April 20, 2014
Will Virtual Reality Decrease The Demand For Goods And Services?

One of the 50 or so ebooks I am cycling between (me no have patience to read single book at a time) is The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson and Andrew McAfee. The book is worth reading. But I have a bone to pick with it:

In some ways, the proliferation of free products even pushes GDP downward.


If the cost of creating and delivering an encyclopedia to your desktop is a few pennies instead of thousands of dollars, then you're certainly better off. But this decrease in costs lowers GDP even as our personal well-being increases, leaving GDP to travel in the opposite direction of our true well-being.

He gives assorted examples of free or cheaper services. But if people spend less on some stuff don't they just spend more on something else? I see no sign that people are saving more of their incomes because feel sated with all the free services they already own and use. After a long debt bender and the 2008 financial crisis consumers deleverated for a while. But now consumer debt is growing again.

Is some portion of the population more willing to work part time and go home and play video games for hours? I can believe that some lazy people will work less and play more given cheap enough ways to play and enough money to pay the rent and buy food. But most people? I think it more likely the poorer people will spend more time on leisure than those who can earn the big bucks.

Let us go further into the future. Will the ability to live more of one's life in virtual reality eventually decrease the desire to live in a real big house? Or will it decrease the desire to fly to Europe or Australia or a tropical island? Will virtual reality decrease the overall demand for goods and services or just shift demand around?

Share |      Randall Parker, 2014 April 20 09:39 AM 

Jamie said at April 20, 2014 11:30 AM:

As GDP drops, so does (some people's) income. Axiomatic economics - if the velocity of money drops, it pools. We see this happening now - I don't want to turn this in to an inequality debate, but clearly the extremely wealthy and companies see cash hoarding as superior to investment, aside from government bonds.

So no, it isn't clear that the money on those encyclopedias will just be spent somewhere else.

Brett Bellmore said at April 20, 2014 1:50 PM:

Frankly, I'm not saving more as I glut myself on really cheap internet, because inflation is running a lot higher than the government is willing to officially admit.

I mean, I grilled some hamburgers yesterday. Ground chuck cost what steak did a few years ago. And I'm talking a GOOD steak. Heck, CHICKEN costs more than I was paying for beef ten years ago.

And don't even get me started on gasoline or health care.

Wolf-Dog said at April 20, 2014 10:00 PM:

The problem is that the GDP is being calculated in purely numerical dollar terms, without taking into account the changes in the quality of life. In the future, the numerical value of money should include adjustments for the quality of life as well.

Certain types of expenses such as food and shelter are becoming more expensive due to the fact that the world population outside the western countries is still increasing, and there is significant immigration to the United States. But it is very possible that thanks to biotechnology, the price of food will decline as fast as the price of computers. Similarly, if new sources of energy such as thorium reactors are developed, the cost of building real estate will decline dramatically, as a lot more land can then be developed at a much lower cost.

The cash-based economy, where payments are made by using money instead of bartering goods, services and labor directly, is also a constraint on economic health. Economic well-being should be measured by both the volume and quality of the goods and services that are created and used for the well being of people, instead of using only crude numerical estimates of dollars that are gained and lost.

But the deflation in knowledge, electric books, internet, etc, is a boon for the training of future work forces. In the future all books will be accessible in electronic format in university libraries, and most people will have access to these resources for a very small fee. And many electronic courses will become far more realistic at very low prices. These days there are only a few videos of courses at top universities, and there are also some PDF files of the courses, but these are still very poorly organized. In the future electronically organized courses will be far better than the traditional lectures that are tough in lecture rooms. Within 50 years any student will be able to graduate from any college without even being present there. Maybe for some senior level laboratory experiments it will be necessary for the students to live near the university, but for most of the work, there will be no need to travel. For Computer Science students, there will certainly be no reason to move.

