I'm discussing Joel Mokyr's book The Gifts of Athena: Historical Origins of the Knowledge Economy. He talks about how the knowledge economy arose, and how it changed where and how people worked and allocated their time. Knowledge propels the economy forward.
The trouble is the process Mokyr describes is fragile.
.. technological progress in a society is by and large a temporary and vulnerable process, with many powerful enemies with a vested interest in the status quo or an aversion to change continuously threatening it. The net result is that changes in technology, the mainspring of economic progress, have actually been rare relative to what we now know human creativity is capable of, and that stasis or change at very slow rates has been the rule rather than the exception. It is our own age, and especially the rapid technological change in the Western world, that is the historical aberration.
Technology always generates resistance, because it creates winners and losers.
Any change in technology leads almost inevitably to an improvement in the welfare of some and to a deterioration in that of others.To be sure, it is possible to think of changes in production technology that are Pareto-superior, but in practice such occurrences are extremely rare. Unless all individuals accept the "verdict" of the market outcome, the decision whether to adopt an innovation is likely to be resisted by losers through non-market mechanisms.
So there is inevitably much conflict over precisely how technology will change society. Society makes decisions by following what Mokyr calls an aggregation rule.
To reach this decision, society follows what I will call an aggregation rule, which maps a vector of n individual preferences into a decision. This aggregation rule may be a market process (as would be the case in a pure private economy), but such a rule is a very special case. The pure market outcome is equivalent to an aggregator that weights preferences by their income. The optimality of the outcome will vary with the income distribution even for the market aggregator.
In the terminology of the new historical institutional analysis, an aggregator is an institution, that is, a non-technologically determined constraint on economic behavior.
Economists tend to believe that more of the decision ought to be left to the market, of course, rather than other aggregator processes like politics. (Of course, economists tend to take preferences as given and unchanging as well). But many others disagree.
Why would there be support for removing the market as the sole arbiter of technological decisions and delegate part of the decision-making process to political bodies? Technological progress disrupts the existing allocation of resources and thus involves externalities as soon as we admit that the reallocation involves costs. Yet a mechanism that relies on markets alone effectively truncates preferences over technology at zero. If one supports a new technique, one can vote yes by buying the new product or switching to the new technique. By not buying the product or refusing to switch, one can express indifference or dislike, but individuals have no control over what others do even if they feel it might affect them. In markets it is difficult to express a no vote.
Technological change will always create disruption and losers. And the losers will fight back.
The more specific a skill or a piece of equipment, the more incentive its owner has to resist anything that will reduce its value through technological obsolescence. It is hard to think of a technological advance that did not reduce the value of somebody's specific assets and skills. .. Moreover, technological change altered the non-pecuniary characteristics of labor. It created and destroyed labor hierarchies, it changed the physical work environment, and it increased and decreased the advantages of domestic production where workers were in control of their own work schedule.
Organizations also tend to resist change.
.. cases in which corporations, presumably trying to maximize profits, resisted innovations are legend... .For any bureaucracy, routine and standard operating procedures are the essence of its long-run existence, and deviance is persecuted and uprooted if possible (Goldstone, 1987). For that reason, it is critical whether the decision-making body is facing some form of competition; if the Xerox Corporation would not make the computer mouse it developed, somebody else would.
There are also intellectual and moral objections to change.
A different source of resistance comes from purely intellectual sources without a necessary direct economic interest. Much of this resistance derives from a genuine concern for some social values. Schumpeter, in fact, predicted that it would be intellectuals that would bring about a growing hostility to what he called the "capitalist order"
These range from concern at the 'dehumanizing' aspects of capitalism to environmental objections, to concerns that technological change is producing unforeseen risks and hazards.
It is not just a matter of risk preference in isolation, though. It is also a matter of how optimistic you are that technology will generate solutions to any problems it creates along the way. When you think about it, it is obvious, but it is nonetheless a separate and interesting judgment. (Liberal views of social change no doubt also entail an optimistic view that solutions will be found to social disruption.)
It is a matter of how optimistic individuals are about society's capability to generate additional new knowledge that will solve whatever unintended consequences a specific new technique will produce.
That partly depends on the structure of property rights, which can obscure costs or benefit private interests at the expense of the public.
Indeed, the last book we looked at argued that old-stlye industrial capital frequently fails to earn its cost of capital if you measure costs correctly.Many environmentalists are suspicious of innovations because they believe that new technologies often make extensive use of resources that have poorly defined property rights.
Putting it all together, however, Mokyr argues technological change tends to create insuperable opposition after a time.
Sooner or later in any society the progress of technology will grind to a halt because the forces that used to support innovation become vested interests. In a purely dialectical fashion, technological progress creates the forces that eventually destroy it. This result holds for a single closed economy.
Assessing the book as a wholeThe reason the book is rewarding is it traces through a persuasive account of the incentives which surround technology, and the social impact that technology has on daily life.
For the most part, I did not find it broke new ground, perhaps apart from the chapter on the impact of health arguments on housework and womens' roles. But it provides a more concrete , satisfying account of how economic change works. It gives a more analytical framework for thinking about economic change. And it is one which complements Douglass North's arguments that I discussed earlier.
The discussion of the origins of the industrial revolution, and why it happened in England, is interesting, but gets a little insiderish and technical. It is of course perhaps the most significant question in economic history, but the precise sequencing and details is of more limited general interest.
Mokyr's emphasis on access to technology and the importance of the institutiions and informal ties that spread knowledge around a society is fascinating, however. I so often feel that the sheer profusion of knowledge is far beyond any one individual's bandwidth. The institutions that integrate knowledge together and generate new combinations can therefore be uniquely important in Mokyr's view. And it is hard to get them right, as they cost resources and may be resisted by many specific insittutions guarding their own domains.
It means that feeling that we get when there are a thousand books and articles on the smallest issues is not just a matter of individual limitations. It is a social limitation that has to be solved and overcome, something which needs institutions and networks and adaptation and informal links.
Above all, Mokyr's discussion of how and why economic activity moves between formal organizations and households and the optimal scale of economic activity is very interesting. One of the most important aspects of IT is how it change the optimal scale of production. That is something which has a direct and profound impact on daily life, in the routine and nature of people's days. One of the biggest changes in the economy is simply where and how we work.