How a Small Country Can Quickly Capture Gains from the Technological Economy

In the ATOM publication, we examine how the only way to address the range of seemingly unrelated economic challenges in a holistic manner is to monetize technological deflation.  For reasons described therein, the countries best suited to do this are small countries with high technological density.  Furthermore, we examine the importance of the first-mover advantage, where when a country can monetize the technological deflation in the rest of the world for the benefit of their domestic economy, the first $1 Trillion is practically free money.  

In Chapter 10, I outline a systematic program for how the US could theoretically transition to this modernization of the economy.  But I then identify the four countries that are much more suitable than the US.  These are two Western democracies (Canada and Switzerland) and two Pacific-Rim city states (Singapore and Hong Kong).  But it is possible to create custom solutions for more countries as well.  To determine how to do that, let us go back to a seminal event in the emergence of these ideas.  

What Japan Discovered for the Benefit of Humanity : Few people have any awareness of what an important event happened in April of 2013.  Up to that time, the US was the only country that had embarked on a program to engineer negative interest rates through monetary creation (rather than the punitive and reductive practice of deducting from bank accounts).  Japan decided that after two decades of stagnation and extremely low interest rates, something more drastic and decisive had to be done.  The early success of the US Quantitative Easing (QE) program indicated that a more powerful version of this could be effective against the even worse stagnation that Japan's economy was mired in.  

In April of 2013, the Bank of Japan (BoJ) decided to go big.  They embarked on a program of monetary easing in the amount of 30% of their annual GDP.  This was a huge upgrade over the US QE programs for two reasons.  Firstly, it was much larger as a proportion to the host nation's GDP, and secondly, it had no end date, enabling long-term decisions.  Since the formal economics profession in the West is burdened by a wide range of outdated assumptions about money printing, inflation, and technology, the Western Economists yet again predicted high inflation.  And yet again, they were wrong.  There was no inflation then at the start of the program.  Japan had correctly called the bluff of the inflation specter.  The third-largest economy in the world could print 30% of its GDP per year for five years, and still experience no inflation.  When I observed this, I drew the connection between technological deflation (worldwide) and the vanishing QE (also worldwide).  Most of Japan's QE was flowing outside of Japan (and indeed into the US, which had long since stopped QE, and has forestalled a major market correction only by drawing from overseas QE, mainly from Japan).  Hence, the combined QE of the world was merely offsetting the technological deflation worldwide.  Japan's big gambit proved this, and in doing so, they showed us how much QE can be done before world inflation even hits 3% (i.e. much more than formal economists thought).  

What is a Small, Prosperous Country to do?  While it is always better to be a prosperous country than an impoverished one, almost every small country (the size of Canada or smaller) is faced with a major vulnerability in the modern economy.  Their economy invariably depends on one or two major industries, and is hence vulnerable to a technological disruption that arises from somewhere else in the world.  The need to diversify against such external risks is obvious, but most countries are not on the best path to achieve this goal.  

These days, everyone I meet from the government of some foreign country seems to have the same goal for their country - to create an ecosystem of local technology startups.  This goal is not just extremely difficult to attain, but it is very misguided.  Technology is becoming increasingly governed by winner-take-all dynamics and capital concentration, which means even in the US, rival cities are unable to compete with Silicon Valley (which itself has concentrated into a smaller portion of the San Francisco Bay Area than was the case in the late 1990s).  Small countries with technology sectors, such as Israel and Singapore, started decades ago and have a number of unique factors in their favor, including a major Silicon Valley diaspora.  Hence, a country that thinks it is productive to create a tech startup cluster in their countries will almost certainly create a situation where young people receive training at local expense, only to leave for Silicon Valley.  So these initiatives only end up feeding Silicon Valley at the expense of the original country.  Even if a few tech startups can be forcibly created in the country, it is extremely unlikely that they will achieve any great size within even 15 years.

