Despite the snark, I think this is one of the most interesting articles I've read on the web this year
Take a look at these farm houses which I saw under construction in remote areas of Yunnan province China. They were not unusual; farmsteads this size were everywhere in rural China. Note the scale of these massive buildings. Each support post is cut from a single huge tree. The massive earth walls are three stories high and taper toward the top. They are homes for a single extended family built in the traditional Tibetan farmhouse style. They are larger than most middle-class American homes. The extensive wood carvings inside and outside will be painted in garish colors, like this family room shown in a finished home. This area of Yunnan is consider one of the poorer areas in China, and the standard of living of the inhabitants here would be classified as "poor."Thanks to Brad DeLong for the heads-up. And Will McLean for this comment.
Part of the reason is that these homes have no running water, no grid electricity, and no toilets. They don't even have outhouses.
But the farmers and their children who live in these homes all have cell phones, and they have accounts on the Chinese versions of Twitter and Facebook, and recharge via solar panels.
This is important because a recent thought-provoking article by a renowned economist argues that the US economy has not been growing during the internet boom and probably will not grow any more than it has already because computers and the internet are not as productive as the last two industrial revolutions.
You can read the article here: Is U.S. Economic Growth Over? (PDF) by Robert Gordon.
Gordon answers his own question with: Yes, US economic growth is over for a while. I think Robert Gordon is wrong about his conclusion, but I wanted to start with one of the bits of evidence he offers for his view. He is trying to argue that the consequences of the 2nd Industrial Revolution, which bought to common people electricity and plumbing, was far more important than the computers and internet which the 3rd Industrial Revolution has brought us. (Gordon's 1st Industrial revolution was steam and railroads.) As evidence of this claim he offers this hypothetical choice between option A and option B.
With option A you are allowed to keep 2002 electronic technology, including your Windows 98 laptop accessing Amazon, and you can keep running water and indoor toilets; but you can’t use anything invented since 2002. Option B is that you get everything invented in the past decade right up to Facebook, Twitter, and the iPad, but you have to give up running water and indoor toilets. You have to haul the water into your dwelling and carry out the waste. Even at 3am on a rainy night, your only toilet option is a wet and perhaps muddy walk to the outhouse. Which option do you choose?Gordon then goes on to say:
I have posed this imaginary choice to several audiences in speeches, and the usual reaction is a guffaw, a chuckle, because the preference for Option A is so obvious.But as I just recounted, Option A is not obvious at all.
The farmers in rural China have chosen cell phones and twitter over toilets and running water. To them, this is not a hypothetical choice at all, but a real one. and they have made their decision in massive numbers. Tens of millions, maybe hundreds of millions, if not billions of people in the rest of Asia, Africa and South America have chosen Option B. You can go to almost any African village to see this. And it is not because they are too poor to afford a toilet. As you can see from these farmers' homes in Yunnan, they definitely could have at least built an outhouse if they found it valuable. (I know they don't have a toilet because I've stayed in many of their homes.) But instead they found the intangible benefits of connection to be greater than the physical comforts of running water.
Most of the poor of the world don't have such access to resources as these Yunnan farmers, but even in their poorer environment they still choose to use their meager cash to purchase the benefits of the 3rd revolution over the benefits of the 2nd revolution. Connection before plumbing. It is an almost universal choice.
This choice may seem difficult for someone who has little experience in the developing world, but in the places were most of the world lives we can plainly see that the fruits of the 3rd generation of automation are at least as, and perhaps more, valuable than some fruits of the 2nd wave of industrialization.
So if people value the benefits of computers and internet so much why don't we see this value reflected in the growth of the US economy? According to Gordon growth has stalled in the internet age. This question was first asked by Robert Solow in 1987 and Gordon's answer is that there are 6 "headwinds," six negative, or contrary forces which deduct growth from the growth due to technology in the US (Gordon reiterates he is only speaking of he US). The six "headwinds" slowing down growth are the aging of the US population, stagnant levels of education, rising inequality, outsourcing and globalization, environmental constraints, and household and government debt. I agree with Gordon about these headwinds, particularly the first one, which he also sees as the most important.
Where Gordon is wrong is his misunderstanding and underestimating of the power of technological growth before it meets these headwinds.
... the 3rd Industrial Revolution is not really computers and the internet, it is the networking of everything.
And in that regime we are just at the beginning of the beginning. We have only begun to connect everything to everything and to make little network minds everywhere. It may take another 80 years for the full affect of this revolution to be revealed.
In the year 2095 when economic grad students are asked to review this paper of Robert Gordon and write about why he was wrong back in 2012, they will say things like "Gordon missed the impact from the real inventions of this revolution: big data, ubiquitous mobile, quantified self, cheap AI, and personal work robots. All of these were far more consequential than stand alone computation, and yet all of them were embryonic and visible when he wrote his paper. He was looking backwards instead of forward."
Finally, Gordon is focused, as most economists, on GDP which measures the amount of "labor saving" that has been accomplished. The more labor you save while making or serving something, the more productive you are. In the calculus of traditional economics productivity equals wealth. Gordon rightly points out that so far the internet has not saved a lot of labor. As I argue in my robot piece in Wired, Better Than Human (not my title), I think the real wealth in the future does not come from saving labor but in creating new kinds of things to do. In this sense long-term wealth depends on making new labor.
Civilization is not just about saving labor but also about "wasting" labor to make art, to make beautiful things, to "waste" time playing, like sports. Nobody ever suggested that Picasso should spend fewer hours painting per picture in order to boost his wealth or improve the economy. The value he added to the economy could not be optimized for productivity. It's hard to shoehorn some of the most important things we do in life into the category of "being productive." Generally any task that can be measured by the metrics of productivity -- output per hour -- is a task we want automation to do. In short, productivity is for robots. Humans excel at wasting time, experimenting, playing, creating, and exploring. None of these fare well under the scrutiny of productivity. That is why science and art are so hard to fund. But they are also the foundation of long-term growth. Yet our notions of jobs, of work, of the economy don't include a lot of space for wasting time, experimenting, playing, creating, and exploring.