A tale of two corporations

2026-05-102026-05-06 PNRJ core principles, critique of neoclassical economics, ethics, inequality Alphabet, Amazon, capital, Elon Musk, Exxon Mobil, Ford, General Motors, Google, income, labor, Marx, Marxism, McDonald's, Microsoft, profit, revenue, SpaceX, Tesla, United Health Group, Walmart

May 10 JDN 246171

Consider two corporations.

Corporation A has net income equal to 2.9% of its total revenue, and pretax income equal to 4.1% of its total revenue. The cost of its goods sold accounts for 77% of its revenue, with most of the remainder going to wages.

This seems reasonable, right? It doesn’t seem like this corporation is being especially exploitative.

Corporation B has 2.1 million employees, and made net income of $21.8 billion, meaning that it could afford to pay every single employee an additional $10,000 and still be profitable. The median employee at this corporation makes approximately $16 per hour, meaning that this would an income increase of over 30%—an absolutely huge jump in income that would make a big difference in millions of lives. Yet instead they have chosen to buy back $30 billion in shares to raise their stock price even higher.

Corporation B seems like they are obviously exploiting their workers and favoring their shareholders, and directly contributing to the extreme inequality in our society.

But I have a bit of a surprise for you.

They are the same corporation. All of these facts are true of Walmart: Here is their income statement, here is their announced stock buyback, and here are estimates of their number of employees and median pay.

Walmart is not a particularly exceptional case. Similar stories hold for most major corporations: the profit margin doesn’t sound that high as a proportion of revenue, but it still amounts to an enormous sum of money that is being hoarded by shareholders instead of paid to workers.

Amazon’s net income of $90 billion on $742 billion in revenue gives it a profit margin of 12%, but would be enough to give all 1.6 million employees an additional $56,000—in many cases doubling their incomes.

United Health Group made $12 billion in profit on $447 billion in revenue, which is only 2.7%; and yet with 400,000 employees, they could still afford to give each one an extra $30,000. How many nurses would be very happy to see another $30,000?

Exxon Mobil’s $28 billion profit was made on $324 billion in revenue, a reasonable-sounding margin of 8.6%. Yet with only 58,000 employees, that’s $480,000 each.

McDonald’s made $8.5 billion on $26 billion in revenue, a margin of 33% (which is actually pretty high). Yet more than 1.8 million people work at McDonald’s including all its franchises, so it could really only afford to give each one an extra $4,700—which sounds small compared to these other figures, but for a minimum-wage employee ($7.25 per hour is about $14,500 per year), that’s still an extra 32%.

This is something I think we have failed to reckon with as a society.

Once a corporation becomes sufficiently large, it doesn’t need to have a big-sounding profit margin to nonetheless control staggering amounts of wealth and funnel it away from employees into the hands of shareholders. Especially with regard to Walmart and United Health Group, those margins honestly sound small as a proportion of revenue—and yet, they still amount to incredibly vast sums of wealth that are being hoarded away from thousands or millions of workers that desperately need help.

I don’t know exactly what to do about this. More progressive taxes, especially on capital income, might help, and would certainly raise much-needed revenue; but they don’t seem like enough on their own. I think we may need something more radical, like requiring employee ownership of a certain proportion of shares—essentially turning corporations into co-ops.

Another option would be simply not allowing corporations to ever get this big, and splitting them up if they already are. Perhaps being CEO of a corporation with billions of dollars in revenue really is just too much power for one person to have. But I am genuinely concerned that this could reduce economic efficiency and thereby lower the standard of living of everyone.

Some corporations actually seem to behave more fairly.

Car companies, for instance, don’t seem to hoard huge amounts.

Ford actually lost money last year, losing $6 billion on $189 billion in revenue (3.1%). With 168,000 employees, that’s $35,000 each—essentially they gave each employee a free car. And Ford employees do fine: Median annual compensation is $126,000.

General Motors made $2.4 billion in profit on $184 billion in revenue, a margin of only 1.3%. With 150,000 employees, it could give each one an extra $16,000. Given that most of its employees are well-paid (median employee salary is $99,000), I actually don’t begrudge them this. Accounting for the risk of bad years like Ford had, I think GM is being reasonable by not simply plowing that $2.4 billion back into their own employees.

Even Tesla isn’t really an exception to this pattern. Tesla made $3.8 billion on $98 billion in revenue, which is 3.9%. With 135,000 employees, this is $28,000 each—more than GM, but still not completely crazy. Median employee pay at Tesla is over $160,000, so these workers are doing well. What’s weird about Tesla, however, is that its revenue is half that of Ford or GM, yet its market capitalization is a staggering $1.5 trillionwhile Ford’s is only $46 billion and GM’s is only $71 billion. A P/E ratio of 20 is considered reasonable. Tesla’s is 365.)

But there are some corporations that don’t even sound reasonable.

Tech companies in particular tend to have very high profit margins.

Consider Apple; its net income of $122 billion on $451 billion in revenue gives it a net profit margin of 27%. It could give all 550,000 of the employees of not only Apple itself but also all its foreign suppliers a raise of $221,000. Some of these employees are sweatshop workers in China—they would be set for life on a sum like that.

Alphabet’s profit margins are even higher than that; its net income of $160 billion was on $422 billion in revenue, for a net profit margin of 37%. With 190,000 employees, that would be $840,000 each.

Yet Microsoft’s margins are even higher; its $125 billion net income was on only $318 billion in revenue, giving it a net profit margin of 39%. It has 228,000 employees, so it could give every single one an additional $540,000.

SpaceX isn’t publicly-traded, so they don’t have to disclose everything; but it is estimated that they made about $8 billion in profit on $16 billion in revenue—a staggering margin of 50%—and with only about 12,000 employees, it could give every single one an extra $660,000. In fact, Elon Musk himself owns enough stock that he could personally give every single SpaceX employee some $60 million in shares and still be a billionaire. That’s a life-changing sum for anyone who works for a living—neurosurgeons would be awed, and even NBA players would consider that a successful career unto itself. But Elon must see number go up!

This is why I’m still somewhat sympathetic to Marxism, despite not being a Marxist.

There really is something terrible going on here, with capital owners making absolutely obscene sums of money and using it to wield enormous power over our society, leaving their own workers to struggle even though they could easily give those employees enough additional pay to significantly change their lives—and if they all did so, even the capital owners wouldn’t be meaningfully worse off, because they already have more wealth than any human being could possibly need and the overall boost to the economy might even compensate them in the long run.

And turning corporations into co-ops (which is, arguably, seizing the means of production) could actually make a very big difference here, and both theory and empirical data suggests that it would greatly reduce inequality without greatly reducing economic efficiency.

But the labor theory of value is still garbage.

On labor theories of value

2026-05-032026-04-28 PNRJ core principles, inequality, mathematical models Adam Smith, capital, capitalism, Das Kapital, diminishing marginal utility, Karl Marx, Keynes, labor theory of value, marginal utility, Marx, Marxism, price, technology, theory of value, utility, utility theory of value

May 3 JDN 246164

I got into an argument a little while ago with an acquaintance of mine who is an avowed Marxist. He posted something that’s been going around Marxist social media about the “irony” that Marx’s labor theory of value is based on Smith and Ricardo’s labor theories of value (plural; they’re not the same), and thus when defenders of capitalism criticize the labor theory of value, they are in effect betraying their founding figures.

The first point I made in response to this was basically, “Yeah. So?” I think one thing that Marxists—at least this flavor of Marxist; I am prepared to exempt more serious Marxian economists—don’t really understand is that mainstream economists don’t have a founding figure that they worship and consider infallible. There is no inerrant text. I am fully prepared to acknowledge—and did, in fact, in that conversation, acknowledge—that Adam Smith made errors and his labor theory of value was one of them. And quite frankly, any defender of capitalism who worships Milton Friedman or Ayn Rand isn’t a mainstream economist, or is at best a very bad one.

My interlocutor then challenged me to describe these different labor theories of value, and I was foolish enough to take the bait, and then the whole conversation devolved into him playing this smug game of “That’s not what Marx really meant” and “clearly you haven’t read Das Kapital” (even though I have, but I admit it was several years ago; I did call up a PDF copy to refresh my memory during the conversation).

