It’s reasonable to assume that as technology continues to accelerate, we can expect dramatic changes in the years and decades ahead. Most of us have come to take rapid technological improvement in the products and services we use for granted. But when technology has a broader impact on society and on the economy, the changes are generally much harder to accept, and there tends to be a great deal of resistance and denial.
My purpose in starting this blog is to explore some of these broader issues. In particular, I want to focus on how advancing technology will impact the future economy. There is much discussion elsewhere of advanced technology itself and of the direct impacts it may have on society. This ranges from dystopian concerns about gray goo and intelligent machine overlords raised by Bill Joy and others, to the far more optimistic views of Ray Kurzweil and Aubrey de Grey—who are both looking forward to technologically enabled immortality.
So far, I have not seen a great deal of deep thought given to how the future economy will work. Most people—and nearly all economists—make the obvious assumption about that: they assume the economy will essentially work the way it has always worked. The basic principles that govern the economy are seen as being relatively fixed and reliable. Economists look to history and find evidence that the free market economy has always adjusted to impacts from advancing technology and from resource and environmental constraints, and they assume that the same will always occur in the future. Crises and setbacks are temporary in nature: in the long run, the economy will rebalance itself and put us back on the path to prosperity.
Is it possible that that assumption is incorrect? In his book, Collapse: How Societies Choose to Succeed or Fail, Jared Diamond tells the story of farming in Australia. When Australia was first colonized, the new arrivals found a relatively lush, green landscape. They invested heavily in developing farms on this seemingly fertile land. Within decade or two, however, reality struck. The farmers found that the overall climate was actually far more arid than they were initially led to believe. They had simply had the good fortune (or misfortune) to arrive during a climactic “sweet spot” — a period when there was far more rain than is normally the case. Today in Australia, you can find abandoned farm houses in the middle of what is essentially a desert.
As a result of the current crisis, macroeconomics is in disarray. The various schools of economic thought (and their accompanying mathematical models) have all been built upon observations and analyses that have occurred over a relatively short period of time—at a maximum, the 230 years since Adam Smith, but as a practical matter, a much more recent period. Is it possible that economists, like the farmers in Australia, have built their models based on observations that have been made during an economic sweet spot? Perhaps the historical observations that underly much of economic theory have taken place during a period when we have had enough technology—but not too much. What if we are now advancing out of that economic sweet spot and encountering a new reality in which different economic principles will apply?
That is obviously a radical view that I expect to be widely criticized or, more likely, ignored. Nonetheless, I think it is very possible, and I think that the major factor underlying the transition is a change in the relationship between workers and machines. Historically, machines have been tools used by workers. Over time, machines have advanced to become better and better tools that have increased the productivity, and therefore the value (and wages), of workers. Now however, we are entering an age when machines, on average, will begin to approach autonomy, and as a result, the value that the average worker adds may begin to decline dramatically. That, I think, has the potential the change the basic operating principles of the future economy.