Take, for example, a country like New Zealand.  It has many favorable characteristics, but certain disadvantages as well in an increasingly globalized economy.  It relies on agricultural and dairy exports, as well as the film industry and tourism.  It is too remote to easily plug into the well-traveled routes of tech executives (less than 30M people live within 3000 miles of New Zealand) or major supply chains.  It is too small to be a significant domestic market for tech (particularly when a functional tech ecosystem has to comprise of startups in multiple areas of tech in order to achieve rudimentary diversification).  New Zealand's success in getting Hollywood films shot in New Zealand cannot similarly translate into getting some Silicon Valley business, as an individual film project has a short duration and distinct ending, with key personnel on site for just a brief period.  Technology, by contrast, is inherently endless, and requires interdependency between many firms that have to have co-location.  Furthermore, no society is capable of placing more than 1-2% of its population into high-tech professions and still have them be competitive at the international level (most tech innovation is done by people in the top 1% of cognitive ability).  For this reason, a tech startup ecosystem does not create broad prosperity (it is no secret that even within Silicon Valley, only a fraction of people are earning almost all the new wealth.  Silicon Valley has among the most extreme inequality found anywhere).  

Now, from the research contained in the ATOM publication, we know that there is a far easier solution that can deliver benefits in a much shorter time.  New Zealand's fiscal budget reveals that as of 2018, it collects about $80 Billion in taxes and spends the same $80B per year.  The world was recently generating $200B/month in QE and is still doing an insufficient $120B/month.  The entire annual budget of New Zealand is well below one month of the world's QE - the QE that is needed just to halt technological deflation.  It would be very easy for New Zealand to waive all income taxes, and merely print the same $80B/year from their central bank.  A brief transition period can be inserted just to soften the temporary downgrades that international rating agencies deliver.  But the waiver of income tax will boost New Zealand's economy with immediate effect.  It can even enter and dominate the lucrative tax-haven industry until other countries adopt the same strategy.

As we know, it is difficult for government officials, legislators, and statesmen to take such a drastic step, particularly when the entire Economics profession is still mired in outdated thinking about how QE will someday, somehow cause inflation (despite being wrong about this for 9 years and over the course of $20 Trillion in cumulative world QE).  For this reason, a second, less drastic option is also available for New Zealand.  That involves create what I describe as a Sovereign Venture Fund, where the New Zealand Central Bank creates a segregated account that is completely partitioned off from the domestic economy, and prints money to place into that account (say, $100 Billion).  It is crucial that this money not circulate domestically at first, as it would cause inflation.  The purpose of this $100B Sovereign Venture Fund is to invest in startups worldwide that might be disrupting New Zealand's domestic industries.  This model is extremely effective and flexible, as :

• i) The money was not taken from New Zealand taxpayers, but rather generated for free by the New Zealand Central Bank.  Hence, it can invest in speculative startups across the world with far more boldness.
• ii) The diversification achieved is immediate, and can always be adjusted with equal immediacy as needed.  
• iii) The Fund is leveraging the rest of the world's technological deflation for New Zealand's domestic benefit.  
• iv) Tech startups worldwide become extremely vocal advocates for the fund, and even the country itself.  It boosts New Zealand's branding (generating even more tourism).  
• v) Fund gains can be used to offset government spending by replacement of income tax, or to fund training to enable citizens to modernize their skills.  It can also provide a greater social safety net to cushion industries buffeted by disruption, but without taxing those who are still working.  This is how to repatriate the money without inflation.  
• vi) Even a larger fund of $800B can earn $80B/year from a 10% return, which exceeds the total taxes collected by the country.  

The Sovereign Venture Fund is an extremely effective, speedy, and versatile method of economic diversification.  It can be customized for any prosperous country (for example, an oil exporter should simply invest in electric vehicle, battery, and photovoltaic technologies to hedge their economic profile).  As a huge amount of worldwide QE has to be done just to offset technological deflation, there is no contribution to inflation even worldwide, let alone domestically.  As the winds of technological change shift, the Fund can respond almost immediately (unlike a multi-decade process of creating a tech startup ecosystem only to worry if the sectors represented are about to be disrupted).  

Since there is a very high and exponentially rising ceiling of how much world QE can be done before world inflation reaches even 3% (about $400B/month in 2018, as per my calculations), there is an immense first-mover advantage that is possible here.  The first $1 Trillion is effectively 'free money' for the country that decides to be Spartacus.  

New Zealand, in particular, has even more factors that make it a great candidate.  The NZ$ is currently too strong, which is crimping New Zealand's exports.  This sort of program may create a bit of currency weakening just from the initial reaction.  For this additional reason, it is a low-risk, high-return strategy for generating a robust and indeed indestructible safety net for New Zealand's citizens, hedging them from the winds of global technological disruption.  

