Apps are creating jobs and even industries—removing life’s inconveniences for reasonable amounts of money, sometimes even at a saving—because technology offers ways of doing things cheaply that in previous times couldn’t be done at all.The challenge, as with any other invention that augments the power of humans, is to find ways to use it in such a way as to offer gainful employment. Those European regulations might be the latest manifestation of the Luddites, properly understood as skilled workers rendered superfluous by technical changes that allowed less-skilled workers to do what used to be impossible. Or they might be the latest attempt to protect those less-skilled workers from job-displacing technologies.
It will take time for human ingenuity to figure out the various services that can be done this way and to harness the awesome (and still-growing) power of information technology to meet the needs and wants of human beings going about their lives. Many of the new ideas and companies will fail, but many will also succeed, making our lives richer and better. Lots of people are going to get wealthy, many more will be able to make a living in ways past generations couldn’t even imagine, and a vibrant new information-based service economy will increasingly take the place of the industrial economy that no longer works very well.
As we already see, the Europeans will be too busy trying to regulate the internet and stop it from disrupting the existing economy to take full advantage of its powers for a while. The U.S., less inhibited and more willing to live with the costs of disruption, will find likely find its way to a new kind of prosperity while many other countries are still fighting to preserve a way of life that is no longer sustainable.
Tyler Cowen suggests there are reasons not to be optimistic.
While we are seeing economic problems for the relatively young, they will eventually become dominant earners in the economy and the major force behind broader statistics.On the other hand, the entrepreneurs who figure out how to harness apparently low-productivity individuals to high-value tasks are also going to emerge slowly. Here's a remark by Harvard economic historian Claudia Goldin (who got her collegiate teaching started in Madison) that hints at why such emergence is possible.
In short, are these economic problems transitory, or are we glimpsing the beginnings of a grimmer future?
If a reset is underway, we might have to accept that public policy cannot reverse it easily. Once unsustainable economic structures begin to fail, it takes a significant improvement to make them viable again. Yet because of the difficulty of making major changes under our current political alignment, most new government policies today are no more than changes at the margin. Perhaps the most basic problem is that it is difficult to be sure when a reset is underway, and it is harder yet to raise public alarm about changes that seem to be gradual and slow.
The easiest way to think about it is as a race between education and technology, or between the supply of skilled workers and the demand for skilled workers. The demand for educated workers is moving out at a constant rate, and as long as the supply keeps moving out at a pretty sturdy rate it keeps the premium to education in check. But when the supply stops moving out there's a large increase once again in the premium to educated workers. That's the very simple one-graph story.That's about the breakdown of public education in the United States, but that's also about arbitrage opportunities. Pay a premium for a software engineer to write that application, or figure out how to compensate assorted free-lancers to write components for you.