is service-based economy an oxymoron?

[Omega 3 snake oil]

This has been on my mind because it is the one point of contention between Stefan and Peter Joseph where I haven't necessarily heard Stefan lock it down.Here's what I mean:  Stefan and Peter (and everyone else) seem to agree that technology inevitably displaces the need for human labour. For PJ, this necessarily means widespread and eventually total unemployment and thus the collapse of economy as we know it. But Stefan seems to think that with maximum freedom we can keep (the) economy going indefinitely--don't mean to put words in Stefan's mouth as I've never heard him say this exactly. It just seems to be implied in his arguments, which I happen to agree with.But, what happens when, say, manufacturing reaches near-total automation--will humans still find ever increasing ways of creating value for themselves? Obviously I don't expect anyone to have a crystal ball on this one... I just mean, in theory/on paper, is it possible to have an economy that is purely service-based?

 

... what say you, FDR-ers?

[masonman]

I don't have any clue of what Stef thinks on the matter, but I can't figure out why automation is ever seen as a bad thing. I am quite confident in my argument that capitalism is always (not as a rule, but as a trend) moving in the direction of achieving technological singularity, and eventually a completely capital-run economy (essentially, press a button, get what you want). The RBE is kind of an attempt to achieve that, but without factoring in subjective value and economic calculation.

 

People seem to have this idea that unemployment is ALWAYS bad. 100 percent unemployment in a society without automated capital goods would just lead to death and starvation. But if every single person on Earth had their job replaced by a machine, that would simply mean we'd live in an economy where it would kind of feel like "post-scarcity" even though it wouldn't be, though it would be a life of abundance.

[dsayers]

You said it yourself with your use of the word displacing. Different from replacing. A machine might do the work of X people, but now you need Y people to engineer, manufacture, and maintain those machines. It frees those X people up to do other things. Or makes it to where everybody needs to work that much less during the week since the labor can be distributed among more people.

 

is it possible to have an economy that is purely service-based?

 

If there comes a time when all people want from one another is services, then sure. I cannot fathom how this could ever come to be. Either we have to manufacture the food from raw sources or we have to make the machines that harvest food from raw sources. As I see it, goods will always be part of the equation.

[Aikenrooster]

We use computers to automatically place orders for machinery, run machinery, design machinery, and build machinery, etc. But, the computers and machines are still just running human programmes.

 

What happens when we have a machine so technologically advanced that it not only can make a copy of itself, but can choose to design other machines, which make machines?

 

This is one of the great topics for discussion in our time.

[tjx]

i read all replies and they were good. i'll add a little.

 

But, what happens when, say, manufacturing reaches near-total automation--will humans still find ever increasing ways of creating value for themselves?

 

yes. our desires will always provide new things to value.

 

 

I just mean, in theory/on paper, is it possible to have an economy that is purely service-based?

 

no, a closed economy always needs production. services are just a function of increasing wealth.

 

by a closed economy, i mean the world. could a country get by on a service economy? yes, but some country somewhere would have to produce something. the producers would have the highest standard of living and the servicers would have a lower standard even though there are many service jobs that pay more than producing jobs. still the producers would have the most benefit.

[MrCapitalism]

In praxeology, humans make definitive choices in order to satisfy their chosen needs. Usually the first choices are about finding food and shelter, that isn't necessarily so. What is logically concluded however, is that the most important needs are satisfied first, however those needs are chosen. This is the 'hierarchy of needs' which is created within the mind, and therefore acted upon. Somewhere way down the list is the time and energy expended in labor in exchange for meeting greater needs. As technology progresses, extra labor is spent only to satisfy lesser and lesser needs.

 

At some point, it just isn't worth spending the time to go to work and make extra money to buy useless crap you don't need. Where that point is located is very dependent on who you're asking. I think the existence of a 'service economy' is a signal of the progression closer towards it.

 

And no, we don't live in a service economy... we live in an inflation economy, which fools people into thinking it's a service economy, up until it collapses.

[J-William]

So the idea is that automation will lead to mass involuntary unemployment and therefore starvation or some other really awful scenario, right?

 

First answer, it has not in the past and there is nothing in the study of economics that would make one suppose that it will at any point in the future.

