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

Hal suggests:
>Suppose the reason we don't see people investing in these projects is
>because people think that their success is unlikely. A lot can go wrong
>before we get around to taking over the universe. There could be war,
>economic collapse, or the technology could have some subtle flaws which
>we are overlooking.
>But suppose that, as time goes on, the odds improve. ...
>Would we see large growth rates (or at least price increases) as we
>transition from a state where the chances of seeing enormously productive
>investments look low to where they look high?

If the odds improved dramatically suddenly, then yes, in principle there
could be so many great opportunities as to hit supply limits on investments,
and then push up rates of return and growth rates.

If the odds improved slowly, however, there would be more of chances for
premature investments, and so less of a chance of hitting investment supply
limits. If such limits are never hit, via most world income being devoted
to investments related to this new opportunity, growth never gets out of
historical ranges.

Robin Hanson
hanson@econ.berkeley.edu http://hanson.berkeley.edu/
RWJF Health Policy Scholar, Sch. of Public Health 510-643-1884
140 Warren Hall, UC Berkeley, CA 94720-7360 FAX: 510-643-8614
Received on Tue Mar 24 00:26:08 1998