Seriously. Sometimes I wonder about who actually is visiting this site.
The 'wonder' of compounding interest?
It's merely the monetary representation of the return on investment in productive activities and assets. The reason money has a cost is because it can be converted into useful, productive activities, so the holder needs to be compensated for that.
The 'wonder' is how animal herds and horticulural products increase enough in quantity to feed us all.
Building a shelter over your head is compounding interest at work. You sleep better, stay healthier and have more time to do other things. Same goes for a knife or a spear, or a factory or a computer.
I find it incredibly odd that we have people running around saying 'we have to stop growth' 'growth is bad'. Yet, on all measurable criteria - every single one of them - things keep getting better. This is because of the compouding effect of investment in knowledge and productive capacity.
I'm not sure where the growth-hate comes from, if it is ignorance or just some sort of strange moral fashion to hate on the modern world. Either way, a class of people have convinced themselves that - of the entire trajectory of growth from nomadic paleoithic peoples to now - it's right at this point the wheels are about to fall off. Strikes me as a little narcissistic, really.
> Seriously. Sometimes I wonder about who actually is visiting this site.
I'm a programmer who sometimes reads about economics and economics history. I've also worked in some finance-related industry for a couple of years early in my career (in the IT department).
> This is because of the compouding effect of investment in knowledge and productive capacity.
Yes, I know how compound interest presently works, I was just questioning its long-term (think 50-to-100 years, if not more) viability. To give an example which I stole from people smarter than me, just think that if you had invested your pension money on the Russian stock market in the 1910s or on the Chinese stock market in the 1930s you would most probably be bust (to say nothing of nationalizations and confiscations of private real estate). And these are two pretty big examples which happened in the last 100 years.
The idea that the return on the rate on investment on the long term can only go down I've stolen from Jean-Baptiste Say, who wrote it down in the ~1820s. Now, he just happened to write this before the Industrial Revolution started doing its thing and, just as important, before economic colonialism started to positively influence the Western economies of that time (think the Opium Wars). Now, you're saying that we'll be able to somehow reproduce that Industrial Revolution a second time, I question that optimism.
> I'm not sure where the growth-hate comes from
I'm not at all "hating growth" (even though I believe that we should be well aware of its downsides). I'm just saying that it's no good making only positive economic projections about the future, we're not magicians and crystal balls are just that, pieces of glass.
If your here to quote Says law then you have my support. But while growth in specific investments must always stop, eventually, aggregate growth will continue unless people opt for a lower standard of living.
It's easy to look at a particular assets class - say railways- and show zero return over a long period. But looking at all improvements across all industries shows growth is always coming from breakthroughs somewhere. Healthcare, rocket science, these are two major fields wher rapid change is evident, even if it is of the incremental kind.
I think you've mixed up the concept of compounding interest and specific assets classes ability to return positive and withstand time. They are really two separate topics.
The 'wonder' of compounding interest?
It's merely the monetary representation of the return on investment in productive activities and assets. The reason money has a cost is because it can be converted into useful, productive activities, so the holder needs to be compensated for that.
The 'wonder' is how animal herds and horticulural products increase enough in quantity to feed us all.
Building a shelter over your head is compounding interest at work. You sleep better, stay healthier and have more time to do other things. Same goes for a knife or a spear, or a factory or a computer.
I find it incredibly odd that we have people running around saying 'we have to stop growth' 'growth is bad'. Yet, on all measurable criteria - every single one of them - things keep getting better. This is because of the compouding effect of investment in knowledge and productive capacity.
I'm not sure where the growth-hate comes from, if it is ignorance or just some sort of strange moral fashion to hate on the modern world. Either way, a class of people have convinced themselves that - of the entire trajectory of growth from nomadic paleoithic peoples to now - it's right at this point the wheels are about to fall off. Strikes me as a little narcissistic, really.