But it got me thinking about labor theories of value, and trying to understand why so many people find them seductive when it really doesn’t take much thought to show that they can’t possibly be right. (This post turned out to be a bit long, but I promise I won’t be as long-winded as Marx.)

So what’s wrong with labor theories of value?

If objects are valued based on the labor put into them, the following four propositions should hold:

A project you spend 100 hours on which ultimately failed and produced nothing useful was extremely valuable.
Everything in the Garden of Eden is worthless, because it doesn’t require labor to access.
If you come up with a cure for cancer in a random stroke of insight, it’s worthless because you didn’t put any labor into it, even though both its utility (the lives it will save) and its price (the money you could make off of it) are surely astronomical.
Increased productivity is worthless, because all it does is make our goods worthless as we get better at making them.

All four of these propositions are clearly preposterous, and yet they all seem to follow directly from the basic concept of valuing things by the labor that goes into them. Mainstream economists eventually realized this, and gave up on labor theories of value in favor of the now-consensus utility theory of value.

To be fair, Marx was no idiot, and he did try to address concerns like these in Das Kapital. (Well, the first three he does; I’ll talk about the fourth one in a moment.) But the way he does so is by continually re-defining his terms in contradictory ways, so that by the time you get through the book, you realize he doesn’t even have a labor theory of value. He has many labor theories of value, and he substitutes them ad hoc whenever they seem to yield the conclusions he’s looking for.

For example: Sometimes he says that it’s the actual labor that goes in which matters. Other times that it’s the “usual” or “socially necessary” amount of labor. Other times that it’s the average amount of labor that would be required for this production across the whole economy. These are not the same thing! They yield radically different results in many cases!

Marx tries to distinguish use-value (approximately utility) from exchange-value (approximately price), which is good; those two things are different. It’s very important to distinguish price from value.

But then he doesn’t even use these concepts consistently! At one point, he gives us this absolute howler:

The use-value of the money-commodity becomes two-fold. In addition to its special use-value as

a commodity (gold, for instance, serving to stop teeth, to form the raw material of articles of

luxury, &c.), it acquires a formal use-value, originating in its specific social function.

– Das Kapital, Volume 1, Chapter 2, p. 63

No, dude. That is exchange-value. That is paradigmatic exchange-value. People mainly want gold because they can sell it at a high price to buy stuff that’s actually useful. If this is use-value, then the distinction between use-value and exchange-value collapses to, well, useless.

I think what Marx is doing here is that he wants use-value to always be higher than exchange-value, so that surplus-value can be the difference between them and always be positive. But gold is a very clear example of a good for which the price greatly exceeds the marginal utility, which I think you can convince yourself by imagining being stranded alone on a desert island with a crate full of gold. If that crate had contained non-perishable food, or water purification equipment, or tools and materials for building shelter, or best of all, a satellite phone and some solar panels, you’d be overjoyed to have it. Even a crate full of books, plushies, or underwear would have some use to you. (Plushies make better friends even than Wilson!) But gold? You have nothing to do but laugh—or cry—at the cruel irony. (And cash would be the same way, though maybe you could use the linen for something.)

But we actually do have a good explanation for how assets such as gold (and Bitcoin) can have prices far exceeding their marginal utility; expectations. If you expect that you’ll be able to sell an asset for more than you paid for it, you have reason to buy that asset, even if it’s useless to you. And for gold, that’s actually been a pretty smart gamble most of the time (Bitcoin, it very much depends on when you bought it). This could be a non-stationary equilibrium in rational expectations, or it could just be an ever-replenishing array of Greater Fools; but one way or another, the reason gold has a high price is that people expect it to have an even higher price in the future.

In fact, this seems like a deep flaw in capitalism! Marx could have spent a whole chapter on why gold is stupid and financial markets are basically a casino—he would have beaten out Keynes on that by decades. (If I were going to worship an economist, it would be Keynes. But again, I still don’t think his work is inerrant. Just very, very good.) But instead, Marx accepted that gold is priced the way it should be, and contorted his already-tortured theory of value into accommodating that.

I really don’t know why Marx was so insistent that all goods had to be valued based on labor. Marx actually had a lot of good insights about capitalism, and he wasn’t entirely wrong that capitalism as we know it breeds exploitation and ever-growing inequality. I believe that relatively simple reforms (like antitrust enforcement, co-ops, and progressive taxation) can solve, or at least mitigate, these problems, and allow us to enjoy the fruits of higher productivity that capitalism provides. But I recognize that I could be wrong about that; maybe some more radical change is genuinely needed. Yet this in no way vindicates Marx’s theory of value, which was simply wrongheaded from the start.

Indeed, why was he so insistent about it?

Why not simply give up on it, and adopt a new theory, or state it as an unsolved problem?

I have a hypothesis about that. Let me reprise proposition 4:

Increased productivity is worthless, because all it does is make our goods worthless as we get better at making them.

This proposition is preposterous, as I’ve already said: A technology that allows you to make 100 cars with the same labor previously required to make 1 car does not make cars less useful. It simply makes them available to more people at lower prices, and this is generally a good thing.

But I think that Marx did not regard it as preposterous; in fact, I think he regarded it as true.

Consider this paragraph:

In proportion as capitalist production is developed in a country, in the same proportion do the

national intensity and productivity of labour there rise above the international level.2 The

different quantities of commodities of the same kind, produced in different countries in the same

working-time, have, therefore, unequal international values, which are expressed in different

prices, i.e., in sums of money varying according to international values. The relative value of

money will, therefore, be less in the nation with more developed capitalist mode of production

than in the nation with less developed. It follows, then, that the nominal wages, the equivalent of

labour-power expressed in money, will also be higher in the first nation than in the second; which

does not at all prove that this holds also for the real wages, i.e., for the means of subsistence

placed at the disposal of the labourer

– Das Kapital, Volume 1, chapter 22, p. 394

So he does get one qualitative fact right here: Nominal prices are higher in rich countries, for goods and services that are not traded across international borders. This is why we use purchasing power parity.

But he then goes on to say that real wages aren’t higher in rich countries. This… is just clearly false. By any reasonable measure, real wages are higher in the United States or France than they are in Congo or Haiti.

One can quibble with the particular measure used; I in fact happen to believe that we do overestimate real wages in the US by using the CPI instead of an index that better reflects the price of necessities. But there’s just no plausible way to say that a laborer in Malawi who makes $600 a year is at the same standard of living as a laborer in the US who makes $20,000. They might both be legitimately considered poor; but saying that real wages aren’t better here just isn’t plausible.

And Marx’s views on wages get weirder from there:

But hand-in-hand with the increasing productivity of labour, goes, as we have seen, the cheapening of the labourer, therefore a higher rate of surplus-value, even when the real wages are rising. The latter never rise proportionally to the productive power of labour. The same value in variable capital therefore sets in movement more labour-power, and, therefore, more labour.

Das Kapital, Volume 1, Chapter 24, p. 421

I’d in particular like to draw your attention to these two clauses: “the cheapening of the labourer, […] even when the real wages are rising.” What in the world does that mean? How can labor simultaneously get cheaper and more expensive? How can I be “cheapened” even as I am better off?

A bit later, he gets close to acknowledging that higher productivity increases value, but he characterizes it in a very strange way:

Labour transmits to its product the value of the means of production consumed by it. On the other

hand, the value and mass of the means of production set in motion by a given quantity of labour

increase as the labour becomes more productive. Though the same quantity of labour adds always

to its products only the same sum of new value, still the old capital value, transmitted by the

labour to the products, increases with the growing productivity of labour.

– Das Kapital, Volume 1, Chapter 24, p. 422

So what he seems to be saying here is that the value added from capital is itself denominated in terms of the labor that was used to create that capital. Yet this is a very strange accounting indeed, as I think a simple model will help you see.

Consider a productivity-enhancing technology.

Suppose that, initially, one can make 1 widget per person-hour. So, Marx says, the value of 1 widget is precisely 1 person-hour.

And suppose there are enough laborers to do 20 person-hours of work. Then we make 20 widgets, and we get value equal to 20 person-hours. Okay, seems reasonable so far.

Then, an engineer comes along, spending 100 hours to invent a machine that costs 10 person-hours to build, and can produce 1000 widgets using 10 person-hours of labor.

