Great Throughts Treasury

"I’ve been asked this question by a few people recently, none of them hardhearted let-them-eat-cakers. If I’m hearing them right, they’re asking two simple yet profound questions: Why should we care if those at the top have a lot (and more all the time), as long as those at the bottom have enough? And because of the productivity gains, innovation, and progress you talk about, isn’t it getting easier and easier over time to have enough, even if you’re at the bottom of the income/wealth distribution?"

"Man is the lowest-cost, 150-pound, nonlinear, all-purpose computer system which can be mass-produced by unskilled labor."

"If you were in charge of the economy, you’d probably care that it could produce a lot, that it had high productivity, that it provided lots of jobs, and that these jobs offered decent pay on average. You might well care about other things, too, but if these four indicators were all headed in the right direction over time (in other words, UP) you’d be pretty happy."

"Instead, the stagnation of median incomes primarily reflects a fundamental change in how the economy apportions income and wealth. The median worker is losing the race against the machine."

"We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come—namely, technological unemployment. This means unemployment due to our discovery of means of economizing the use of labor outrunning the pace at which we can find new uses for labor. "

"While the foundation of our economic system presumes a strong link between value creation and job creation, the Great Recession reveals the weakening or breakage of that link."

"How can we implement a “race with machines” strategy? The solution is organizational innovation: co-inventing new organizational structures, processes, and business models that leverage ever-advancing technology and human skills."

"Where People Still Win (at Least for Now) Although computers are encroaching into territory that used to be occupied by people alone, like advanced pattern recognition and complex communication, for now humans still hold the high ground in each of these areas. Experienced doctors, for example, make diagnoses by comparing the body of medical knowledge they’ve accumulated against patients’ lab results and descriptions of symptoms, and also by employing the advanced subconscious pattern recognition abilities we label “intuition.” "

"There has never been a worse time to be competing with machines, but there has never been a better time to be a talented entrepreneur."

"Technologies like robotics, numerically controlled machines, computerized inventory control, and automatic transcription have been substituting for routine tasks, displacing those workers. Meanwhile other technologies like data visualization, analytics, high-speed communications, and rapid prototyping have augmented the contributions of more abstract and data-driven reasoning, increasing the value of those jobs."

"Over the past 25 years, physical activities that require a degree of physical coordination and sensory perception have proven more resistant to automation than basic information processing, a phenomenon known as Moravec’s Paradox'."

"The threat of technological unemployment is real. To understand this threat, we'll define three overlapping sets of winners and losers that technical change creates: (1) high-skilled vs. low-skilled workers, (2) superstars vs. everyone else, and (3) capital vs. labor."

"An increasingly common approach uses the Khan Academy’s tools to flip the traditional classroom model on its head, letting students watch the video lectures at home at their own pace and then having them do the “home work” exercises in class while a teacher circulates among them, helping each student individually with specific difficulties rather than providing a one-size-fits-all lecture to all the students simultaneously. "

"The root of our problems is not that we’re in a Great Recession, or a Great Stagnation, but rather that we are in the early throes of a Great Restructuring."

"The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little."

"Information doesn’t get used up even when it’s consumed. "

"A wonderful study by economist Robert Jensen found, for example, that as soon as mobile telephones became available in the fishing regions of Kerala, India, the price of sardines dropped and stabilized, yet fishermen’s profits actually went up. This happened because fishermen for the first time had access to real-time price and demand information from the markets on land, which they used to make decisions that completely eliminated waste. Results like these help explain why there were more than 3.8 billion mobile phone subscriptions in the developing world by late 2010, and why The Economist..."

"A system for transmitting information from the notes of the lecturer to the notes of the student without going through the brain of either."

"A 1965 NASA report advocating manned space flight: “Man is the lowest-cost, 150-pound, nonlinear, all-purpose computer system which can be mass-produced by unskilled labor.”"

"As the old joke goes, it’s a system for transmitting information from the notes of the lecturer to the notes of the student without going through the brain of either."

"About 90% of Americans worked in agriculture in 1800; by 1900 it was 41%, and by 2000 it was just 2%."

"Although multiplying five-digit numbers is an unnatural and difficult skill for the human mind to master, the visual cortex routinely does far more complex mathematics each time it detects an edge"

"As time goes by—as we move into the second half of the chessboard—exponential growth confounds our intuition and expectations. It accelerates far past linear growth, yielding Everest-sized piles of rice and computers that can accomplish previously impossible tasks."

"Because the process of innovation often relies heavily on the combining and recombining of previous innovations, the broader and deeper the pool of accessible ideas and individuals, the more opportunities there are for innovation."

"American teachers make 40% less than the average college graduate."

"Capitalists tend to save more of each marginal dollar than laborers. In the short run, a transfer from laborers to capitalists reduces total consumption, and thus total GDP. This phenomenon is summarized in a classic though possibly apocryphal story: Ford CEO Henry Ford II and United Automobile Workers president Walter Reuther are jointly touring a modern auto plant. Ford jokingly jabs at Reuther: “Walter, how are you going to get these robots to pay UAW dues?” Not missing a beat, Reuther responds: “Henry, how are you going to get them to buy your cars?”"

"Combinatorial innovation is the best way for human ingenuity to stay in the race with Moore’s Law."

"And computers (hardware, software, and networks) are only going to get more powerful and capable in the future, and have an ever-bigger impact on jobs, skills, and the economy. The root of our problems is not that we’re in a Great Recession, or a Great Stagnation, but rather that we are in the early throes of a Great Restructuring. Our technologies are racing ahead but many of our skills and organizations are lagging behind. So it’s urgent that we understand these phenomena, discuss their implications, and come up with strategies that allow human workers to race ahead with machines instead..."

