Re: poly: Re: Why interest rates may stay low

From: Hal Finney <>
Date: Tue Jul 21 1998 - 17:59:05 PDT

In Robin Hanson
argues that an economic singularity will probably not occur for at least
100 years. Part of the reasoning is that investments which could have
produced high growth rates instead get their excess returns "burned up" by
premature investment. This causes average returns to be equal to marginal
returns and is, as I understand it, a crucial step in the analysis.

Robin mentions that if there could be property rights to prevent
competition in developing the technology, then the burn-up could be
avoided, but that such property rights are not recognized in our current
legal system.

We've had much discussion about these issues here, but in looking
back over the archives I see that on March 23 Robin seemed to suggest
a loophole:

> The question is: if interstellar colonization will be such a good
> investment, and if most of the returns from that will go to owners of
> near-solar mass, and if most of the near-solar mass will be owned
> by the first projects to go grab it, and if such projects are nearly
> feasible now, why aren't hundreds of billions being spent now on
> such projects? The size of any one project isn't the point; it's the
> total spent on all such projects.
> One answer is to say that investors *don't* believe most colonization
> returns will go to owners of near-solar mass, or that they don't believe
> most near-solar mass will go to people who try to grab it via near-current
> technology. If there are no obvious property rights that one could grab
> now that would give a big lock on interstellar colonization, the prospect
> of big returns won't induce a big race now to grab such property rights.

So it seems that the burn-up could be avoided if there were not likely
to be property rights in the fruits of the premature developments.
If later competitors can come in and grab much of the value of the
premature investment (say, via leaked research results, or because
the technology was appropriated by government), then there is not the
incentive to invest in the premature research, but rather to wait and
hope someone else does so.

Take a specific case like nanotech. Fans of the technology believe that
it could produce tremendous rates of growth (in some industries, at least)
of hundreds of percent a year in perhaps only twenty or thirty years.
This should be fabulously profitable. Yet there is no large scale
investment today to "burn up" these excess returns. Why is this?

It could be that the nanotech visionaries are simply wrong, that it won't
work, and that people controlling investment dollars know this and so
they don't throw their money away. But can we conclude that this must be
the case? Is the lack of investment in nanotech proof that it won't work
(or at least that the chances of success are poor)?

Another explanation, based on Robin's point above, is that potential
investors are not confident that money invested today will deliver them
enough protectable technology that they can prevent competition during
the decades before nanotech becomes profitable. If they invest now they
will find themselves in ten or fifteen years having spent a fortune but
not being in much better position than their competitors who are free
riding on their results.

If burn-up does not occur, then average returns can be higher than
marginal returns and perhaps this could get us to a singularity sooner
than Robin's estimate. If burn-up does occur, then we need to explain
why people are not investing in those technologies which hypothetically
will produce huge returns in a few decades.

Received on Wed Jul 22 01:05:29 1998

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