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Scott Atherley on Mokyr and Cowen

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

The main difference between Cowen and Mokyr, in regards to the future of the American economy, is tone and emphasis. Average is Over (henceforth AIO) is anything but techno-pessimism (Mokyr agrees, I think). In fact, it develops a framework to explain how the economy, and specifically the labor market, might develop and change as the capital base evolves to include more machines with more intelligence. Cowen has been regrettably misrepresented – while AIO is often framed as a book about income inequality it is actually a book about the changing nature of work. The impact on measured income inequality is secondary, although it makes for better marketing.

AIO emphasizes the human dimension of technological change, noting that the average American will struggle to deal with smarter machines. Many professions and skills are growing obsolete. Those workers who thrive will be those who can work with smart machines and add value to automation. Those who cannot do this will struggle. Both Cowen and Mokyr argue that this process is a net positive in the long run while accepting that creative destruction has a human cost in the short-run.

However, the human cost of technological change is often overstated. While many American policy intellectuals seem to view the 1950s assembly line as the idyllic end-state of the labor market, Mokyr’s longer vision identifies it as another transient era in development. The emerging machine age will make many new forms of production and labor possible. Home manufacturing (of software, of media, of educational materials and 3D-printed industrial proto-types), for example, is growing increasingly viable.

Personal physical capital is growing far more affordable in many ways. Claims of stagnation do not mesh with the mass availability of cheap computers and the infinite availability of free information.  While computers may be qualitatively the same as they were in the 1970s, the experimentation they empower could increase the likelihood of truly disruptive innovation and the emergence of new low-hanging fruit (a possibility Cowen touches on in The Great Stagnation).

Adding speed incrementally may also be more revolutionary than it seems. More speed makes ever more complex (in terms of size) communications progressively cheaper for more and more people. It is no longer conceivable that genius will languish in a place that has no use for it. No one has (yet) invented a workable flying car, but cheap, easy communications should not be sneered at.

Another way to phrase this is that computers have dramatically reduced transaction costs. It is now possible for individual sellers to contract directly with individual buyers at long distances and for individuals to collaborate on complex production without being in the same physical location.

Where does this leave the American worker? AIO suggests that income inequality will expand. It does not suggest that income inequality is a static concept over time. Those who decry income inequality seem to believe that the modern income gap between Jamie Dimon and the person who makes his morning Latte is qualitatively equivalent to the historic gap between the Pope and a farm laborer in the 1400s. It isn’t. The average Starbucks Barista cannot afford first-class flights, but he or she does have access to an unbelievable array of cheap comforts. Leisure has increased dramatically in value, an argument to which both Mokyr and Cowen subscribe. The point is that the true welfare gap between the 1% and the poor is considerably smaller than it has ever been historically. This should not be taken lightly.

I am not sure that Cowen and Mokyr differ substantially in their broader visions of the future. Cowen operates on a shorter time horizon while Mokyr takes a generational approach. The immediate question is, as always, how current members of the labor force adapt to a changing world. Our children will be just fine.