In fact, most geniuses seem to simply not get economics. An example is the recently departed physicist Stephen Hawking, who - like so many - made rather ridiculous statements of economic nature. Quoted by MSN/MarketWatch, Hawking makes several very simple mistakes in his attempted economic commentary. For instance, he seems to not understand the difference between a natural resource (the physical production factor) and an economic resource (the subject value), which leads him to erroneously conclude that hoarding, and the resulting increased scarcity of physical resources, impoverishes humanity. Also, Hawking noted:
“If machines produce everything we need, the outcome will depend on how things are distributed,” he wrote. “Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution.”
This is a common view that at best captures a fundamental misunderstanding of economics: that ownership of the means of production somehow implies power (economic or otherwise). But, as we’ve known since Menger, the means of production have only value to the extent they contribute to the production of consumers’ goods, the consumption of which is the realization of value. In other words, if I buy all machinery in the world and refuse to use any of them to produce goods, the economic value is zero. If I don’t use the machinery to produce and sell consumers’ goods, I have destroyed the economic value of my property.
The real effect of robots “producing everything” is that the cost of production plummets, which offers producers profits. But as we’re flooded with goods, their market price also plummets. And as the (only) role of capital is to increase the productivity of labor, it means we don’t have to work much to support a very high standard of living. The true gig economy is that we can work only for an hour or two - when we feel like it - to support a month’s (or maybe a year‘s) worth of luxurious leisure.
This is apparently a problem to some geniuses.
