the apples is less so i have a surplus with less productivity.

so a surplus can be attributed to less demand which can cause a reduction in capital, this may change the way i do business and force me to invent something new..

I guess that what i am suggesting is that you missed the basic fundamental of the economic principle which is based on supply and of course, demand.

tdvance
2008-Sep-17, 06:17 PM
I'm not an economist, only took Econ 101 in college. But in any soft science (econ teacher said economics was soft because .3 correlations coefficients are considered significant, as opposed to a requirement closer to .9 or .99 for hard sciences) statements are generally not absolute.

So, a=>b and b=>c and c=>d ... y=>z might not mean a=>z since implies "=>" is really "usually implies".

He also taught that if you train a parrot to say "supply and demand", it will correctly answer about half the economics questions you give it.

mugaliens
2008-Sep-17, 09:57 PM
I've been pondering something after a discussion with a colleague:

Increased productivity requires technology

Technology requires investment

Investment requires capital

Capital requires a surplus

A surplus requires increased productivity.

Am I missing something?

Just the clasp on that diamond necklace...

peteshimmon
2008-Sep-17, 10:28 PM
Love the parrot joke. The phrase "conservation
of energy" answers half the questions in
physics.

A lot of economic stuff the past sixty years
or so has been about efficiency. Operational
research and all that. Thinking before
spending! Can still help I think!

Jens
2008-Sep-18, 01:35 AM
I've been pondering something after a discussion with a colleague:

Increased productivity requires technology
Technology requires investment
Investment requires capital
Capital requires a surplus
A surplus requires increased productivity.

Am I missing something?

Well, I majored in economics.

I don't think you're missing something, but the problem is that the terms you use are not necessarily clear. Just as an example, increased productivity is often attained through organization. For example, people began to raise plants instead of just picking them. I.e. agriculture. Now, was there an investment required to do this? Yes, in a sense, but not an investment that required "capital," unless you define capital in a way that includes people getting together and deciding to do something.

Jurassic Clark
2008-Sep-18, 02:50 AM
I'm sure there are economists here, but this is pretty hostile territory. There seem to be an awful lot of people at this board who think they are economists, but are obviously completely ignorant of the field, and are ignorant of their own ignorance.


Increased productivity requires technology

You need to be precise here. Productivity per unit of what? If it is per unit of labor, productivity can be increased by acquisition of capital. A long time ago, that was thought to be the driving force behind productivity increase, although it was shown a long time ago that acquisition of capital can't be the whole story. Improvements in technology can allow higher productivity per unit of labor even holding capital fixed. Technology doesn't have to be so-called high technology; finding a better way to stack the boxes on a delivery truck is a technological improvement.


Capital requires a surplus

What do you mean by a surplus? Savings, available for investment? The next answer assumes that's what you mean.


A surplus requires increased productivity.

A surplus of production over consumption (as per above, assuming this is what you mean), requires that the amount consumed be less than the amount produced. Ever increasing productivity is a nice thing, but is not a requirement for the existence of capital to be invested.


Am I missing something?

That's not a real specific question, but maybe the comments above will be helpful.

Jurassic Clark
2008-Sep-18, 03:02 AM
econ teacher said economics was soft because .3 correlations coefficients are considered significant, as opposed to a requirement closer to .9 or .99 for hard sciences

I really hope your economics teacher did not actually say that.

The size of a correlation has nothing to do with its statistical significance. A very strong correlation can be statistically insignificant if there are very few observations. I just generated two series of random numbers, three numbers in each series, using the microsoft excel rand() function. The results could hardly have been better for the point I'm making. The correlation coefficient was -0.917. It is large, but it is not statistically significant. The flip side is that a very small correlation can be highly statistically significant, if it is based on a large sample.

There is nothing unique to economics here. Suppose a medical study finds that eating a certain amount of a certain food (doesn't really matter what it is) leads to a 20% increase in incidence of a certain type of cancer. The 20% does not tell you whether the result is statistically significant. You need to know the sample size for that. If the 20% was found to hold in a population of ten people, or in ten thousand people - the level of significance will be quite different in the two cases.

Statistical significance is not a measure of the size of a correlation, it's a measure of how sure you are that the correlation actually exists. A small correlation in a large sample can be very significant - even though the correlation is small, you can be quite sure that it is for real. A large correlation in a small sample can be insignificant - with my random numbers, a huge correlation showed up just by luck. It is not statistically significant.


