Thursday, March 13, 2008

Transtemporal Economics

Tyler Cowen considers the economics of time travel. Actually, he starts with the economics of interstellar travel, but if you take relativity seriously, it’s the same thing. Tyler is most interested in how time travel in the presence of time dilation would affect interest rates (e.g., what happens if someone saves a penny and then travels into the future?; what happens if everyone tries to do that?).

I’m more interested in the effect of time travel on migration and trade. If wages are expected to be higher in the future, then once the cost of time travel falls low enough, we can expect people to start migrating in large numbers into the future – just as they migrated from Europe to the North America from the 1500s onward, and just as they migrate from Mexico to the U.S. today. A simple model of transtemporal migration would therefore predict equalization of wages over time, as wages rise in the present (from reduced labor supply) and fall in the future (from increased labor supply). But wage equalization does not even clearly result from international migration today. New arrivals, aside from increasing the supply of labor, both (a) increase the demand for goods and services, and (b) to the extent they are willing to work for less, lower the price of goods and thus increase purchasing power. The future might be able to absorb the time-traveling arrivals with little impact.

Moreover, there could actually be increasing returns from larger populations, because more people interacting with each other generate more ideas and innovations that can benefit larger numbers of people. Maybe the future would leave the present behind, not just temporally but economically, as its population grows while ours shrinks.

And that’s assuming time travel is only possible in a forward direction. (I think time dilation only makes forward time travel possible, but I confess that I’ve never fully wrapped my head around relativity.) If backward time travel is also somehow possible, maybe firms in the future will choose to outsource some of their operations to the past, locating their manufacturing and other services in lower-wage time periods. This opens the possibility of transtemporal gains from trade... assuming, of course, that governments don’t implement effective trade barriers. Would America-3000 place tariffs on goods from America-2000? Would temporal nativists call for the construction of a time-wall to keep out the trans-temporal immigrants -- even if those immigrants were, in fact, their own ancestors?

* I use ‘transtemporal’ to refer to economic phenomena related to time travel, since ‘intertemporal’ already has an economic meaning without time travel.


Insert Username Here said...

The reason we don't have time travel already is the anti-"gooback" sentiment among wealthy future citizens.

Anonymous said...

Time travel?...Hope that Ray Kurzweil's predictions about the technological Singularity are correct.

Gil said...

Wouldn't America-3000 have to expose America-2000 to their technology in order to use the labor effectively?

Could that cause any problems?

Glen Whitman said...

IUH: Clearly, I need to watch more South Park.

Bob Murphy said...

I think Gil is right. What happens if the greedy CEO in the year 3000 ends up laying off his great-great-grandfather just as he was about to buy a diamond ring for his girlfriend? Does the universe blow up?

Seriously though, this was pretty darn interesting Glen. I may have to start reading your blog instead of Marginal Revolution.

The Epicurean Dealmaker said...

Um, Glen, leaving aside the vast number of practical questions dogging this speculation--as is usually true of fantasies about time travel--I have a simple economic question for you based on your premises.

You postulate higher wages in the future should lead people in the present to migrate there. But surely, unless you postulate dramatic productivity gains, the cost of living should be proportionately higher in the future, as well. People would move to the future only to find that they were no better off, even before labor supply/demand effects, no?

The only way I can see your premise making sense is if you allow transtemporal commuting, in which people living in the present commute to the future to work and bring their inflated future wages back to the present to consume. (Alternately, they could send most of their wages home via Future Western Union, like many migrant workers today.) Then, I could see equalization in intertemporal wage markets.

Anyway, this speculation is probably moot since we have no evidence that it is happening today or did so in the past. This could be because our future progeny are very good at keeping their ancestors in the dark (the conspiracy theory); our present is on a branching path in multi-universe space where time travel has not yet happened (hence no intertemporal paradoxes); or there are indeed high barriers--tariff, information, physical, or otherwise--to time travel.

Fun to contemplate, but I wouldn't give up your day job just yet.

The Epicurean Dealmaker

Glen Whitman said...

Epicurean -- actually, I was assuming higher real wages in the future. That is, wages will rise faster than the cost of living. And if history is any guide, that's a reasonable assumption. The standard of living of Americans is dramatically higher now than it was in 1900, and I expect it to be even higher in 2100.

Anonymous said...

I think we have empirical evidence that backward time travel is not going to be an issue. The absence of attendees at the "Time Travelers' Convention" pretty convincingly demonstrates their non-existence. (Or perhaps just the extremely high cost - forever - of doing it.)

Jeff Brown said...

As soon as our lifespans have lengthened to equal that of the universe, the cost associated with skipping more time will be huge: you gain nothing but immediacy. I think people would still do it, but there'd be enough left behind to avoid an escalating, lemming-like race to the Big Crunch.

It's not clear to me how long the paradigm in which people spend large fractions of their lives in wage labor will last. In imagining the future I'm continually drawn to a scenario in which the vast majority of human "work" consists of art and virtual reality, because all our "real" needs have been met.

gcallah said...

"(I think time dilation only makes forward time travel possible, but I confess that I’ve never fully wrapped my head around relativity.)"

Einstein is quite definitive in asserting that information cannot move backwards in time.

Unknown said...

It is a very important fact that there could actually be increasing returns from larger populations, because more people interacting with each other generate more ideas and innovations that can benefit larger numbers of people.
Economics papers