So the value of that machine, according to Marx as I understand him, is 10+X person-hours, where X is some amortized fraction of the 100 person-hours involved in inventing it. It’s unclear how to do this amortization; what time frame should be using? Once invented, the machine can be built many times. But I guess we could maybe make sense of it as the patent duration—the price of the machine will surely be higher during the time the patent is still valid, and I guess we could say that is somehow reflected in its value. (Notice how this is already getting pretty weird.)

Now, let’s go ahead and make 1000 widgets with the machine.

We have spent 10 person-hours of labor running the machine, another 10 building it, and we’re supposed to count in X from inventing it in the first place. X ranges somewhere between 0 and 100.

So at the low end, when X=0, these 1000 widgets have only cost us 20 person-hours to make, increasing productivity 50-fold. This is sort of where we expect to end up after the machine goes out of patent and becomes commonplace.

But at the high end, when X=100, these 1000 widgets have cost us 120 person-hours to make, increasing productivity a lesser, but still substantial, 8-fold. This might be where we find ourselves when the very first machine comes online and it’s still an experimental prototype.

Under the utility theory of value (which, again, virtually all mainstream economists, including both neoclassical, behavioral, and even Marxian economists, accept), the value of widgets has increased from U(20) to U(1000); exactly what this value is depends on how many consumers there are and what their utility functions are, but two things we can say for sure:

This is definitely much higher than before. (Probably more than 10 but less than 50 times higher.)
The value is the same regardless of how we account for the person-hours that went into inventing the machine.
The cost gets lower over time, as the technology becomes established.
Thus the value added should increase over time. (Whether or not profit does depends upon additional factors we haven’t modeled.)

But as Marx seems to be saying here (again, he may say differently elsewhere, but that’s kind of my point; he doesn’t have a coherent theory), we are to value these 1000 widgets as follows:

When the technology is new, X=100, and so the value of the 1000 widgets is 120 person-hours, the labor that went into inventing, producing, and using the machine. So this productivity enhancement has increased value somewhat—a 6-fold increase—but not all that much. And the value of each widget has been radically reduced: It is now only 0.12 person-hours, or about 7 person-minutes.

Yet once the technology becomes established, X=0, and so the value of the 1000 widgets is 20 person-hours, the labor that went into producing and using the machine. So now this productivity enhancement has not increased value at all. The value of each widget has fallen even further: It is now a mere 0.02 person-hours, or just over 1 person-minute.

This weird dynamic, where technology increases value temporarily, then brings it back down to exactly what it was before, is clearly not how technology actually works. The value added from new technologies—in terms of utility, what really matters—is permanent and increasing over time.

Yet upon re-reading Marx and reflecting some more on his labor theories of value, I think Marx believed that this is actually what happens.

I think that Marx’s whole account of why the rate of profit must fall (even though it absolutely hasn’t, empirically, and even Marxian economists today recognize there’s no particular theoretical reason it should) is based on this misconception.

I think because he believed that labor is the correct measure of value, the fact that human beings can only do so much labor (which hasn’t really changed much over the millennia) means that standard of living can never really increase, because higher productivity simply translates into stuff becoming more and more worthless.

And I think part of where the confusion comes from is that price does sort of behave this way, at least qualitatively; no doubt in a world where widgets can be produced with only 1 minute of labor instead of 60 is one in which widgets are much cheaper to buy. But that doesn’t mean that their value has been correspondingly reduced; they are still just as useful (for whatever widgets do) as they were before, and any decline in marginal value merely comes from diminishing marginal utility as people get more and more of them.

Yet I think Marx didn’t want that result, because it seemed to imply that capitalism could actually make life better, even for workers. (As, empirically, it absolutely did.) He wanted to be able to prove that, despite all appearances, workers have gained absolutely nothing from capitalism and technology, and live just as poorly today as they did in the Middle Ages. And a labor theory of value was just the way to do that, for we only work slightly more hours today than most people did in the Middle Ages (and given the state of Medieval scholarship at the time, Marx may have even thought it was the same). Yet I for one am really a fan of vaccines and flush toilets; I don’t know about you.

He quickly realized many of the problems with this theory, and so he added more and more epicycles to try to correct these problems; but the result was a theory that wasn’t even coherent. Yet in part because of Marx’s incredibly dense and verbose writing style (please note; there are 547 pages in Volume I of Das Kapital, and it has three volumes.)it remained plausible enough to non-experts to catch on, and due to its very complexity, it becomes genuinely hard for anyone to understand. So then we can have the argument I had, where even as I clearly demonstrated the deep flaws in the theory, my interlocutor could always insist I hadn’t really understood what Marx was saying, and it was all my failing, not anything wrong with the theory, which is of course inerrant and handed down from On High.

For some people (not all, but some), Marxism really does seem more like a religion than a scientific theory: “I don’t know exactly what it means, but dammit, I know it’s true and you’ll never convince me otherwise.”

Is there a way to make a labor theory of value work?

I’m pretty well convinced that Marx’s labor theory of value is either wrong, or so incoherent as to be not even wrong. (Adam Smith’s and David Ricardo’s theories were coherent, so they were definitely just wrong.)

But could there, somewhere buried in all those hundreds of pages of mind-numbingly dense and self-contradictory text, be a theory worth salvaging?

Can I steelman the labor theory of value?

I’m going to give it a try.

Okay, so clearly it’s not the actual amount of labor used, as that runs afoul of proposition 1 immediately:

A project you spend 100 hours on which ultimately failed and produced nothing useful was extremely valuable.

That’s nonsense, so we’ll rule that theory out.

Okay, maybe we can patch it up by saying it’s the socially necessary amount of labor required; the amount of labor that the most-efficient worker would require. Clearly, if you are spending 100 hours on something useless, you’re not being the most-efficient worker.

This seems to be closer to Marx’s account, but it still runs afoul of propositions 2, 3, and 4:

Everything in the Garden of Eden is worthless, because it doesn’t require labor to access.
If you come up with a cure for cancer in a random stroke of insight, it’s worthless because you didn’t put any labor into it, even though both its utility (the lives it will save) and its price (the money you could make off of it) are surely astronomical.
Increased productivity is worthless, because all it does is make our goods worthless as we get better at making them.

Marx actually seemed to like proposition 4, but we can see that it’s wrong. So this is a problem.

Also, while propositions 2 and 3 may seem like extreme thought experiments, consider the following:

First, “The Garden of Eden” is very much what a Star Trek-style fully automated luxury communism would feel like. Many leftists say that they really would like to see such a world, and I agree with them on this. But on this theory of value, it’s all worthless, because nobody has to work to get anything.

Second, a sudden insight into a miracle cure that ends up becoming cheap and plentiful is pretty much what happened with penicillin and vaccines. Yes, there was some labor involved in making them (and still is), but it was clearly far less than the utility gained from all the improvements in health and lifespan that we have received from these inventions. Valuing these technologies in terms of their labor cost seems to completely miss the point of why they were such miracles.

So is there some other way to make a labor theory of value work?

The best I can come up with is this:

The value of a product is the amount of labor it would take to make that product by hand with pre-historic technology.

This is my attempt at steelmanning the labor theory of value. It does solve propositions 2, 3, and 4:

For 2, the fact that everything is handed to you (perhaps by robots) doesn’t change the fact that making it yourself would be really, really hard.

For 3, it’s much harder to make penicillin by hand than in a factory (though it can be done!), so improved penicillin technology is a gain in value. And every new vial of penicillin is worth the many hours that would have gone into making it by hand.

And for 4, any improvement in labor productivity works exactly how you’d expect: A machine that can do the work of 100 people produces 100 times as much value in goods. (In some ways, this is even more intuitive to most people than the utility theory of value, which predicts an increase, but not a one-to-one increase.)

So, okay, this theory is not preposterous, unlike everything we’ve considered so far.

But it really can’t be Marx’s theory, because he contradicts it very heavily in multiple places, and this theory, unlike his, does not predict that the rate of profit must fall. (Which, again, is good, because it doesn’t.)

