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Would You Rather Have Indoor Plumbing Or An iPhone?

This article is more than 10 years old.

A Plumbing We Will Go (Photo credit: Wikipedia)

The TED Conference kicked off this morning in Long Beach, Calif. with a rollicking debate between two very different-thinking economists over the big conundrum facing the global economy: Have we reached the end of progress?

The opening salvo in the debate was a talk by Northwestern University economist Robert Gordon, whose spent most of his allotted 18 minutes tossing pails of cold water on the idea that we’re likely to innovate our way out of developed-world stagnation. All of the productivity gains and economic growth achieved in the last 150 years, he explained, come thanks to inventions that are behind us: electricity, the internal combustion engine, indoor plumbing and heating, electronics and computers. Before us are four headwinds too tough to overcome: debt, economic inequality, an aging population and a flawed education system.

First, Gordon offered up a super-quick history of productivity. From 1300 to 1700 the world economy was basically flat: 0.2% growth. You know what happened then: steam, railroads, the telegraph, electricity. From 1891 to 2007 the U.S. economy grew 2% a year, a sufficient rate to lift almost all Americans out of poverty and ensure that each generation would be more prosperous than the next.

But what has happened to us lately is not at all that good. Growth in per capita income has been negative in the U.S. for the past ten years, he said. For the bottom 99% of the country it’s been hovering at 0.8% for the past decade. Hours worked per person has been shrinking because the boomers are retiring, and significant numbers of working-class males are dropping out of workforce as their jobs disappear. Thanks to spiraling inflation in higher education, our college completion rate is now 15 percentage points below that of Canada. If the growth line continues downward you get right back to 0.2% per annum we had prior to the Industrial Revolution. We won’t double our standard of living each generation. Our kids will be worse off than our parents.

The only way technological progress can lift the masses above 0.8% growth is if we match these great inventions. He ended with a challenge to the TED audience of technologists and high net-worth world beaters, can you match what Thomas Edison, Alexander Graham Bell and others achieved in the 19th and 20th century.

Enter the opposite view in the form of MIT economist Erik Brynjolfsson, who quickly averred that growth is not dead. The benefits of technology almost always take longer to root than we expect. Recall Amara’s Law: "We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run." It was the second generation of managers that reaped the gains after electrification of American factories 120 years ago, because they took the opportunity to redesign their processes. Electricity is a general-purpose technology and it takes people to reinvent the systems around it. Computers are today’s general-purpose technology and we are not doing a great job of designing our processes around it. Although some may quibble with this stats, Brynjolfsson said productivity grew faster in the 2001-2010 period than it did in the prior decade, same before that and before that. The new machine age is more about knowledge creation: brains not brawn, ideas not things. There’s also a measurement problem among economists. We’re getting more stuff for free: music, social networks, telecommunications. But this is not how economists measure GDP. Zero price means zero weight. He estimates that there are some $300 billion in goods and services missing from GDP stats.

The “new machine age” Brynjolfsson sees is digital, exponential and combinatorial. Our brains are wired for a linear world, not an exponentially changing one. This is why people are shocked when they hear that driverless cars will likely be on the roads in large numbers by 2020. And the combinatorial part explains how innovation begets innovation. Thanks to giant social platforms and smartphones, new apps and businesses can launch and reach millions of users right away

Brynjolfsson is flummoxed by the irony that people are arguing that technology is stagnating at the very moment we are developing highly intelligent machines like IBM’s Watson. But he acknowledges that optimism has its limits. Technology is racing ahead but leaving more people behind. Incomes are falling even though we’ve created more wealth in the past decade than ever. This is great decoupling of productivity from employment and wealth from work.

So while Gordon’s challenge to the TED audience was to become the new Edisons, Brynjolfsson challenged the audience to figure out how to learn to race with the machine not against it. After losing to a supercomputer at chess, Garry Kasparov created a team event with machines and humans working together against a single computer. The team won every time.

Then TED curator Chris Anderson got up onstage to engage the two economists in a debate. Gordon asked Brynjolfsson if machines can replace in one package the diversity of human activity, because a robot certainly can’t get itself on an airplane and fly from Boston to Long Beach to give a talk. Brynjolfsson said machines are not here to mimic us, they are best used to do things differently than the way humans solve problems. It’s complementary.

Then Brynjolfsson questioned why it isn’t a good thing that computers and robots will allow people to work fewer hours. Isn’t the goal of economics to improve people’s utility and happiness? Gordon said yes, but early retirement for all will only worsen the entitlement spending blow-up underway. Brynjolfsson countered that there is or should be more to life, or more to what economists track, than how well our basic needs are met. Chris Anderson posed an excellent question to wrap things up, which is that, when you’re sitting on top of the S curve of growth, you can see all the gains you’ve made but it’s hard to see what hasn’t been invented yet. Brynjolfsson couldn’t agree more (nor could I) in that we have a bias against the future. It’s Amara’s law all over again.

Gordon had the last word: Robots are going to make money for the people who invent them and own them but they will replace workers and that will bad. What good is a world when we have all these snazzy machines and we listen to music for free but we have no gainful employment and kids dropping out of school?

In a final survey of the audience, Anderson asked for a show of hands to see where the TEDsters in the crowd stood on their estimation of progress. Which would you rather have, he asked, indoor plumbing or the internet? Indoor plumbing won easily, 60 to 40 percent. Then he asked for another show of hands: Is the story of our future one of slowing or accelerating progress? Only a smattering of hands went up for slowing progress. But huge show of hands went up for accelerating progress. Big surprise. This is TED, after all.