Sunday, 11 May 2014

The Economics of Information in the 21st Century: A Review of Jaron Lanier's Books

Author: Dave Hochfelder

Jaron Lanier, You Are Not a Gadget: A Manifesto. New York: Vintage, 2010. 240 pp.
Jaron Lanier, Who Owns the Future? New York: Simon & Schuster, 2013. 416 pp.

The specter of technological unemployment has been haunting traditional economics since at least the Great Depression. Technological unemployment arises from increasing labor productivity due to technological advances like automation and computerization. In the aftermath of the Great Depression, American economist Hans Neisser warned of “permanent” technological unemployment and ended his article with the “inevitable” conclusion that “there is no mechanism within the framework of rational economic analysis that…would secure the full absorption of displaced workers and render ‘permanent’ technological unemployment in any sense impossible.” [1] More recently, in 2012, Nir Jaimovich and Henry E. Siu published an NBER working paper showing that recovery from the last three recessions has been “jobless” because of productivity gains from technology.[2]

Enter Jaron Lanier, a Silicon Valley pioneer turned critic of Web 2.0. In these two books, he lays out a powerful indictment of the technological and economic ideology behind today’s Internet and its likely future development. In particular, Lanier warns of a serious potential effect of networked information technologies: an increasing gap in the distribution of wealth. In a world where information is free, the creators of that information derive no economic value, Lanier argues. Instead, wealth flows upward to those who control the servers that store and disseminate that information. Karl Marx famously noted that “the hand-mill gives you society with the feudal lord; the steam-mill society with the industrial capitalist.” In Lanier’s future, the digital cloud gives you society with a techno-oligarchy.

Traditionally, the workers most affected by technological unemployment were in the manufacturing sector. 3-D printing and new-generation robotics are likely to reduce employment in manufacturing while enabling dramatic increases in output. Lanier, however, warns that workers in the so-called creative and knowledge classes are also likely to fall victim thanks to the technological networks of the 21st century. File-sharing, for example, has allowed musicians to reach broader audiences while at the same time has eroded their ability to earn a living at their craft.

Lanier offers a solution—allow individuals to monetize the information they share in the digital cloud. He reasons that since this information is valuable to Google, predictive analytics companies, and advertisers, then the people who generate this information should be compensated in the form of “nanopayments” (Who Owns the Future? p. 20).  It is unclear whether the “lords of the clouds” (You Are Not a Gadget, p. 54) will accept this solution, but Lanier argues that it is in their long-term interest to do so. Otherwise, he concludes, the alternative is a world of vastly unequal distributions of wealth and power.

[1] Hans P. Neisser, “’Permanent’ Technological Unemployment: ‘Demand for Commodities Is Not Demand for Labor,’” American Economic Review 32 (March 1942): 50–71.
[2] Nir Jaimovich and Henry E. Siu, “The Trend Is the Cycle: Job Polarization and Jobless Recoveries,” National Bureau of Economic Research Working Paper, 31 March 2012. (accessed 5 May 2014).

No comments:

Post a Comment