The idea of a singularity has been adapted to futurism. Just as the laws of physics break down under the extreme conditions of a black hole, in a technological singularity our laws, theories, and models of human society will break down. So the physics singularity of the black hole has been used as a metaphor for science and technology progressing at exponentially faster rates.
In Say's day people sometimes argued that new labor saving technology should be suppressed to save jobs, or deliberately inefficient production should be adopted to create jobs. Variations of this argument are always with us and Say's Law is the basis for the standard arguments against these policies.
Say said that the market would automatically create jobs. His key idea is that the capitalist would not sit on his savings. The capitalist would always find profitable ways to invest. To sit on his savings and give up the opportunity to make interest or profits would be irrational. The investment of savings would push the economy back toward full employment.
About twenty years later Say came back and issued what I like to call Say's Caveat. He said that his law would only work as long as the capitalist could find profitable investments.
Many economists rejected this warning, but others developed variations on the idea. Marx said that monopoly capitalism would accumulate savings until profits and interest were driven toward zero. Then when the capitalists failed to invested there would be mass unemployment and a crisis in capitalism. He thought this would lead to revolution. The great depression saw something like this happen. Keynes and other economists pushed for deficit spending to suck up the excess savings. Currently many economists write about interest rates on safe investments being close to the lower bound, that is zero. All of these ideas are variations on Say's Caveat to Say's Law.
Not everyone agrees that technology is accelerating. Peter Thiel, the technology investment wizard, has been saying in the last few years that technological progress is slowing because the tech companies are sitting on their money rather than investing it. I am suggesting the opposite is happening. It is not slow technological progress that is discouraging investment but rapid progress. Rapid progress makes large investments that pay off over long periods uneconomic. Only small investments that pay off quickly make sense, and those can not absorb all the money that is being saved.
A similar argument can be made about many sources of renewable energy. It is commonly reported that wind power, both on land and at sea, various forms of solar power, geothermal, and other renewable energy sources are continuously getting cheaper. As these energy sources require a large upfront investment and pay for themselves over a long period of time with cheap energy they seem like the perfect way to suck up excess savings. But if the cost of generating energy with these rapidly advancing technologies is always going down why not wait. Next year's wind generator will be more cost effective than today's. Furthermore, with so many rapidly developing technologies it is very likely that the investor will bet on the wrong one. This provides another economic reason to put off investment.
Let us consider other examples that are central to our own lives. Consider your home, your car, and your computer. All are important to you, but you probably spent vastly more on your home, much less on the car, and far less on your computer. A major reason for this is that the technology of houses changes very slowly, cars much faster, and computers far faster still. We do not invest heavily in technology that changes rapidly.
We will have to adjust to the new rapid progress and change our policies to accommodate the changes, but as we do the technology will continue to accelerate which will require us to accommodate the changes at an ever more rapid rate. Welcome to the technological singularity. As Bettie Davis said in the movie All About Eve, "Fasten your seat belts, it's going to be a bumpy night."
Here is an index to my other pages on economics, and a short review of my qualifications in this field.
Another web page that discusses this issue of rapid progress and investment is this one on Blockbuster
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Posted October 18, 2019
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