Remembrance of brilliance past and getting our mojo back
The global wealth increased many-folds since the industrial revolution but lately the engines of our ingenuity have been stagnating. We must get out of this funk.
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The global GDP has significantly increased since the industrial revolution, driven by imaginative innovation. The global per capita productivity growth paused because we stopped substantive imagining and are obsessed with frivolities. Yet we need to get back on track to address the challenges of Population Implosion and Climate Change. I am an optimist. I believe humanity has capacity to innovate and overcome.
The chart plots, in 2017 US dollars, the growth of global output over last 2000 years.
Divide it by the global population growth to get the GDP per person chart:
I will make three observations.
Observation #1 - Imagination precedes Innovation
James Watt patented his steam engine in 1769. Average product by each person was $1277 in that year. It rose to $16170 by 2020.
This obviously is a clear demonstration of how the steam power and the rest of the industrial revolution changed the world.
In 18th century, maybe 80% of the world were peasants. The almost 13-folds per capita GDP growth from 1769 to 2020 was not achieved by better farming but by production of items unimaginable by the peasants of 1769.
Using the measures of that time, it is impossible to multiply wealth by thirteen. We cannot make farms 13 times larger because the world does not have enough land. The same goes for cattle; and even gold though for different reasons.
If we asked them, the more enlightened peasants could have asked for better health and longer life. Incidentally, the life expectancy increased since 1769 but not 13-folds:
In any case, increased life expectancies are not direct inputs to GDP calculations.
Of course, people living in 1769 would appreciate many of the things we enjoy today like refrigeration, air conditioning, motor vehicles, aeroplanes, television, YouTube, and so on. But only when they have them. Otherwise, these things would be beyond their imagination. We achieved the explosion in productivity since 1769 by imagining new things that we can build with our new tools. A steam engine is not useful unless one imagines things to do with it.
Observation #1 — Figure 1 shows the growth of our imagination.
Observation #2 - We stopped imagining
To make my second observation, I need to produce a new chart out of the above two. If I calculate the change in GDP each year compared to the previous year and divide this difference by the size of the population that year, I should get a value that represents the average global productivity per annum per person. I smoothed out the yearly random aberrations by calculating moving averages over 10-year windows:
This chart shows a steady growth in productivity until 1990s and then a sudden spurt and then stagnation. The sudden spurt of 1980s is due to previously unproductive nations joining the global production effort. I mean mostly China but not only China.
More of the global population is now producing and therefore the average productivity (=total GDP/world population) is higher. But it is worrisome that the growth of productivity seems to have stopped. We have been hovering around the same level. I argue that this happens because we stopped imagining new things to build. We are wasting our energy on frivolous pursuits, stuck in tedium.
Observation #2 — We misplaced our ability to do substantive imagining.
In this context, I recall an observation I made last year on the so-called Great Stagnation, which I believe we have been suffering since 1980s. Then I predicted the Stagnation about to end for a number of reasons, which I will not list here.
Observation #3 - We have to try and find our groove
We have two good reasons to try harder: (a) population implosion; and (b) climate change. Both require new innovative solutions although in different areas.
Population implosion
The world is facing a population implosion, at the moment in the developed countries but rapidly spreading. The Statista web site had the following chart :
The world has not been in a period of long-term population decrease before. We are entering uncharted territories. The problem is not necessarily running out of people to make things. Earlier last century, the working class was mostly males and women stayed home but we managed. The problem is the prospect of having too many old people who will need to be cared for. Part of the problem is the need to produce more and I believe we can produce more with better technologies and by increased automation. The other part of the problem, and more serious one, is who will pay for looking after the elderly. This is a distribution problem and we do not yet have the tools to deal with it.
Climate Change
CO2 and other greenhouse gas emissions, by-products of the industrial revolution, are causing irreversible changes in global climate. We may already be witnessing the harmful effects as record temperatures and increasing weather event severity.
Some might say that the the rate of climate change will be less as our numbers decrease. This is not useful thinking. There will be no human-induced climate change if there are no humans but we probably need to imagine a different future.
The humanity went through difficult periods before. I am an optimist and I believe we will find ways of dealing with our present challenges. There are objective indicators that support this optimism as mentioned in my Great Stagnation post.
Observation #3 — We will get back on track because we have to.
