Racing with the car: challenges and prospects for the economy of the future

One of the problems of post-crisis America is high unemployment. A significant part of the 12 million Americans who lost their jobs during the global economic crisis of 2007–2009 failed to find a new job, despite the economic recovery and record numbers of large American corporations. Leading economists can not name the exact causes of the situation. Someone talks about the cyclical nature of the economy and the lack of growth. Others claim stagnation and declining American dynamism - the ability and inclination to innovate. Still others believe that the “End of Work” has come - new technologies will replace the labor of workers.
MIT researchers Erik Brynjolofsson and Andrew McAfee (Andrew McAfee) see the reason that many workers lose the race against the accelerating progress of information technology. But, it is believed that the development of technologies opens up many new opportunities, when a person and a car complement each other’s strengths.

Retelling-translation-review of the book “ Race against the machine ” by Erik Brynjolofsson and Andrew McAfee.

The economy is not able to return people to work

In July 2011, 25 months after the official end of the recession, according to official statistics, the unemployment rate in the United States was 9.1%. Less than 1 percent better than the worst point of the crisis. The average job search time increased to rates that were recorded in the post-war years, and the percentage of workers among working-age people dropped below 64% to the 1983 level.
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Now everyone agrees that this is a huge problem. Nobel Prize winner Paul Krugman (Paul Krugman) describes unemployment as “a terrible disaster ... a continuing tragedy ... How can we expect prosperity in two decades, if now millions of young graduates are essentially out of a chance to start their careers ”

Economists give several explanations for the current situation:

• The cyclical explanation says that there is nothing new in what is happening, we are simply going through one of the business development cycles, albeit rather painful. The economy is not growing fast enough, therefore, for such slumps as the recession of 2007-2009 should be a long and difficult recovery. The supporter of such a theory, in particular, is Paul Krugman.
• The second view is that the difficult times that are going through now are not a cycle, but a stagnation of the economy. America has reached a technological plateau and can no longer offer innovations that would increase productivity and support the economy. New ideas are being implemented too slowly and America is not competing in the international arena.
  
• The third theory, “The End of Work,” put forward by American economist Jeremy Rifkin, says that technological progress is developing too fast, not too slowly. In his book, Rifkin writes “ We are entering a new phase in world history, in which fewer and fewer workers are required to produce goods and services necessary for the global population. ”
  

The authors of the book agree with some of these arguments, but believe that we are not paying enough attention to the impact of new technologies on the economy. The speed of technology development has become so great that it just left many people behind. Many workers began to lose in the race against the car.
Now it is especially important to bring technology back to the center of the discussion. Technological progress poses serious challenges, but also opens up tremendous opportunities.


Brynjolfsson and McAfee write:

“The root of our problems is not that we are in the Great Recession, or the Great Stagnation, but rather in the fact that we are now experiencing the first torments of the Great Restructuring”

Technology and man on the second half of the chessboard

Since childhood, everyone knows the problem of grains and a chessboard, in which it is calculated how many grains will be on a chessboard, if we put on the next cell twice the grains than the previous one, starting with one. It was so much that the inventor of chess asked the award from the ruler of the country for his invention. The answer will be an exponential sequence, 2 ^ 64 - 1 = 18,446,744,073,709,551,615, a number exceeding the entire volume of wheat harvest collected in the entire history of mankind. According to one of the versions of this problem-legend, as a result of the calculations, the inventor had to part with his head.

In the book “ The Age of Spiritual Machines ”, American inventor and futurologist Raymond Kurzweil noted that the heap of wheat obtained from the cells of the first half of the board is not extraordinary. After 32 cells, the ruler will have to give the inventor 4 billion grains. About as much can be collected from a large field: the ruler is still the ruler, and the inventor retains his head. But as soon as they begin to walk on the second half of the board, someone will inevitably be in trouble.