Yet even this theory is ultimately unsatisfying, for the following reasons:

Some products literally cannot be made by hand using pre-historic technology. Consider a graphics card or a strong-force microscope. In order to make these things, we had to make tools to make better tools to make even better tools to make still better tools to make yet even better tools to make staggeringly near-flawless tools to make them. Even if you had the complete schematics for all the necessary tools and machines, all the raw materials you needed, and an unlimited supply of labor, I’m not sure you could build a graphics card from scratch within a single lifetime.
While it can account for the value of increased efficiency in producing a given good, it doesn’t seem to be able to account for the value of inventing whole new classes of goods. (Yes, penicillin can be made by hand using pre-historic tools, but nobody did as far as we know, and the value of that invention was absolutely enormous in a way that even this labor theory of value cannot account for.)

These two problems are related: The new products you can make now that you couldn’t before are made possible by a mix of new ideas and an accumulation of better and better tools.

As far as proposition 5, I think we might be able to shore up the theory by counting the value of capital accumulation in terms of the labor that would be needed at each level of technology: however many person-hours to make the optical microscope, and then however many person-hours to make lasers, and however many person-hours to make sulfuric acid, and so on and so forth, until you’ve finally added up all the labor that went into producing the things that produced the things that produced the things that produced the things that produced graphics cards.

But as for proposition 6? I think this is just fatal. I don’t think there’s any way for a labor theory of value to not systematically and catastrophically undervalue new discoveries and new inventions.

The whole point of new inventions is that they make new things possible or allow us to do things with far less effort or cost than before. The value they create is in the labor they save. But if they are things we theoretically could have done, just didn’t know how (like penicillin), then there is no value added by the discovery (though at least there can be a lot of value added by the actual production). And if they are things we couldn’t have done until we reached a certain level of technology and capital, the value added seems to all be captured by the production of each new tier of technology, with nothing left to go to the discovery itself.

Maybe there’s still a way to save this theory. But at some point, we have to stop and ask ourselves:

Why?

Why do we even want a labor theory of value, when we already have a utility theory of value?

Maybe it’s the fact that utility is hard to measure precisely, and so the idea of basing our value system on it is uncomfortable? Yet I think this is just a fact of life: The things that really matter are hard to measure precisely.

And it’s not as if we have absolutely no idea: We can tell the difference between happiness and suffering, and we can see how various products and technologies can contribute to happiness and alleviate suffering. (We can also see how some products and technologies can reduce happiness and contribute to suffering! Not all new technologies are good, and some products that are good for their users are bad for other people!)

Indeed, we even have a unit of measurement: The QALY. And for some particular technologies—such as penicillin and vaccines—we actually have a pretty good idea of the number of QALY they’ve added to the world, and it’s enormous.

I’m not even saying Marx was wrong about everything. He had some good ideas, actually. And Marxian economists today do sometimes come up with useful findings that can be integrated into a deeper understanding of political economy.

But he was wrong about some things, and the labor theory of value is one of them.

A letter from the real singularity

2026-04-052026-03-31 PNRJ computer science, critique of neoclassical economics, development economics, ethics, futurism, inequality, macroeconomics, market failure, public policy, science and academia artificial general intelligence, artificial intelligence, basic income, depression, Factorio, future, history, medicine, Minecraft, robotics, Singularity, video games

Apr 5 JDN 246136

I’ve been unable to find it, but several years ago someone famous wrote a sci-fi work entitled something like “A letter from the post-singularity” about how great life is after AI takes over everything. Today I thought I’d write a more realistic take on the path we actually seem to be on.

The year is 2073. Technically we still don’t have true AGI; as far as we can tell, AI still isn’t actually sentient and AIs aren’t people. (Some of us wonder, though. Philosophers debate it.) But that doesn’t really matter, because all white-collar work has been completely automated, and so has any blue-collar work that doesn’t require fine dexterity or unusual expertise. Plumbers and electricians are still doing all right (though they do more of their work at data centers than homes these days); sometimes I wish I’d apprenticed to be an electrician. Then again, the world can still only support so many electricians. AI managers command AI-run asteroid mines to extract ores to transport with AI-run spacecraft to Mars where AI-run factories process those ores and fabricate chips for more AIs that more AI-run spacecraft carry to Earth to be installed in AI-run data centers. And each time one gets sold, some trillionaire’s number goes up, and that’s the only thing people like him have ever cared about in their lives.

There are of course a handful of super-brilliant, super-creative, or just super-lucky individuals who manage to get rich making art or music or books or video games or whatever, but the vast majority of people who do art are still starving artists, just as they’ve always been, I guess. And the AI-generated stuff is good enough now that most of the time people will just use that instead of paying extra for the “authentic” “artisanal” stuff. (And most people can’t even tell the difference anyway.)

Harvard and Oxford still have professors, but most universities have fully automated teaching and most of their administration—and yet somehow tuition is barely any cheaper now than it was in your time, even adjusted for inflation. And if you were thinking of becoming a professor yourself? You should probably just go play prediction markets or something; you’d have better odds. The number of research papers published every year is astronomical, but they’re all written and reviewed by AI, rarely if ever even read by any human being, and so it seems like the actual progress of scientific knowledge has pretty much ground to a halt. (Seriously, how are there still string theorists? It’s been a century.) I guess corporate R&D still keeps on improving those graphics cards somehow; maybe they’ve discovered something important, but if they have, they’re keeping it to themselves. And I keep reading about amazing advancements done by AIs (especially in pure math that I’m not sure anyone understands), but none of it actually ever seems to affect anyone’s actual lives.

As for me, I live on UBI. Like 90% of people do. It’s enough to rent a cheap apartment (but own a home? Are you serious? Only millionaires own homes.), buy basically-adequate food (as long as you don’t eat out too much anywhere that’s not fast food), and pay for all the subscriptions to media services and home assistants and whatnot. What you make on UBI will only buy you the ad-supported versions, so while my fridge will order milk for me (delivered by drone in a couple of hours) and my robot maid will cook breakfast, fold the laundry and put the dishes in the dishwasher, my fridge is also constantly running ads and my maid will intersperse targeted sales pitches into its casual conversation. Sometimes I think I should just get rid of it (her?) and do my own cooking and cleaning myself, so I would never be able to sell it for half what I paid for it. If I could make some extra money, maybe I could at least upgrade to the ad-free subscription for my maid. (The Pro subscription and hardware addons to make her your girlfriend are just gross, but I’m sure they make tons of money.)

Every year, some politician makes a big deal about how the UBI trust fund is draining and will be gone in ten years or whatever; but it’s obvious that all they’d have to do to fix that would be raise the taxes on trillionaires a little bit, yet somehow that never seems to happen. But they also don’t cut UBI payments either, except sometimes to reduce our cost-of-living adjustments. I dunno; maybe they will really cut UBI payments in a few years. Or maybe we’ll get lucky and they’ll actually raise taxes for once.

At least I wasn’t dumb enough to move to Mars, where “employment is guaranteed!” but you have to pay a subscription for your oxygen.

My worst days are probably… about as bad as your worst days. Frankly they couldn’t be much worse, because sometimes I just want to die. Like a lot of people on UBI, I feel like a burden on society, like the world would be better off without me. Medicaid won’t cover neuroregulator implants, so I still take pills for my depression; they’re probably better than the pills you could get, but they’re still far from perfect.

My best days are maybe better than yours, maybe worse; it depends, I guess. If you’ve got cancer, your days are probably worse than mine, because we can pretty easily treat most cancers now. But if you’re healthy and you’ve got a steady job and a tight-knit community where you live, I’m guessing your days are better.

I have access to faster computers and faster Internet than you can probably imagine; my understanding was that back in the day you had to wait for downloads sometimes? Or even sometimes wait for webpages to load? What was that like? And your storage was measured in gigabytes, not petabytes? Humanity has never been so connected; human beings have never been so isolated. I theory I can contact anyone in the Solar System at the speed of light, but in practice my friends and I always seem to have trouble keeping in touch. (Oddly, it’s my best friend who lives on a station over Ganymede that I seem to stay in touch with best; we have to write full-length emails, because there’s no way to have a conversation on a ping of an hour and a half. It feels like being an old-timey pen pal, I guess.)

It’s not all bad. Some things are definitely better these days.

