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Zero-sum activities grow in importance as we approach satiation in basic goods and services

7/28/2017

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Adair Turner at INET: 
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"it's striking how much high-talent manpower is devoted to activities that cannot possibly increase human welfare, but entail competition for the available economic pie. Such activities have become ubiquitous: legal services, policing, and prisons; cybercrime and the army of experts defending organizations against it; financial regulators trying to stop mis-selling and the growing ranks of compliance officers employed in response; the huge resources devoted to US election campaigns; real-estate services that facilitate the exchange of already-existing assets; and much financial trading. Much design, branding, and advertising activity is also essentially zero-sum. … 
"Such zero-sum activities have always been significant. But they grow in importance as we approach satiation in many basic goods and services. … 
"The impact on measured GDP and productivity reflects national accounting conventions. …  more and better-paid divorce lawyers increase GDP, because end consumers pay them. But more and better-paid commercial lawyers don't raise output, because companies' legal expenditures are an intermediate cost. ...
"measured GDP and gains in human welfare eventually may become entirely divorced. Imagine in 2100 a world in which solar-powered robots, manufactured by robots and controlled by artificial intelligence systems, deliver most of the goods and services that support human welfare. All that activity would account for a trivial proportion of measured GDP, simply because it would be so cheap. Conversely, almost all measured GDP would reflect zero-sum and/or impossible-to-automate activities – housing rents, sports prizes, artistic performance fees, brand royalties, and administrative, legal, and political system costs. Measured productivity growth would be close to nil, but also irrelevant to improvement in human welfare."
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