Short Takes
Inequality growing in most countries
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Gini coefficient is a parameter that measures the degree of income inequality. If everybody has the same income, the Gini coefficient is 0. If one person has all and the rest nothing, the Gini coefficient is 100. The following chart Statista web site copied from UBS Global Wealth Report shows South Africa as the most unequal country, with Brazil running a close second.
According to the UBS Report, Australia is slightly better than Japan with a Gini coefficient rounded to also 54. I added it to the Statista graph. The Gini coefficient for Turkey is not included in the UBS Global Wealth Report. Another source, The World Bank , lists it as 44.4 in 2021. But, it looks like the World Bank has different method of calculation because it lists the 2018 Australian Gini coefficient as 34.3 (54 in the UBS Report). I scaled up the World Bank number for Turkey using the ratio between the two numbers for Australia and calculated the Turkish Gini coefficient as 54/34.3 x 44.4 = 69.9.
New Turkish millionaires
Some predict the inequality in Turkey to continue rising. The following graph shows the projected percentage change from 2023 to 2028 in the number of USD millionaires. Semafor copied this graph from the same UBS Global Wealth Report. According to this projection, Turkey is the second to Taiwan only.
Why all generators are paid the same price?
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Following my last post, a reader asked why the generators were paid uniformly at the market clearing price by the market operator but not what they bid.
This was discussed in 1990s when electricity markets were being deregulated. A presentation prepared in 2012 by the British energy regulator Ofgem (Office of Gas and Electricity Markets) argued pay-as-bid and pay-as-clear were expected to produce similar results, theoretically:
This was also being discussed in USA. A 2001 paper by Kahn, Cramton, Porter and Tabors favoured pay-as-clear price setting for the following reasons:
Pay-as-bid was inefficient. It would reward not the lowest-cost generators but those that forecast the market clearing price better.
Related to the above, there would be substantial costs associated with predicting the market clearing price and these costs would be passed on to the customers. Moreover, the forecasting costs would not be a fixed cost and therefore their effect on the generation price would be smaller for larger generators.
The collusion between the large generators would be easier in a pay-as-bid set-up.
I could not find an Australian study on this topic but it would probably be making similar points. Note how the above discussion is limited to power markets where all generators are similar (thermal power plants) and the purpose is to prevent them from gaming the system. Nobody predicted how the solar and wind would become the lowest-marginal cost producers in only in a couple of decades. The power generators in 1990s were large whales swimming lazily in stagnant waters and had no defence to the orcas (solar and wind generators) entering the market in 2010s. Read my last post for an explanation of how the orcas decimated the lazy whales.
The biggest loser from the retreat of thermal generation has been coal. For example, in 2015, 1496 gigawatts (GW) of new coal plants were projected to be built. Since 2015, the amount of coal power in development has dropped to 578 GW, with 56% of all new coal plants canceled or suspended as of 2023.
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US spends more on arms than any other nation
Semafore, 18 June 2024
The US government argues the military spending by China is very high and is evidence of the agressive ambitions. At the same time, they criticise the European Union because they do not spend enough.
The following chart shows that the military spending for China and EU is almost exactly at the same as fraction of their GDP and both spend less than the world average. The US by far is the biggest military spender of all with an annual military spending at 3.5% of its GDP.
I do not think China is gunning for future world domination. On the contrary, I think they are going out of their way to avoid being seen as acting agressively. A case in point is the Chinese reaction to the Filipino ship staying grounded on the Second Thomas Shoal since May 1999. Read here on a fellow Substack page how some Chinese thinks China could project more force here; but Beijing leadership prefers caution.
YouTube
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I copied this meme from Oliver López Corona’s post on Medium.
It would be great if more people laughed at this nerdy meme he says. If you did laugh at it, then I reckon you already know about the Ramanujan Summation and do not need to watch the following YouTube video.
Diary
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Kebab Palace
Last Friday, we took away some kebabs from the Kebab Palace. Yi likes chicken shish, Taylan likes Lahmacun and Adana Kebab. Meliz likes Sucuklu Pide. I like them all. We also ordered a Margherita Pizza because I like their pizza too. Kebab Palace has a very convenient on-line system. I order first and then go and pick them up. Here is what I ordered last Friday. Probably a bit too much for four adults plus Eleanor but it is better to order too much than too little:
I added the prices in Turkish liras for those who like comparing these things. Below is what the place looks like. I took the photo when they were packing my order.
