Noah Smith, in this article, argues that the Metaverse could enable economic growth to increase a lot and sharply decouple itself from real-world resource usage. By creating markets in which we buy and sell immaterial things, world GDP would grow.
He also says, rightly, that GDP correlates with the well-being of a nation.
But there’s a non-stated point: would creating huge markets in the Metaverse for buying and selling digital goods make us actually richer? What I mean is this: suppose that, thanks to the Metaverse, huge virtual economies get created and people get real money out of stuff they sell in these economies. But suppose that e.g., agricultural production output doesn’t go up much. Does that mean that we’re simply going to pay more for groceries, without being able to afford more of them? The more general question is: would real-world stuff simply get a lot more expensive, and so our well-being doesn’t really increase besides us being able to afford digital goods and having richer virtual lives? (This must count for something, but I’m more interested in whether virtual economies somehow would trickle to the real economy and make us able to afford more physical stuff.)
This is not a leading question, I genuinely can’t tell what’s the right answer, because I don’t feel confident enough in my knowledge of economics. Perhaps a way to rephrase is: what dominates here, inflation or virtual GDP growth? Is that even the right way of looking at the problem?
I think you are slightly muddling your phrases.
You are richer if you can afford more goods and better goods. But not all goods will necessarily change price in the same direction. Its entirely possible that you can become richer, but that food prices grow faster than your new income. (For example, imagine that your income doubles, that food prices also double, but prices of other things drop so that inflation remains zero. You can afford more non-food stuff, and the same amount of food, so you are richer overall. This could happen even if food prices had gone up faster than your income.)
I think a (slightly cartoony) real life example is servants. Rich people today are richer than rich people in Victorian times, but fewer rich people today (in developed countries) can afford to have servants. This is because the price of hiring servants has gone up faster than the incomes of these rich people. So it is possible for people to get richer overall, while at the same time some specific goods or services become less accessible.
Maybe a more obvious example is rent (or housing in general). A modern computer programmer in Silicon valley could well be paying a larger percentage of their income on housing than a medieval peasant. But, they can afford more of other things than that peasant could.
It’s not really a question of developed countries. Singapore is a developed country and it’s much cheaper to hire servants over there.
Western ideas of equality and migration policy are what’s making servants more expensive.
I think even if you open up Western countries, there are more productive areas where labour can be absorbed rather than household work.
Servants in Singapore are probably are a result of Singapore’s migration policy. Let’s say a developed country had a lax migration policy that allowed people to just come and setup a business, work or study or do nothing.
Then this would allow people to take risks such upskilling themselves and moving into more productive sectors of the economy in a similar fashion to the native population. Current migration policies tend to be restrictive as they tie down individuals to a specific job.
Switching jobs, upskilling yourself or starting a business becomes really hard without breaking immigration laws. Thus, condemning workers to the low productive jobs that they first got when they came into the country.
The ability to do nothing assumes welfare policy for migrants. Singapore allows migration but doesn’t provide welfare for the migrants which enables low wage labor like household work to happen.
The migrants might be better of than in their home country and the person who’s employing them has a cheap servant.
On the other hand, Western countries don’t want those relations so they don’t have migration without welfare that would lead to that.
How? It might be better to be homeless in US than having a house in Afghanistan. Job visa restrictions don’t allow you to be homeless.
I simply mean allowing people to stay in a country when they are in-between jobs or looking for other jobs. Most countries only give you a fixed period like 30-days to find similar work, otherwise you are asked to leave.
If there were no job-specific restrictions, people can save up money for a time period or work in another job / employer other than the one stated on your visa.
Not arguing against this. But the migrant can’t for example take out a loan and start a business due to visa restrictions or move to more productive parts of the economy.
See this as an example: https://www.reddit.com/r/h1b/comments/1l1lcwq/moving_to_india_after_15_years/
Yes. If you measure “huge” by number of 2025 dollars spent in those markets, rather than number of items sold (copies of digital goods could have very low prices due to low marginal costs of production, after all).
