The Gimmick Economy: how central banks pretend software isn't eating the world

Mathematician/economist Eric R Weinstein is managing director of Thiel Capital, but that doesn't mean that he thinks capitalism has a future.

In a short, but wide-ranging essay in Edge's Annual Question series (this year's question is "What do you consider the most interesting recent [scientific] news? What makes it important?"), Weinstein talks about the fundamentally transformative nature of software-based societies and the challenges they put to the nature of work and economics.

First, Weinstein looks at the impact of software-driven automation on labor and education. Previous cycles of automation have displaced some repetitive work while creating new and better forms of labor in the long run (weavers put out of work by looms, new textile industries created by cheap fabric). But software consists of two kinds of automation: doing repetitive work; and doing "rube goldberg-like processes that happen once," and mostly, they do the former. Since that's also what teachers, lawyers, doctors, and software engineers do, meaning that the new software economy displaces far more people — and leaves behind a very small number of opportunities for people who are good at thinking up and executing "rube goldberg-like processes that happen once" (like writing novels or founding Facebook).

He says this leads to ever-more-lavish rewards for successful rube-goldbergers, but disaster for people who use "stable and cyclical work to feed families."

Next up is software's intrinsic nature as a "public good" (a good that is inexhaustible and non-excludable — something everyone can use, including people who didn't pay for it). Historically, he argues, public goods were a minority of the goods we relied on, and we taxed everything else to pay for them. But software (and 3D printers) shift an ever-greater percentage of useful goods into the public good category, leaving a dwindling rump of excludable/rivalrous things that can be used as the raw fodder for market economies.

The result, he says, is an insurmountable challenge to market capitalism (for which "there is as yet no known alternative"). This leads central banks and governments, who have no idea what to do next, propping up markets with "gimmicks" like quantitative easing, while the real economy melts down around them.

If you look at your news feed, you will notice that the economic news no already longer makes much sense in traditional terms. We have strong growth without wage increases. Using Orwellian terms like "Quantitative Easing" or "Troubled Asset Relief", central banks print money and transfer wealth to avoid the market's verdict. Advertising and privacy transfer (rather than user fees) have become the business model of last resort for the Internet corporate giants. Highly trained doctors squeezed between expert systems and no-frills providers are moving from secure professionals towards service sector-workers.

Capitalism and Communism which briefly resembled victor and vanquished, increasingly look more like Thelma and Louise; a tragic couple sent over the edge by forces beyond their control. What comes next is anyone's guess and the world hangs in the balance.

Anthropic Capitalism And The New Gimmick Economy
[Eric R. Weinstein/Edge]

(via Dan Hon)

(Image: Emergent Universe Wiki)