Re: poly: Why interest rates may stay low

In a message dated 2/27/98 12:27:46 PM, hanson@econ.berkeley.edu wrote:

>So regardless of how much technology makes investments
>intrinsically profitable, without property rights the
>average return on investment stays at the marginal rate,
>which is determined by our evolutionary heritiage on
>discounting time, at 1-2%/year. And to the extend that
>growth rates are tied to the average return on investment,
>growth rates will also say moderate.

You've lost me somewhere. Real rates are above 1-2% right now,
and have been for a while.

One thing to consider is that the additional investments may
in turn create additional investment possibilities. Quite
plausibly, there's always a way to produce decent substitutes
for any of the investment goods at a ROI better than 2%. That
gives you a demand curve at 4% and a supply at 2%. Then
there's no real equilibria, just effects of decisions made
with grossly inadequate information. Investments just end
up restricted to where the factors of the demand curve are
well enough known.

>Now consider for the moment a population of uploads and
>ordinary people, with uploads running much faster. The
>uploads discount time much faster, so they won't find it
>in their interest to invest their resources until interest
>rates are much higher than they are now. So the humans
>do most of the saving, and so own most capital, and keep
>interest rates at 1-2%/year.

Uploads won't necessarily discount faster; that depends on
their discount rates. I would assume uploads wouldn't be
tied to just a multiplier of their human discount rate.
An interesting corrolary of this is that all wealth ends
up in the hands of the late breeders (who tend to have the
lowest discount rates).

>Now maybe if we get far enough out on the supply curve,
>it hits a wall and goes up real fast, then interest rates
>could rise up to where fast uploads would find them
>interesting.

Another point: much, if not most, of investment is in human
capital in such forms as technical knowledge and experience.
There are some walls there; you can't train a person longer
than they live; and I doubt many would accept training that
swallowed up all their good reproductive years.
Received on Sat Feb 28 00:38:25 1998