The American Interest
Analysis by Walter Russell Mead & Staff
Paul Krugman’s Better Half

We’ve already written about Paul Krugman, the Hari Seldon fan whose political beliefs about defending the declining blue social model have landed him in the camp of Trantorian functionaries rather than psychohistorian future builders.

But as this blog post reminds us, Krugman is right about at least one thing: Growth isn’t over. The information revolution is going to transform the way we live and could lead to much greater affluence for all:

Consider for a moment a sort of fantasy technology scenario, in which we could produce intelligent robots able to do everything a person can do. Clearly, such a technology would remove all limits on per capita GDP, as long as you don’t count robots among the capitas. All you need to do is keep raising the ratio of robots to humans, and you get whatever GDP you want.

Now, that’s not happening — and in fact, as I understand it, not that much progress has been made in producing machines that think the way we do. But it turns out that there are other ways of producing very smart machines. In particular, Big Data — the use of huge databases of things like spoken conversations — apparently makes it possible for machines to perform tasks that even a few years ago were really only possible for people. Speech recognition is still imperfect, but vastly better than it was and improving rapidly, not because we’ve managed to emulate human understanding but because we’ve found data-intensive ways of interpreting speech in a very non-human way.

And this means that in a sense we are moving toward something like my intelligent-robots world; many, many tasks are becoming machine-friendly. This in turn means that Gordon is probably wrong about diminishing returns to technology.

Hari Seldon would approve; so would Isaac Asimov, though we think both might shake their heads sadly at Krugman’s inability to visualize the economic impact of this new abundance as anything but the rule of a few robot owning overlords towering over the helpless masses of unemployed.

What’s more likely in that kind of world is that the cost of machine made goods and services will dramatically decline until even very sophisticated products don’t cost much more than the raw materials used to make them. (Such products would include machines; machine ownership is likely to be more widely distributed than Krugman fears.) Humans would do the work that machines couldn’t do, or that people prefer to have done by other people. Wages for some work might be low in nominal terms, but because the price of the basic, machine-provided goods you needed for comfortable living would be extremely low, living standards would be much higher than they are today. It’s likely that basic minimum guarantees for things like food, medical care and education would cover more than they do now with less strain on the economy, but also that people will continue to want more than the basics — and will think up ways to earn more.

It is always difficult to imagine a future whose economic conditions are radically different from those we know today. Often, those imaginary futures are nothing more than the projections of our beliefs about the forces at work in the present. But Paul Krugman is right that we face almost unlimited prospects for growth and abundance. The information revolution has a long way to run, and before it is over human life will be profoundly transformed.

Published on December 28, 2012 12:01 pm