Tyler Cowen: observation

Transcript context

…We did talk to Joel a lot about that in writing the book, and he was immensely helpful. We used his work a lot. I think the distinct difference we would make, just in terms of those facts, is that if you look at how people lived in cities — for example, in Manchester in the 1830s, which Engels wrote about — whether or not you like Marx and Engels, that was a really good, powerful description of working-class conditions. It was bad, Tyler, and if you look at the conditions of workers and children working in coal mines in the 1840s, which was subject to a big investigation in the UK, it was also absolutely terrible and much worse than the conditions for children before the Industrial Revolution. Sure, Joel is right that some people definitely had some gains in some areas. But I don’t think that the living standards, taken in any modern sense, of people in and around the textile factories of Manchester or the coal mines of Northumbria or the town I’m from, Sheffield, which was steel that was just starting to emerge at that time — I don’t think people really saw much by way of gains until after the 1850s. Our view is, it took a hundred years for this really to pay off. Then it does pay off. Joel’s right about the importance of entrepreneurs tinkering with technology — love that take on the driving force, but that wasn’t enough to generate shared prosperity. It took a bit more than that. As we know, until fairly recently, there have been significant increases in wealth inequality in many Western nations. But don’t they coincide with a period of relatively low TFP, not relatively high? Productivity growth is pretty slow since 1973. Income inequality goes up. But the story you’re trying to tell in the book is, “Oh, you have a lot of tech advances, and then income inequality goes up.” But we’ve been seeing almost the opposite of that. The problem is not enough tech advances, so wages are somewhat stagnant until lately. We would like more tech advances and more productivity growth, to be clear. We’re not anti-tech at all. And you’re quite right about the coincidence of what’s happened since the 1970s. What we say is that a lot of the digital technology, for example, Tyler, was quite disappointing in terms of productivity effects, but it was nevertheless deployed because management thought it would be helpful to displace workers. Daron Acemoglu, my co-author, and Pascual Restrepo coined the term so-so technology, where you automate even though it doesn’t boost productivity — marginal worker productivity and, therefore, wages — but you do displace workers. And their favorite example is self-checkout kiosks at supermarkets, for example, where you shift the work onto the consumers. You’re not making the workers more productive. You don’t see increases in the wages in supermarkets where they adopt self-checkout kiosks. That, more broadly, lines up with what you just described in terms of the macro phenomenon, which is technology change doesn’t become productivity growth, and it’s also consistent with widening inequality.…

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