 

Second answer... People provide value for things of value, so as long as you can provide enough value to other people they will provide what you value.

In the past it was very hard to produce much more than you needed to sustain yourself and your family, as technology advanced that became easier and now it is possible to live in great luxury that wasn't afforded to the wealthiest people 100 years ago.

If you simply want to sustain yourself you could probably get by only working 10 hours a month.

In the future there will be better technology, and perhaps you'll be able to sustain yourself on 1 hour of work a month, and looking far into the future 1 hour of work a year... But few people would want that when they saw their friends wizzing around in flying cars...

[tjx]

 

In the past it was very hard to produce much more than you needed to sustain yourself and your family, as technology advanced that became easier and now it is possible to live in great luxury that wasn't afforded to the wealthiest people 100 years ago.If you simply want to sustain yourself you could probably get by only working 10 hours a month.In the future there will be better technology, and perhaps you'll be able to sustain yourself on 1 hour of work a month, and looking far into the future 1 hour of work a year... 

 

you show a deep understanding of economics. automation has been mankind's greatest boon and will continue to be, as long as we don't let socialism overwhelm us.

 

in addition to all you've said, automation adds to the value of the dollar, since it makes things cheaper. of course other things like taxation and over regulation reduce the value of the dollar. so it's a constant tug-of-war between value and devalue. the stronger a nation's economy is, the stronger their currency is. they go hand in hand.

[Magnus]

is it possible to have an economy that is purely service-based?

 

 

 

Once upon a time, having access to a water source was synonymous with wealth.  Then arable land was synonymous with wealth.  Then coinage was synonymous with wealth.  Then manufacturing capacity was synonymous with wealth.

 

At the moment, wealth is the rate at which electronic blips get passed between people.

 

As long as the quality of life can be improved by doing certain things instead of other things, there will always be an economy.

[Omega 3 snake oil]

At the moment, wealth is the rate at which electronic blips get passed between people.As long as the quality of life can be improved by doing certain things instead of other things, there will always be an economy. 

Yep. And is the rate at which electronic blips get passed between people presently improving quality of life? Not saying it's not, just curious as to how it is, if it is.

[dsayers]

I'm not an economics guy, but I would say that it does if only for its effect on our capacity to trade. We're no longer limited by business hours of a bank or proximity to an ATM or even the product we're trading for for that matter.

[tjx]

Yep. And is the rate at which electronic blips get passed between people presently improving quality of life? Not saying it's not, just curious as to how it is, if it is.

it isn't. what improves the quality of life is production. the more production we have, the better and easier life becomes. automation is a great way to increase production.

[Magnus]

it isn't. what improves the quality of life is production. the more production we have, the better and easier life becomes. automation is a great way to increase production.

That doesn't really answer the question. "Production" includes both products and services. Manufacturing widgets is a kind of service. Although objects are sold on a per unit basis, and the buyer never meets the maker, the distinction between product and service is largely imaginary. What improves the quality of life is subjective -- the satisfaction of desires. If that means paying for the temporary use of things rather than permanent ownership of them, then so be it. Sometimes use is all that's desired.

[tjx]

That doesn't really answer the question. "Production" includes both products and services. Manufacturing widgets is a kind of service. Although objects are sold on a per unit basis, and the buyer never meets the maker, the distinction between product and service is largely imaginary.What improves the quality of life is subjective -- the satisfaction of desires. If that means paying for the temporary use of things rather than permanent ownership of them, then so be it. Sometimes use is all that's desired.

Magnus, services would not exist without production. that's because without production nothing can be paid for. and it doesn't matter that the buyer never meets the maker.

 

without production we would not just suffer, but die. even the cavemen had to produce. they made spears and animal hides. the food they harvested was also part of what they produced. and although they mostly consumed their own production, they probably enhanced their 'wealth' and increased their 'standard of living' which increased their chances to survive, by trading their excess production. their excess production was their currency of the time.

[Magnus]

Magnus, services would not exist without production. that's because without production nothing can be paid for. and it doesn't matter that the buyer never meets the maker.

