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Why are cryptocurrencies still a thing?
There is a paranoid fear that some inexplicable and incomprehensible ghostly cabal of Federal Reserve technocrats may one day make ordinary money go to hell! There is the success of young brothers who have minted a fortune by convincing other young brothers to embrace it while still attracting a generation with poor job prospects to try and strike it rich from their bedroom.
Can that be all, though? You might expect some urgency to find a purpose for a technology that consumes more energy than Australia, but hasn’t been able to develop a real-world function other than paying ransoms, drugs or child pornography. But once you get past the bigger fool theory, you’re left with little more than a tagline: It’s hi-tech.
I’m talking about a problem that goes far beyond cryptocurrencies: the lack of purpose, the absence of a reason for society to keep churning out new things all the time, despite the cost, driven by a contrived narrative in Silicon Valley featuring technology , any technology, inevitably fueling human progress.
In the valleys telling, questioning this progress is best left to the Luddites. But the safe march of new technologies on society requires critical appraisal. The casualties of progress are piling up, questioning why you are implementing such technologies in the first place.
The social consequences of social media are chilling not only for its proven potential to distort the national conversation, spreading disinformation too fast for the truth to catch up. As many observers have also complained, they are replacing online social connections with real ones, building alternative realities open to manipulation in pursuit of profit.
Used by business managers to automate processes and make increasingly complex decisions, robots have built a better reputation. But the reputation rests on unexamined assumptions: first, that automation necessarily improves the company’s profitability; secondly, that the fruits of this progress will be widely shared throughout society.
Firms that become more productive, the story goes, will expand production and hire more workers. Automation will also create new tasks within companies for humans. Incomes that grow in line with productivity will generate demand for new products and services, further stimulating employment. And the additional competition for work will drive up wages.
But while these proposals make sense, at first blush they don’t really fit with what we’re seeing in the real world, where job growth occurs mostly in low-paying jobs like McDonalds and 7-Eleven. Anyone who thinks the gains from automation are widely shared hasn’t been paying attention.
A new vein of economic research into the consequences of technological change has found that technology’s bias towards automation can explain most of the rise in wage inequality, polarizing the labor market between less educated workers who are displaced from their jobs and they see their wages go down and those mainly college graduates or college graduates who aren’t.
Technology demands new tasks, opening the door to new jobs, but they too are geared towards highly educated people and offer little to basic-skilled workers whose tasks have been taken over by machines.
Research by economists at the Massachusetts Institute of Technology, Northwestern University and Utrecht University has found that the economy created a lot of middle-wage manufacturing and white-collar jobs from 1940 to 1980. But many of those are now gone. The jobs created since then have been either high-paying professional positions or low-paying service jobs.
And you just wait for the artificial intelligence to take its toll. What Google CEO Sundar Pichai calls the most important thing humanity has ever worked on will open up new realms of human activity to what the money in the valley likes to call disruption. Workers displaced by the next version of ChatGPT will play their usual role in the narrative of progress: roadkill.
The problem with progress isn’t just how its fruits are shared. Earnings themselves are being questioned. You may recall Elon Musk’s acknowledgment that humans are undervalued, a rare admission of error after his attempts to automate Tesla’s assembly lines led to delays and malfunctions. The mistake is common: technological contributions to productivity are often hard to find.
As Daron Acemoglu of the Massachusetts Institute of Technology observes, a lot of automation provides just a so-so boost to profits. Think automated customer service or McDonalds touch screens. Managers automate anyway for two reasons: its progress and everyone does it, and the costs imposed on displaced workers by new technologies are, to the company, irrelevant. So even though the returns are incredibly small, it’s worth it.
Innovation, by some measures, is happening at a breakneck pace. In 2020, the US Patent Office issued more than 350,000 patents for inventions, almost six times more than in 1980, at the dawn of the digital revolution. But total factor productivity during this period grew by just 0.7 percent a year, on average, less than a third of the growth rate from the 1940s to the 1970s.
While the techno-optimists of Cupertino and Mountain View tend to dismiss the dismal numbers as bad-measurement data crunchers that miss out on all the good stuff, many serious scholars are coming to the idea that all great IT won’t necessarily lead to a revolution in computing. productivity.
Innovation is undeniably a cool thing. This is why we survive diseases that used to kill us regularly. We can access and process unimaginable amounts of information. Without new technologies we would never have faced the challenge of decarbonising the economy and containing climate change.
But as Acemoglu and his MIT colleague Simon Johnson point out in their forthcoming book, Power and Progress, due out in May, contemporary evidence and mankind’s long history of technological development confirm that nothing is automatic about new technologies. technologies that bring widespread prosperity. Whether they do or not is an economic, social and political choice.
Silicon Valley, they argue, shouldn’t feel empowered to make the call. With the venture capital industry chasing opportunities for AI to take on an increasing range of tasks and decisions by playing Go, practicing law, analyzing the markets, Acemoglu and Johnson worry that technological advancement is driving society on a dark path.
What if instead of increasing productivity, AI simply redistributed power and prosperity away from the common people and towards those who control the data? What if it impoverishes billions in the developing world whose cheap workers can’t compete with cheaper automatons? What if it reinforces prejudices based, for example, on skin color? What if it destroys democratic institutions?
Evidence is mounting, they write, that all of these concerns are valid.
We can avoid Skynet. Technology must not lead us to an oligarchic dystopia. The last 150 years are filled with technological breakthroughs that have empowered workers and lifted all boats.
Think of the mouse and the computer GUI, Excel or e-mail. These inventions extended human capabilities, rather than extinguished them. Arguably the most significant technological revolution in our history, the transformation of an agricultural economy into an industrial powerhouse, has left the working class much better off.
We have extraordinary technological tools. The question is whether we deploy them in a way that integrates human beings or discards them as redundant waste from the march towards progress.
It may not be obvious how to distribute the technology along a more human-centric path; build tools that amplify what humanity can do. One thing is clear, though. It will require wresting the uncontested decision on the direction of innovation from a technological oligarchy that profits from human displacement and social alienation.
So we could build a non-optimized social media platform to spread disinformation, capture viewers’ attention, and maximize ad revenue. We may not replace the customer service workers of American companies with machines that provide none of the same. And we may not accept accelerating climate change just to find a new way to pay for the illegal stuff.
Eduardo Porter is a Bloomberg Opinion columnist covering Latin America, US economic policy and immigration. He is the author of American Poison: How Racial Hostility Destroyed Our Promise and The Price of Everything: Finding Method in the Madness of What Things Cost. This column does not necessarily reflect the opinion of the editorial board or of Bloomberg LP and its owners.
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