With the space shuttle fleet having joined the Concorde in the museum, and the golden age of nuclear energy swamped by the waves, is technology innovation a rare and surprising feature of a bygone age?
Tyler Cowen, a professor in economics at George Mason University, is of the view that the major breakthroughs of the industrial revolution, which characterised the decades between World War I and the hippie era of the late 60s, have not been repeated in the last 40 years. In contrast with fossil fuels, the automobile and jetliners, today's innovation is more about improvement at the margins, such as limiting pollution.
He notes that this stagnation is very visible in other indicators, such as the rising mean age of inventors, and the slowing growth of median household incomes. Moreover, he points out that a large part of GDP consists of public education and healthcare expenses, rather than growth based on technological innovation.
Entire floors of typists and bookkeepers have been made obsolete by computers.
Ivo Vegter, ITWeb contributor
Peter Thiel, founder of PayPal, shares this pessimistic outlook. In a debate with George Gilder, publisher of the Gilder Technology Report, he observed that the Concorde embodied the peak of transportation. Progress in the field has been limited by the cost of fuel, betraying “a great lack of innovation in energy”. Likewise, he said, agricultural yield increases are slowing, and drug patents are on the decline.
“The world's last great science fair was in 1968. In 1969, the hippies took over the world, and the science progress was lost,” he told the large audience at FreedomFest 2011, in Las Vegas, last month.
Although the likes of Cowen and Thiel acknowledge computers as “the shining exception”, Thiel says their economic value has not matched the innovations of the early 20th Century. “Steve Jobs called the iPhone more important than the Apollo space programme. It's questionable whether they are comparable, but how have they improved our lives?”
Gilder, like me, is a technophile. He disagreed strongly with Thiel. “It's night-time in America. So says Peter Thiel,” he started, sneering at Cowen's observation that “it's all been 30 fall seasons of Gucci bags”.
Then he launched into an impassioned speech: “To say that all the economy is slowing down except computers is to miss the point. Computers is what we do. They're transforming every product and service in American life.”
This view has more merit than might at first be apparent. Thiel might question the economic value, but entire floors of typists and bookkeepers have been made obsolete by computers. This is hardly an insignificant footnote to history. It has made every business more efficient and every product less expensive.
But Gilder likes computers not just because they make production more efficient. There's a political dimension to his view.
“To except computers,” he continued, “is a complete failure to recognise the emergence of a bottom-up supply-side economy fulfilling the libertarian dream of individual production and creativity. The individual as a producer, not a consumer. The net worth of the average American household has tripled since the 1970s. We have a massive, overwhelming profusion of choices today that we didn't have then.”
He said some innovation is being stifled, particularly in energy, agriculture, food and medicine. “It is true that some technological progress is being actively repressed by government policies, but all that is needed is a removal of these restrictions, and progress will revive.” He believes doing so will “bring about morning in America”.
Thiel agreed that government hampers progress: “Take engineering. Computer engineering has been good, financial engineering worked until 2007, electrical was okay, but every other kind of engineering failed. Mechanical, chemical, civil, nuclear, aerospace... they all failed. The 'information age' is just a codeword for environmentalism, in which every kind of technology progress is discouraged or outlawed. Just like chess in the Soviet Union was a symbol that everything else was outlawed, so computers are a symbol of everything else being outlawed.”
“The theory of secular stagnation is not new,” said Gilder. “Brilliant people like Thiel always see diminishing return and foresee some stable equilibrium and an eventual decline. Marx, Malthus, Schumpeter, all fell for this delusion. It's quite a destructive delusion, because pessimism is destructive to entrepreneurial risk-taking. The idea that progress is slowing down is delusional.”
A deeper truth emerged from the Thiel-Gilder debate, however. It is true that the Internet has liberated individuals to act as producers, rather than simply consumers. Because it is a source of education, a means of access to markets, and a channel free from large companies that monopolise the distribution chain, the Internet has unleashed the creativity and innovation of millions of people.
Much of this productivity and trade isn't visible in the official numbers that economists study. The stock market indices don't count the profit of bloggers, or the revenue of the entrepreneurs on eBay and Etsy. Tax inspectors have rather less of a view of the real scale of online commerce than they'd like to have. Even worse for quantitative economists, there's a strong culture of barter online, especially for intangible goods and services. None of that will show up in the official data on which Cowen and Thiel's analysis rests.
Mobile phones and the Internet have greatly transformed modern political movements, contributing in essential and new ways to events ranging from Barack Obama's election campaign to UK Unkut protests to the Mahreb revolutions.
The same, as Gilder noted, is true for the economy. Computer technology has been a liberating force, empowering individuals to produce, free from government interference, stifling bureaucracy and expensive regulations. The impact has been no less than the “death of distance” caused by the invention of personal transportation and high-speed long-distance travel.
With government-controlled economies on the precipice, the individualist economy symbolised by mobile phones, computers and the Internet could be the single most important determinant of 21st Century economic progress.
With his chess analogy, I think Thiel meant to imply that the computer, remaining free, is an incongruity in a world of stagnating technology. He is right, but not only in a superficial sense. The computer has the power to liberate technology from the stifling oppression of government bureaucracy and incumbent corporate interests. Ironically, Thiel's own company, PayPal, is an apt symbol for this view.
Computers are not only a force for economic progress on a par with the steam engine or the mechanical weaving loom. By returning the freedom to produce and trade to individuals, they put even such a liberating technology as the automobile in the shade.
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