alt Hacker NewsTheoretically, that's true. In practice the gains were limited to the wealthy who use that money to fund increasingly deranged start-ups* until the market crashes. Then rinse and repeat. The failed start-ups effectively waste any increased productivity leaving everyone about where they were before.
*They fund these start-ups to get a good return on investment so they can get even more money. As the economy overheats the number of places to invest with a reasonable return falls so they are left with the high-risk stuff to invest in. I'm not sure what they want the money for, though, since they could already afford most of the things I would find useful...
I think funding deranged startups is a type of consumption, and it does get money back into the economy the same way funding a remodel does. Maybe the reasoning to do so is different, and maybe the deranged startups add more capital than a bathroom remodel, but then again, bathroom remodels probably tank less often than startups, and worst case you can always read a magazine in your new bathroom. hard to do that in a dead startup