"Compounding this measurement problem is the fact that free digital goods like Facebook, Wikipedia, and YouTube are essentially invisible to productivity statistics. As the Internet and mobile telephony deliver more and more free services, and people spend more of their waking hours consuming them, this source of measurement error becomes increasingly important. Furthermore, most government services are simply valued at cost, which implicitly assumes zero productivity growth for this entire sector, regardless of whether true productivity is rising at levels comparable to the rest of the economy."

"Computers are the GPT of our era, especially when combined with networks and labeled “information and communications technology” (ICT)."

"Computers are, in some sense, the “universal machine” that has applications in almost all industries and tasks. In particular, digital technologies now perform mental tasks that had been the exclusive domain of humans in the past. General purpose computers are directly relevant not only to the 60% of the labor force involved in information processing tasks but also to more and more of the remaining 40%. As the technology moves into the second half of the chessboard, each successive doubling in power will increase the number of applications where it can affect work and employment. As a result,..."

"Digital technologies change rapidly, but organizations and skills aren’t keeping pace. As a result, millions of people are being left behind. Their incomes and jobs are being destroyed, leaving them worse off in absolute purchasing power than before the digital revolution. While the foundation of our economic system presumes a strong link between value creation and job creation, the Great Recession reveals the weakening or breakage of that link. This is not merely an artifact of the business cycle but rather a symptom of a deeper structural change in the nature of production."

"Computers and networks bring an ever-expanding- set of opportunities to companies. Digitization, in other words, is not a single project providing one-time benefits. Instead, it's an ongoing process of creative destruction; innovators use both new and established technologies to make deep changes at the level of the task, the job, the process, even the organization itself. And these changes build and feed on each other so that the possibilities offered really are constantly expanding."

"Entrepreneurs reap rich rewards because what they do, when they do it well, is both incredibly valuable and far too rare."

"Economic progress comes from constant innovation in which people race with machines. Human and machine collaborate together in a race to produce more, to capture markets, and to beat other teams of humans and machines."

"Decouple benefits from jobs to increase flexibility and dynamism. Tying health care and other mandated benefits to jobs makes it harder for people to move to new jobs or to quit and start new businesses."

"Economist Ed Wolff found that over 100% of all the wealth increase in America between 1983 and 2009 accrued to the top 20% of households. The other four-fifths of the population saw a net decrease in wealth over nearly 30 years. In turn, the top 5% accounted for over 80% of the net increase in wealth and the top 1% for over 40%."

"Economic power tends to beget political power even in democratic and pluralistic societies. In the United States, this tends to work through campaign contributions and access to politicians that wealth and money tend to buy. This political channel implies another, potentially more powerful and distortionary link between inequality and a non-level playing field."

"Eliminate or reduce the massive home mortgage subsidy. This costs over $130 billion per year, which would do much more for growth if allocated to research or education. While home ownership has many laudable benefits, it likely reduces labor mobility and economic flexibility, which conflicts with the economy’s increased need for flexibility."

"Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new … ideas were discovered. And every generation has underestimated the potential for finding new … ideas. We consistently fail to grasp how many ideas remain to be discovered. … Possibilities do not merely add up; they multiply."

"fast as hardware does, at least in some domains. Computer scientist Martin Grötschel analyzed the speed with which a standard optimization problem could be solved by computers over the period 1988-2003. He documented a 43 million-fold improvement, which he broke down into two factors: faster processors and better algorithms embedded in software. Processor speeds improved by a factor of 1,000, but these gains were dwarfed by the algorithms, which got 43,000 times better over the same period."

"Ford CEO Henry Ford II and United Automobile Workers president Walter Reuther are jointly touring a modern auto plant. Ford jokingly jabs at Reuther: “Walter, how are you going to get these robots to pay UAW dues?” Not missing a beat, Reuther responds: “Henry, how are you going to get them to buy your cars?”"

"Fortunately, digital technologies create enormous opportunities for individuals to use their unique and dispersed knowledge for the benefit of the whole economy. As a result, technology enables more and more opportunities for what Google chief economist Hal Varian calls “micro-multinationals”—businesses with less than a dozen employees that sell to customers worldwide and often draw on worldwide supplier and partner networks."

"Franklin D. Roosevelt put this most eloquently: No country, however rich, can afford the waste of its human resources. Demoralization caused by vast unemployment is our greatest extravagance. Morally, it is the greatest menace to our social order."

"How can we expect to prosper two decades from now when millions of young graduates are, in effect, being denied the chance to get started on their careers?”"

"In each case, economic theory is clear. Even when technological progress increases productivity and overall wealth, it can also affect the division of rewards, potentially making some people worse off than they were before the innovation. In a growing economy, the gains to the winners may be larger than the losses of those who are hurt, but this is a small consolation to those who come out on the short end of the bargain."

"However, if it grows at 4% per year, as it did in 2010, then living standards are 16 times higher after 70 years. While 4% growth is exceptional, the good news is that the past decade was a pretty good one for labor productivity growth—the best since the 1960s. The average of over 2.5% growth per year is far better than the 1970s and 1980s, and even edges out the 1990s (see Figure 3.1)."

"If, in like manner, the shuttle would weave and the plectrum touch the lyre without a hand to guide them, chief workmen would not want servants."

"In fact, economist Ed Wolff found that over 100% of all the wealth increase in America between 1983 and 2009 accrued to the top 20% of households. The other four-fifths of the population saw a net decrease in wealth over nearly 30 years. In turn, the top 5% accounted for over 80% of the net increase in wealth and the top 1% for over 40%."

"If you zoom in on the past decade and focus on working-age households, real median income has actually fallen from $60,746 to $55,821. This is the first decade to see declining median income since the figures were first compiled. Median net worth also declined this past decade when adjusted for inflation, another first."