Innovation, optimism and jobs

Is digital technology destroying middle-class jobs? Does it exacerbate income inequality? Does it boost economic growth and productivity - without creating the jobs that ought to come with economic growth?

Last month I gave space to a book titled Who Owns the Future? by the computer scientist Jaron Lanier. His answer was an unequivocal yes. He tellingly compared the great photography company of the analog age, Kodak, with the hot photography company of the moment, Instagram. At its peak, Kodak employed 140,000 people; Instagram had only 13 employees when it was bought by Facebook (for $1 billion!) in 2012.

Lanier isn't the only one to have noticed the Kodak-Instagram example. So have Erik Brynjolfsson and Andrew McAfee, two economists from the Massachusetts Institute of Technology, whose newly published book is titled The Second Machine Age. As they put it, "Rapid and accelerating digitisation is likely to bring economic rather than environmental disruption, stemming from the fact that as computers get more powerful, companies have less need for some kinds of workers."

In some ways, The Second Machine Age is an odd book. For the most part, its tone is one of sunny optimism about all the wonderful things technology will soon bring us, from driverless cars to more powerful forms of artificial intelligence. "Innovation," they write, is the "most important force that makes our society wealthier." The authors believe that we are at a moment when technological innovation is about to accelerate, and make the world much wealthier, just as the Industrial Revolution did 250 years ago.

Yet buried in their sunny prose is a darker forecast: that while this digital revolution will be great for innovators, entrepreneurs and other creative people, not everyone will participate - especially those who do jobs that software can do better. The authors label the good that technology will do "the bounty." The downside they call "the spread."

Not everybody buys the technology-is-going-to-change-everything mantra espoused by Brynjolfsson and McAfee. Robert J Gordon, a macroeconomist at Northwestern University, calls them "techno-optimists." In his view, the next 40 years of innovation is not going to look much different from the past 40 years, which he believes haven't been nearly as transformative or wealth-creating as the discovery of electricity and the invention of the light bulb.

Unlike Brynjolfsson and McAfee, Gordon believes that economic growth is going to be anaemic for years to come, and that, he says, has nothing to do with the rate of technological innovation. Rather, he describes a series of "headwinds" facing the American economy: a stagnant educational system and income inequality, for starters. When I asked him whether future innovation would cost jobs, he said he thought it would, but no more or less than has always been the case.

In truth, it is probably too early to know whether this round of technological innovation will ultimately cost or create jobs. The history of innovation has also been a history of job creation - though not necessarily right away. After people figured out how to harness electricity, it took decades before businessmen figured out how to maximise its use in factories.

It also required both behavioural and governmental change. People had to abandon farms, move to cities and undertake very different kinds of lives. Factories used children as workers, until governments passed child labour laws.

In America, as the country became industrialised, free education became the law of the land. It was one of the greatest policy decisions ever. The authors of The Second Machine Age contend that we don't have to be "tech determinists," as Brynjolfsson put it when we spoke; we also have the ability to take control of our destiny rather than letting technology take control of us.

On Friday, I called Tyler Cowen, the George Mason University economist (and a contributor to The New York Times) to ask what he thought about the relationship between technological innovation and jobs. He told me that he mostly agreed with Brynjolfsson and McAfee about the future, though he disagreed with their assessment of the past. (One of his recent books is titled The Great Stagnation.)

Yes, he said, technology would replace humans for certain kinds of jobs, but he could also envision growth in the service sector. "The jobs will be better than they sound," he said. "A lot of them will require skill and training, and will also pay well. I think we'll get to driverless cars and much better versions of Siri fairly soon," he added. "That will make the rate of labour force participation go down."

Then he chuckled. He had recently been in a meeting with someone, explaining his views. "So what you're saying," the man concluded, "is that the pessimists are right. But it's going to be much better than they think."

©2014 The New York Times News Service