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Technology is a Public Good and You Are a Free-Rider

November 17, 2009

I’ve heard a few speeches from Peter Thiel–at the Seasteading Conference and the Singularity Conference–and I’ve read his Hoover essay, his bit on the Contrarian Hero, and I’ve seen his interview with Peter Robinson. Many have linked to these, but few have discussed the central theses he raises in all of them, which I take to be the following:

  • History shows overly optimistic beliefs about economic growth inflate financial bubbles (e.g. South Seas 1720s, Jazz Age America 1920s, Japan’s Rising Sun of the 1980s, Dot-Com, and finally 2007’s house of cards.)
  • We can call the recent debacle a “credit crisis,” but that’s just another way of saying it’s a bet about the future of economic growth that didn’t pay out. Credit is optimism measured in money.
  • So what we ought to focus on is why economic growth did not proceed apace. Since rapidly increasing growth = asset bubbles of little or no consequence.
  • A la Endogenous Growth Theory, macroeconomic expansion requires the right mixture of technology-generating institutions and policies. At a deep, fundamental level, growth depends on invention.
  • One big reason expansion hasn’t lifted us higher is because people are somewhat irrational–they build retirement nest-eggs, buy houses, bank on pension funds growing at 8 percent a year, but then in the voting booth they support policies inimical to growth. The tragic irony is that much of what people assume about their personal finance depends upon economic growth. And no growth, no pension. Or better: no innovation, no pension.
  • Inventing new technologies is a public good, but one that can’t be financed by direct government intervention. Governments are good at providing subsidies for basic science research, but public choice and knowledge problems prevent governments from being active players in this game. Worse, they’re probably obstacles.
  • Goverments fail, but so do people.  Many are not investing enough in new technologies. (E.g. the 5 percent of your portfolio dedicated to VC investment is more important than the 95 percent dedicated to diversified lower risk investments, because, in the long run, for the 95 percent to pay out at 8 percent, you better hope something out of that VC goes orbital.) Instead, many free-ride, expecting others to do the dirty work of inventing profitable technologies.
  • Last but not least, all of civilization as we know it may be one colossal bubble and it will burst unless we focus on inventing more and better productivity enhancing technologies.

Did I miss anything? Oh yeah–there’s an assumption in there reviving the Great Man Theory of History. Here are some quotes:

  • “The agon between globalization and its alternative will be close — at least in the sense that individual choices will prove to be of decisive significance.”
  • “Unlike the world of politics, in the world of technology the choices of individuals may still be paramount. The fate of our world may depend on the effort of a single person who builds or propagates the machinery of freedom that makes the world safe for capitalism.”

For all these reasons, Thiel has said that not only are Seasteading and other forms of competitive government probable, but more than that, they are necessary–necessary, that is, if we believe the global standard of living ought to improve.

It’s a lot to chew on and I’m not sure where to start. Any takers? As a bonus question, you can discuss this further absurd (or brilliant?) claim from Thiel: Rene Girard is the greatest philosopher since Kant.

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5 Comments
  1. November 17, 2009 10:19 pm

    I haven’t read most of what you cite, but on reading your summary, I wonder whether or how much of a supporter of government-sponsored property rights to inventions Thiel is.

  2. Mike Gibson permalink*
    November 18, 2009 3:04 pm

    @ Michael yeah, I’m not sure. Thiel never delves too deeply into the specifics. That’s a great question tho. Do you know of any research in that area?

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