Related ATOM Chapters :

Chapter 4 : The Overlooked Economics of Technology

Chapter 10 : Implementation of the ATOM Age for Nations

 

 

 

Comments

[Ed Zimmer]

Kartick,
Good proposal. Certainly looks workable for a country like NZ. Problem is technological deflation isn't well-accepted (even among the heterodox economists) - and the mainline economists haven't even grasped the elementary implications of a fiat currency. I'm not as strong an advocate of no income tax as you are. I can't shake the feeling that it adds some credibility to the currency (credibility that a fiat currency depends on) - but I do agree it's economically not needed.

[Kartik Gada]

Ed,

Yes. I think that the volume of international trade done by a country is a stronger determinant of that country's currency credibility, more so than how it taxes its own citizens. Remember that the US did not have any income tax until 1913.

[Geoman]

This is an interesting concept. If the fund is neutral, that is to say, the investment profits go to "pay back the fund", then, over time, the fund could be entirely replaced by investments.

Dividends from the fund would be used to "pay back" the treasury, which could, at their discretion, simply burn the money. Or distribute it out to the NZ economy.

The fiat investment in the fund would slowly evaporate, and the fund would eventually be made of real assets.

I think you have just figured out how to spin straw into gold.

[Ed Zimmer]

Kartick,
Yes, but in 1913 (and well into the '70s) the US currency was commodity-based (ie, redeemable into gold) & now it's pure fiat. The value of current US currency is the users' perception of the strength of its economy. While trading partners are among those users, the far greater number are the US people. PCE (Personal Consumption Expenditure) represents well over 80% of GDP while Net Import/Export hovers in the 6-7% region. So the perception of both is important, but I'd argue that the US economy could remain viable (and maybe even strong) even if no other country wanted our dollar at all.

Geoman,
I think what Kartick had in mind was using the Fund's profits to supplement its payments to its people. The Fund gives NZ a way to participate in the tech economy despite having little opportunity for direct participation.

[fatcat]

A side note. I can think of one notorious high-tech investor in New Zealand - Kim Dot Com..

[Kartik Gada]

Geoman,

I think you have just figured out how to spin straw into gold.

Heh. Now if only I can get some recognition. People have won the Nobel Prize in Economics for much less significant innovations than this.

While there is no need for the Fund to return back the printed money (since the world has to do an ever-rising amount of printing just to offset technological deflation), that is a good marketing ploy to deter initial critics. Years later, no one will demand that the initial capital be returned back to the central bank.

Note that this is still the second choice after ATOM-DUES and 0% income tax, as the latter creates a more broad-based prosperity, while the Sovereign Venture Fund will contribute to tech bubbles. The Sovereign Venture Fund is just a more turnkey step that may face less resistance, if ATOM-DUES is just too high-concept for current governments.

[HB]

The main issue with addressing technological deflation has always been:

(A) Will the benefits of technological deflation flow in a meritocratic way to those who one way or another either participate or have participated in the past to the advancement of technology towards the singularity ?
or,
(B) Will meritocracy be diluted and the benefits of technological deflation be distributed through the political process and government fiat?

The de facto answer for many countries may be (B), because, well,... in a democracy... the public will just vote for (B). Why? Because "Yes, they can!"

Printing money so that lesser participants can also enjoy the benefits of technological deflation -- beyond what meritocracy would warrant -- is exactly option (B). So is distributing unearned income through universal unconditional salaries.

But just because electorates can impose option (B), either through money printing or universal income, does not mean that fundamental human nature and motivation will conform to the "will of the people". Reality, and in this case the reality of human nature and motivation, has its own cardinal rules (at least for now because genetic manipulation of humans, eugenics of you want, might be in the cards sometime in the future, but not quite yet).

So the reality will remain that those societies where the benefits of technological deflation flow in an unfettered market driven (meritocratic) way to the technology contributors will have more motivated contributors -- and thus a faster trajectory towards the singularity.

The dilution of meritocracy by politics and government fiat (even when supported by electoral supermajorities) has had a negative impact on growth and prosperity wherever it was applied. From the totalitarian fascist and socialist regimes of past and present to countries which might have become prosperous in less interventionist times but whose rate of growth has fallen pathetically behind the world average ever since they adopted redistributionist policies (e.g. Scandinavia).

The race to the singularity is on, and as everything human irreversibly accelerates, even small differences will lead to ever growing prosperity divergences.

Those societies where the contributors to technological advancement find their meritocratic benefits diluted by money printing, political dirigisme, and universal income handouts, will have less motivated contributors -- and in an era of ever accelerating evolution towards the singularity they will fall pathetically behind.