People often live to be 110 or even 120 nowadays. (So you might still be alive when I write this.) Rarely does anyone seem to make it past that, though; aging is just… really hard to beat. (The Boomers are finally almost gone, but Gen X is still gonna be with us for awhile yet.) We’ve cured a lot of the diseases that were bad in your time, but not all of them. And sometimes only people rich enough to pay for their own healthcare can afford the cures.

Language barriers are pretty much gone. If I wanna read something that was written in Japanese or Xhosa, I just have an AI translate it, and the translations are good enough now that you’d have to be really deeply-versed in the language to find any problems with it. Like, okay, maybe I’m not getting all the subtle connotations of Japanese literature, but was I ever going to actually learn kanji to read the originals? No. That kind of thing is for people with crazy obsessions.)

Our video games are definitely way better than yours. Characters with AI personalities that adapt in real time to how you behave. Procedurally-generated open worlds that can literally expand to the size of entire planets. (Actually, I vaguely remember reading you had a couple games that did something like the second one? Minecraft and Factorio, I think they were called? Impressive that you could pull that off on a gigaflop processor.) Worlds and factions that adapt to your actions and provide realistic consequences so that no two players’ experiences of the game are exactly the same. It’s easy to lose yourself in a game like that (especially if you’ve got a VR setup), and when you’re playing in such a rich, interesting world for hundreds of hours. you can sometimes forget how bleak things are back in the real world your flesh-and-blood body lives in. (But then you get hungry or have to pee and you get forced back into reality.)

Economists keep telling us that per-capita GDP and productivity have never been higher, and that we have access to all these wonderful goods and services that previous generations could scarcely even imagine.

But if that’s true, why do I sometimes just want to die?

The United States has stopped creating jobs—maybe forever?

2026-03-292026-03-26 PNRJ current events, futurism, inequality, macroeconomics, market failure, public policy artificial intelligence, cyberpunk, employment, job creation, jobs, productivity, techno-hype unemployment, technological unemployment, unemployment

Mar 29 JDN 246129

When the preliminary data for our job markets over the past few months were released, they looked all right. But after more careful analysis and better data has allowed us to revise the figures and do more accurate seasonal adjustments, the results are really quite shocking:

The United States has lost more jobs than it created for the last six months.

That is certainly something we’ve done before; it is indeed what tends to happen during recessions. But no recession has been declared, GDP seems to be growing normally, and unemployment still stands at a perfectly-reasonable 4.4%.

What’s going on here?

If you look at the employment level—the absolute number of people employed—it looks shockingly flat since 2023.

From 2009 to 2019, US employment grew from 138 million to 159 million, growing at 1.4% per year. Obviously it collapsed during the 2020 recession, but then it recovered to 158 million by the end of 2022. It now stands at 163 million, only 0.7% growth per year since 2022. Since January 2025 it has actually fallen from a peak of 164 million.

Because our population is growing (albeit not as much as it once was, because immigration has collapsed after Trump’s crackdowns), this actually looks even worse when you consider the employment rate, the ratio between the number of people employed and the total population:

US employment peaked at 61.1% just before the 2020 recession, and has still not recovered to that level. It reached 60% in 2022, stayed around there through 2024, and then since then has actually declined, now to 59.3%. In fact, it was even higher in 2007 before the other big recession of my adult life (you know, it’s starting to feel like the economy hates Millennials in particular), reaching 63.3% before crashing and never recovering.

Yet our GDP growth looks fine!

Sure, it had a huge drop in the 2020 recession, but it grew very fast in the recovery, and since then has fluctuated a bit, but generally averaged about 2.5% per year—which is pretty good for a highly-developed country. We had negative growth in the first quarter of 2025 and slow growth in the fourth quarter, but the second and third quarter both had strong growth to make up for it. Overall real GDP growth for 2025 as a whole was a perfectly respectable 2.1%.

Even our unemployment rate looks fine—though with employment falling, it suggests more people are leaving the labor force instead of looking for jobs at all.

The only major industry that has actually shown strong employment growth over the last year is healthcare, growing 2.4%. Every other major industry grew 1% or less, or even shrank.

What would cause something like this?

This actually looks like what you’d expect to happen under technological unemployment: Productivity-enhancing technology allows GDP to increase even as employment falls.

But we haven’t actually had a surge in productivity. The massive—utterly irresponsible—rollout of AI technology has shown little, if any, effect at improving productivity. 3% of effort saved really isn’t that much, especially since a lot of people seem to overestimate how much AI tools help them.

Overall, our productivity growth looks… pretty normal, by historical standards:

Instead, what actually seems to be happening is what we might call techno-hype unemployment: Employers think that a massive productivity surge is around the corner, and they’ve already stopped hiring in anticipation of that.

Maybe they’re not even wrong about that! There is now some evidence that while initial adoption of AI reduces productivity, eventually it may increase productivity. (But we really haven’t had it long enough to be sure.)

Unemployment isn’t rising very much, not because people are finding jobs, but because people who already have jobs are generally keeping them, while people who don’t have jobs are basically giving up.

The hiring rate is now the lowest it has been since the 2020 recession—and not much higher than it was at the trough of the 2020 recession!

As far as I can tell, on our current path, one of two things will happen:

The current paradigm of AI will work, and genuinely increase productivity.
The current paradigm of AI will fail, and expected productivity gains will not materialize.

It turns out that neither possibility looks good for workers.

If AI succeeds, then businesses seem like they’re gonna just… stop hiring, especially entry-level positions that can be more readily replaced. People who already have senior positions may do just fine, or even make more money; but anyone fresh out of college, or even anyone whose career got derailed and is trying to start again, looks like they’ll just be… out of luck.

It’s every capitalist’s dream: To buy a machine that lets you never have to hire anyone ever again. And maybe, at last, they’ve found that Holy Grail.

On the other hand, if AI fails, the bubble will burst, the huge amount of investment that was previously driving the economy will suddenly dry up, and we will have a financial crisis and a recession. Businesses that were so sure they could replace their workers with AI will want to start hiring again, but won’t be able to, because no one can afford to buy anything and so nobody is making any revenue to pay employees with.

In many ways, the second one appears to be the preferable outcome, because at least it’s temporary. We would, sooner or later, recover from that recession and bring things back to normal. If AI ever actually works even half as well as most of the tech industry claims it will any minute, the most likely outcome seems to be launching us fully into a cyberpunk dystopia where a handful of trillionaires own everything and the rest of us struggle for scraps because our skills can now be replaced by machines.

This didn’t have to happen.

Even if AI is really going to be a transformational technology, we could have prepared for it better. We could have implemented policies that would ensure that people would continue to be provided for even as their labor was more and more replaced by machines. But that would have made the billionaires slightly less rich, and it sounded like “socialism” to ideologues, and the right-wing media convinced millions of people that even moving slightly in that direction would destroy all they held dear.

It’s not even too late! We could still turn it around, if those same people who stopped us from doing the right thing before weren’t still in charge of everything and richer than ever and just as effective as they ever were at deluding the masses.

I don’t know how to be optimistic about the future anymore. It feels like I’m watching the collapse of our entire civilization live in real time.

What would a world without poverty look like?

2026-03-222026-03-18 PNRJ core principles, critique of neoclassical economics, development economics, education, ethics, futurism, inequality, public policy development, education, Elon Musk, future, growth, healthcare, housing, human rights, inequality, literacy, post-scarcity, poverty, QALY, scarcity, technology, United Nations, wealth

Mar 22 JDN 2461122

In my previous post I reflected on the ways that conventional measures of poverty seem inadequate—and that a richer understanding of poverty suggests that it is far more ubiquitous than such measures suggest.

In this post, I will ask: Given this richer understanding of poverty, what would a world without poverty look like? Is it something we can realistically hope to achieve?

In techno-utopian circles (looking at you again, Scott Alexander), it is common to speak of “post-scarcity”: A world where there is no poverty because resources are effectively unlimited.

I don’t think that’s possible.

Not for humans as we know them. Perhaps in a future where greed is a recognized and treatable psychiatric disorder, we could genuinely have an economy where people really just take whatever they want and it works out because nobody wants an unreasonable amount.

But the fact that there are people with hundreds of billions of dollars tells me that among humans as we know them, some people’s greed is just literally insatiable. Give them a moon and they’ll demand a planet; give them a planet and they’ll demand a solar system. Whatever they are getting out of more wealth (status? power? the dopamine hit of number go up?), they’re never going to stop getting it from even more wealth, no matter how much we give them. For if they were going to stop at a reasonable amount, they would have stopped four orders of magnitude ago.

