Thanks to interconnected computers that are able to compute and communicate at incredibly low costs, we have entered a time of what I’ll call deep automation. The story of modern economies has always been a story of automation, of course, but what what’s going on today goes far beyond anything that’s happened before. We don’t know what the consequences will be, but the persistent, high levels of unemployment in developed economies may well be a symptom of deep automation.
In a provocative article in the new issue of the McKinsey Quarterly, W. Brian Arthur argues that computer automation has in effect created a “second economy” that is, slowly, silently, and largely invisibly, beginning to supplant the primary, physical economy:
I want to argue that something deep is going on with information technology, something that goes well beyond the use of computers, social media, and commerce on the Internet. Business processes that once took place among human beings are now being executed electronically. They are taking place in an unseen domain that is strictly digital. On the surface, this shift doesn’t seem particularly consequential—it’s almost something we take for granted. But I believe it is causing a revolution no less important and dramatic than that of the railroads … There’s no upper limit to this, no place where it has to end. Now, I’m not interested in science fiction, or predicting the singularity, or talking about cyborgs. None of that interests me. What I am saying is that it would be easy to underestimate the degree to which this is going to make a difference.
The computer system is, Arthur argues, “intelligent” in only the most basic sense of that word – intelligence defined as the ability of a thing to change its state in response to a stimulus. But, when spread across such enormous and enormously fast information-processing capacity, even that rudimentary degree of intelligence is enough to take over many traditionally human activities, even highly sophisticated ones: “Physical jobs are disappearing into the second economy, and I believe this effect is dwarfing the much more publicized effect of jobs disappearing to places like India and China.” So far, moreover, this new wave of automation, unlike the automation of manual labor during and after the industrial revolution, doesn’t seem to be creating large numbers of good new jobs to replace those it’s supplanting.
That means that, as a society, we now face a very different kind of economic challenge than we’ve faced in recent history:
The second economy will certainly be the engine of growth and the provider of prosperity for the rest of this century and beyond, but it may not provide jobs, so there may be prosperity without full access for many. This suggests to me that the main challenge of the economy is shifting from producing prosperity to distributing prosperity. The second economy will produce wealth no matter what we do; distributing that wealth has become the main problem. For centuries, wealth has traditionally been apportioned in the West through jobs, and jobs have always been forthcoming. When farm jobs disappeared, we still had manufacturing jobs, and when these disappeared we migrated to service jobs. With this digital transformation, this last repository of jobs is shrinking—fewer of us in the future may have white-collar business process jobs—and we face a problem.
Arthur is optimistic that we will be able to figure out a way to solve that problem, though the solution is by no means clear at this point. Distributing prosperity, as we’re seeing today, is not one of America’s traditional strengths – and, indeed, the entire idea is viewed with great suspicion. But if Arthur’s analysis is right – and if we don’t find a solution to the problem – Occupy Wall Street may be just a taste of what’s to come.
Next to distributing prosperity we’d also have the problem of making sure everybody does something useful, or at least not harmful, with their time.
A year ago, I was in Kenya with a friend who had a building project. I felt useless because I could help out all day, ór I could spend $5 and hire two workers …
There’s always soma.
This is describing a post scarcity economy. If it is effectively free to manufacture anything then value is placed elsewhere. Specifically moving towards science and art.
As It becomes easier to move from an idea to a physical object so innovation becomes easier, allowing development to happen in the physical realm to happen as quickly as it does in the the software one.
If the cost of living is zero what do wages matter?
Yes, this is whole (buzzwords) post-industrial, knowledge-economy information-age argument. But I think viewing it as technologically different is a mistake, and feeds into the technological-determinism framework. In that framing, the only acceptable punditry is to at best wring one’s hands over the inequality and misery because anything else would be bad bad bad Luddism. Rather it’s a political issue, involving everything from attacks on unions to plutocracy. And that’s exactly why there’s “Occupy Wall Street”, for example.
Economic analysis only comes into its own w.r.t scarce goods. But things are only scarce by convention.
