Kind of interesting that they mention Toby Ord in the article and not his (similar) book, _The Precipice._ William's book _What We Owe the Future_ sounds similar, but rather than research on avoiding disaster as a species, it seems _What We Owe the Future_ will spend more time convincing people that the long-term matters. Please let me know if someone has read both (already) and can compare and contrast the two.
>To mature as a species, we need to embrace a perspective called longtermism – a way of thinking that differs greatly from the prevalent mindset today.
Interest rates effectively reflect how short term or long term oriented people are, they are supposed to balance consumption and investment in such a way that consumption in the future is maximized. The lower the interest rates the more future oriented people are, the the higher the interest rate, the more present oriented people are. So from this perspective the demand to think about the long term today is irrational, a high interest rate means there are short term needs that haven't been met and that there are no resources available that can be committed toward the long term future.
What this also means is that any lower bound on interest rates acts as a barrier to how future oriented people are, it acts as a barrier to long term thinking because when interest rates go to zero, the short and the long term rate differences start compressing and disappearing, leading to excessive demand for short term investments. So if the rate on a long term bond must be zero, the rate on short term bonds must be negative just to maintain the shape of a steep yield curve that rewards long term investments.
In the extreme case of deflation, rates may have to be negative just so real yields can be 0%. If the real yield isn't adjusted back to zero, then deflation effectively raises real returns on liquid demand deposits and cash which are both very short term savings. This means deflation drives people to become very short term oriented just because of a flaw in the monetary system. This is why ending a recession or depression early actually has long term benefits to an economy because simply continuing the economy as if there is no recession means that people don't start liquidating and closing down businesses too early when it turns out that those very same businesses are needed three years later and reopening would take too long and incur pointless costs.
Now all of this is pretty damning to the long termists. First of all, it means that long termists aren't actually long termists, they are short term thinkers of a different kind. I have seen "cute" animations on YouTube where people made the point that saving just a few seconds in the early stages will have a huge effect on the number of future humans. This isn't long term thinking, this is extreme short term thinking that you would expect when interest rates are really high. The fact that a lot of longtermists demand or are comfortable with extreme capitalism with high interest rates even when growth rates are low actually means that the short term is more important for them and they just use longtermism as a cover to care about their specific short term needs at the expense of other short term needs. Most commonly longtermists think rich countries are the only ones that matter and poor countries should be ignored. This is blatant short term thinking. The fact that they simply expect high growth rates to continue forever shows an obvious inability to think about the long term future. Growth at the expense of sustainability means lower total economic output of human society. If growth rates would ever go down or even fall to zero the whole long termism idea falls apart because there won't be 10^58 humans to gain utilitarianist superiority. Aging and shrinking populations are the longtermists worst nightmares even though a smaller population means sustainability is easier to achieve which should allow humanity to extend its lifespan instead of cutting it short because of ecological limits.
Second, an imposition of long term thinking by decree while ignoring obvious constraints to long term thinking in the monetary system is just going to put a bandaid on society without fixing the underlying problems. This leads to a perplexing contradiction. The purpose of the interest rate mechanism is to deal with short term needs, then near future needs and then progressively longer term need...
2 comments
[ 0.23 ms ] story [ 13.5 ms ] threadETA: I see a link to the 80,000 hours podcast mentioning Ord's book as well: https://80000hours.org/podcast/episodes/toby-ord-the-precipi...
Interest rates effectively reflect how short term or long term oriented people are, they are supposed to balance consumption and investment in such a way that consumption in the future is maximized. The lower the interest rates the more future oriented people are, the the higher the interest rate, the more present oriented people are. So from this perspective the demand to think about the long term today is irrational, a high interest rate means there are short term needs that haven't been met and that there are no resources available that can be committed toward the long term future.
What this also means is that any lower bound on interest rates acts as a barrier to how future oriented people are, it acts as a barrier to long term thinking because when interest rates go to zero, the short and the long term rate differences start compressing and disappearing, leading to excessive demand for short term investments. So if the rate on a long term bond must be zero, the rate on short term bonds must be negative just to maintain the shape of a steep yield curve that rewards long term investments.
In the extreme case of deflation, rates may have to be negative just so real yields can be 0%. If the real yield isn't adjusted back to zero, then deflation effectively raises real returns on liquid demand deposits and cash which are both very short term savings. This means deflation drives people to become very short term oriented just because of a flaw in the monetary system. This is why ending a recession or depression early actually has long term benefits to an economy because simply continuing the economy as if there is no recession means that people don't start liquidating and closing down businesses too early when it turns out that those very same businesses are needed three years later and reopening would take too long and incur pointless costs.
Now all of this is pretty damning to the long termists. First of all, it means that long termists aren't actually long termists, they are short term thinkers of a different kind. I have seen "cute" animations on YouTube where people made the point that saving just a few seconds in the early stages will have a huge effect on the number of future humans. This isn't long term thinking, this is extreme short term thinking that you would expect when interest rates are really high. The fact that a lot of longtermists demand or are comfortable with extreme capitalism with high interest rates even when growth rates are low actually means that the short term is more important for them and they just use longtermism as a cover to care about their specific short term needs at the expense of other short term needs. Most commonly longtermists think rich countries are the only ones that matter and poor countries should be ignored. This is blatant short term thinking. The fact that they simply expect high growth rates to continue forever shows an obvious inability to think about the long term future. Growth at the expense of sustainability means lower total economic output of human society. If growth rates would ever go down or even fall to zero the whole long termism idea falls apart because there won't be 10^58 humans to gain utilitarianist superiority. Aging and shrinking populations are the longtermists worst nightmares even though a smaller population means sustainability is easier to achieve which should allow humanity to extend its lifespan instead of cutting it short because of ecological limits.
Second, an imposition of long term thinking by decree while ignoring obvious constraints to long term thinking in the monetary system is just going to put a bandaid on society without fixing the underlying problems. This leads to a perplexing contradiction. The purpose of the interest rate mechanism is to deal with short term needs, then near future needs and then progressively longer term need...