Recipes and Production
There are two categories of things required for economic production:
1. Natural Resources
2. Human Effort
Both categories are broad and varied, but highlighting them simplifies thought on a few key issues. Capital is not a substitute for human effort, it is a type of effort. Instead of producing goods directly at high effort per good produced, people can first produce capital and then use the capital to reduce the per-unit cost of production. Thus, capital's share of production is the amount of return necessary to compensate the factors of production used to produce it.
Malthus's big insight was that biological growth is exponential and natural resources are fixed. Therefore, if people continue to expand at unrestricted rates, they will eventually outstrip their food supply. The basic intuition is correct, although agricultural technology has grown very quickly and people have stopped breeding so rapidly, eliminating the danger of a Malthusian trap.
There is a type of effort that is very peculiar, and in a way can be thought of as a form of capital: the recipe. Recipes are the accumulated knowledge of which arrangements of scarce resources are effective at satisfying the goals of people. Once discovered, they can improve all further production efforts, or satisfy needs that were unachievable before. In the past, most human effort went into following recipes already known. Hunter/gatherers spent very little effort improving the methods they used to hunt and gather. Farmers farmed the way their parents had and their parents before them. At the edge of the Malthusian trap, there is little room to try risky new recipes. Throughout history, more and more effort has been spent coming up with new recipes, and less has been spent on following them.
Soon, perhaps, robots, 3D printers and universal assemblers will be able to produce any arrangement of atoms we can design, so long as they have enough raw materials to work with. We are already there in terms of digitalizable goods. I think the economy of the future will be all about coming up with new recipes, and not very much effort will go into executing them.
1. Natural Resources
2. Human Effort
Both categories are broad and varied, but highlighting them simplifies thought on a few key issues. Capital is not a substitute for human effort, it is a type of effort. Instead of producing goods directly at high effort per good produced, people can first produce capital and then use the capital to reduce the per-unit cost of production. Thus, capital's share of production is the amount of return necessary to compensate the factors of production used to produce it.
Malthus's big insight was that biological growth is exponential and natural resources are fixed. Therefore, if people continue to expand at unrestricted rates, they will eventually outstrip their food supply. The basic intuition is correct, although agricultural technology has grown very quickly and people have stopped breeding so rapidly, eliminating the danger of a Malthusian trap.
There is a type of effort that is very peculiar, and in a way can be thought of as a form of capital: the recipe. Recipes are the accumulated knowledge of which arrangements of scarce resources are effective at satisfying the goals of people. Once discovered, they can improve all further production efforts, or satisfy needs that were unachievable before. In the past, most human effort went into following recipes already known. Hunter/gatherers spent very little effort improving the methods they used to hunt and gather. Farmers farmed the way their parents had and their parents before them. At the edge of the Malthusian trap, there is little room to try risky new recipes. Throughout history, more and more effort has been spent coming up with new recipes, and less has been spent on following them.
Soon, perhaps, robots, 3D printers and universal assemblers will be able to produce any arrangement of atoms we can design, so long as they have enough raw materials to work with. We are already there in terms of digitalizable goods. I think the economy of the future will be all about coming up with new recipes, and not very much effort will go into executing them.