Despite Coase and the Law & Econ movement and the theory of rent seeking developed in the 70’s, the fact is it fails to capture almost everything about the ‘Economic’ aspect of our Lebenswelt- stuff about signalling, positional goods and services, ‘rights’ (these are rents), identity (this is rent seeking with gross substitutiability such that Homo Sacer exceptionalism can arise), meta-preference manipulation and mechanism design control etc, etc.
Essentially, what we call Econ is just a credentialist availability cascade or Scholastic strait-jacket.
‘Distributing prosperity’ is the sort of oxymoron it grants laissez passer to.
What is a ‘job’? No such animal ever existed in the wild- at least, in the manner it is conceptualized by Anglo-Austrian Economists. There is work on the one hand and there is some sort of feudal or mystical concept of the employee on the other. The notion of the proletariat- those who serve the state by their reproductive power merely- arises out of the German Princeling’s employment of actuaries (Like Novalis!)and engineers to maximize the revenues from his forests and fields. When Marx applies the notion to England the result (think Hyndman in the 80’s) was to slowly poison the well springs of … dunno… I’ll say ‘Englishness’ (coz I is black and ignirrint) such that everything just started getting coarser and coarser and even the lyric genius of our not ‘lean, unlovely’ but sweet and Seraphic language yielded returns as diminishing as this.
‘I knew Seraphina; Nature gave her hue,
Glance, sympathy, note, like one from Eden.
I saw her smile warp, heard her lyric deaden;
She turned to harlotry; – this I took to be new.’
That’s what happens if you succumb to an availability cascade masquerading as oeconomics.
I believe one of the most fundamental challenges to Western culture has been identified by the author. How do we adapt our economic, political, and ethical systems to an environment where every human working a full “Work Week” isn’t needed to generate a level of wealth that will keep any reasonable person happy?
Our core vision of self worth is tightly bound to our contribution to society via work. Our view of other people’s worth is driven by the same.
Now that is disruptive change!
I TOO have been thinking about this a lot lately. In my opinion, MUCH (not all) technology has made greater profits for companies (who can cut down on their hiring), but will the technology they now use buy the products they make as the people who are now becoming unemployed will no longer be able to afford these items (or afford the gold standard of the latest technological advancements in science and medicine as health care is so expensive) and I fail to see how even NEWER technology is going to create new jobs (oh, for a few they will, but not for the masses). Also, people are no longer going to be able to afford to go to college as more colleges prefer students that can pay cash, and loan requirements are impossible (what I think would be an interesting concept based on Steve Jobs commencement speech @ Stanford is to have a degree based on his “drop in college” theory, where you don’t take the classes they SAY you need (I’m sorry, but high school should make you prepared for this and 2 more years of Gen Ed courses is such a waste) and take courses that are of interest to you, save time, money AND find the mix that may ignite the NEXT BEST THING. I also am interested in seeing what will happen to all these universities that have expanded during good times as their student base contracts. Who made these companies successful? What are these companies going to do when no one has the means to support them any more. We need a 3 class economy, I fail to see how the wealthy and the poor can support a vital economy. We need multiple skills (even the OLD skills) and I for one will not support technology that offers me no overall benefit.
It’s unfortunate that jobs are no longer forthcoming. The frustration pouring into the streets is warranted. The system is dysfunctional and corrupt. Too often, for too long, distribution has remained highly concentrated behind private walls.
On the other hand, cultural lag is also a problem here. If one doesn’t have the technical skills on demand in today’s economy, for whatever reason, they are stuck with fewer options. It’s increasingly common for one to gain a higher level of education than a high school diploma or four-year college degree. Neither guarantees a ticket to employment or prosperity. Advancement technologically and medically marks progress that is eventually commoditized and more accessible to the masses.
In this way, automation simplifies and frees us up to develop increasingly complex systems to raise living standards.
I’ll give you a hint.
Morlocks.
Guillotines.
Robot Riot Police.