Consumption-Biased Technological Change
On last night’s PBS, Paul Solman interviewed Tyler about The Great Stagnation in Tyler’s antiquated kitchen. MIT’s Erik Brynjolfsson provided counterpoint. Highlight: Solman versus Brynjolfsson:
Sure, high-tech gadgetry abounds, says Cowen, but
it hasn’t transformed our economy and created new high-paying jobs, as
past so-called industrial revolutions have.
Take the ubiquitous iPod. It’s created less than 14,000 jobs in the
U.S., Internet giant Google, 20,000 employees, Twitter, a mere 300.
What’s happened with the most recent wave of technology is what
economists call skill-biased technical change, technology that benefits
relatively more skilled workers and hurts the livelihoods of people who
maybe who have high school educations. As a result, the median income
has stagnated, even though overall wealth in the economy has grown
Notice the contrast? Sure, high-skilled workers’ incomes have risen a lot faster than other people’s over the last forty years. But iPods, Google, Twitter, and much of the Internet demand virtually zero workers of any skill level. From this perspective, “skill-biased technological change” is a major misnomer. A much more accurate description is consumption-biased technological change. Firms are figuring out ways for small numbers of workers to create tons of value – then give it away to consumers for pennies or less. And as far as I can tell, the CPI totally ignores these benefits.
CPI bias: Now worse than ever. Quality of life: Now better than ever.