[Kartik Gada]

Ed Zimmer,

We got off of the gold standard at the right time. Note that over the last several years, gold has fallen by half even in the face of $20T of money-printing. The ATOM always reduces the cost of all commodities (oil, gold, or anything else). Asteroid mining will eventually crash gold prices further.

Cryptocurrencies, whatever their other flaws, prove that commodity-based is no longer necessary. A currency built around computational power would be the most durable.

[Kartik Gada]

HB,

So the reality will remain that those societies where the benefits of technological deflation flow in an unfettered market driven (meritocratic) way to the technology contributors will have more motivated contributors -- and thus a faster trajectory towards the singularity.

I agree with this. But there are three factors you have to take into account.

i) Income tax on these contributors should be zero. That is the single biggest increase in incentives. Not just the tax rate, but complexity of the code (wasting hundreds of hours researching various loopholes).

ii) The Upgrade Paradox is real. Technology is constricting its own demand.

http://www.singularity2050.com/2017/04/the-upgrade-paradox.html

iii) Technological deflation has to be offset, so perma-QE has to be done anyway.

For this reason, 0% income tax + ATOM DUES is best. Let the less capable be a leisure class - there is still value in being consumers of technology.

The Sovereign Venture Fund is relatively easier to sell, and more likely to lead to financial profit for me, so that is where that arises. But it is less comprehensive of a solution, even in the race to The Singularity, than ATOM-DUES + 0% income tax.

[Kaneki]

People have a natural aversion to a central authority controlling the money supply. People are already using gold, bitcoin and similar products to store their savings instead of EUR. In your system people would ditch the inflating currency instead using a deflating medium to store their money. Why would i or anyone use EUR or USD if some asshole is printing billions a month making my money lose value. Technological deflation is good and should not be "undone" by printing extra money.

[Fatcat]

Hi Kartic ,
...while the Sovereign Venture Fund will contribute to tech bubbles. The ...
And at the same time provide infestent cash for the technological improvements. And it's market value child b used as collateral out some kind of backing of more quantified reading or local income redistribution

Hi HB,
. ..So the reality will remain that those societies where the benefits of technological deflation flow in an unfettered market driven (meritocratic) way to the technology contributors will have more motivated contributors -- and thus a faster trajectory towards the singularity.

To a degree you are right. But don't forget that the technological innovation didn't happen in vacuum. It needs a stable, low abiding society with enough purchasing power, less perverse incentives and somewhat correct taxation of externalities. The redistribution off the gains is the price to maintain such a society. On the other hand if the concentration of power and riches is too high and the inquiry is rampant then the society is unstable and without vertical social mobility which in turn reduces they meritocracy.

Hi Kartic ,
...
. Note that over the last several years, gold has fallen by half even in the face of $20T of money-printing. The ATOM always reduces the cost o

One big factor are the fallen oil prices. After all, with cheap energy you could mine cheaper gold. Ironically, gold prices are similar to platinum which is way more rare. But since it is still a major final instrument the good just sits in vaults in the form of gold bars...

[Fatcat]

Hi Kaneki,
...Technological deflation is good and should not be "undone" by printing extra money....
As long as there is an adequate supply of liquidity you are correct.

[Geoman]

"While there is no need for the Fund to return back the printed money (since the world has to do an ever-rising amount of printing just to offset technological deflation), that is a good marketing ploy to deter initial critics. Years later, no one will demand that the initial capital be returned back to the central bank."

Exactly. I think what you are proposing is monetizing good government. This solution would never work for Cuba or Egypt. Why? Because there is low trust in the government. Outside investors would force the currency lower to the exact degree money was printed.

And naturally, I favor such wealth funds being created to fund portions of the government, that are then split off to form non profit corporations. For example, a NASA that pursues exploration and settlement of space, which is funded entirely from the earnings of a trust fund set up for that purpose. The fund is set up, the agency spun off, and the federal government reduces annual spending accordingly.

We would have non-profit corporations building housing and roads, performing research, teaching kids. The USGS. NOAA. An enormous number of these agencies would be gone.

And not only would the federal budget be constantly shrinking, the agencies would be more free to pursue their purposes free of congressional or presidential interference.