Permanent doubling - exponential growth, poorly visible for small indicators of the function. But time passes and technological progress takes us to the second half of the chessboard, when computers are capable of solving problems that previously seemed intractable.

In a 1965 article “ Cramming more components onto integrated circuits, ” Gordon Moore noted that the number of transistors on integrated circuits doubled every 12 months and predicted that such growth would continue in the future. This prediction was confirmed and became “Moore's Law”. Variations of this law were created for hard disk capacity, display resolution, bandwidth of communication channels.

Software and algorithms also did not stand still. Computer science professor Martin Grötschel (Martin Grötschel) conducted an analysis of the time for computing a standard optimization problem on a computer , from 1988 to 2003. According to this study, a 43 millionfold increase in speed was recorded, which it broke into two components: faster processors and more advanced algorithms. The speed of processors has increased 1000 times, but at the same time, the algorithms have become 43 thousand times better.

The speed of development of computer technology is unprecedented for world history.

In the second chapter of the book The New Division of Labor Frank Levy and Richard Murnane present a range of information processing tasks. At one end of the spectrum is the simple application of a certain set of rules. For example, the solution of arithmetic problems can be easily automated. At the other end of the spectrum, there are problems of recognition and patterns and images, where a set of simple rules cannot be obtained. As an example, they give the task of driving a car:

" The truck driver processes the continuous flow of information (visual, acoustic, tactile) from the environment. To program this behavior, we can start by installing a video camera and other sensors to receive input data. But in order to make a left turn in oncoming traffic, it is necessary to take into account such a huge a set of factors that is difficult to imagine a set of rules that could repeat the behavior of the driver.
Formalizing human knowledge and embedding it in software is an extremely difficult task, with the exception of the simplest cases. Computers cannot replace a person in ... [work like driving a truck] "

The results of the DARPA Grand Challenge in 2004 confirmed the findings of Levi and Marnein. The essence of the competition was to create a car without a driver who could drive 150 miles through the Mojave Desert. The “winning” car was unable to drive further eight miles along the course and it took him several hours to achieve such a modest result.

But only six years later, driving a car ceased to be an example of a task that could not be solved, but, on the contrary, turned into a task whose prospects became obvious to all . In October 2010, Google announced in their blog that they managed to create a completely autonomous car based on the Toyota Prius and that it was able to drive more than 1,000 miles on American roads without any human intervention.

Another interesting example is the Watson super-computer developed by IBM. Designed to participate in the television quiz Jeopardy (“Own Game”), he beat two of the most successful players in 2011. The computer is able to understand the questions in the form familiar to man. IBM sees medical diagnostics as one of the prospects for the commercial use of its development. I think many will be able to name dozens of ways to use an expert system that has the ability to semantic analysis of a natural language.

All these examples motivate on the one hand, but scare on the other. If cars replace drivers, vendors, workers in factories, is there a new place for these people?

Symptoms of a new economy and the road to recovery.

Technological progress is already changing the structure of the economy. Someone benefits from these changes, while others are left with nothing. The authors of the book distinguish three overlapping classes of winners and losers:

• Highly skilled and low-skilled workers. Over the past 40 years, the gap in incomes of university graduates and those who received only secondary education is constantly growing. Moreover, the wages of some workers with secondary education in recent years have begun to fall.
• “Superstars” against everyone else. In many industries, the best representatives of the profession get an order of magnitude more than their less successful colleagues. Digital technologies have made the labor market global and open, and everyone wants to get the best of the best in their state. It is enough to compare the salary of the CEO and the ordinary engineer. Another example is pop music, where global celebrities completely overshadow their local colleagues.
  
• Capital versus labor. As modern technologies replace the labor of workers, the incomes of equipment owners increase and wages are reduced. This is becoming noticeable even in countries such as China, where the pay of a worker is not very high. Nevertheless, the largest contract electronics manufacturer Foxconn plans to raise the number of robots at its plants from the current 10,000 to a million in three years , while firing part of the workers.

