Time-Price Meets Covid-19

Monday, 7/13/2020 18:58

Theory versus the face masks...

HOW do you invest in a world gone covidiously cuckoo? asks futurologist George Gilder for Addison Wiggin's Daily Reckoning.

In Agora founder Bill Bonner's take: wandering through life facelessly suspended "between six feet apart and six feet under?"

In a country that locks down its healthy and productive citizens, while refusing even to bother, let alone lock up, crazed mobs of masked arsonists and burglars in the streets?

How do you soldier on without despair in the throes of the doomsday Adventist cult of Covid-19, with its high priest Anthony Fauci trumpeting a "Second Coming" of the virus, as a scourge for sinners in the hands of an angry doctor?

He probably means you and me, folks.

Indignant at Southern and Western states that have apparently unleashed vicious "surges" of viral YouTube porn after opening up their economies, the reverend doctor stormed: "Just look at some of the film clips that you've seen! Of people congregating! Often without masks!"

Don't deny it, you yourself may have taken a dirty peek or two at the shocking scenes of happy faces.

Some of the celebrants are adopting strange new and kinky positions: "Of being in crowds...and jumping over, avoiding, and not paying attention to the guidelines that we very carefully put out."

Predicting hundreds of thousands of infections a day unless the misbehavior stops, the Doctor seemed shaken by the guideline-scoffers: "We're going to continue to be in a lot of trouble. And there's going to be a lot of hurt."

Don't say he didn't warn you!

Meanwhile, with the all-cause death rate in this decade still the lowest of the century, death rates plummet around the world, while the spikes and surges affect only test-rates and media spins.

In the index of Covid death rates per thousand people, the Southern and Western rebels remain an order of magnitude behind the lock downers in New York.

Texas's per capita Covid death rate is just 6% of the death rate of New York; Arizona's is 16%. William Briggs and David Stockman are both on top of the data.

Intelligent investors will ignore the pandemonium and seek the signal in the noise.

They are always ready to invest in the midst of what economist Joseph Schumpeter called "gales of creative destruction."

And in the future, they will take solace from understanding the message of time-prices, which gained impressive new momentum and authority with recent research from the anti-doomsday voices of economists Marian Tupy and Gale Pooley.

Time-prices are the only true prices. They gauge the number of hours and minutes you have to work in order to buy goods and services.

An index of economic progress, they combine in one number both the rise of incomes and the drop in prices resulting from the advance of innovation.

In the past, Pooley and Tupy have confined their measurements and observations to the relatively halcyon years between 1980 and 2018.

During this period, while world population increased 73%, the prices of 50 key commodities of life, measured in the work hours to buy them, dropped 71% and their abundance grew 518%.

Nowhere was evidence of "peak commodities" or unsustainable resources. As population grew, commodities grew yet more abundant per capita. Human populations do not burden the planet; they proliferate its bounties.

Although an exciting breakthrough in economic statistics, this evidence of surging economic growth and progress fails to offer guidance to investors for a time of economic and social catastrophe such as today.

As Steven Pinker of MIT has documented in several books, the era between 1980 and 2018 has been a time of unprecedented peace, productivity, and increasing longevity.

But now Tupy and Pooley have uncovered a new series of commodity prices going back to 1960 (World Bank).

For the US, they also compiled time-prices going back to 1919 (US Bureau of Labor Statistics), 1900 (Canadian economist Davis S. Jacks) and even 1850 (also Jacks).

Since the US was what we now would call a Third World country in 1850, its 19th century ascent is suggestive of the global trend.

This new data covers the US Civil War, the First World War, the Spanish Flu, the Great Depression and World War II. The Spanish Flu in 1918 had a death rate roughly ten times Covid-19 today.

What Pooley and Tupy found was that innovation proceeded with little disturbance through all these disasters. In my Information Theory of Economics, with wealth measured as knowledge, growth as learning, and money as time, wars and plagues could buffet but not balk the process of growth and innovation.

The current and recent Covid-19 lockdowns represent the most egregious public policy blunder of all time, ravaging economies around the world, causing a UN estimated (and probably exaggerated) 260 million starvation deaths in the Third World, with no detectable improvement in healthcare outcomes.

The carnage perpetrated by a clueless political class and its sanctimonious experts is possibly unprecedented in world history. But as long as the human heroics of invention, learning, and creativity are allowed to continue, the prospects for the world economy remain better than ever.

Our time-price chroniclers show that innovation has been accelerating ever since 1850. In the early period in the US, time-prices improved on average around two percent a year as workers had to spend ever less time to gain the crucial commodities of life.

Through wars and plagues, time-prices continued to improve, dropping some 3.4% per year compounded through the most recent period.

Innovation is a process of learning, accomplished through falsifiable business and technological experimentation – business projects that can fail and thus yield knowledge regardless of outcome.

The key metric is the learning curve – the tendency of costs to drop between 20-30% with every doubling of unit sales – the most widely documented data in business history.

Tupy and Pooley's most recent data opens up wide global horizons for investors that dwarf the political botches and blunders of 2020.

What investors have to do is find the most innovative and creative entrepreneurs and support them.

Don't let the lockdown control freaks control you.