Just to give a good example, NASA. It has become obvious to everyone that the SLS is a bust, and the NASA money could be better spent contracting all launch services to Spacex. But they can't. Why? Congress won't let them, and wants the money to keep flowing where it is flowing. NASA could BUY 10-15 launches of the Falcon Heavy for the cost of developing the SLS, and another 10-15 launches per SLS flight. How incredibly wasteful.

A non-profit would be free to cut the cords and start bidding each launch out. Billions would be freed up for additional missions of exploration.

[Donny]

I'd like to thank you for the ATOM publication. I've shared it and your Misandry Bubble article more in the past year than any other pieces of work I've come across.

Since reading the ATOM publication I've heard Ray Dalio mention the high probability of a recession coming in the first half of 2018 and the government may have to resort to "helicopter money" which is similar to your DUES proposal but likely with the intention of it being a temporary stimulus.

What are you thoughts on the timeline of the upcoming financial crisis now that 2017 has come and gone?

[Kartik Gada]

Hi Donny,

Thanks for reading.

I said that the crisis may begin in 2017, and that top to bottom takes 18 months or more. The top was almost certainly in 2017, as measured by the ^vix index, and the stock market peak was 1/26/18, or 26 days into 2018.

One could note that the surprise election of Trump boosted the markets that delayed a more decisive fall by a few months, but otherwise, it nonetheless seems like the top is behind us.

[Donny]

Thank you for your reply. I am not familiar with bear markets and the time they take to unwind, and I would not expect even the most prescient to precisely time the market. Selling early in this instance is much safer than selling late.

Peter Schiff said the same re: Trump delaying the market fall. Of course Schiff is always calling for a crash and sees inflation caused by QE as the biggest issue.

Keep up the great work, I look forward to each new post.

[Kartik Gada]

Geoman,

The problem with non-profits is that they are prone to corruption and politicization.

A sovereign venture fund, while still prone to a little bit, has a lot less overhead and the returns are published openly.

In the case of New Zealand, an $80B/year Federal tax burden can be mitigated by an $800B Fund that earns 10%/year. The spending level can hence rise at 10%/year (which is faster than it currently is).

[fatcat]

I am afraid it will take at least 10 years before your views become mainstream. For example we have fears of budget deficit:
https://www.washingtonpost.com/news/wonk/wp/2018/04/09/why-americas-return-to-1-trillion-deficits-is-a-big-problem-for-you/?noredirect=on&utm_term=.661e8e74070d

[HB]

Kaneki,

The currency may not actually deflate, at least not much. But you are absolutely right. If ATOM contributors can keep more of their unfettered contribution to technology, by inventing and using a deflating currency, then they will do so.

Printing money is still redistributive central planning and will require coercion to implement (the outlawing of alternative currencies or other yet to be invented mediums of exchange). As with any distortion ways will be eventually found around it-- though the longer the distortion lives the bigger the correction shock.

Eventually the compounding distortion of money printing and the coercion involved in forbidding a naturally deflating currency will grow so large that ATOM contributors will do anything to bypass it -- even if they have to emigrate to a jurisdiction that does not print money and rewards them in a hard naturally deflating currency. Heck, as the money printing distortion relentlessly compounds to astronomical proportions any escape to a more meritocratic system that does not dilute the rewards of technological deflation will become the top priority of ATOM contributors.

There is no particular "asshole" printing money. People themselves will either directly or indirectly ask for it (as you can see from the comments in this blog) in an attempt to redistribute more widely the benefits of technological deflation.

But the distortion may then become so large that ATOM contributors may be willing to move to jurisdictions with high levels of authoritarianism, so long as they can escape the people's money printing democracies. We are already seeing such trends in e.g. Europeans moving to Dubai or Singapore.

As wealth irreversibly and exponentially compounds economic freedom becomes increasingly important and at some point even overtakes social freedom. For example, in France you can demonstrate every weekend, or every day if you want, but day-in-day-out your fellow citizens confiscate more than half of your vitality through taxes, and yes, money printing too. In Dubai the sheikh forbids demonstration but only confiscates a third of the vitality compared to what the French people confiscate for their communal endeavors. As prosperity grows exponentially and increasingly becomes the dominant factor in decisions, an increasing number of people find Dubai more attractive --and actually freer on balance -- than France.

Unprecedented and exponential increasing mobility is forcing even dictatorships to compete. Voter-lemmings who hang on to redistributionist policies either through taxation, regulation, or money printing, are on their way to economic extinction. I think that some (but few) democracies with wiser electorates will escape -- or at least I hope so!

