Why we are Stagnating

Declining marginal utility explains why the economy's in such a funk...

IT'S UNAVOIDABLE. As a society ages its institutions become brittle and inefficient, writes Bill Bonner, founder of the Daily Reckoning.

They are no longer dynamic and productive. And, they become nests for dead-head zombies. The two things go hand in hand. On the one hand, declining marginal utility undermines the productivity of future inputs. And the zombies take over...making it impossible to direct inputs elsewhere. The zombies protect their turf; they make sure they get more resources, not less.

Take education, for example. A little of it goes a long way. When a person learns to read and write, the whole world of ideas and information opens up to him. Whether more inputs of formal education actually pay off or not is open to question. Clearly, beyond some point, they don't. Americans spend twice as much per student as they did 40 years ago. The educational attainment results are about the same. Which suggests that the marginal utility of investment in the education industry declined to zero 4 decades ago.

Most the world's great ideas...great books...and great inventions were produced by people who spent relatively little time in formal school settings. But now, every goofball and half-wit is expected to have a college degree. What do you expect? A college degree isn't really worth very much.

But the zombies want their children to go to college. And the zombies want cushy jobs as 'educators' and educational administrators. (They don't want to teach...that's too hard!) And children are no dopes either; they know it's a lot more fun to spend 4 years at Party U., at someone else's expense, than 4 years out in the real world. Especially now, when it's hard to get a job. That's part of the reason student loans have quadrupled since 2007.

Obama promised to bring 'change' to the nation. But change is the last thing the zombies want. And it's the last thing that Obama would want to give. The voters wouldn't stand for it.

Instead, we have a Great Stagnation...an economic deadend...where further inputs into traditional, zombie-controlled institutions no longer pay. More credit? More military spending? More Medicaid? More Social Security? More education? More consumer spending? More hiring? More capital investment? More energy consumption? More programs? More unemployment compensation? More taxes? More laws? More regulations? More lawyers? More educators? More security guards?

Will they pay off?

Not a chance.

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