So let’s try to imagine what a world would look like if it really had no poverty, but not by somehow producing such staggering amounts of wealth that everyone could literally take whatever they want.

I think the key is that it would require all basic material needs to be met.

Everyone would have, at minimum:

Clean air to breathe
Clean water to drink
Nutritious food to eat
Shelter from the elements
Security against theft and violence
Personal liberty and political representation
A basic education
A basic standard of healthcare

(I will note that these resonate quite closely with the UN Universal Declaration of Human Rights.)

Some of these needs can probably never be completely satisfied—there is an inherent tension between liberty and security which requires us to balance them against each other. A society with zero crime is a horrific totalitarian police state; a society with complete liberty is an equally horrific Hobbesian nightmare. But we have achieved, in most of the First World at least, a reasonable standard of security along with a great deal of liberty, and preserving that balance should be of a very high priority.

Even clean air and water would be difficult to satisfy perfectly: even if we pivot our whole economy to solar, wind, and nuclear power (as we very definitely should be doing!), some amount of pollution is probably necessary just to have a functioning industrial society. So we need to establish reasonable standards for what amounts of pollution exposure are safe, and effective mechanisms for ensuring that people are not exposed to pollution outside those standards—we have largely done the former, but seriously fail at the latter.

But probably the most difficult needs to satisfy are actually difficult to even define.

Just what constitutes a basic standard of education, and a basic standard of healthcare?

These seem like moving targets.

Let’s start with education:

Someone who is illiterate and can barely add two numbers together would be considered to have very poor education today, but would be considered completely average among peasants in the Middle Ages. Someone like me with a PhD has education well beyond what anyone had in the Middle Ages: While Oxford was already graduating doctors in the 12^th century, those doctors didn’t have to write dissertations, and didn’t know nearly as much about the world as you must to earn a modern PhD. (Most of the mathematics required to get an economics PhD specifically literally had not been invented.)

So it’s conceivable that educational standards will continue to rise over time, especially if we are able to radically improve learning via new technologies. In the most extreme case, if everyone can just download knowledge like in The Matrix, then it wouldn’t be unreasonable to expect the average person to know as much as a typical PhD today in dozens of fields.

Suppose that such technology did exist. Would it be fair to consider someone poor if they didn’t have access to it?

Yes, I think it would.

Because if it’s really cheap and easy to give breathtakingly vast knowledge on a variety of subjects to anyone instantly, then letting some people have that while others do not puts those others at a severe disadvantage in life. If you must know how to solve partial differential equations to get a job, then someone who only made it through high school algebra isn’t going to be able to find jobs.

So I think what we’re really concerned about here is inequality: The education of a rich person should not be too much better than the education of a poor person, lest “meritocracy” simply reinforce the same generational inequality it was supposed to eliminate.

Now consider healthcare:

This, too, has radically improved over time. Indeed, I’m not really sure it’s fair to call Medieval doctors doctors at all; they lacked basic knowledge of human physiology and their intervention was as likely to hurt patients as to help them. Surgeons certainly existed: They knew how to amputate a gangrenous limb or suture a wound. (They did so without antiseptic, let alone anaesthetic!) But should you come to them with a fever or a headache, they would likely do you as much harm as good.

So we could imagine a world of Star Trek medicine, where you lie in a bed, get scanned for a few moments, and the doctor immediately knows what’s wrong with you and what kind of painless injection to give you to fix it.

Once again, we must ask: If you don’t have that, are you poor?

And again, I’m going to say yes.

If the technology exists to heal people this effortlessly, and some people get access to it while others do not, the latter are being allowed to suffer when their suffering could be easily alleviated.

But now we must consider: what if the technology exists, but it’s too expensive to use routinely?

Most technologies are like this when they are first invented. Over time, the technology improves (and the patents expire!) and they become cheaper and more widely available.

Unlike education, healthcare doesn’t usually impose large advantages on those who receive it—though it can, especially in a society where disabilities are not adequately accommodated.

So I think I’m prepared to allow “early adopters” of new medical technology, people who are rich enough to pay for advanced treatments before they are available to everyone—within certain limits. If some new treatment grants radically higher productivity or lifespan, then in fact I think we have a moral obligation to wait until it can be universally shared before we give it to anyone—precisely because of the risk of reinforcing generational inequality.

Once again, in our effort to define poverty, we end up returning to inequality: The rich should not be allowed to be too much healthier than the poor.

This definitely makes education and healthcare more complicated than the others.

While we can pretty clearly define how much food and water a human being needs to live, and we could provide it to everyone, and then nobody would be poor in terms of food or water.

But making nobody poor in terms of education and healthcare requires meeting a standard that may in fact increase over time, and it is no contradiction to imagine that someone living in the 31^st century could be receiving better healthcare than I ever will and yet is still not receiving adequate healthcare based on the technology available.

Furthermore, that person demanding better healthcare is not being ungrateful or envious—they are quite reasonably demanding that society fairly allocate healthcare so that there aren’t some people who live in eternal youth while other people still die of old age.

Are they richer than I am? In some sense, perhaps. We could stipulate that in every material way they are better off than I am now. But there’s a treatment that could extend their life by centuries, and nobody’s giving it to them, because they can’t afford it—and that’s wrong. That makes them poor, and it makes their society unfair and unjust. It isn’t just a question of how many QALY they have; it’s also a question of what it would cost to give them a lot more.

But with all that said, I do believe that a world without poverty is possible.

In fact, I believe that technologically we could already provide that world, if we had the political will to do so. Maybe we don’t quite have the economic output to support it worldwide, but even that is not as far off as most people seem to think.

Providing an adequate standard of food and water, for example, we could already do with existing food supplies. It would cost about one-eighth of Elon Musk’s wealth per year, meaning that, with good stock returns (as he most certainly gets), he could very likely afford it by himself!

Clean air for all would be harder, but we are moving the right direction now that solar power is so cheap.

Universal liberty and security would require radical shifts in government in dozens of countries, so that one seems especially unlikely to happen any time soon—yet it is very definitely possible, and by construction only requires political change.

Universal education and healthcare would be very expensive, and most countries are too poor to really provide them on their own. They are not simply poor in money, but poor in skills: There aren’t enough doctors and teachers, and so we would need to use the ones we have to train up a new generation, and perhaps a new generation after that, before the world’s needs would really be met. (Fortunately, there are people trying to do this. But they don’t have enough resources to really achieve these goals.) So this is not a technological limitation, but it is an economic one; it will probably be at least another generation before we can solve this one.

What about universal shelter? Now there’s the rub. Even in prosperous First World countries, housing shortages and skyrocketing prices are keeping homeownership out of reach for tens of millions of people, and leaving hundreds of thousands outright homeless. We clearly do have the technology to produce enough homes, especially if we are prepared to build at high density; but the economic cost of doing so would be substantial, and our policymakers don’t seem at all willing to actually pay it. I think as long as housing is viewed as an asset one invests in rather than a good that one needs, this will continue to be the case.

The problem isn’t that we don’t have enough stuff. It’s that we are not sharing it properly.

What is poverty?

2026-03-152026-03-11 PNRJ core principles, critique of neoclassical economics, development economics, ethics, inequality inequality, needs, poor, poverty, rich, Rockefeller, wealth

Mar 15 JDN 2461115

What is poverty? It seems like a simple question, one we should all already know the answer to; but it turns out to be surprisingly complicated.

In practice, we mainly define some amount of income or consumption that is considered a “poverty line”, and declare that everyone below that line is in poverty, while everyone above it is not.

This post is about why that doesn’t work.

The most obvious question is of course: How do we draw that line? Some absolute level, or relative to income in the rest of society? Different places do it differently.

But I have come to realize that there is actually a deeper reason why there will never be a satisfying choice of “poverty line”:

There is no specific amount of income that could ever decide whether someone is in poverty.

It’s not a question of purchasing power. prices, or inflation. It’s not something you can adjust for statistically. It’s a fundamental error in defining the concept of poverty.

The problem is this:

Human needs are not fungible.

