"The problem is that if you don’t build anything you cannot possibly innovate--you cannot innovate if most of your economy is service--or anything other than manufacturing."
Quoted for disagreement. (Was this posted for disagreement?) I think plenty of HN participants know that innovation is possible in service industries. They have seen it done, because they have done it themselves. That means wealth-creation is possible in an economy based largely on services.
After edit: Upon a bit more reflection, it appears that the author of the submitted article has had an extremely poor education in economics.
You can innovate in service industries, but service industries contract when an economy contracts, whereas manufacturing and industry expands.
e.g. Who cares if my Barista can be faster and more efficient? I just want coffee for less.
The problem with innovation is that it's leaky. There's no national border to it. America is a tremendously innovative country, but there's nothing stopping that innovation from finding its way to countries where they'll produce that same innovative product for less. (e.g. Look at the iPad and forthcoming Adam from India.)
Economies are equalizing. Nothing, including innovation, will stem that tide.
Well, more like "service industries necessarily contract when an economy contracts (unless they help others deal with the government)", "whereas manufacturing and industry may expand."
E.g. your solution to "coffee for less" may be making your own, which will involve some equipment purchases on your part, but on the other hand the coffee shops you and people like you used to frequent won't be buying more equipment (in fact, new entrants/shops will likely be buying used but serviceable stuff from failed shops).
Getting outside of the service field, lots of people including my father have decided to drive their current vehicles much longer than they'd previously planned. Auto companies are seeing much less demand due to that sort of thing (uncertainty on the part of my father, others just don't have the money) and are buying less capital equipment, tooling, etc.
> That means wealth-creation is possible in an economy based largely on services.
How so? The service economy is basically masturbatory. I can trade my services for your services, around and around, but at the end of the day we both still need to eat. We need to put gas in our cars. We need medical supplies and all sorts of other consumables.
If we have a 'service economy' where all we do is sell services to each other, and buy all the real physical stuff from abroad, we're going to be in big trouble.
This seems to be exactly the situation that the U.S. is in. Yes, we still have something of a manufacturing industry but it's not producing enough to offset our imports. We've gotten away with it for a few decades because other countries are willing to send us useful stuff in exchange for Treasury notes, but that doesn't seem exactly sustainable.
Unless we can make the 'service economy' into something that essentially replaces exports (selling services abroad), I don't see how we can avoid going broke. And selling services abroad is a lot more tricky and much less stable than grinding out widgets and packing them into a shipping container.
It doesn't seem like we have much of a plan, moving forward. About the only good thing that I can see is that we still produce much of our own food, so that we probably won't starve if the rest of the world decides to stop sending us manufactured goods in exchange for worthless slips of paper. It'll be a lot of white bread, corn chips, orange juice, and peanut butter, though.
Quoted for disagreement. (Was this posted for disagreement?) I think plenty of HN participants know that innovation is possible in service industries. They have seen it done, because they have done it themselves. That means wealth-creation is possible in an economy based largely on services.
After edit: Upon a bit more reflection, it appears that the author of the submitted article has had an extremely poor education in economics.