When I wrote about trades not creating real value, I just meant that any value created in the trade is incidental and not the main thing we are talking about. Like, economic theory says we should expect $1000 of value to have been created even if our trade didn’t create any value (perhaps because both buyer and seller were indifferent to whether or not to trade). Of course I understand the point about moving existing stuff to higher-valued uses.
The idea that burying money is as good as investing it seems to contradict Paul Christiano’s explanation of why investing it creates real value, which I found fairly convincing. I’m not sure what to make of the claim that GDP is a meaningless number. Again, Paul Christiano seems to think there are two different levels of growth that one can meaningfully measure, and he seems like he knows what he is talking about. And intuitively it seems to me like most people will spend their money on things that don’t grow as fast as investments. Though perhaps I will just have to let you two argue about it.
I’m not sure if I can explain why what you wrote doesn’t feel like a causal model to me, but maybe it is because it seems to gloss over too many details. Like, the main detail I was interested in was “how does there arise a connection between investment and factory-building?” although Paul Christiano’s comment may have mostly answered that. In your comment, maybe what I want to know is if you perform a service, how does the value of that service end up getting compounded at the same rate regardless of what the service was? This seems a little odd to me… Also, according to your theory, if we perform a service but then don’t accept money for it, is that the same as performing a service and then burying the money? (My understanding of economic theory is that these are basically the same, but my understanding is also that they are different from investing the money.)
When I wrote about trades not creating real value, I just meant that any value created in the trade is incidental and not the main thing we are talking about. Like, economic theory says we should expect $1000 of value to have been created even if our trade didn’t create any value (perhaps because both buyer and seller were indifferent to whether or not to trade). Of course I understand the point about moving existing stuff to higher-valued uses.
The idea that burying money is as good as investing it seems to contradict Paul Christiano’s explanation of why investing it creates real value, which I found fairly convincing. I’m not sure what to make of the claim that GDP is a meaningless number. Again, Paul Christiano seems to think there are two different levels of growth that one can meaningfully measure, and he seems like he knows what he is talking about. And intuitively it seems to me like most people will spend their money on things that don’t grow as fast as investments. Though perhaps I will just have to let you two argue about it.
I’m not sure if I can explain why what you wrote doesn’t feel like a causal model to me, but maybe it is because it seems to gloss over too many details. Like, the main detail I was interested in was “how does there arise a connection between investment and factory-building?” although Paul Christiano’s comment may have mostly answered that. In your comment, maybe what I want to know is if you perform a service, how does the value of that service end up getting compounded at the same rate regardless of what the service was? This seems a little odd to me… Also, according to your theory, if we perform a service but then don’t accept money for it, is that the same as performing a service and then burying the money? (My understanding of economic theory is that these are basically the same, but my understanding is also that they are different from investing the money.)