I have a system of beliefs I use to view the world and it has served me pretty well in making predictions but it has a big hole. So I drive around in my theory without a complete understanding of the engine, but it gets me from point a to point b effectively.

I’m confused by the fact that something that is not really a need can have value. We pay people to make us laugh but you can’t survive on laughter despite that famous quote about medicine. I have a theory and I’m going to use ‘laughter’ in place of anything intangible that we want but don’t need that we might pay money for.

Our ability to pay for laughter is equal to GDP (Gross Domestic Product) minus something I’ll call NTNP. Necessary tangible national product. NTNP is the economic value of the production of things like food, housing, transportation, clothing. Basic necessities which are the foundation of the economy in the 3rd world but that also exist in the 1st world. The NTNP as a percentage of GDP is probably a lot higher in places like Ethiopia where people struggle to survive and don’t spend $100 a month on HBO.

So in my thought experiment GDP = NTNP + EMNP. EMNP is the reason Eddie Murphy is a fabulously wealthy comedian, it’s the value of everything produced people buy after they’ve paid for necessities. Funny people in Ethiopia probably aren’t very wealthy because in Ethiopia they eat tomatoes, we throw them.

For the sake of argument
US economy: 20% NTNP and 80% EMNP.
Mexico: 50% NTNP and 50% EMNP.
Ethiopia: 90% NTNP and 10% EMNP.

The interesting point is that even if you’re having a bad year in Ethiopia the economy will never collapse due to a lack of confidence like it can in America. Eddie Murphy National Product on the other hand is ephemeral, subject to the whims of collective grumpiness.

One of my beliefs is that accelerating technological change is squashing the middle class. When everybody is driving electric cars in ten years there will be a million or so mechanics out of work because electric cars are so much easier to maintain. That’s just one example. The newspaper business is on the brink of collapse due to the Internet, etc.

I’m going to coin a new term to describe what our middle class is facing. Schumpeter came up with creative destruction. Kurzweil has accelerating change. Mash them together and you get the ugly term Accelerating Destruction.

EMNP will continue to shrink in the future as the rich get richer. Why? Because wealthy people only have so much time to go to the movies and Olive Garden. But those businesses employ a heck of a lot of middle class people.

We need to learn to live with deflation. The number one criticism of deflation is that it strangles the economy because people stop spending and wait for things to get cheaper in the future. If that was really a problem nobody would ever buy a laptop. Fear of deflation is probably due to the knowledge that our bubble economy sat precariously atop debt funded pillar of happy thoughts.

I get the sense that policy makers know that confidence is a prerequisite (hence the blind optimism) but they don’t seem to get that the confidence was paid for with unsustainable debt.

Wealth redistribution is not technically fair in my opinion (Bastiat) but it may be the only way to prevent the complete collapse of capitalism given accelerating destruction. Someone has to keep the people paying for laughter.