An example to illustrate why: Suppose in year 0, with no metaverse, I am someone who is employed in a way that does not fully use my talents, but I am able to get by. To directly address your question about agrigultural production, let’s say I’m a subsistence farmer.
In year 10, there is a thriving metaverse where I can perform various digital activities for money. More money than I could make as a subsistence farmer. So I start doing some of that, and my income goes up. And because of that, I’m able to access loans and credit that I was not able to before. So my ability to invest in productivity-enhancing equipment on my farming operation goes up. And I do so, and my farm income goes up, and more agricultural production has occurred.
Or, let’s suppose I’m not a subsistence farmer. Let’s suppose I’m unemployed, and I skill up in year 10 and do some digital thing for which I get paid. And my ability to access more and better quality food goes up. I spend some of my money on that. As a result, a mix of things happens. The demand for the food I buy goes up slightly, which means those who can produce it cheaply make a bigger profit, and invest more in producing more of that food, and to the extent that the demand can’t immediately be met in this way the price spikes a little, which brings more production on line as new businesses decide they can make a profit at this higher price point. Exactly how much of my income goes to increased profit for existing producers who then shift more of their efforts towards that line of business, how much goes to a price spike that brings new producers into the market, and how much is other effects, is hard to answer, but in equilibrium under competition, price = marginal cost, so to a first approximation, enough extra production gets brought online to meet the demand my buying generates, and maybe the marginal cost goes up because some inputs to that production are scarce, or maybe marginal cost goes down because of economies of scale. But roughly, probably, price goes up a little and production goes up to meet the new demand.
Most likely an individual isn’t going to make a noticeable difference, they’ll just get served out of existing inventory. But scale that story up by 1000x and you start being able to see the effects.
The key here is I’ve been able to do a new, more valuable thing, which makes the people around me better off, and some of the benefit of this is captured in how much they are willing to pay me. Whether that’s a physical thing like planting a seed or doing something in a digital virtual marketplace, if it’s genuinely of value to the people paying money for it, that’s what matters. Both I and they become richer than we would be if I didn’t do the thing, and some of that enrichment will likely mean growth in the amount of physical stuff produced.
Yes! No! What does “richer” actually mean to you? For that matter, what does “we” mean to you (since the existing set of humans is changing hour to hour as people are born, come of age, and die, and even in a given set there’s an extremely wide variance in what they have and in what’s considered rich).
To the extent that GDP is your measure of a nation’s richness, then it’s tautological that increasing GDP makes the nation richer. The weaker argument that it (often) correlates (not necessarily causes) with well-being (in some averages and aggregates) is more defensible, but makes it unsuitable for answering your question.
I think my intuition is that GDP is the wrong tool for measuring how “rich” or “overall satisfied” people are, and simple sum or average is probably the wrong aggregation function. So I fall back on more personal and individual measures of “well-being”. This, for most people I know, and as far as I can tell, the majority of neurotypical people, is about lack of worry for near- and medium-term future, access to pleasurable experiences, and social acceptance among accessible sub-groups (family, friends, neighbors, online communities small enough to care about, etc.).
For that kind of “general current human wants”, a usable and cheap shared-but-excludable VR space seems to improve things for a lot of people, regardless of what happens to GDP. In fact, if consumption of difficult-to-manufacture-and-deliver luxuries gets partially replaced by consumption of patterns of bits, that likely reduces GDP while increasing satisfaction.
There will always be needs for non-virtual goods and experiences—it’s not currently possible to virtualize food’s nutrition OR pleasure, and this is true for many things. Which means a mixed economy for a long long time. I don’t think anyone can tell you whether this makes those things cheaper or more expensive, relative to an hour spent working online or in the real world.
You’re basically talking about the software industry. Meta isn’t special. Considering how big the video game industry is, not to mention digital entertainment, and business software, I don’t think we have anything to worry about there.