The gap in society is growing. Evidence of this is the recent “ Bring Wall Street ” action.
The great industrial revolution of the 18th century led to similar unrest. It seemed to many workers that the new machines would leave them without work, but in the end it ended with a transformation of the structure of the economy, the creation of new industries and jobs, a tremendous increase in the general level of well-being. The authors of the book believe that the digital revolution unfolding before our eyes also opens up many new opportunities. But to use them, you need to prepare for change, promote them.

Having made this diagnosis, economists propose a series of measures that will help “improve” the economy, accelerate innovative transformations and develop human capital in order to keep up with technological progress. The following 19 steps are voiced in the book:

Education

1. Investment in education. You can start just by increasing the salaries of teachers so that the best and brightest would strive to be in this profession, as many representatives of other nations do. American teachers earn 40% less than the average university graduate. Teachers are among the most important creators of national wealth. By providing an increase in the quality and quantity of skilled labor, they give us double winnings by accelerating economic growth and reducing wage inequality.

2. Make teachers more accountable for results by, for example, waiving permanent contracts . This should be part of the deal for pay increase.

3. Separate the teaching process from the testing and certification processes. Focus the educational process to a greater extent on verifiable results and measurable performance indicators and less on the creation of signals of well-being, effort or prestige.

4. Increase the number of class hours for K-12 students. One of the reasons why American schoolchildren lag behind their international peers is that they get less lessons a year by about a month.

5. Increase the percentage of skilled labor in the United States by encouraging skilled immigration. Offer green-cards for international students who have earned advanced degrees, especially in scientific and engineering specialties at proven universities. Expand the H-1B visa program. Skilled workers in America often create more value when working together with other skilled personnel . By bringing them together, you can accelerate innovation and economic growth in the world.

Entrepreneurship

6. To teach entrepreneurship as an important skill not only in elite business schools, but also through traditional higher education. To educate a wide class of small technology entrepreneurs by learning the basics of business creation and management.

7. Support US entrepreneurship by creating a special category of visas for entrepreneurs who want to create a business in the US, as is done in Canada and other countries.

8. Create clearing centers and databases to simplify the creation and distribution of new business templates. Such packages of services for startups can include everything from franchising to digital “recipe collections” that will provide a template structure for business organization. Training by profession must be complemented by business advice.

9. Dramatically reduce government barriers to the creation of new businesses. In too many industries, establishing a company requires obtaining official permits from several agencies at several administrative levels. Very often, these difficulties have the implicit purpose of preserving the rent from the owners of existing businesses at the cost of not created new businesses and jobs.

Investments

10. Invest in upgrading national communication and transport infrastructure. The American Association of Civil Engineers has put the overall assessment of three existing infrastructure . Its improvement will bring tangible benefits by facilitating the flow of ideas, people and technology. This will also lead to the direct creation of new jobs. It is not necessary to be an ardent supporter of Keynesianism in order to believe that there is no better time for such investments than in the conditions of the weak labor market that have taken shape today.

11. Increase funding for basic research and our outstanding state-owned R & D institutions, such as the National Science Foundation (NSF), the National Institutes of Health (NIH), the Advanced Defense Research and Development Agency (DARPA) with an updated focus on intangible assets and business innovation. Like other forms of basic research, these types of investments are often underfunded by private investors because of the side effects they generate.

Laws, regulations and taxes

12. Retain the relative flexibility of the US labor market by resisting existing attempts to regulate hiring and layoffs. Paradoxically, a ban on dismissal can lead to a decrease in employment , increasing the risks for firms in recruiting new staff, especially if they are experimenting with new products or business models.

13. To increase the relative attractiveness of hiring staff, in comparison with the purchase of new equipment. This can be done by, for example, reducing payroll taxes and providing subsidies or tax breaks for those who hire people who have been unemployed for a long time. Costs can be reimbursed by increasing taxes on pollution of the environment or use of roads during peak hours .

