"Sympathy for the Luddites"

Paul Krugman says technological disruption is real, and argues redistribution is the only way to deal with it.

And the modern counterparts of those woolworkers might well ask further, what will happen to us if, like so many students, we go deep into debt to acquire the skills we’re told we need, only to learn that the economy no longer wants those skills?

Education, then, is no longer the answer to rising inequality, if it ever was (which I doubt).

So what is the answer? If the picture I’ve drawn is at all right, the only way we could have anything resembling a middle-class society — a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules — would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income.

It's interesting evidence mainstream economics is starting to get worried about this issue. He's not providing a "but these fears have always been misplaced in the past" usual take.

The trouble is redistribution without some sense of who deserves what isn't going to fly. This is the left's problem: people don't believe equality is the same as justice (or "fairness".) We can't solve this without having some sense of what we value, or what the good life is. And liberal neutrality on that question, and its focus on material resources and income above all, makes that impossible.

Krugman's solution also assumes there will be supernormal profits, but technology may compete and innovate those away, too. In a perfect market profit is zero, after all, and tehnology is removing barriers to entry and market segmentation.

 

 

 

 

Siren Servers

The stories about NSA surveillance of email and phone metadata are one more boost to skepticism about the new digital economy.

Here's a separate article in the NYT about digital concentration of influence and wealth.

DISSECT almost any ascendant center of power, and you’ll find a giant computer at the core. In the past, power and influence were gained by controlling something that people needed, like oil or transportation routes. Now to be powerful can mean having the most effective computer on a network. In most cases, this means the biggest and most connected computer, though very occasionally a well-operated small computer can play the game, as is the case with WikiLeaks. Those cases are so rare, however, that we shouldn’t fall into the illusion of thinking of computers as great equalizers, like guns in the Wild West.

The new class of ultra-influential computers come in many guises. Some run financial schemes, like high-frequency trading, and others run insurance companies. Some run elections, and others run giant online stores. Some run social network or search services, while others run national intelligence services. The differences are only skin deep. I call this kind of operation a “Siren Server.”

The irony is the original image of the personal computer was of liberation, such as Apple's famous Superbowl ad in 1984. The Silicon Valley political vision of the world - a kind of libertarian paradise - is encountering increasing resistance and skepticism.

So the author of the NYT article suggests we should move towards micropayments for our personal information, to reduce the advantage of the "siren servers."

Of course, the counterargument is today's titans - Google, Facebook, Amazon, Apple - are likely to be tomorrow's Dell, Compaq, MySpace, or AOL, let alone earlier titans such as Bethlehem Steel or Pennsylvania Railroad. I doubt there are natural monopolies or network effects sufficiently powerful to entrench the current digital elite for long.

Algorithms can be replicated. That kind of information wants to be free, too. And if people find their personal data is being over-exploited, they will find alternative ways to communicate.

There can often be something of an arms race with technology. Take airline fares, for example. Large centralized computing power originally enabled the airlines to segment their customers in the 1970s and 1980s, and extract the maximum amount people would pay for a certain route. But the consumer caught up. Technology also brought transparency before long, including sites like Expedia or Kayak. Large centralized computers still price airline fares, but the airlines barely stay out of bankruptcy most of the time, and their only way to get pricing power is to cut capacity. Their industry became commoditized.

People have also feared the use of technology for surveillance for decades, but it usually enables transparency and less power for gatekeepers too.

The whole economy is changing in deeper ways, and that is irreversible. But I doubt that technology will enable any enduring center of power.