Consider it from the perspective of stocks. If the S&P collectively doubled its earnings per share and dividends tomorrow, what would happen? On one hand, people would feel wealthier and perhaps feel less of a need to save (say a 50 year old who was formerly getting $25,000/yr in dividends is now getting $50,000/yr, and decides to stop saving). Conversely, others might find the dividend yield extremely attractive and be very willing to bid up the price of the stock. My own intuition is that the latter effect will dominate, and the value of the S&P would more or less double.

I see [2] but not [1]. Could you explain more clearly? My initial view is that Increased productivity means less labor is needed to produce the same or more goods and services. So the first thing more productivity implies is less demand for labor. The only way it could demand more labor is indirectly, something like “owners of more-productive capital get more surplus to spend, so they demand more goods and services and therefore demand the labor used to produce those.” But there are all sorts of complications that might even make that statement untrue. For example, what if the luxuries demanded by capitalists with more surplus were also produced more productively? Or what if the more-productive capital plant only wanted a few high-skilled workers, so demand for them when up while overall labor demand went down, since many workers are not high-skilled. Also, in the special case of US wages, they are clearly depressed by increased competition from immigrants.* With enough immigration, wages can keep falling even as capital becomes more and more productive. Does that explain the US wage story?

(*Gentle reader, please don’t waste electrons disputing this. If you don’t know what Tata Consulting is or why Silicon Valley uses so much immigrant labor, you are too ignorant to contribute anything useful.)

We conclude that while preferences for partner height generally translate into actual pairing, they do so only modestly.

Compare that weak sauce to assortive mating Arnold is talking about:

…if matching in 2005 between husbands and wives had been random, instead of the pattern observed in the data, then the Gini coefficient would have fallen from the observed 0.43 to 0.34, so that income inequality would be smaller.