The Digital Economy: Higher Productivity, Fewer Jobs

I’ve always loved technology and been a proponent of its mostly beneficial effects on humanity’s existence. I still believe that, but I also try to keep a somewhat close eye on macroeconomic currents, and I don’t like what I see.

Der Spiegel recently published an article covering this in some detail. It opens with two MIT economists who set out to write a book about how technology creates more jobs than it destroys, but as they were researching the book, they found exactly the opposite – old jobs get wiped out and productivity increases, but these promised new jobs never materialize.

I’ve just started reading Jaron Lanier’s (so far excellent) book Who Owns the Future that says roughly the same thing. Lanier was at the forefront of the video gaming industry in the 80s, particularly in regards to virtual reality, and in recent years has become a kind of techno-philosopher. He isn’t very well known outside of tech circles, but he should be.

In the book, Lanier plays out what he believes is happening right now: manufacturing, and “physical” jobs in general, are disappearing; “information” is becoming the most important resource in the digital economy; we are all generating information on a massive scale (on social networks, blogs, etc); and finally, the companies that own this information will monopolize this power they have amassed.

That may seem a bit abstract or even far-fetched, but the evidence thus far does bear out his theory. We can probably agree that the manufacturing industries in general have already been gutted by automation – factories that once employed thousands of people are now run by a few dozen. That transition has already happened, and the economy has mostly managed to absorb those losses and find other jobs for those people. It hasn’t been seamless by any means, but it wasn’t cataclysmic either – we haven’t suffered recessions because of it.

But what of the “human” jobs that are left? Bus drivers, surgeons, teachers? Self-driving cars are mere years away from mass-market use, and it’s highly likely that bus drivers will be among their first casualties (as well as airline pilots, who are far better-paid and thus a juicier target). Surgeons are already being “helped” by robots that can operate with far more accuracy and efficiency than any human and that will probably replace them eventually. Teachers (or university professors more specifically) are lashing out against the rise of the MOOC, which threatens to wipe out all but the very best teachers working for the very best schools. What will those people do once they’re out of a job?

White-collar professions have been our refuge from the job losses caused by automation, but what will we do when robots spread from the factory floor to our cubicles?


Lanier’s suggestion (he admits it may not be practical or even possible) is that everyone be paid for the information they generate, whether consciously or unconsciously, using microtransactions – many tiny individual payments flying all over the internet, into individuals’ bank accounts. This was actually supposed to be directly built into HTML (the code that powers web pages) in the 90s, but the idea was scrapped before that came to fruition.

His idea is that every time Facebook or Google or whoever else makes any money using the information we generate (that we are currently giving away for free, enriching these companies immensely), they would pay us a portion of that amount, directly deposited into our bank account. Googlebot will crawl this blog post once it’s published; if Google were to use it for, say, writing analysis for its Translate program, they would send me a small amount of money. It wouldn’t be much, but it would at least be some compensation for my work if others use it for profit.

That would at least be a hedge against the collapsing middle class – if all that’s left for us to do is writing a blog or posting on Facebook, we may as well make a few bucks off it.

The Jobless Economy

The other possibility, often brought up by the techno-utopians, is that we won’t need to work in the first place if robots and nano-assemblers are doing all our work for us. We could just sit back and occupy ourselves however we wish, maybe making a bit of money on the side as artists or musicians or life coaches.

While that looks great on the surface, it seems inevitable that in that scenario, the people who make and sell the robots will become disproportionately powerful and influential, in the process making Marxism relevant again. The cost of living would be extremely low, in a sense almost becoming a barter economy or even like Star Trek where you just ask your replicator for whatever you want, but the robot-makers would be filthy rich compared to the other 99%. Will that money still buy any influence in a quasi-moneyless world? I don’t know, but I’d rather not wait until that happens to find out.

Taken even farther, some say we will eventually merge with our machines and all of our worldly problems will be irrelevant anyway; we will all exist as software programs running in the cloud, we will turn the matter around us into a quantum computer and “saturate the universe with our consciousness”, and so on. Becoming a “disembodied spirit, dead and yet unborn” sounds fun and all but telling people to sit tight until that happens isn’t really a solution for the chaos we will be living through in the next 20 years or so as jobs get systematically wiped out by computers and people have nowhere left to make a decent living. Will it lead to massive deflation in “roboticized” nations? Would that actually be a blessing, increasing purchasing power, or would that make matters worse by discouraging spending across the board and causing even more stagnation?

I’m not well-versed enough to fully understand the implications of what’s on the horizon, but I find it frightening that almost no one seems to be talking about it. Sure, there’s some chatter on the fringes about the Dow being back up to pre-recession levels while the job market is still flat, but that’s just a symptom of the larger problem. Economic productivity is inexorably rising, but it’s only benefiting an ever-narrower stratum of people – those that own the machines and the servers. What’s the solution? Is it to create the mother of all nanny states, or is it rather pushing this process to its natural limit, destroying the industrial economy to create a moneyless life of leisure? I don’t know, but I hope people start asking more questions so that we can at least guide this train we’re on rather than letting it run us over.