 

without production we would not just suffer, but die. even the cavemen had to produce. they made spears and animal hides. the food they harvested was also part of what they produced. and although they mostly consumed their own production, they probably enhanced their 'wealth' and increased their 'standard of living' which increased their chances to survive, by trading their excess production. their excess production was their currency of the time.

 

I don't disagree with any of that.  Yes, production of things will always be necessary, so that we have food, clothes, shelter, coffee, computers, notebooks, coffee, refrigerators, coffee, etc.

 

The capacity for manufacturing has grown tremendously, not only since 1750, but since 2005.

 

Will people find ways to increase wealth, despite the vast increase in material output and its efficiency?  Sure.  Machines are just media -- extensions of man.  They enable people to do things we do.  They are not laborers -- they are labor-magnifiers. They do not ACT, in the Misesian economic sense of the word, i.e., in the sense of making choices about how to behave in order to pursue the fulfillment of one's goals.

 

For example, designing the things that the machines make is a service, but also a form of economic production.  Making fine art is a form of economic production, even if it's just writing an e-book or singing a song or speaking a role in a play, which have almost no durable, tangible manifestation at all.  These things improve lives to the extent that people want them, and they're willing to forego something else to get it.

 

"Growing" or "improving" the economy is a matter of increasing the coordination of production with consumption.  It's not a matter of the volume of stuff produced, or the number of dollars circulated by transfer agents, or the number of barrels of petroleum pumped or burned.  It's the degree of coordination between producers and consumers (and we all play both roles, at different points throughout the day).  It's the degree to which people are doing things that other people are willing to trade for.

 

So, economic improvement will always be possible, even if the growth areas of the economy consist mostly of finding new or better ways to provide desired services, while the physical production of things becomes easier, and thus less and less of a limiting factor.

[tjx]

 

 

 

For example, designing the things that the machines make is a service, but also a form of economic production.

 

i think we need to be careful about what we call services. true services have no product. waitresses, repairmen etc. provide a service. but many people say dentists are servicers. but dentists produce fillings and such that have user value (they help you to be able to eat). if we blur the lines between services and production, then everything can be called a service and it loses its meaning.

 

Making fine art is a form of economic production,

 

art would lose its value in a destitute world. it's hard for us to fathom this because we were born late enough that we were born into a wealthy world. we could be frivolous with our wealth because we had so much of it. but we're on a wealth destroying course now and the effects will be profound.

 

even if it's just writing an e-book or singing a song or speaking a role in a play, which have almost no durable, tangible manifestation at all.  These things improve lives to the extent that people want them, and they're willing to forego something else to get it.

 

yes, and again that's because there is much wealth in the world. unfortunately for us, we're in the process of destroying wealth with socialism.

 

"Growing" or "improving" the economy is a matter of increasing the coordination of production with consumption.  It's not a matter of the volume of stuff produced,

 

the boom and bust cycle is really just errors of production. there's no crystal ball way to know precisely how much to produce. even 'just in time' doesn't help. so ultimately, production can't be successfully coordinated with consumption. if it could, there would never be things like 'rebates'. or huge discount sales. we just have to live with errors of production. maybe in the future technology can solve the problem by instant manufacturing. but we can't do that now.

 

until that day comes, we will naturally try to produce everything we think we can sell. and if we need more, we'll produce that too because there's profit in it.

 

or the number of dollars circulated by transfer agents,

 

of course dollars are products. they're just the 'grease' in efficient trade.

 

It's the degree to which people are doing things that other people are willing to trade for. 

 

which is value at its fundamental form.

 

So, economic improvement will always be possible,

 

yes, as long as we aren't taxed and regulated into oblivion.

 

even if the growth areas of the economy consist mostly of finding new or better ways to provide desired services,

 

yes, if the free market is allowed to work more wealth gets generated and more services will become available. but as i keep repeating, the socialists are slowly taking over the country. business are going to close. prices are going to rise and misery index is going to skyrocket. the only way out is to roll back tyranny (big government).

 

while the physical production of things becomes easier, and thus less and less of a limiting factor. 

 

yes, as technology advances, the cost of production keeps approaching zero. and again, that's not happening here anymore. we are going to be punished economically for electing socialists and tyrants. 

sorry i messed up the above post. i'm just learning how this board works..