This Less Wrong post on “Anoxistan” really opened my eyes to that: No amount of money can make up for the fact that you’re missing something you need, be it a roof over your head, food on your table, clean water to drink, or medical care—or, as in the parable, air to breathe.

The best definition of poverty, then, is something like this:

Poverty is having to struggle to meet basic human material needs.

(I specify “material” needs, because someone who is alone and unloved has unmet human needs, but it is not the responsibility of even a utopian fully automated luxury communist society to provide for those needs. They may very well be miserable, but it does not make them poor.)

Maybe—maybe—in a well-functioning market economy, we can sort of muddle through by making a list of what everyone needs, finding the prices for all those goods and services, adding that up, and declaring that the poverty line. (This is often what we actually do, in fact.) The notion would then be that, as long as you have at least that amount of money, you can probably buy all the things you need.

But this rapidly breaks down if you aren’t facing the same prices as what were used to make that aggregation—which you almost never are, because nobody is the average American living in the average American city. And it also misses the fact that security is a human need, and simply having the necessary income for now is not at all the same thing as knowing that you’ll continue to have the necessary income in the future.

One Libertarian commentator asked me: “Would you really switch places with Rockefeller if you could?”

I had to think about it: I’d be losing a lot of things, for sure. No Internet, no cell phone, no computer, no video games. The quality of my clothes might actually be worse (though my wardrobe would surely be larger). Finding vegetarian food I enjoy might actually be more of a challenge, though I could surely import it from anywhere. Worst of all, I would lose access to many medical treatments I currently depend upon: Treatment of migraines in the late 19^th century was considerably worse, and treatment of depression was essentially nonexistent.

Since this is about wealth, I think we can ignore the fact that I’d be moving into a terrifyingly racist, misogynistic and homophobic society. That itself might actually be the reason I wouldn’t really want to make the switch. But you can simultaneously believe that the late 19^th century was a worse time than today for everyone who wasn’t a White cisgender heterosexual man, and also that Rockefeller was much richer than you’ll ever be.

But what would I gain? Power, though I have very little interest in that. Opportunities for philanthropy, which I do care about, but they’d benefit other people more than myself. Real estate—I don’t even own my own home, and Rockefeller owned multiple mansions, including, famously, the Casements in Florida.

But above all, I would gain security. Owning an oil company would allow me to live comfortably for the rest of my life, and most likely also allow my heirs to live comfortably for their entire lives, without me ever needing to work another day. I could still take jobs if I wanted them, but no employer would ever have any power over me. If I was unhappy at a job, I could just leave. If I wanted to spend a month, or a year, or a decade, without working at all, I could just do that. That is what it means to be rich. That is what Rockfeller had that I don’t think I will ever have.

The difference between being rich and being poor is security.

As long as anyone is struggling to make ends meet, poverty exists.

As long as anyone is afraid to lose their job, poverty exists.

As long as anyone is choosing not to have children because they don’t think they can afford them, poverty exists.

As long as bosses can abuse their employees and get away with it, poverty exists.

And in fact, it begins to look like poverty in the United States has not been decreasing over the last two generations, even as our per-capita GDP and median income have continued to rise and our population below “the poverty line” have fallen. (Indeed, that particular measure of “unable to afford children” has very clearly greatly increased, and is a very bad sign for our society’s future.)

This is how our economy is failing. It has given us lots more stuff, and made some things available to all that were once only available to the rich; but it has not freed us from the constant struggle to meet our basic needs, even though there are clearly plenty of resources available to do that.

The housing affordability crisis in one graph

2026-03-082026-03-04 PNRJ critique of neoclassical economics, current events, inequality, macroeconomics, market failure, public policy, statistics affordability, FRED, housing, housing prices, inflation

The housing affordability crisis in one graph

Mar 8 JDN 2461108

The graph below, constructed from FRED data, provides a simple measure of housing affordability: How many years of median earnings does it take to afford the median home?

From a low of 4.4 in 1982, this rose to about 5.5 and was relatively stable in the 1990s. Then in the 2000s, it began to rise, peaked at 7.2 just before the housing crisis, and then rapidly dropped to back to 5.5 again.

Then in the 2010s it began to rise again, peaked even higher at 7.6 in 2017, and then dropped down to 6.0 in 2020 before beginning to rise anew. In 2023 it reached a yet higher peak of 8.0, and then has been slowly declining ever since—but is still about 6.5, well above its 1990s level.

I honestly expected worse than this, but I think part of what’s happening is that new homes have gotten a bit smaller in the past few years: median square footage of homes sold has fallen from a peak of 1997 in 2019 to 1788 today. (Unfortunately, FRED doesn’t have this data series going back any earlier than 2016.)

If we adjust for that, the price a typical 2019 home today would be about 7.2 years of median earnings, which is about what it was at the peak of the housing crisis in 2007.

Note of course this isn’t actually how many years you need to save up to buy a house. You clearly can’t save your entire earnings, but you also don’t need to come up with the full price, only the down payment. And what you can afford also depends upon interest rates and such. But still, it’s a pretty clear sign that housing is radically more expensive now than it was in the 1980s or even 1990s.

In my view, this is the affordability crisis.

Gas prices really aren’t that important. Car prices are relatively stable. Food prices are volatile but don’t have a bad long-term trend. We do still have serious problems with affordability in education and healthcare, but we have obvious solutions available (that several other countries are already doing successfully); we’re just not doing them because Republicans don’t like them. But housing? We have no clear solutions on the table, certainly not anything that would be politically viable. Fundamentally, we need to build more housing in places people want to live—a lot more housing—and force the price of housing down.

And with our society structured the way it is, when you price people out of housing, you price them out of adulthood. Millennials are not having kids at anywhere near the rate of previous generations, because raising kids requires living space. Especially with immigration collapsing after Trump, this housing affordability crisis is going to turn into a population crisis.

I guess what I’m hoping for at the moment is just consciousness-raising, making people see that this is actually a problem. For some reason, everyone agrees that rising prices of goods are a bad thing, except when it comes to housing.

Inflation in food? An urgent crisis that must be immediately resolved.

Inflation in gas prices? So terrible it’s worth invading other countries over.

Inflation in housing? No, somehow that’s good actually, because it makes homeowners feel richer (even though they actually owe more in property taxes). We treat housing like an asset instead of a good, which is something we should absolutely never, ever do with a good that people need to live.

What if we just banned banks?

2026-02-222026-02-18 PNRJ critique of neoclassical economics, ethics, financial fraud, inequality, market failure, public policy bank, Bank of America, Capital ONe, Chase, Citi, Citibank, co-op, corporation, credit union, Jeffrey Epstein, Wells Fargo

Feb 22 JDN 2461094

I got a mailer from Wells Fargo today offering me a new credit card. The offer seemed decent, but the first thing that came to my mind was: Why is this company still allowed to exist?

In case you didn’t know, Wells Fargo was caught in 2016 creating millions of fraudulent accounts. They paid a fine of $185 million—which likely was less than the revenue they earned via this massive fraud scheme. How am I supposed to trust them ever again? How is anyone?

It’s hardly just them, of course. Almost every major bank has been implicated in some heinous crime.

JP Morgan Chase helped Jeffrey Epstein conceal assets, rigged municipal bonds transactions, and of course misrepresented thousands of mortgages in a way that directly contributed to the 2008 crisis.

Bank of America also committed mass fraud that contributed to the 2008 crisis.

A case against Citi is currently being tried for failing to protect its customers against fraud.

Capital One is being sued for failing to pay the interest rates it promised on savings accounts.

And let’s not forget HSBC, which laundered money for terrorists.

If these were individuals committing these crimes, they would be in prison, probably for the rest of their lives. But because they are corporations, they get slapped with a fine, or pay a settlement—typically less than what they made in the criminal activity—and then they get to go right back to work as if nothing had happened.

I think it’s time to do something much more radical.

Let’s ban banks.

This might sound crazy at first: Don’t we need banks? Doesn’t our whole financial system rest upon them?

But in fact, we do not need banks at all. We need loans, we need deposits, we need mortgages. But we already have a fully-functional alternative system for providing those services which is not implicated in crime after crime after heinous crime:

They are called credit unions.

Credit unions already provide almost all the services currently provided by banks—and most of the ones they don’t provide, we probably didn’t actually need anyway. There are already nearly 5,000 credit unions in the US with over 130 million customers.