Nick G said at April 20, 2014 10:02 PM:

Let's be clear: if prices fall, that doesn't mean GDP falls: if an equal or greater number of "encyclopedias" are delivered, then production (and Gross Domestic Production) is rising.

If prices are falling, it just means that a sector of the economy is experiencing deflation. If the statisticians who calculate the CPI miss the fact that prices have fallen and show production as falling, that's a statistical error.

Dan said at April 21, 2014 11:18 AM:

But what if the encyclopedia presents as fact things that are plainly false?

Mammals, including humans, do not change genders. That genetics precludes this possibility has been known for a hundred years at least.

Yet Wikipedia spews forth pages upon pages of nonsense obfuscating that fact, supported by reams of obfuscating research.

Now substantial numbers of young and guillible people really believe they can change genders, backed by bogus, agenda-driven 'science.' Others, bitterly clinging to reality, are seen as bigots and heretics to be eliminated.

In a world centered on knowledge, shouldn't descent into a dark ages be counted as a large subtraction from GDP? In our much celebrated knowledge-world, young people know as fact so much that is false. Most of the so-called dark enlightenment, which a few rebels cling to at the margins, was simply common knowledge throughout Western civilization until recently. This is progress? Hardly.

Jamie said at April 22, 2014 1:29 PM:

Nice hooby horse you got there, Dan, but it would be nice to flog it somewhere where it is actually topical. (Explanation of the difference between sex and gender omitted.)

Dan said at April 22, 2014 2:31 PM:

Jamie -- "The difference between sex and gender" -- none.

Mind you there are, as I said "pages upon pages of nonsense obfuscating that fact, supported by reams of obfuscating research" and I am sure someone versed in all that arcana can talk circles around me, but this is exactly my point: a plethora of new 'knowledge' has been manufactured out of almost nothing at all, like the theologians of old discussing angels dancing on the head of a pin.

There are other areas where hypothetical questions morph into vast pseudo-knowledge fields of almost no practical value. String theory and climate modelling come to mind for sucking up huge resources while making no falsifiable predictions at all in the former case and forecasts that are little better than chance in the latter case.

Most of the social sciences must fall into the category of nonsense. For example, archeologist Napoleon Chagnon was attacked almost universally in his field for doing actual archeology rather than propagating the 'noble savage' myth. Which goes to show that apparently none of the other 'archeologists' were doing actual archeology. Seemingly none of the ethnic studies departments at any university address HBD, which would actually be the starting point if you were a sincere, knowledge-seeking social scientist of ethnicity, which apparently none of them are, anywhere in America.

It seems certain that in areas of theory (that is, areas not powered by the advance of technology) knowledge is actually less than it was fifty and sixty years ago. Meaning that knowledge workers in these fields have been a cumulative subtracting force to real GDP over time.

Ronald Brak said at April 22, 2014 9:09 PM:

Brett, if US inflation was a lot higher than the official rates then the US dollar would be falling and I would be going there for my holiday wearing a loud Haiwaian shirt and saying things like, "How much of this goldarned Mickey Mouse money do I gotta pay to get me a Waldorf salad in this place?"

Jamie said at April 24, 2014 10:48 AM:

Dan -

It must be frustrating when academia fails to cater to one's personal opinions and biases. Perhaps you and some like minded folks can start the Dark Enlightenment Univsersity to correct the situation. Although that probably runs counter to the Staussian impulses at least some of that crowd seems to favor.

In the mean time, back on topic, Ronald is of course correct, and it is a very common error to note prices going up on things one frequently buys and failing to see them dropping in other baskets.

Dan said at April 25, 2014 2:24 PM:

@Jamie --

When the discoverer of DNA and possibly the greatest living biologist is driven out of academia completely by his lessers for an observation in violation of the prevailing leftist theology, I think the problem lies not with me. When the anthropologist who conducted more fieldwork for a longer time than any other is intolerable to his far less accomplished colleagues for bucking the leftist narrative, I think the problem lies not with me.

