Hitting the Wall

To the Wall Street economists, it’s an article of faith that the wants of mankind are infinite. And the best way to satisfy these infinite wants is for the economy to freely adapt to new means of production, new technologies, new systems. Sometimes the old ways of doing things get swept aside, but it’s ‘creative destruction,’ and it’s all good.

For example, when we went from horses to cars for personal transportation, the buggy-whip manufacturers went out of business. But the new machines brought a need for mechanics to look after them.

And for that reason, we’re not supposed to complain when all the manufacturing jobs that enabled vast numbers of us to enjoy a middle-class lifestyle get shipped off to China. Some great new endeavor will appear, bringing new worlds to conquer, new jobs, and new prosperity.

But is that really true?

When the Internet became a popular phenomenon in the 1990s, I thought it a useful means of communication and media distribution, but it wouldn’t be more than that unless we evolved a new sense organ. I fancifully imagined an Ethernet jack growing behind one’s left ear.

But we do have a new sense organ in the form of the smartphone. And it has enabled the Internet to become more than it was in the 1990s.

And yet, as an economic driver, the smartphone hasn’t given us new worlds to conquer:

– There are only so many of us, and each one of us has only two ears and one brain.

– Smartphones have gotten to the point where there is little room for technical improvement. (Apple calls the displays on their newer devices ‘Retina’ because the resolution of the display is comparable to the human eyeball: any further improvement would be of little practical use.)

– Facebook and Twitter have changed the way people communicate, and while they have been profitable for their founders, they employ relatively few people, with the vast majority of their services rendered by machines.

– Time spent on one’s smartphone is generally not productive time, and displaces other activities that are more productive, or at least more engaging.

So while smartphones are fun, and some of us find them useful, they are not the engine of prosperity we’d imagine them to be.

But what is the next engine of prosperity?

Meanwhile, events this week brought another perspective: our Senator, Chuck Schumer, was proposing that the commuter rail authorities and Amtrak pool their resources and create a new joint authority to build new rail tunnels between New York and New Jersey under the Hudson River.

The original tunnels were built over a century ago by the Pennsylvania Railroad. They financed the construction with their own corporate resources and no government subsidies. They built them to last and they serve us to this day.

And if the Pennsy hadn’t been run into the ground after World War II, they might have built additional tunnels in the 1950s or 1960s. But now, there is no government or business entity capable of managing an essential piece of new infrastructure.

And the only solution is apparently to create yet another government agency.

2 thoughts on “Hitting the Wall”

  1. The reason why we invest in infrastructure has changed. It’s not a question of what will yield a positive return for the company building it, but what might attract the most in government subsidies in order to shift costs onto the taxpayer to make it possible to build marginal projects. High gas prices make rail transport more attractive. Intermodal transport (railroads carrying trailers or containers of items) is pretty routine.

    This doesn’t mean that the old projects weren’t subsidized. The government granted land for the railroads to have the right-of-way for their projects, and that right-of-way generally extended hundreds of yards, if not miles, on either side of where the rail was eventually laid.

    Though people’s desires may well be infinite, their ability to pay for what they want is not, and that acts as a brake on acquisition. We are in about thirty years of more or less stagnant wages, so if people want to buy the new shiny thing, they have to give something up or accrue more debt in most cases. There is a “free cell phone” tent a couple of blocks from my house. This is the phone that is paid for by the tax on telephone service that gives people at most a couple of hours of call time monthly for free, and is meant for emergency calls for low-income people. I’d bet that they don’t get an iPhone with that service.

  2. Here’s what I see is the problem: society is changing and we can’t afford it. As I’ve discussed, I worked for the local government run railroad. It was so corrupt and while they claimed they couldn’t afford raises were making sure the big wigs got theirs. Meanwhile they kept raising fees. It really opened to my eyes about corruption but there’s the other problem is they keep getting money where does it go? I worked in a city known for corruption and everyone knows it.

    The other problem of course is declining white collar jobs. Many years ago if you didn’t work in a factory you commuted. My mother got a job paying well after high school. Now of course with technology, outsourcing and visa workers less people commute. Many others are now freelancers working from home. Technology has made it both better and worse.

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