A “crisis of abundance” initially seems like a paradox. After all, abundance is the ultimate goal of technology and economics. But consider the early history of the electric washing machine. In the 1920s, factories churned them out in droves. (With the average output of manufacturing workers rising by a third between 1923 and 1929, making more washing machines was relatively cheap.) But as the decade ended, factories saw they were making many more than American households demanded. Companies cut back their output and laid off workers even before the stock market crashed in 1929. Indeed, some economists have said that the oversupply of consumer goods like washing machines may have been one of the causes of the Great Depression.
.. Counting both humans and machines, the world’s labor force will be able to do more work than ever before. But this abundance of workers—both those made of cells and those made of bits—could create a glut of labor.
.. Thompson: There is an ongoing debate about whether technological growth is accelerating, as economists like Erik Brynjolfsson and Andrew McAfee (the authors of The Second Machine Age) insist, or slowing down, as the national productivity numbers indicate. Where do you come down?
Avent: I come down squarely in the Brynjolfsson and McAfee camp and strongly disagree with economists like Robert Gordon, who have said that growth is basically over. I think the digital revolution is probably going to be as important and transformative as the industrial revolution. The main reason is machine intelligence, a general-purpose technology that can be used anywhere, from driving cars to customer service, and it’s getting better very, very quickly. There’s no reason to think that improvement will slow down, whether or not Moore’s Law continues.
.. I would say the best evidence comes from the wage growth numbers. I know we’ve experienced an uptick in recent months, but we’re seven years into the recovery and still well short of the level of nominal wage growth we would expect, even compared to recent disappointing recoveries.
.. Employment in Britain is at an all-time high, and wage growth there has underperformed America and most of Europe. This suggests that the main way that employers are using people in countries like the U.K. is to use them to do low-productivity work.
.. In the long run, I’m optimistic for technology to transform health care, but that’s a harder sector to disrupt.
.. The very rich will still want people, their own personal shoppers and assistants. Being able to retain human labor would be a sign that you’re wealthy. So even in a future city that had a lot of laborers replaced with technology, you might still have artisanal service sector workers.
.. A universal basic income is a totally different social contract. It says that, on a permanent basis, a large class of people will probably be subsidized by a different class. That’s a much trickier thing politically, and it raises questions about the value that they are contributing to society.
Consider that in 1870, most homes were lit by candles and whale oil lamps. To use the bathroom, your choice was an outhouse or a chamber pot. Your world was confined to the distance your horse could travel. You would spend long hours of your short life doing backbreaking labor, owning only two changes of clothes, and eating a whole lot of pork and grain mush.
.. What really amazed me was not the speed of innovation but the speed of adoption. In 1910, there were 2.3 motor vehicle registrations for every 100 households. By 1930, there were eighty-nine.
.. Gordon’s premise is that what he calls the third industrial revolution, the one driven by computers and digitalization, is limited to communication, information, and entertainment. I believe it’s far broader than that.
.. The digital revolution affects the very mechanism of the marketplace. How buyers and sellers find each other, how we amass information, how we can create models to simulate things before building them, how scientists collaborate across continents, how we learn new things—all of this has changed dramatically thanks to digital innovation.
.. The truth is, while economic measurements like TFP can be useful for understanding the impact of a tractor or a refrigerator, they are much less useful for understanding the impact of Wikipedia or Airbnb... In the future, GDP may not grow as fast as it did in the past—or, for all we know, it may—but that alone doesn’t tell you whether people’s lives are going to get better... Think of a cure for Alzheimer’s. That disease costs the U.S. $236 billion per year, mostly to Medicare and Medicaid. A cure would immediately alter the budget of every state in the country, not to mention millions of lives.
Over the last decade, the growth rate of real G.D.P. per person has averaged just 0.44 percent per year, compared with the historical norm of 2.0 percent. At a rate of 2.0 percent, incomes double every 35 years. At a rate of 0.44 percent, it takes about 160 years to double.
.. A statistical mirage
.. Think of how your smartphone now replaces your camera, GPS, music system and various other previously stand-alone devices. According to this theory, the problem is not in the economy but in the statistics.
.. A hangover from the crisis
.. Secular stagnation
.. reduced demand for capital to fund investment projects. He cites several reasons for the change, including lower population growth, lower prices for capital goods and the nature of recent innovations, like the replacement of brick-and-mortar stores with retail websites.
.. inability of the economy to generate sufficient demand to maintain full employment.
.. Slower innovation
.. This generation’s innovations, like the smartphone and social media, are just not as life-changing.