Ten Megabytes and Economic Growth

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Ten Megabytes and Economic Growth

by Ralph Shnelvar, March 17, 2005 (posted)

One of the great benefits of doing political work with Ari Armstrong are the discussions we have that are seemingly unrelated to the event at hand.

As you know, Ari and I went to downtown Denver to witness the historic transfer of medical marijuana from the Denver Police's property clerk to Thomas Lawrence.

I picked Ari up at his house and we showed up about 30 minutes early. Indeed, this may be the first time in human history that a pair of libertarians showed up early for anything. As usual, the media took no note of that miracle. [Editor's note: Fortunately, the media did give some coverage to the event itself. Channel 4 broadcast a report of the event that evening, and on March 10 David Harsanyi of the Denver Post and Boulder Weekly covered the event. StopTheDrugWar.com covered the event as well, and there may have been additional coverage of which I'm unaware. -- Ari Armstrong]

Ari was remarking about the enormous progress in computer technology. He noted that it was now possible to easily carry 60 gigabytes of storage just to play music. I smiled.

One of the great banes of doing political work with Ari is the realization of just how old I am. I told Ari of a story that happened to me around the time he was born [or apparently a few years later].

My company was in desperate straights for additional disk space. I was writing some software (Good God, when am I not writing software?) and we were constantly hitting limits on storage. A client was willing to loan us a ten-megabyte disk drive.

An employee of mine, Richard, and I jumped at the chance to get that huge amount of extra storage. Richard and I drove the five miles to the client site, disassembled the disk drive from its housing and proceeded to take the drive back to the car.

To fully appreciate this story, you need to form a picture of Richard. He's about 6'3". He weighed around 300 pounds. He was as strong as a horse and looked it.

A typical iPod contains a 40 gigabyte drive. You could fit 4,000 times the storage of that 10-megabyte drive into a single iPod that easily fits in a shirt pocket.

So you're probably thinking that that 10-megabyte drive was something like the 10-megabyte drives that fit into the early IBM desktops. Nope. This story goes back farther than that.

That 10-megabyte drive weighed about 200 pounds. Richard and I lugged that drive to my car and carefully heaved it into my trunk. Poor Richard threw his back out in the effort.

Times have changed. In some small but very tangible ways, the world has gotten 4,000 times better than it was in 1980.

I told Ari this story. Ari pointed out something that I had often thought about but he put it into words (and got me to agree to write a little article about it).

All during the 1990s and continuing through today, the world economy has been the beneficiary of enormous productivity growth. This growth has been an almost unmitigated blessing to the human race.

Being libertarians, we've got to complain about something.

What both Ari and I want to complain about is that government has managed to siphon off a vast amount of the growth in this economy. The entire economy is not 4,000 times better off. It's not even ten times better off.

What has happened is that the economic trend line for the world economy in general and the U.S. economy in particular has been upwards. Recently, it's been more-or-less flat, but over the last twenty years it has trended upwards.

What has happened, of course, is that this enormous bounty has been squandered on government. The American people haven't noticed because, to them, the world seemed to be getting better every year. The price of the cool stuff kept dropping and their incomes seemed to go a little farther every year so, for the most part, they were content to let government squander the bounty. Hell, you could see the Broncos better on that big screen TV than if you actually went to the taxpayer-subsidized stadium.

Ari and I, on the other hand, wonder what the world would have been like had government not squandered that bounty. How much better off would the world be?

It's something to talk about and think about while we wait for the historic moment while the cops gave back some medical marijuana to a patient.

Yeah, we'd like to put those dreams of a world relatively unfettered by government and its burdens into a pipe and smoke it.

[Editor's remark: I no longer describe myself as a "libertarian," though I don't fight very hard against the label. I support free markets. To me, the central argument is not that government is worse the bigger it gets, but rather that today's government performs many functions that are not part of the legitimate function of government, which is offering dispute resolution and protection against crime, fraud, and invasion. Cato offers some graphs that show the exposion of federal spending in the mid-20th century. When the state wastes a bunch of money, that slows the rate of capital production and thus the rate of long-term economic progress. Colorado Democrats like to talk about the "ratchet effect" of the Taxpayer's Bill of Rights, but the "ratchet effect" of wasteful state spending is truly and greatly destructive. For example, let's look at the difference between 2% annual growth and 5% annual growth. I think it's a reasonable guess that wasteful and inappropriate state spending, in conjunction with stifling regulations, slow economic growth by at least 3% per year, but the example is meant to be illustrative. At 2% annual growth, $100 in year one becomes $146 in year 20, a 46% increase. At 5% annual growth, $100 in year one becomes $253 in year 20, a 153% increase. In other words, after 20 years, annual economic growth of 5% yields an economy 73% greater than does growth of only 2%. That's the ratchet effect, and the numerical example illustrates our lost potential. -- Ari Armstrong]

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