*Race Against the Machine* and TGS, a comparison

Race Against the Machine is compared to TGS in this forthcoming Economist article, and see this earlier piece.  Short bit:

Erik Brynjolfsson, an economist, and Andrew McAfee, a technology expert, argue in their new e-book, “Race Against the Machine”, that too much innovation is the bane of struggling workers. Progress in information and communication technology (ICT) may be occurring too fast for labour markets to keep up.

I agree a version of this is happening (though I wouldn’t use the phrase “too much”) and I don’t see my analysis as so different from theirs.  Possibly the three of us could agree on these propositions:

1. IT has seen rapid innovation since the 1990s, and it has led to great gains, but not so much for ordinary workers.

2. Had innovation gains been much greater in non-IT sectors, median living standards would have gone up much more.

I’m not sure if Erik and Andrew would agree with my:

3. Innovation gains in non-IT sectors have been much slower than usual (by post 1870 standards) in the post 1973 period.

I would make a few other points which I suspect they would not agree with, or would wish to reframe:

4. IT productivity was highest in 1995-1998 and those were splendid years for wages and the labor market.  That is one reason why I focus on the “glass half empty problem” (low non-IT innovation post 1973), rather than the “too much IT innovation for labor’s good” argument.  I do think the “too much innovation for labor’s good” argument explains why the productivity statistics from 2001-2004 didn’t translate into significant real wage gains and that is an important phenomenon.  But it’s at the side of my argument rather than central to it.  It’s central to their argument.

5. The S&P 500 has been flat, in real terms, for well over a decade.  I thus see a truly gloomy productivity picture post 1997-98 or so, weighing IT successes against other problems and slowdowns.  (I see this as one issue for their account, since they are asserting good times for capital in recent years.)  More generally, the productivity picture for the U.S. between 1995-1998 is quite good and IT-based, and 1973-1995 is poorly understood, highly mixed, but overall still quite inadequate with the 1970s and early 1990s having been worse than most people realize.  Overall I see the bad productivity years as bad years for the workers, not vice versa.  I also see the broader technological stagnation as setting in well before the IT boom of the 1990s.

6. The biggest employment problems, namely those of late, have come when output is low and/or falling, not rising.  That is another reason why my agreement with some of their major propositions comes at the side of my argument rather than being central to it.  I understand how the TGS argument fits into the cyclical story of 2007-2011 (excess confidence and overextension, Minsky moment, AD contraction, AS problems slow down the recovery), but I don’t understand how the Race Against the Machine story interacts with the cycle, or if it is even supposed to.

I had a long chat with Erik earlier in the week and found large areas of agreement on many matters (without wishing to speak for him in any formal sense, don’t attribute any of this to him!).  We also have quite similar predictions about the future, and this blog post is solely about the past.  These “side arguments” I am referring to are already in the process of becoming more central and they will shape our future.  The story of a largely stagnant median will become progressively less important relative to the story of labor market polarization, and I suspect that over time Erik and I (I didn’t get to chat with Andrew as much) will agree increasingly.

Addendum: Arnold Kling comments.


Comments for this post are closed