[Kartik Gada]

HB,

As wealth irreversibly and exponentially compounds economic freedom becomes increasingly important and at some point even overtakes social freedom. For example, in France you can demonstrate every weekend, or every day if you want, but day-in-day-out your fellow citizens confiscate more than half of your vitality through taxes, and yes, money printing too. In Dubai the sheikh forbids demonstration but only confiscates a third of the vitality compared to what the French people confiscate for their communal endeavors.

Yes. Westerners have a very distorted view of what freedom is and is not, and perhaps a certain smugness that they know best (I am now strongly opposed to US attempts to transplant US democracy on entirely different societies, when there are obvious problems from democracy even in the US itself).

[Fatcat]

HB,
Don't forget that a growing economy needs a growing liquidity. You could get away with deflationary currencies until you got an a crisis of overproduction.
And suddenly the best investment is in hard cash. The smartest investors have to be gold bugs! That effective will stop the growth or even lead to a collapse or even wars.

To avoid the stagnation we need enough liquidity.
And the liquidity increase has to offset the sequestered money 💰 and cover the growth too. Having too much liquidity leads to inflation and overheating. Too little to stagnation or reduced growth. To make the things more complicated the money also has speed, can be multiplied by derivatives or landing, or sequestered or slowed down. Ironically, a society that provides enough liquidity and distributes it better through the population is a better market for the ATOM products and a Bette incubator too.

[Geoman]

"The problem with non-profits is that they are prone to corruption and politicization." Unlike...? Governments?

Governments are prone to corruption and being highly politicized, and that is who is calling the shots now. I suspect non-profits, with very specific charters, will likely be less so than they are today.

If NASA had a non-profit charter than said, basically "promote the exploration and settlement of space" it would be fairly easy for us to judge whether they were in fact pursuing that goal or not.

Again, we are talking as if we don't already have vast non-profits doing work in the U.S. Some are bad, but most are unremarkable. Is the Mayo clinic and St Jude's Hospital corrupt and politicized? Untied Way? Salvation Army? YMCA?

[HB]

Fatcat,

I do acknowledge that your warnings about deflation are valid points -- but are nonetheless standard points of conventional economic theory, exactly the standard economic thinking that is much derided amongst singularity followers, myself being one. I don't see why conventional economic thinking must be jettisoned when it comes to money printing but not when it comes to liquidity and deflation.

I'm trying to add more balance to the discussion by pointing out that just as we tend to think that things are now different and money printing is no longer detrimental, so perhaps we should consider that deflation (so long as the underlying cause is exponential technological advance) may also no longer be a bad thing after all. Deflation may simply bring a different equilibrium. Yes, people may engage in more delayed gratification. But there's a limit. Will we stop eating and save the money because there will be much better nutrition in the future? Will we forego personal transportation because there will be much better options in the future? Will we forgo medicine today to spend the money on future medical advancements? Will we not play computer games waiting for much better versions that will soon arrive?

My point remains that money printing is indirect redistribution. Redistributing to non-participants (or distributing more than a purely meritocratic market driven system would) has little utility. Yes, there is the view that redistribution help could turn some non-contributors to contributors, and that is a leftist view, perhaps even a somewhat valid one. But otherwise the main remaining utility of indirect redistribution through money printing is to placate the non-contributing majority, so that they don't exacerbate class warfare, or even start a revolution, and thus slow down or sabotage the ATOM. But that is more damage control rather than true utility.

As pressure mounts (also in an exponential trajectory) ATOM contributors will ultimately escape to jurisdictions that insulate them from this indirect money printing redistribution -- and defend themselves with the weapons made possible by their faster moving ATOM to boot. These jurisdictions may not quite exist yet but they will almost certainly form as their utility to a faster growing ATOM increases.

International balances of power will change -- and change quickly -- and as with everything ATOMic ever faster than ever before. I'm afraid that strong countries that step on the banana-peel of redistribution will become pariahs on the the world stage in a few short decades. Once a society opens the bottle and lets out the genie of redistribution there is no going back. That society will fall off the fast train to the singularity.

[Kartik Gada]

HB,

Redistributing to non-participants (or distributing more than a purely meritocratic market driven system would) has little utility.

Once again, the Upgrade Paradox proves otherwise. Demand constriction due to the rising total costs of various upgrades is a real problem.

