The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies

by Erik Brynjolfsson

This means that the best way to use new technologies is usually not to make a literal substitution of a machine for each human worker, but to restructure the process.

In contrast, both nonroutine cognitive work and nonroutine manual work grew in all three decades.

We wish that progress in digital technologies were a rising tide that lifted all boats equally in all areas, but it’s not. Technology is certainly not the only force causing this rise in spread, but it is one of the main ones. Today’s information technologies favor more-skilled over less-skilled workers, increase the returns to capital owners over labor, and increase the advantages that superstars have over everybody else. All of these trends increase spread—between those that have a job and those that don’t, between highly skilled and educated workers and less advanced ones, between superstars and the rest of us. It’s clear to us, from everything we’ve seen and learned recently, that all else being equal, future technologies will tend to increase spread, just as they will boost the bounty.

The Economist sums it up, “Back in its Horatio Alger days, America was more fluid than Europe. Now it is not. Using one-generation measures of social mobility—how much a father’s relative income influences that of his adult son—America does half as well as Nordic countries, and about the same as Britain and Italy, Europe’s least-mobile places.”11 So the spread is not only large, but also self-perpetuating. Too often, people at the bottom and middle stay where they are over their careers, and families stay locked in across generations. This is not healthy for an economy or society.

Ideation in its many forms is an area today where humans have a comparative advantage over machines. Scientists come up with new hypotheses. Journalists sniff out a good story. Chefs add a new dish to the menu. Engineers on a factory floor figure out why a machine is no longer working properly. Steve Jobs and his colleagues at Apple figure out what kind of tablet computer we actually want. Many of these activities are supported and accelerated by computers, but none are driven by them. Picasso’s quote at the head of this chapter is just about half right. Computers are not useless, but they’re still machines for generating answers, not posing interesting new questions. That ability still seems to be uniquely human, and still highly valuable. We predict that people who are good at idea creation will continue to have a comparative advantage over digital labor for some time to come, and will find themselves in demand.

So ideation, large-frame pattern recognition, and the most complex forms of communication are cognitive areas where people still seem to have the advantage, and also seem likely to hold on to it for some time to come. Unfortunately, though, these skills are not emphasized in most educational environments today. Instead, primary education often focuses on rote memorization of facts, and on the skills of reading, writing, and arithmetic—the ‘three Rs,’ as Tory MP Sir William Curtis named them around 1825

They also find, however, that at every college studied some students show great improvement on the CLA. In general, these are students who spent more time studying (especially studying alone), took courses with more required reading and writing, and had more demanding faculty.

The negative income tax combines a guaranteed minimum income with an incentive to work. Below the cutoff point in the example (which was $3,000 in 1968 but would be about $20,000 in 2013 dollars), every dollar earned still increases total income by $1.50. This encourages people to start working and keep finding more work to do, even if the wages they receive for this work are low. It also encourages them to file tax returns and so become part of the visible mainstream workforce.

The income tax first appeared during the Civil War and was made permanent in 1913 by the Sixteenth Amendment to the Constitution.18 By 2010, over 80 percent of all revenue collected by the federal government came from individual income taxes and payroll taxes.

The better machines become at substituting for human labor, the bigger negative effect any tax or mandate will have on human employment. So in addition to subsidizing work via a negative income tax, we also support not taxing work as much in the first place and reducing burdens and mandates on employers. Like so much else at the intersection of economics and policy, this is easy to say and extremely hard to enact. How else, if not by taxes on labor, are expensive, popular, and important programs like Social Security and Medicare to be funded? How is health care coverage to be provided if not by employers? We don’t claim to have all the answers to these critical questions, but we do know that the economist’s toolkit contains other kinds of taxes besides those on labor. As discussed in the last chapter, these include Pigovian taxes on pollution and other negative externalities, consumption taxes, and the value-added tax (VAT), which companies pay based on the difference between their costs (labor, raw materials, and so on) and the prices they charge customers.

A VAT has several attractive properties—it’s relatively straightforward to collect, adjustable, and lucrative—but is not currently used in the United States. In fact, America is the only one of the thirty-four nations in the OECD without one.

Any system this complex and tightly coupled has two related weaknesses. First, it’s subject to seeing minor initial flaws cascade via an unpredictable sequence into something much larger and more damaging. Such a cascade, which sociologist Charles Perrow labeled a ‘system accident’ or ‘normal accident,’ characterized the 1979 meltdown of the Three Mile Island nuclear plant, the August 2003 electrical blackout that affected forty-five million people throughout the U.S. Northeast, and many other incidents.1 Second, complex, tightly coupled systems make tempting targets for spies, criminals, and those who seek to wreak havoc. A recent example here is the Stuxnet computer worm, which may have been incubated in government labs.

There’s a genuine tension between our ability to know more and our ability to prevent others from knowing about us. When information was mostly analog and local, the laws of physics created an automatic zone of privacy. In a digital world, privacy requires explicitly designed institutions, incentives, laws, technologies, or norms about which information flows are permitted or prevented and which are encouraged or discouraged.

Even in the face of all these challenges—economic, infrastructural, biological, societal, and existential—we’re still optimistic. To paraphrase Martin Luther King, Jr., the arc of history is long but it bends towards justice.10 We think the data support this. We’ve seen not just vast increases in wealth but also, on the whole, more freedom, more social justice, less violence, and less harsh conditions for the least fortunate and greater opportunities for more and more people.

As we have fewer constraints on what we can do, it is then inevitable that our values will matter more than ever. Will we choose to have information widely disseminated or tightly controlled? Will our prosperity be broadly shared? What will be the nature and magnitude of rewards we give to our innovators? Will we build vibrant relationships and communities? Will everyone have the opportunities to discover, create, and enjoy the best of life?