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Dallas Weaver on Mokyr and Cowen

Here is Dallas Weaver’s essay, one of three winners in the EconTalk essay contest, comparing Mokyr and Cowen’s vision of the future.

A view of the Future

Tyler Cowen describes a future where computers/robots become capable of doing many, if not most jobs available today and do them better than the humans they will replace.  A root canal or dental implant will be done faster, more accurately and less expensively by a robot than a human dentist.   Computers’ proven superiority at games like Chess and Jeopardy is only the tip of the iceberg of the areas in which computers will outperform humans.  At the present time, workers in small niche markets will be protected from competition by computers longer, because of the cost of programming computers to replace humans, but even these workers will not remain unthreatened indefinitely.

Dr. Cowen believes that these changes will continue to be socially and financially beneficial towards the elite who have mastered and create these rapidly evolving technologies to the detriment of the median or average person.   The non-linear shifts in social and financial rewards will create a slow economic growth society as all the “low hanging fruit” has been harvested.

On the contrary Dr. Mokyr’s view of  history focuses on many analogous situations which have existed in the past; where the consequences have made more of humanity more prosperous and more productive than at any time in history.  Fundamental changes, arguably as great as those facing man today, have led to dramatic improvements in all measures of human wellbeing.    A historian can view the development of the automobile and the tractor as ushering in decades of unimaginable opportunity – or as catastrophically throwing millions of farmhands and stable boys out of work.

The nature of expanding technological markets substituting and competing with an existing social/economic functions with rapid growth rates per year, such as the car and tractor, can be stealthy in their effects.    Initially, a doubling of automobile and tractor sales would not have a dramatic impact on workers in the horse-and-buggy sector of society.  But as double doubles double, the last doubling time finds all the remaining transportation and work horses eliminated and job losses in the horse maintenance sector suddenly become huge (about 1929 time scale), which is also the time that car and tractor production decreases in growth rate or hits market saturation.     In this case, history provides an optimistic precedent; as after a few decades, unemployed stable boys and other horse support staff, or their children, ended up with jobs in new sectors ranging from manufacturing washing machines, to refrigerators utilizing the manufacturing technology developed in the automobile industry.    The 30’s may have been a turbulent time for the economy, but it was also a time of unprecedented technological creativity, which ultimately made everyone better off.

The projections of Dr. Cowen and Dr. Mokyr are probably both correct, but they are talking about different time scales.   Dr. Cowen stresses the destruction part of creative destruction, while Dr. Mokyr seems to overlook the local destruction and the impacts of expanding populations on a finite planet.   If the social stresses of the coming era prove manageable, we could all end up with a very comfortable and creative way of life envisioned by Dr. Mokyr, while the process may have many of the bumps Dr. Cowen foresees along the way.

To obtain a better feel for this “future” question, we need to drill down a lot deeper into the details of evolving technology and driving forces.   The big driving forces are fourfold:  the 3 billion additional people expected to arrive on our finite planet; the exponential improvement in cost/performance in microelectronics (Moore’s Law); the present exponential improvement in biotechnology (especially genetics); and the exponential increase in total human knowledge with decreasing information distribution cost.

People are good at linear extrapolations, but exponentials create real thinking problems with the way our brains are wired.  Unlike many previous technological revolutions, this is a very fast exponential revolution.   Exponentials can create new “low hanging fruit,” even without a change in kind.   The old mechanical computer on the battleship calculating shell trajectories is nonetheless a computer, just like a Cray supercomputer; but the differences are so large as to be effectively new.   The last three doubling times on an exponential create something new.

When exponentially growing sectors are directly and indirectly compete with existing sectors in our economy, the existing sectors notice little change until the last 3 doubling times when the new alternative goes from 20% of the competitive field to 100%, and the old goes the way of buggy whip.  The competition could just be for a common resource, such as discretionary income, which has resulted in some hobbies, like keeping tropical fish, decreasing as video games and computers outcompeted for income and attention.

The problems created by the expanding world population are huge.  These would be challenging problems even if the birthrate declined to replacement levels faster than predicted.  This is especially true if we want to leave any land or resources for wild life.    With modern technology, all resources are essentially fungible, where any resources can be converted into another.   The only primary resource is energy.  For example, with existing technology, it is possible to use electricity (energy) to produce hydrogen and ammonia from water and air; and with that hydrogen you can grow genetically engineered bacteria providing a balanced diet for fish, which will then provide you with a fish dinner.   Existing thermal nuclear technology only uses about 3% of the energy in the mined uranium.  Fast reactors can utilize the 97% that is now wasted and also utilize the more abundant thorium cycles.  In other words, it will be possible to eliminate energy as a limiting resource.

