🚀 Faster, Please! — The Podcast #28

Does technological progress automatically translate into higher wages, better standards of living, and widely shared prosperity? Or is it necessary to steer the development of technological improvement to ensure the benefits don't accrue only to the few? In a new book, two well-known economists argue the latter. I'm joined in this episode by one of the authors, Simon Johnson. Simon is the Kurtz Professor of Entrepreneurship at MIT. He and Daron Acemoglu are authors of the new book Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity. Simon is also co-author with Jonathan Gruber of 2019's Jump-Starting America, now out in a new paperback. In This Episode * Is America too optimistic about technology? (1:24) * Ensuring progress is widely shared (11:10) * What about Big Tech? (15:22) * Can we really nudge transformational technology? (19:54) * Evaluating the Biden administration’s science policy (24:14) Below is an edited transcript of our conversation Is America too optimistic about technology? James Pethokoukis: Let me start with a sentence or two from the prologue: “People understand that not everything promised by Bill Gates, Elon Musk, or even Steve Jobs will likely come to pass. But, as a world, we have become infused by their techno-optimism. Everyone everywhere should innovate as much as they can, figure out what works, and iron out the rough edges later.” Later, you write that that we are living in a “blindly optimistic” age. But rather, I see a lot of pessimism about AI. A very high percentage of people want an AI pause. People are very down on the concept of autonomous driving. They're very worried that these new technologies will only make climate change worse. We don't seem techno-optimistic to me. we certainly don't see it in our media. First of all, let me start out with, why do you think we're techno-optimistic right now, outside of Silicon Valley? Simon Johnson: Well, Silicon Valley is a very influential culture, as you know, nationally and internationally. So I think there's a deep-running techno-optimistic trend, Jim. But I also think you put your finger on something very important, which is since we finished the book and turned in the final version in November, I think the advance of ChatGPT and some of our increased awareness that this is not science fiction — this is actual, this is real, and the people who are developing this stuff have no idea how it works, for example—I wouldn't call it pessimism, but I think there's a moment of hesitation and concern. So good, let's have the discussion now about what we're inventing, and why, and could we put it on a better path? When I think about the past periods where it seemed like there was a lot of tech progress that was reflected in our economic statistics, whether it's productivity growth or economic growth more broadly, those were also periods where we saw very rapid wage growth people think very fondly about. I would love to have a repeat of 1995-2000. If we had technologies that could manage that kind of impact on the economy, what would be the downside? It seems like that would be great. I would love a repeat of the Henry Ford experience, actually, Jim. Henry Ford, as you know, automated the manufacturing of cars. We went from producing tens of thousands of cars in the US to, 30 years later, producing millions of cars because of Ford's automation. But at the same time Ford and all the people around him — a lot of entrepreneurs, of course, working with Ford and rivals to Ford — they created a lot of new jobs, new tasks. And that's the key balance. When you automate, when you have a big phase of automation, and we did have another one during World War II and after World War II. We also created a lot of new tasks, new jobs. Demand for labor was very strong. And I think that it's that balance we need. A lot of the concerns, the justified concerns about AI you were mentioning a moment ago, are about losing jobs very quickly and faster than we can create other tasks, jobs, demand for labor in other, non-automating parts of the economy. Your book is a book of deep economic history. It's the kind of book I absolutely love. I wonder if you could just give us a bit of a flavor of the history of what's interesting in this book about those two subjects and how they interact. We tried to go back as far as possible in economic and human history, recorded history, to understand technological transformations. Big ones. And it turns out you can go back about 1000 years with quite reliable information. There are some things you can say about earlier periods, a little bit more speculative to be honest. But 1000 years is a very interesting time period, Jim, because as you know, that's pretty much the rise of Europe timeframe. A thousand years ago, Europe was a nothing place on the edge of a not very important part of one continent. And through a series of technological transformations, which took a long time to get going — and that's part of the medieval story that we explore — [there was] a huge amount of innovativeness in those societies. But it did not translate into shared prosperity, and it was a very stop-start. I'm talking about over the period of centuries. Then, eventually, we get this Industrial Revolution, which is initially in Britain, in England, but it's also shared fairly quickly around northwest Europe: individual entrepreneurship, private capital, private ownership, markets as a dominating part of how you organize that economy. And eventually, not immediately, but eventually that becomes the basis for shared prosperity. And of course, that becomes the basis for American society. And the Americans by the 1850s to 1880s, depending how you want to cut it, have actually figured out industrial technology and boosted the demand for labor more than the Europeans ever imagined. Then the Americans are in the lead, and we had a very good 20th century combining private capital, private innovation with some (I would say) selective public interventions where a private initiative didn't work. And this actually carried a lot of countries, including countries in that European tradition, through to around 1980. Since 1980, it's become much more bumpy. We've had a widening of income inequality and much more questioning of the economic and political model. Going back into the history: Oftentimes people treat the period before the steam engine and the loom as periods of no innovation. But there was. It just didn't have the impact, and it wasn't sustained. But we were doing things as a society before the Industrial Revolution. There was progress. There was technological progress, technological change. Absolutely. The compass, the printing press, gunpowder — these are advances. Right. The Europeans, of course, were sort of the magpies of the world at that point. A lot of those innovations began in China. Some of them began in the Arab world. But the Europeans got their hands on them and used them, sometimes for military purposes. They figured out civilian uses as well. But they were very innovative. Some people got rich in those societies, but only a very few people, mostly the kings and their hangers-on and the church. Broad-shared prosperity did not come through because it was mostly forced labor. People did not own their labor. There was some private property, but there wasn't individual rights of the kind that we regard as absolutely central to prosperity in the United States, because they are central to prosperity and because they're in the Constitution for a reason, because it was coming out of feudalism and the remains of that feudal system that our ancestors in the United States were escaping from. So they said, “Let's enumerate those rights and make sure we don't lose them.” That's coming out of 800 years of hard-learned history, I would say, at that point. And that's one reason why, not at the moment of independence but within 50 to 70 years, the American economy was really clicking and innovating an… This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit fasterplease.substack.com/subscribe