The shape of things to come

What if Professor Robert Gordon is right and innovation has peaked?

That would mean no more alternative sectors to employ, even mop up, labour that finds itself surplus to requirements so they end up being low-paid domestic servants (also under threat from robotics), people carers or artists, say

Or they indulge in what Adair Turner, Chairman of the INET (Institute for New Economic Thinking) calls ‘zero-sum activities’ i.e. some become criminals, others policemen, so the overall benefit to ‘human welfare’ is nil – whereupon overall productivity growth will fall to zero

Turner continues: “It’s striking how much high-talent is devoted to activities that cannot possibly increase human welfare but entail competition for the available economic pie” citing:

  • Legal services, policing and prisons
  • Financial regulators preventing mis-selling
  • Cybercrime and experts defending against it
  • Resources devoted to election campaigns
  • Real-estate services that facilitate the exchange of already-existing assets
  • Much financial trading
  • Much design, branding and advertising activity – but will 2050’s designs and brands make us any happier than those of now?”

Such zero-sum activities grow in importance as basic goods and services reach a peak

And if people devote more of their income to competing for scarce housing, driving up prices and rents, GDP and national productivity will also be seen to increase, because rent is included in GDP, although housing supply is unchanged

On the other hand, ICT has improved human welfare in ways not captured by GDP – billions of hours previously wasted filling in forms, making telephone calls or queuing have been eliminated by internet shopping and search services – and valuable information and entertainment is even offered for free

Thus, Turner’s important conclusion is that: “Much that delivers human welfare benefits is not reflected in GDP”

Continuing in this vein: “By 2100, robots and AI may well deliver most of the goods and services that support human welfare – and all that activity would account for a trivial proportion of measured GDP because it would be so cheap”

Conversely, measured GDP would cover all zero-sum and impossible-to-automate activities – so measured productivity growth would be close to nil, and also irrelevant to improvement in human welfare

The trend in that direction has already started – the SS New Millenium has already set sail

1 comment

    • Tamsin Stanley on December 2, 2017 at 8:05 am
    • Reply

    Another thought-provoking blog – and what depressing reading: that list of zero-sum activities!

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