Credit unions almost always fare better in financial crises, because they don’t overleverage themselves. They are far less likely to be involved in fraud. They don’t get involved in high-risk speculation. They offer higher yields on savings and lower rates on loans and credit cards. Basically they are better than banks in every way.

Why are credit unions so much better-behaved?

Because they are co-ops instead of for-profit corporations.

Customers of credit unions are also owners of credit unions, so there are no extra profits being siphoned off somewhere to greedy shareholders whose only goal in life is number go up.

Free markets are genuinely more efficient than centrally-planned systems. But there’s nothing about free markets that requires the owners of capital to be their own class of people who aren’t workers or customers and make their money by buying, selling, and owning things. That’s what’s wrong with capitalism—not too little central planning, but too concentrated ownership.

As I’ve written about before, co-ops are just as efficient as corporations, and produce much lower inequality.

For many industries, transitioning to co-ops would be a major change, and require lots of new organization that isn’t there. But for banking, the co-ops already exist. All we need to do is ban the alternative and force everyone to use the better, safer system. Come up with some way to transfer all the accounts fairly to credit unions, and—very intentionally—leave the shareholders of these criminal enterprises with absolutely nothing.

In fact, since credit unions are more likely to support other co-ops, forcing the financial system to transition to credit unions might actually make the process of transitioning our entire economy to co-ops easier.

It may seem extreme, but please, take a look again at all those crimes that all these major, highly-successful, market-dominating banks have committed. They’ve had their chance to prove that they can be honest and law-abiding, and they have failed.

Get rid of them.

Productivity by itself does not eliminate poverty

2026-01-252026-01-22 PNRJ core principles, development economics, ethics, inequality, market failure artificial intelligence, Dario Amidei, Elon Musk, poverty, productivity, scarcity, Scott Alexander, utopia

Jan 25 JDN 2461066

Scott Alexander has a techno-utopian vision:

Between the vast ocean of total annihilation and the vast continent of infinite post-scarcity, there is, I admit, a tiny shoreline of possibilities that end in oligarch capture. Even if you end up there, you’ll be fine. Dario Amodei has taken the Giving What We Can Pledge (#43 here) to give 10% of his wealth to the less fortunate; your worst-case scenario is owning a terraformed moon in one of his galaxies. Now you can stop worrying about the permanent underclass and focus on more important things.

I agree that total annihilation is a very serious risk, though fortunately I believe it is not the most likely outcome. But it seems pretty weird to me to posit that the most likely outcome is “infinite post-scarcity” when oligarch capture is what we already have.

(Regarding Alexander’s specific example: Dario Amidei has $3.7 billion. If he were to give away 10% of that, it would be $370 million, which would be good, but hardly usher in a radical utopia. The assumption seems to be that he would be one of the prevailing trillionaire oligarchs, and I don’t see how we can know that would be the case. Even if AI succeeds in general, that doesn’t mean that every company that makes AI succeeds. (Video games succeeded, but who buys Atari anymore?) Also, it seems especially wide-eyed to imagine that one man would ever own entire galaxies. We probably won’t even ever be able to reach other galaxies!)

People with this sort of utopian vision seem to imagine that all we need to do is make more stuff, and then magically it will all be distributed in such a way that everyone gets to have enough.

If Alexander were writing 200 years ago, I could even understand why he’d think that; there genuinely wasn’t enough stuff to go around, and it would have made sense to think that all we needed to do was solve that problem, and then the other problems would be easy.

But we no longer live in that world.

There is enough stuff to go around—at the very least this is true of all highly-developed countries, and it’s honestly pretty much true of the world as a whole. The problem is very much that it isn’t going around.

Elon Musk’s net wealth is now estimated at over $780 billion. Seven hundred and eighty billion dollars. He could give $90 to every person in the world (all 8.3 billion of us). He could buy a home (median price $400,000—way higher than it was just a few years ago) for every homeless person in America (about 750,000 people) and still have half his wealth left over. He could give $900 to every single person of the 831 million people who live below the world extreme poverty threshold—thus eliminating extreme poverty in the world for a year. (And quite possibly longer, as all those people are likely to be more productive now that they are well-fed.) He has chosen to do none of these things, because he wants to see number go up.

That’s just one man. If you add up all the wealth of all the world’s billionaires—just billionaires, so we’re not even counting people with $50 million or $100 million or $500 million—it totals over $16 trillion. This is enough to not simply end extreme poverty for a year, but to establish a fund that would end it forever.

And don’t tell me that they can’t really do this because it’s all tied up in stocks and not liquid. UNICEF happily accepts donations in stock. Giving UNICEF $10 trillion in stocks absolutely would permanently end extreme poverty worldwide. And they could donate those stocks today. They are choosing not to.

I still think that AI is a bubble that’s going to burst and trigger a financial crisis. But there is some chance that AI actually does become a revolutionary new technology that radically increases productivity. (In fact, I think this will happen, eventually. I just think we’re a paradigm or two away from that, and LLMs are largely a dead end.)

But even if that happens, unless we have had radical changes in our economy and society, it will not usher in a new utopian era of plenty for all.

How do I know this? Because if that were what the powers that be wanted to happen, they would have already started doing it. The super-rich are now so absurdly wealthy that they could easily effect great reductions in poverty at home and abroad while costing themselves basically nothing in terms of real standard of living, but they are choosing not to do that. And our governments could be taxing them more and using those funds to help people, and they are by and large choosing not to do that either.

The notion seems to be similar to “trickle-down economics”: Once the rich get rich enough, they’ll finally realize that money can’t buy happiness and start giving away their vast wealth to help people. But if that didn’t happen at $100 million, or $1 billion, or $10 billion, or $100 billion, I see no reason to think that it will happen at $1 trillion or $10 trillion or even $100 trillion.

A new Santa Baby

2025-12-282026-01-02 PNRJ current events, development economics, inequality Christmas, christmas-music, food, malaria, music, platinum, Santa Baby, song, vaccine, writing, yacht

Dec 28 JDN 2461038

In the song “Santa Baby”, there are several high-value items requested as Christmas gifts. I’m currently working on a rewrite of the song that compares these items with humanitarian interventions of the same cost, making into a protest song—but so far I’ve had trouble making it actually singable with the meter of the song.

So for now, I thought I’d share my cost estimates and what could be purchased with those same amounts:

Sable: $1000 More expensive than most dogs, but really not that bad! In fact, some purebreds cost more than that.

1954 convertible: $28,000; yeah, classic cars are really not that expensive actually.

Yacht: There are yachts and then there are yachts. Could cost anywhere from $300,000 to $500 million.

Platinum mine: Hard to estimate, but with platinum costing $2400 per ounce and mines capable of producing thousands of ounces per year for 20 years, should be worth at least $100 million—and possibly as much as $1 billion.

Duplex: $400,000 or so, depending on the location.

Decorations at Tiffany’s: Depends on what you buy, but easily $10,000 to trim a whole tree; that store is so wildly overpriced that a jewellery box can cost you $2,000 and even an individual Christmas tree ornament can cost $160. (Seriously, don’t shop at Tiffany’s.)

Ring: Depends on a lot of factors; I’ll assume platinum, so that will run you anywhere from $400 for a basic band to $95,000 for one with a huge diamond.

The platinum mine is a clear outlier; unless you buy one of the largest yachts in the world, none of the other items even come close to its price. Aside from the yacht, all the other items add up to less than a million dollars, and even the cheapest platinum mines are clearly worth more than that.

What else could you buy for these amounts?

Well, a malaria net costs about $2, and on average every $3,000 spent saves a child’s life. A vaccine costs about $1-$5 per dose. So for the price of the platinum mine alone, we could buy 50 million malaria nets or 20 million vaccines, and either way expect to save the lives of about 30,000 children.

(Maybe some other time I’ll actually make this into something singable.)

On the other hand, if you really wanna buy a sable or a 1954 convertible, they’re really not that expensive. The former is cheaper than a purebred dog, and the latter costs about the same as a new car.

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A tale of two corporations

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The United States has stopped creating jobs—maybe forever?

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The housing affordability crisis in one graph

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Productivity by itself does not eliminate poverty

A new Santa Baby