A battle is raging in the war of ideas, and the future prosperity of the world will determine who is right.
The battle is over optimistic or pessimistic views as to the future impact of technological change. It’s a battle with problems on all sides. The economists tend not to understand the technology, and the technologists fail to understand the economics. The result is that there are lots of technologies being talked about, but nobody is pulling them together into a coherent view of the future.
When it comes to the scale of future technological change, there is enormous uncertainty, with a very broad spectrum of views, from pessimists to utopians. On the pessimistic end of the spectrum are those who see the productivity boost from the digital economy as largely “been and gone”, a phenomenon of the late 90s and early 00s, which has disappeared post financial crisis. For many, this is a case of secular stagnation, enough said.
Moving rightward across the spectrum, the next port of call is mild optimists, those who believe that, while we shouldn’t get carried away, traditional National Accounts statistics fail to capture key elements of the new economy. The stats capture Google advertising revenue but omit all those hours we surf the web, and the activities this spawns.
Shifting further right, optimism rises, with an emphasis on potential general-purpose technology (GPT) effects. An example of a GPT is electricity, which had a broad and deep impact across the whole economy. Many see similar potential in the information and intellectual revolution currently underway.
But some also see beyond general-purpose effects to a fourth industrial revolution, moving on from the first steam revolution, the second electricity revolution, the third electronic and automation revolution, to the fourth information and intellectual revolution. The difference between a GPT and fourth industrial revolution is the breadth and depth of technological change.
There are some who envisage an even greater technological era to come, a singularity. The singularity is a utopian world of exponential change induced by artificial intelligence (AI) and machine learning on an unimaginable scale.
This is an age of abundance, with advances in AI and computing exceeding human intelligence. If something sounds too good to be true, it probably is. But even with a step back from the singularity, a fourth industrial revolution would still entail enormous technological change, the consequences of which are only dimly understood at present.
The battle of ideas is also being waged over the employment impact of technical change. Here again there are optimists and pessimists i.e. optimists about the scale of technological change, but pessimists about the employment consequences of automation. Economic history teaches us that technological change is good, not bad for employment. But the shelves are beginning to fill up with new books arguing that this time it’s different, and that massive technological change heralds mass unemployment.
It’s an interesting argument, but there’s precious little evidence to back it up. The opposite in fact, with strong US evidence of high jobs multiplier effects from new economy companies.
From the Internet of Things, AI, robotics, nano technology, autonomous vehicles, new materials, energy storage and superconductors, 3D printing, automation, biotechnology and genome sequencing, to a payments revolution and blockchain, all these technologies are huge in and of themselves. But together they could swirl into a roaring tornado blowing down industries and institutions in their path.