At the greatest extreme, Silicon Valley has become a place where almost all the money is made by just 7000 people. I would be fine with that, but they simultaneously obstruct the construction of new real estate supply. If real-estate were built based on market demand, then that would enable *more* technology in SV, not less.

The free market has to be total, not selective. This brings us to your next point..

But that is more damage control rather than true utility.

Yes, but that is a very valid reason to do it. They are still voters, and such a program cannot be implemented unless they can be convinced they are getting something out of it.

Plus, violent revolt can always happen.

International balances of power will change -- and change quickly -- and as with everything ATOMic ever faster than ever before.

Yes. As it should. Few people realize that the US, in devoting its vast but finite resources towards a war against nature itself, has ascertained its own decline unless it reverses this trajectory.

[HB]

Kartik,

I think that what voters will get is emigration of ATOM contributors to jurisdictions that protect them -- with the very arms that a faster moving ATOM enables. Then voters will get nothing.

History is full of electorates that vote themselves into obsolescence, and as the singularity approaches, and thus everything human moves ever faster, this divergence will keep happening ever faster. It is already happening and is already manifesting itself in what leftists perceive as "rising inequality". Voters cannot re-engineer reality, no matter how much their leaders tell them that "Yes, they can!"

I'm rather confident that all four economic models will emerge rather soon, so competition will play out.

a) Jurisdictions that keep redistributing through taxes, some with increasing intensity as they convince their voters that coercive communal action is the only way to address their falling behind.

b) Jurisdictions that step on the banana peel and start redistributing through money printing in hopes of replacing taxation with permanent quantitative easing, only to end up with both taxation and money printing redistribution on top.

c) A few jurisdictions that manage to replace redistributive taxation with redistributive money printing to some extent or another.

d) A few jurisdictions that scale down on central planning and offer redistribution protection to the ATOM contributors thus raising significantly their growth exponent towards the singularity and thus quickly diverging their prosperity compared to the other jurisdictions left behind.

My personal hope is that the last category remains democratic, or at least contains also a few democracies. Because, as I already mentioned, unprecedented human mobility has enabled and will continue to enable such emigration competition that even authoritarian jurisdictions have to play nice and compete offering their citizens freedoms (current case in point Singapore, Hong Kong ...and more to come...)

I agree that the US has ascertained its own decline unless it reverses course. This is obvious since American structural growth rates have now fallen much below average world growth rates. As we approach the singularity all that counts is a country's growth exponent, and a growth exponent that is structurally below world average spells arithmetically deterministic doom. But that is because American voters are increasingly embracing the redistributionist and central planning ideas of Europe, a continent with an even more pathetic growth exponent.

For example, China would have been left in the dust and would not be the threat it is today had western world voter-lemmings not slowed down their growth rates by adopting the redistributionist policies of ever bigger government.

As an indication towards where American voters are headed, notice an important detail: American voters are abandoning the individual freedom principles that propelled them to the top of the world's prosperity rankings and are now showing a particularly nasty reaction to the formation of type d) jurisdictions, with uniquely authoritarian laws such as FATCA, worldwide taxation (something they share only with Eritrea any more), and nasty vindictive tax punishments towards those who emigrate even renouncing their citizenship (most states that employed such vindictive tactics no longer exist).

An oppressive war against reality only exacerbates things, delays the inevitable correction, and brings distortions to a much more turbulent implosive end.

As we move towards the singularity at an ever accelerating exponential rate reshufflings of world prosperity rankings will happen ever faster. Today's high ranking places could quickly become tomorrow's hellholes.

The best use of our time as individuals is to find those ascending future prosperous jurisdictions and emigrate there early. Of course, human global mobility will continue to increase, perhaps lessening the urgency of such moves.

[Kartik Gada]

HB,

I mostly agree. My only disagreement with your thesis is that ATOM-DUES is redistribution, as in reality, a lot more entrepreneurship even among the masses, will take place in the wake of 0% income tax.

0% income tax paired with ATOM-DUES is very comprehensive, and is not really redistribution. The cost of not placating the masses is violent revolt. It is always relatively easy for the masses to round up and execute elites.

[Kartik Gada]

I am meeting Nobel Laureate Jean Tirole on April 30 at the Berkeley Faculty Club. Let's see what happens.

[Ed Zimmer]

Kartik,
Just for the record, I've had another chance to make The Economist readers aware of your ATOM paper - https://www.economist.com/comment/3574648#comment-3574648

[Kartik Gada]

Thanks for persisting, Ed.