Blog Post

AEIdeas

I wanted to replay the following from my recent podcast interview with MIT’s Andrew McAfee (co-author of several books with his colleague Erik Brynjolfsson, including “Race Against The Machine,” and “The Second Machine Age,” and his most recent one, “Machine, Platform, Crowd: Harnessing Our Digital Future”):

Pethokoukis: I always like to go to Twitter and ask people for questions for the guest and I got one from economist Adam Ozimek, who tweeted “Is this the back half of the chessboard yet? It doesn’t feel like the back half of the chess board.” He’s referring to a kind of a complicated metaphor, so I’ll just say what he’s asking is, are we entering the period of exponential growth? You and Erik seem to be saying that we are in time of accelerating change, but in many ways it doesn’t feel like it. McAfee: The second half of the chessboard, is to say it a little too simply, when things get really weird and crazy. And when I look at, not economic growth rates, but the kinds of innovations that are coming out of the technology sector, things are getting crazy. And so, the example of the computerized Go champion — we were not anticipating this. So, to answer that really good question, my intuition is that we are in the early squares of the second half of the chessboard. We are in the period when things are getting a little crazy and we ain’t seen nothing yet.

The rice and chessboard story is one of exponential growth. And Ozimek is skeptical that we are beginning to see some sort of rapid economic acceleration, even early stages. He notes, for instance, that while McAfee and Brynjolfsson have been talking about autonomous cars since 2010 when they wrote “Race Against the Machine,” progress since then feels linear rather than exponential. In that book, M&B point out that as recently as 2004, many experts thought driverless cars were impossible, yet the technology sure seemed possible if not probable by 2010. Here is Ozimek:

But where have we gone in the seven years since then? Well Google’s prototypes have driven millions of miles, but you still can’t buy one. Car companies are adding incrementally more autonomous features, and many companies continue to work on the problem. So I look around and I certainly see steady progress, but it’s progress that looks rather… dare I say, linear. I don’t want to minimize the potential and even the inevitability of self-driving cars. I believe they are coming, and probably within the next five to ten years. But what I see is not non-linear improvement, but rather a one-time jump from maybe impossible to looking pretty possible, then slow, linear progress after that. understand the debates about productivity mismeasurement, but it’s hard to hide truly exponential growth with measurement error. So while I am hardly betting against the future, and I lean towards optimism, I think on net what has unfolded since the publication of Race Against the Machine has looked rather linear.

As Ozimek notes, you sure don’t see signs of exponential supergrowth in the numbers. And I agree that were that the case, even measurement error caused by using 20th century industrial economy metrics for a 21st century digital economy probably couldn’t hide the rapid acceleration.

But what about tomorrow or the day after tomorrow? I think there is a plausible case for a productivity acceleration beyond an eventual post-recession cyclical rebound, as I have written here, here, and here. And then there is this paper coauthored by Brynjolfsson, (I blogged about it yesterday), which attempts to explain how one could believe today’s measured stagnation yet remain optimistic about another wave of game-changing innovation and productivity growth. I’m not even sure we need much better public policy to get there, though it sure wouldn’t hurt. Maybe just “do no harm.” On that issue, more from McAfee and me:

What would you tell policymakers right now, who I think are beginning to wake up to the issues of technology and automation and sustained productivity growth? What should government be doing? I tell them not to try to solve the problems of 20 or 40 years from now, today. So, people are a little bit too worried about the jobless economy, or when the robots take over everything, what do we do with human beings. You know, maybe you and I will live to see that day, but that’s not the day we are in. We are in an era where the American economy still has jobs without exception month by month for more than 80 months. We are not anywhere in sight of peak labor in the American economy. The problem is that instead of kicking out the great American middle-class jobs, it’s kicking out lower-middle-class jobs, more precarious ones. Okay, if you go grab the Econ-101 textbook off the shelves, you’ll get a series of great ideas about what to do about that situation. And they include things like revamping our educational system, investing really heavily in infrastructure, trying to increase rates of entrepreneurship, being welcoming to immigrants as opposed to hostile to them, and investing in good old-fashioned basic research which turns into companies and jobs somewhere down the road. Any economist, if you woke them out of a deep sleep, could rattle those things off. My frustration is that for a while now, we’ve been doing a moderate to lousy job in all of those areas, and I think we are heading in the wrong direction more quickly now than we were before.