Alchemy: Turn Knowledge Into Gold, by Soundview Executive Book Summaries, Soundview Executive Book Summaries, March 1991.

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Redefine Recession
School for Life
Will Japan Bury the West?
 

The Impact of Technology
     Historically, levels of technology have been measured in terms of ages (Iron, Bronze) and revolutions (agricultural, industrial) which usually lasted millennia, centuries, or decades.  Technology, the driving force of a nation's economy, now changes by the moment.
     Traditional economics treats technology as a constant, a view clearly outdated.  In contrast, consider these tenets of the Theory of Alchemy:
     1. Technology is the major determinant of wealth because it determines the nature and supply of physical resources.
     2. The advance of technology is determined mainly by our ability to process information.
     3. The backlog of unimplemented technological advances (the technology gap) is the true predictor of economic growth for both the individual and society.
     Technology affects both sides of the traditional economic equation but it has a greater impact on the demand side.  John Maynard Keynes predicted in the 1930s that people would lose their incentive to buy more after fulfilling basic needs, causing demand to fall.  The opposite is true--the more people earn, the more they spend.   Indeed, John Kenneth Galbraith said, in 1958, "In the affluent society, no

SUPPLY-SIDE ALCHEMY
     In 1972 the shocking conclusion of the enormously influential study The Limits to Growth was that the world's physical resources would be exhausted sometime in the next decade and most of humanity could be wiped out before the year 2100.  The world's population was growing at a rate of about 2 percent per year and industrial output was rising by 7 percent annually--both too fast to save our resource base.
     Economic growth, which had always been regarded as the solution to all woes, suddenly seemed to be the problem.  Even the skeptics' doubts about the report were soon washed away: Arab oil producers raised prices and cut off deliveries to the West.  The future looked grim.
     Between 1973 and 1981, soaring energy prices sent the United States into some of the worst recessions in four decades.  Yet the world didn't come to an end.
     That's because the study reached the wrong conclusion.  The world's physical resources aren't decreasing.  On the contrary, our effective supply of resources--oil, natural gas, copper, silver, gold--is increasing.  What's more, prices have tumbled as supplies have increased.
     We're richer than we've ever been before.  This is difficult to believe.  You probably feel you have to work harder than ever simply to make ends meet.  But the fact is you work significantly less than you used to in order to get what you want.  Fact: In 1970 Americans worked three times as many hours to earn enough to buy a TV as they did in the late 1980s. 
     How is it that we have more resources at lower prices than ever before?  Alchemy.
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