As for the topic at hand, I am certainly addressing it. The point Brynjolfsson and McAfee make is that we are in an age where content and knowledge is cheap or free, and that GDP measures aren't factoring that in. I countered that in many areas of knowledge we are regressing. Apologies if you had a hard time grasping that.

I notice that you do not make substantive counterarguments to any point I raised. That is expected.

Reductionist_Passing_By said at April 25, 2014 9:20 PM:

Sex/gender is a constellation of metrics, and some of the kids who undergo sex changes exhibit above-average metrics for their chosen sex/gender.

In this news video, for example, the kid actually seems very psychologically balanced... needlessly fixated on sex/gender, IMHO, but still with a better psychology than most people.

Those metrics are going to continue to improve as science gets closer to being able to regrow the human body. For example, labs are now able to grow working vaginas for the 1 in 4,500 girls who are born without one. (This technique will presumably also be used for victims of vaginal cancer or other disorders.)

I'm happy to let people do as they wish on this issue, so I can spend my political capital on issues that are more important to me.

Dan said at April 26, 2014 7:43 PM:

Reductionist_Passing_By --

You sound like well educated millenial. The term 'clever sillies' clearly applies.

Of course the number of humans who have successfully changes genders so far remains stubbornly stuck at zero. Sex/gender is first, second and last about reproduction, scientifically speaking (i.e. in the realm of reality). It is true that some have malfunctioning reproductive systems, but nobody has ever navigated successfully from one reproductive role to the other. Doctors don't even try: the primary sex organs are not the penis and vagina, but the testes and ovaries, as we learned in middle school, but doctors who would change a person's sex/gender take away one without replacing it with another, leaving patients stuck in a valley somewhere.

I find this topic fascinating because so many smart people wilfully ignore the obvious. If science ever advanced to where people could actually get to the other side (i.e. have the other reproductive role) it would be even more obvious that the early experimenters of the present are getting fleeced.

Getting back to the topic of virtual reality, maybe these gender surgeons are a little bit like video game designers, both giving unhappy people a place to escape to.

Reductionist_Passing_By said at April 27, 2014 1:34 PM:


Don't get me wrong: I think sex-changes look irrational to us because we're "strong seed."

Our minds proceed according to ordered rational laws, making us less vulnerable to the many forms of frivolity.

IMHO, people who have alternative gender desires tend to be (but are not always) "weak seed," with less ordered minds than ourselves. That's why their minds are able to be captured by fixations on gender.

Reductionist_Passing_By said at April 27, 2014 1:42 PM:


You're talking about reproductive gender, which indeed can't be changed.

But kids who get sex-changes are genuinely able to change their social & psychological gender.

As well, they're able to change their fornicatory gender to some degree. One of the commenters at that news video writes:

I was skeptical our current level of medicine could create a convincing and functional neovagina, but it doesn't seem to be a problem.

This document shows photos of a convincing neovagina, and writes that they tend to be experienced by sexual partners as 'tighter' than the natural human vagina.

These kids can still participate in reproduction by freezing semen before they undergo the procedure, same as boys who get childhood cancer do.

I advise people to just grow up and adapt to their gender, but I don't really care about the issue.

Regarding Randall's topic of virtual reality: I see sex-changes as being connected because, same as virtual reality, they're both about advancing technology allowing humans to increasingly fine-tune their experiences to their pleasures.

Dan said at May 1, 2014 9:20 AM:

"These kids can still participate in reproduction by freezing semen before they undergo the procedure"

Well of course. Our 'woman' has the possibility of fathering children, miracle of miracles. Our 'woman' also continues to have the full complement of male Y-chromosomal genes, most of which continue to be expressed.

I remember how Oprah trumpeted the astounding breakthrough of a pregnant man. It turns out it was a pretty much normal woman who took just enough hormones to grow a bit of peach fuzz, but not so much as to mess up her fertility.

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