A few days ago I received an e-mail from MIT professor Erik Brynjolfsson inviting me to consider supporting an Open Letter on the Digital Economy that a small group had recently drafted. As he explained in the e-mail:
“We met out in Silicon Valley to discuss how technology was driving an economic transformation. We concluded that the effects on wealth and income are already significant, and emerging technologies promise greater effects in the coming decade. While the economic pie is bigger than ever, wages for the median worker in America and other advanced nations have stagnated, increasing inequality. With more powerful technologies available than ever before, the challenge before us is to create a better society than ever before. We decided to draft an open letter expressing some of our ideas.”
Since the steam engine in the late 18th century, we’ve had major waves of innovation every 50-60 years, including railroads, steel, electricity and heavy engineering in the 19th century; and automobiles, airplanes and telecommunications in the 20th century.
Each such wave was accompanied by periods of creative destruction, when older industries and jobs where displaced by the new technology-based innovations. Over time, these innovations transformed the economy, re-shaped the institutions of society, and ultimately led to the creation of all kinds of new, more productive industries and many new kinds of jobs.
“Previous technological innovation has always delivered more long-run employment, not less. But things can change,” is the tag line of an article on the future of jobs published in January of 2014 in The Economist. “Nowadays, the majority of economists confidently wave such worries away. By raising productivity, they argue, any automation which economises on the use of labour will increase incomes. That will generate demand for new products and services, which will in turn create new jobs for displaced workers…”
“For much of the 20th century, those arguing that technology brought ever more jobs and prosperity looked to have the better of the debate… Yet some now fear that a new era of automation enabled by ever more powerful and capable computers could work out differently. They start from the observation that, across the rich world, all is far from well in the world of work. The essence of what they see as a work crisis is that in rich countries the wages of the typical worker, adjusted for cost of living, are stagnant.”