He also taught that if you train a parrot to say "supply and demand", it will correctly answer about half the economics questions you give it.

some of the people at this board could stand some lessons from the parrot.

geonuc
2008-Sep-18, 09:19 AM
I'm sure there are economists here, but this is pretty hostile territory. There seem to be an awful lot of people at this board who think they are economists, but are obviously completely ignorant of the field, and are ignorant of their own ignorance.


some of the people at this board could stand some lessons from the parrot.

Welcome to BAUT, Clark. I think.

Hopefully you'll find something here that doesn't offend you too much.

mahesh
2008-Sep-18, 10:00 AM
.......
some of the people at this board could stand some lessons from the parrot.

Pirates' Day, isn't until tomorrow!

Ivan Viehoff
2008-Sep-18, 10:04 AM
I've been pondering something after a discussion with a colleague:
- Increased productivity requires technology
- Technology requires investment
- Investment requires capital
- Capital requires a surplus
- A surplus requires increased productivity.
Am I missing something?
I'm a professional business economist. Putting the lack of clarity to one side, what you are missing is that every single line is wrong.

- Increased productivity requires removing an inefficiency. There are plenty of inefficiencies capable of being removed that have nothing to do with technology or investment.
- New technology generally requires investment by someone, it doesn't have to be the user, it often isn't. The user can pay for technology as current expenditure: by leasing new equipment, or licensing a new technique, or buying an improved input stock.
- Investment requires an investor who has capital. That can be an external investor, or it can come from internally generated funds.
- Capital formation does require a prior surplus, but see previous comment. The capital formation could have happened some place, some time, else. Plenty of money around until the credit crunch. Somehow your business started, and you didn't have any prior surpluses from your business to fund that even bigger hurdle.
- There are plenty of reasons for making a profit or a loss that have nothing to do with increased productivity. They include the economy, the exchange rate, the interest rate, resource price changes, marketing, what the competitors do, government interventions, random fashion, even the weather.

What we can, sort of, learn from your inaccurate anecdote is that there is a virtuous circle in business that if you make improvements you can make surpluses from which you can internally fund further improvements. Internal funding is often the way to go if you have it available, don't have to waste time courting new investors and keeping them happy, but the external route is also available. But internal funding decisions can be a business's biggest mistakes, because you don't get an external reality check.

Ivan Viehoff
2008-Sep-18, 10:15 AM
I'm not an economist, only took Econ 101 in college. But in any soft science (econ teacher said economics was soft because .3 correlations coefficients are considered significant, as opposed to a requirement closer to .9 or .99 for hard sciences) statements are generally not absolute.
Actually economic statistics are a excellent source of 0.99 correlations that aren't significant.

Ever noticed that a lot of economic statistics just tend to drift in one direction? Correlate a couple of those and you'll get 0.99. Actually you can choose some other statistic that tends to drift in one direction and discover that retail prices in Brazil are very closely correlated to the incidence of AIDS in Botswana.

As usual, it depends what you are doing. Time series analysis requires very careful techniques (known as cointegration analysis) to find real relationships rather than random correlations.

In the type of statistics that is known as cross-sectional analysis (analysis of a population rather than a time series), a 0.3 correlation that is highly statistically significant (eg as shown by the t-statistic) is truly telling you that factor X does indeed account for 30% of the variation in phenomenon Y. That's very similar to the kind of results that you get in the medical sciences, take this drug and 30% more patients get better than with placebo, but perhaps medical science isn't a hard science for you.

You get really weak relationships in astrophysics. Astrophysicists are often happy with results that are + or - 1 in the logarithm of the measurement...

tdvance
2008-Sep-18, 03:53 PM
Love the parrot joke. The phrase "conservation
of energy" answers half the questions in
physics.

and it's been at least considered that "stationary action" answers ALL the questions of physics. If you don't get too specific, anyway.

mugaliens
2008-Sep-18, 08:44 PM
There are absolute droves of people who're paid good money to analyze every numerical stream known to man, including lottery jackpots, to determine the effect, if any, on either the stock market as a whole, or in part.

Over the years they've found many causal relationships suitable for predicting market trends, and many people have gotten filthy rich off the margins.

The thing is, though, that edge doesn't last very long, as when word gets around, those margins disappear.