Where is the Future?
By Arnold Kling
A decade ago people all over the place were saying confidently that the economic effect of the internet would outstrip the effects seen by the invention of railways and telecommunications, and that new synergies from fast and universal communication would generate a society of massive capability…
Yet economic growth since the internet came has been, well – ahem! – very modest…
I am reminded of a quote from William Gibson: “The future is here, it is just unevenly distributed.” I think that the economy has not yet adapted to the Internet, just as in 1930 it had not yet adapted to the automobile.
I think that ultimately the Internet will yield high productivity, but for now it is creating a mix of winners and losers. I am a winner. My cost of living is way down as a result of the Internet. Our household gets along very well, and if it were not for college tuition for our daughters, the past few years I would not even have needed the income of a median worker .
Many people who use the Internet for work have been winners. At the same time, the Internet has introduced new forms of competition, including offshoring of services, and this has created losers.
I suspect that the age of mass production is gradually passing. That is, the proportion of the world’s population that can be economically put to work producing mass goods, such as automobiles, is on the decline. That may reduce the standard of living for low-skilled workers.
You might look at the technology of warfare as a leading indicator. In 1939, the world’s armies still had a lot of horses. But motorized vehicles soon made horses obsolete.
The idea of sending massed formations of relatively untrained soldiers into war, as countries did in the middle of the 20th century, seems absurd today. Instead, we think in terms of highly professional military personnel using advanced equipment. What if the economy in general is moving in that sort of direction? With highly-skilled professionals using advanced equipment substituting for masses of low-skilled workers?
We are undergoing a major demographic shift, with the ratio of older dependents to younger workers rising. That may slow the increase in the standard of living, at least for the younger workers.
We may end up throwing away much of the productivity increase on ineffective medical services. But I think that we will have a lot to throw away.