There is a lot of capital and a lot of labor, but in different areas where they don’t complement each other. For example, maybe there is a lot of car factories and equipment, but not enough skilled workers to operate the equipment.
There is just more economic power than people actually want. For example, there is a lot of car manufacturing capacity and a lot of skilled auto workers, but people don’t feel the need to buy more cars.
As a side note, I strongly believe that the conceptual tools of “modern” economics are increasingly ill-suited to describe the modern world. Economic concepts like supply/demand and labor/capital were developed in an era where most economic activity was centered around the production and distribution of goods—either agricultural or industrial. In the modern world, physical goods are becoming less and less important. Agriculture is down to 1% of GDP in the US, and industry is down to 20% (even this number seems high). The economy is now dominated by sectors like health care, education, technology, and government. These sectors cannot be described well by traditional economic concepts. What does it mean to talk about the “demand” for health care or education? How can one apply concepts like marginal cost and comparative advantage to the technology sector, where the marginal cost is zero and there is usually a free version of every product available?
Two guesses:
There is a lot of capital and a lot of labor, but in different areas where they don’t complement each other. For example, maybe there is a lot of car factories and equipment, but not enough skilled workers to operate the equipment.
There is just more economic power than people actually want. For example, there is a lot of car manufacturing capacity and a lot of skilled auto workers, but people don’t feel the need to buy more cars.
As a side note, I strongly believe that the conceptual tools of “modern” economics are increasingly ill-suited to describe the modern world. Economic concepts like supply/demand and labor/capital were developed in an era where most economic activity was centered around the production and distribution of goods—either agricultural or industrial. In the modern world, physical goods are becoming less and less important. Agriculture is down to 1% of GDP in the US, and industry is down to 20% (even this number seems high). The economy is now dominated by sectors like health care, education, technology, and government. These sectors cannot be described well by traditional economic concepts. What does it mean to talk about the “demand” for health care or education? How can one apply concepts like marginal cost and comparative advantage to the technology sector, where the marginal cost is zero and there is usually a free version of every product available?
A lot of capital existing means that inflation adjusted US t-bond have at the moment a 0.07% interest rate. It even used to be negative in 2013.
A lot of labor existing means that we have high unemployment in many countries.
It’s sad that big pharma companies buy back their own shares and let go of employees instead of investing the money into developing new drugs.
Apple doesn’t buy back shares but has $158.8billion in cash in there reserves that they don’t manage to invest into developing new technology.