14. Separate social packages from work to increase the flexibility and dynamism of the workforce. Linking medical and other mandatory services and benefits to the workplace makes it difficult for people to switch from one job to another or start a new business. For example, many potential entrepreneurs are blocked by the need to support health insurance. Among the progressive countries in this area are Denmark and the Netherlands.

15. No need to rush to regulate new network businesses. Some observers believe that crowdsourcing businesses, such as Amazon Mechanical Turk, exploit their subscribers, and therefore they require regulatory support. However, developers of such experimental platforms should be given maximum freedom for innovation and experiment, especially in this early experimental period.

16. Eliminate or reduce massive mortgage subsidies. They cost us more than 130 billion dollars a year, which could be of much greater benefit by being invested in development and education. Owning a home without any benefits brings many benefits, but it reduces the mobility of the workforce and the flexibility of the economy, which is in conflict with the increasing need to be dynamic.

17. Reduce huge implicit and explicit subsidies to financial institutions. This sector attracts a disproportionate number of the best and brightest minds and technologies, in part because the state guarantees a “too big to fail” rule for such institutions.

18. Reform the patent system. In addition to taking a good patent, it takes years because of the accumulated queue and the lack of qualified experts, a lot of low-quality patents are issued that litter our courts. As a result, patent trolls freeze innovations instead of encouraging them.

19. Reduce, not increase, the effect of copyright and increase the flexibility of “fair use”. Copyright covers too much digital content. Instead of encouraging innovation, as written in the Constitution, excessive restrictions such as Sonny Bono’s act hamper creative reuse and mixing of different content.

Conclusion

The issues discussed in the book are not new (old as the world), but at the same time relevant as never before. Even we speak about the need for modernization (it is enough to recall the speeches of our president), although very little is being done. Wonderful opportunities that the future prepares for us do not hang on trees like apples and pears, for their realization there are tasks to be solved, the right approach to which we simply do not know. Those of us who, at the professional level, came across the tasks described in the book: recognition of speech and images, extraction of semantic information from text, and traffic management know that there are simply no “magic” solutions.
Many are aware of the three laws formulated by the science fiction and futurologist, Sir Arthur Clarke :

1. When a respected but elderly scientist argues that something is possible - he is almost certainly right. When he claims that something is impossible - he is very likely mistaken.
2. The only way to discover the limits of the possible is to venture a step into the impossible.
3. Any sufficiently developed technology is indistinguishable from magic .

For many people, modern technology is already indistinguishable from magic. And it seems that the progress of information technology will not end. But the horizon of the digital future that is opening up to us can store in itself both grandiose opportunities and tremendous disappointments. Somehow it resembles the cosmic dreams and hopes of the mid-twentieth century.

In 1942, the first launch of the V-2 ballistic rocket was made, in 1957 the first artificial satellite of the Earth, Sputnik-1, was put into orbit, in 1961 the first manned space flight with Yuri Gagarin was carried out on board, and in 1969 -11 became the first people to set foot on the Moon's surface .. Probably then it seemed to many people that flights to other planets were not far off, and then interstellar travels, meetings with alien civilizations. The great fiction writers of those times: Isaac Asimov, Stanislav Lem, the Strugatsky brothers talked about the problems of our cosmic future. In just 30 years, what was considered a sphere of fantasy was achieved, and it seemed that there were no unsolvable problems for technical progress. But what then ...

Now, when the gaze of the best minds of mankind has descended from the stars to the earth, computer technologies are at the edge of our hopes. It seems that here there are no those fundamental physical barriers that have arisen on our way into space. The evolutionary development of information and communication technologies, the emergence of new cyber-physical systems will change our usual life.Or will the inertia and inertia of our thinking prevent the opportunities opening up?

Anyway, the economy is changing and you need to be ready to change yourself, so as not to remain a loser in the race against the car.