And here is their mangal.
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Sunny Park Renovation
The work is still going on. They have been going at it for almost a year now. I took a look the other day and I do not think the end result is enough to justify all that effort. Here is the latest:
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Zika’s Pastries
Regular readers will remember Zika’s Pastries. New owners, who are Japanese, maintain Zika’s originals like Bosnian Lepinja bread and bureks but they also added Japanese sweets. The biggest change is in the coffee choices. This is their board now. I do not know what some of the coffee/tea choices are:
The main thing is it seems still popular. I am glad because I like their lepinja and sourdough rye loaf.
BBQ with Taylans
First barbecue since we came back from Istanbul. I have not lost my BBQ skills:
Eleanor started sharing our table. She prefers lamb cutlets. I scrape the bones clean to make it easy for her to hold them in her hand
Pascal Hagi
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Either Pascal or Hagi, I could not figure out which one, is pretending to be an alarm whistle in this video. They are imitating the sound the phone makes every morning.
Somebody asked what they eat apart from the lettuce leaves that I posted here before.
Lorikeets do ot eat seeds. In fact, it is harmful to feed them any hard pellets or seeds because they would damage their tongues trying to eat them. The Rainbow Lorikeet's tongue is like a bristle brush, which it uses to extract sweet sticky nectar and pollen.
We buy them lorikeet feed, which is a mixture of ground cereal, bread crumbs, sucrose, and some vitamins and minerals. Every night I prepare their food:
Pascal and Hagi sleep inside. I put their fresh feed outside at night after they sleep. I open the door in the morning and they fly out to have their breakfast. They wet their tongue in the water and pick the feed on their wet tongues. There are two water bowls: one for Pascal and one for Hagi. I put two scoops of feed into the feed bowl. They do not eat much at one sitting but keep eating through the day when they feel like it. This is what remains of the feed in the evening:
What I read
Ted Gioia on his Substack page gave brief reviews of the top 10 books of the 21st century according to New York Times. I noticed I have already read a few of them. Here is the top 10 according to NYT. Those I have read, I will mark from 1 (the poorest) to 5(the best):
(1) My Brilliant Friend by Elena Ferrante —- 5/5
(2) The Warmth of Other Suns by Isabel Wilkerson — ?
3) Wolf Hall by Hilary Mantel — 5/5
(4) The Known World by Edward P. Jones — ?
(5) The Corrections by Jonathan Franzen — 3/5
(6) 2666 by Roberto Bolaño — ?
(7) The Underground Railroad by Colson Whitehead — ?
(8) Austerlitz by W.G. Sebald — 4/5
(9) Never Let Me Go by Kazuo Ishiguro — 5/5
(10) Gilead by Marilynne Robinson — 3/5
Ken MacLeod, The Lightspeed trilogy
The third book of this trilogy was released recently and I finished it last week. The story takes place in a world like ours but different. The world of this trilogy has three big powers: the Alliance (the Anglosphere plus India and minus Ireland and Scotland); the Union (the former European Union, now a revolutionary ‘economic democracy’, including Ireland and Scotland) and the Co-ordinated States (China and Russia), all with various client states and non-aligned countries outside. Faster-than-light (FTL) travel was discovered around 2020 but is being kept secret. A London PhD student LAKSHMI NAYAK receives a letter in 2067 in her own handwriting, with equations that describes how to build a FTL spaceship.
I discovered Ken MacLeod twenty years ago. His wikipedia page says that he is a Scottish SF writer and a techno-utopianist with frequent references to libertarian socialist themes. He used to be a a Trotskyist activist.
The Union in the Lightspeed Trilogy is a socialist market democracy, which, in MacLeod’s books, means a democratic market economy where enterpreneurs have equal opportunities.
AT Index
Last post I started a new section on Australian versus Turkish pricers for a small group of items. See last post for details.
Below are the prices in Turkish liras for the items in the basket on 21 July 2024. The conversion rate is 1AUD=22.08TRY
The following is the plot of AT index. Australia is still more expensive than Turkey but not as much what it used to be the last time.
The code to create the above tables and the plot is in my github repository and can be downloaded if you are interested.