Kurzweilonomics

Arnold Kling, who is one of the most interesting thinkers around, is onto something very profound here and here.  The clock of history continues to tick, the pace of innovation and creativity to accelerate regardless of political trend or dysfunction.  I've mentioned Mancur Olson on this blog before. He would likely say that the kinds of innovation and productivity increases Kling and Kurzweil predict could not be contained or optimized within current institutional structures and that the new ones would be most likely to emerge in new places. Any thoughts?

Comments

[Colin Henderson]

I am probably way out of my depth here, but let me make a couple of observations from what I have seen:

- productivity is improving, and that will continue, as man and technology work better together. Big business, such as Banks, Telco's could operate on 1/10th of their current HQ staff if they trusted each other, and allowed staff to operate with modern tools
-technology itself improves exponentially; I watch Ruby on Rails programmers produce rich, powerful code in less than 5% of the code lines that would have been required 3 years ago. Leverage from metaprogramming produces exponential gains that we have not felt in the mainstream/ beyond startup economy.
- a counter to the productivity increase is that with significantly less cost input, the output can be sold for less. In short and as a minimum (and this is where I get way out of my depth) traditional GDP measures of growth will not be adequate to reflect the growth by 2025 that Kling speaks of. This is not an inflation/ deflation point.

Example1 that I am familiar with: if a P2P lender [Prosper, CommunityLend, Zopa, CircleLending (VirginUS)] can produce loans and investments with minimal middleman involvement, then consumers get what they want, yet, the revenue that goes to Banks today is eliminated.
Example2 that we are all familiar with: Amazon singlehandedly eliminated corner bookstores. What was the wage loss/ GDP loss there?

My simple premise is that I buy the productivity gain, but I question that it will translate as positively into economic measures that we use today.

PS ... love your blog!

[Michael R. Bernstein]

Hmm. Personally I would like to see more quantative economic studies (and critiques) on the interplay between increased productivity (and it's benefits) and increased inequality (and it's harms).

My own (unscientific) feeling is that overall the increased inequality has more-or-less nullified the advantages of increased productivity to society as a whole, and that the professional class and middle class have been hit nearly as hard as the working class (and the middle-managerial class has been obliterated).

[RF]

Colin - Thanks for your insights as well as your kind words.

Michael - Thank you for your ongoing contributions which are always insightful and thought provoking. I think Kurzweil's argument takes this into account. He says productivity gains return to equity if I'm not mistaken. Seems to me right now the super-profits are accruing in the form of royalties to those who own and control intellectual property. That is where most of inequality is rooted. Of course we also have to up the valleys. That means the service jobs have to be turned into something resembling the old manufacturing and middle management jobs. So real institutional change is needed.

But we lack any leadership voices who will even raise these issues.

[RF]

Colin - Thanks for your insights as well as your kind words.

Michael - Thank you for your ongoing contributions which are always insightful and thought provoking. I think Kurzweil's argument takes this into account. He says productivity gains return to equity if I'm not mistaken. Seems to me right now the super-profits are accruing in the form of royalties to those who own and control intellectual property. That is where most of inequality is rooted. Of course we also have to up the valleys. That means the service jobs have to be turned into something resembling the old manufacturing and middle management jobs. So real institutional change is needed.

But we lack any leadership voices who will even raise these issues.

[rod / techfold.com]

Warning: this comment got more ramble-y than anticipated. Apologies!

To my thinking, both modern economic and modern political structures evolved to meet the needs of previous decade's (or century's) citizens: i.e.: middlemen in the form of elected officials (representative democracy) or business people (the record labels) provide services or knowledge that were unavailable or inaccessible to general public or their specific audiences. For example...

- At the turn of the century, representative democracy allowed an elected representative to communicate a predominantly rural population's views at a time when communication tech/infrastructure did not exist to allow more direct participation.
- The record labels evolved to provide distribution networks and high quality recording technology to bands for who both of which would have otherwise been out of reach.

The common theme is that these institutional structures evolved to provide for either technological or knowledge gaps: access to communications, education, production and distribution networks, etc.

The salient point is that the needs that drove their evolution can now be met on an individual low cost basis: i.e.: a band can do a high-quality recording at home and achieve the same distribution online as a studio act. One can see what the implications have been for recording studios; I'll let you draw your own inferences for the future of democracy.

In relation to your post: the band scenario above is an example of improved productivity rendering a "middleman industry" (ie: labels between artists and listeners) unnecessary. Thus I'd suggest that current institutional structures won't so much be replaced as they will cease to exist entirely.

So, how much of our GDP is tied up in these industries, and what will the impact of their evaporation be? In the longer term, less middlemen suggests more efficient use of capital and more capital available for investment; on the other, short term impacts will be no doubt follow with much hand-wringing.