G and I talked more about Mai Tai. I think it's interesting, she says. But with so many people out of work and deep economic problems, is abundance really the problem? Don't we have too much deprivation?
Sure, I said, we've got huge economic problems. But it's not because we lack the ability to produce goods and services. It's not lack of stuff. Even people who lose their jobs have plenty of stuff. Entire provinces of China are working 24/7 producing more stuff with remarkable speed and efficiency.
We're having serious setbacks because the current economic model is running out of steam. The market is a wonderful way of allocating scarce resources. It enforces basic reciprocity, which is the foundation of its success. You can't get something for nothing. You have to work if you want to eat. You have to produce if you want to consume.
Except those things increasingly aren't true. Look at the biggest growth companies. Facebook is preparing for a titanic IPO. But it charges nothing to individual users. And it employs very few people for a company its size.
Technology is increasingly eliminating routine jobs. Whenever that has happened in the past, the economy created new jobs even faster. But that isn't happening in the same way now, because the new goods and services we want are not labor intensive, and are often not even traded.
They are things like personal connection, social interaction and purpose, just as we saw in the Mai Tai example. And those aren't excludable, rivalrous goods like a car or a transistor radio. They are increasingly nonrivalrous, nonexcludable, public goods or goods with almost zero marginal cost. Markets work brilliantly for specific material goods. But as the song goes, you can't buy love.
We've deferred the problem for decades by expanding the scope of the market economy, by women moving into the workforce, for example, and by huge asset booms to make up for feebler income streams. We sold the future and amassed titanic mountains of debt. We built a huge welfare state.
But now there are savage political arguments over the size of government and the welfare state. Fiscal policy is tapped out. We've had increasingly serious crises in the last twenty years, even as many argued we were seeing a "Great Moderation." The position of the less educated and unskilled is becoming far weaker.
And the pace of technological innovation is increasing. It's exponential, as new tools make it easier to design still better technologies. Whole areas of the economy like retail are starting to get amazoned. Better artificial intelligence could eliminate millions of jobs. Siri is just the start.
Education and health have been major areas of spending and job growth. But they too could have productivity revolutions before long.
And that's why we have to rethink the institutions and incentives in the economy. Just as we transitioned from agriculture to manufacturing and then the modern service economy, we need another transition.
The crisis is a symptom of the fact that what works for an economy of stuff no longer works for an economy of connection and purpose and flourishing.
Instead of stuff, we need purpose. And you can't easily exchange that at the local store.