As we learn more, it is becoming clear that life, ecologies and nature are not straightforward linear problems but interacting networks, where complexity is the only viable description. The exponential change in computing will allow man to reach beyond his own ability to keep track of fewer than a dozen independent variables at a time, enabling him to tackle problems in ways impossible in the past.  There will be a lot of human/computer interactions like Dr. Cowen’s man/computer chess playing teams that are superior to both men and machines alone.  The big challenge of the future will be complexity.

As these exponential growth sectors increase,, the number of jobs that can/will be eliminated increases.  Yet the number of potential “new” possibilities also increases.  As an example, smart phones are changing transaction costs and allowing smaller niche businesses.   Everything new interacts with everything already existing and everything that existed in the past.   This creates an N! ( N * (N-1) * (N-2) … * 1 ) number of interaction, when everything new interacts with everything else and creates something new again.   It is worth remembering that factorial functions increase even faster than exponentials.   It is these interactions creating new possible innovations and job niches that will allow continued economic growth and do battle with stagnation.

A great many existing jobs will be eliminated, but people will find opportunities with an expanding N! number of creative new niche jobs.   Although each individual niche in the rapidly expanding number of niches will probably create fewer jobs per niche, there will many more such niches.  This can continue to expand economic and individual growth even as many large employment niches, such as assembly work, can be automated.

Unfortunately, the evolution of millions of niche jobs will face a head wind in the form of regulatory bureaucrats whose expansion is also a N! problem, where every new regulation interacts with all existing regulations, creating new ways to prevent new jobs from being created.   Already regulatory times for most projects are many times longer than the project construction time.  These regulatory delays have lethal effects on job creation.   Regulatory delays can also slow the supply/demand response times to the point of creating an economic instability.

Existing sectors threatened by competition or perceived competition work to stifle the budding new innovators and job niches by using political and bureaucratic power.

We can see how the head winds of the regulatory bureaucrats are already being used to prevent the evolution of obvious new job sectors, ranging from attempts at restricting phone app ride sharing systems to apps facilitating room sharing.  When the world of apps touches the physical world, it is apt to find itself poking the regulatory bureaucrat who will respond by trying to expand his authority, viz. the FDA wanting to regulate heart monitoring apps on i-Phones.

Much of the head wind blowing in the face of millions of small niche jobs is really nation state based and effectively local.   Global aquaculture is a good example: US activists and bureaucrats have stifled aquaculture in the US, preventing wider development of an industry that improves the efficiency of converting “feed stuffs” into meat (solving the population increase, land area, meat production world wide issue).  We are leaving it to the rest of the world to generate the hundreds of thousands of jobs producing seafood for the world and the US, often using soy/corn “feed stuffs” from the US in the fish/shrimp diets.   Even if our bureaucrats render it effectively impossible to develop fast breeder nuclear reactor technology here at home, China, Russia and India will continue to develop the technology.    Economic growth will continue in the world, and the N! job creation machine will create jobs faster than they are lost to automation.

Of course the problem of measuring economic growth is becoming messier and more uncertain as the world shifts from easily measured “stuff” to less tangible things.   What is the real value of being able to access the knowledge of the world on a lap top computer.   The measurement problem is made more difficult as economic growth numbers are positively impacted by negative activities, such as increasing crime, prisons and get rich law suits.   The further we get from the basic problem of getting enough calories to eat and water to drink, the more uncertain long term comparisons become.

As work and jobs shifts towards the numerous smaller niche areas created by interactions between the expanding numbers of innovations, the meaningfulness of measurement becomes even more difficult.    Employment and tax based statistics become strained as new niche jobs can’t be shoe-horned into existing industrial categories and no one want to flag the IRS with an “other” category.

Overall, the world looks rosy, but individual countries may slow innovation enough to have job losses exceed the creative gains in employment.   The big opportunity and challenge is how to get the median person in the society, often with a marginal functional culture, involved in the N! creative gains possible and make corresponding increases personal wellbeing.