 Like Economics: The User's Guide, Ha-Joon Chang's 23 Things They Don't Tell You About Capitalism is a reader-friendly manual to economics. It provides its readers the tools to think critically about the economy and subverts the mystique of expert authority surrounding the field of economics.
The book is written in a particular context: the aftermath of the 2008 financial crisis. For Chang (as for many others), this is the result of free market ideology (or neo-liberalism or neo-classical economics) that has been dominant in university departments and in policy making since the 1980s. (From this perspective, I think it is important to note the failure of expertise in the economics profession in the current debates about the deflation of expertise, loss of trust in authority, and the rise of populism.) The 23 Things enumerated and elaborated upon in the book refute the self-evident "truths" that this branch of economics takes for granted. Free market ideology filters into public consciousness through language and frames the way that we think about the world (e.g. human motivations) and Chang provides a counterweight to these ideas in this very approachable book. Some of the more intriguing Things are the following: Thing 1. There is no such thing as a free market: there are always rules and boundaries in every market (e.g. slavery, child labour, food safety), and calls for a free market are always a political opinion, not an objective economic determination. Thing 4. The washing machine has changed the world more than the internet has: The washing machine and household appliances have allowed women to enter the work force and has led to massive social and economic transformations, much more so than ICT. Chang is being overly provocative in this Thing, but he makes the point that "our fascination with the latest, and our under-valuation of what has already become common " (p. 40) can lead us astray. Thing 7. Free-market policies rarely make poor countries rich: Growth in the developing world (e.g. Latin America, Sub-Saharan Africa) was faster before they followed neo-liberal prescriptions. The largest success stories in recent times, India and China, did not follow neo-liberal prescriptions. Even developed countries advocating for free market developmental policies today (U.K. and U.S.) used state-led development for their development. Thing 13. Making rich people richer doesn't make the rest of us richer: Trickle down economics does not work; making the rich richer through tax cuts, incentives, etc. has not led to faster economic growth, especially as this has not led to more investment. It can be preferable to redistribute wealth downward, as those with lower incomes spend a higher proportion of their incomes. Thing 19. Despite the fall of communism, we are still living in planned economies: Governments in large capitalist economies are always planning. Additionally, a large part of the planned economy in capitalist economies is missing in these debates: the private sector. Large corporations are also planning their activities and dominate a large section of the economy; more of the global economy is coordinated and planned by these companies and not through market transactions between firms.
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 The Second Machine Age was written in 2014; I was worried that it'd be an outdated compilation of emerging technologies at the time. Fortunately, Brynjolfsson and McAfee offer more than that.
The first machine age refers to the technologies developed from the Industrial Revolution, which allowed human beings to harness mechanical power to overcome physical limitations. The second machine age will provoke a similar transformation for mental power. Key to Brynjolfsson and McAfee's thesis is the assumption of continued exponential growth in computing (Moore's Law)--whether processors, memory, or sensors--which has been a continued reality thus far. Exponential growth is starting to create the conditions for technologies that could not have been imagined previously, or as Brynjolfsson and McAfee write, "sometimes a difference in degree (in other words, more of the same) becomes a difference in kind (in other words, different than anything else)" (p. 56). The current digital economy is a particularly fruitful arena of innovation. According to certain theories of innovation, innovation is not about "coming up with something big and new, but instead recombining things that already exist" (p. 78), and for Brynjolfsson and McAfee, "digital innovation is recombinant innovation in its purest form" (p. 81). The characteristics of digital information facilitate recombinant innovation: digital information is non-rival (and not used up after consumption) and it has a close to zero marginal cost of reproduction. Digitization creates more and more permanent building blocks, and these are can be infinitely reused and recombined for innovation. The potentially infinite number of reconfigurations and recombinations require "more eyeballs and bigger computers" (p. 83) to test them out. AI technology represents a significant development for the latter. For the former, those who have the most interesting insights are those "marginal"--or "have education, training, and experience that [are]not obviously relevant for the problem" (p. 84). This speaks to the power of crowdsourcing and open innovation approaches, which are enhanced by the power of communication technology. The digital economy works by different rules of bounty and spread. While the the development of new technologies will bring more bounty, the spread (or distribution) of the bounty is uneven. Those who own the new technologies, the new products and services, capture all of the wealth; previous forms of production distributed the bounty by employing human labour. Only those whose labour complements technologies receive a small portion of the created value; those whose labour can be automated must participate in a race to the bottom, where their wages compete with the costs of robotics and machinery. (Of course, one must not succumb to fatalism; we can easily imagine a world where the public owns these new technologies, and where labour is not automated completely, but partially, and one can get paid the same amount or at a higher rate for doing less work instead of ending up jobless and destitute. These ideas are not discussed in the book.) Brynjolfsson and McAfee offer an interesting discussion on "stars and superstars," who benefit the most from the new economy. Through digitization and interconnected markets, the non-rival and close to zero marginal cost of reproduction digital goods and services have access to a larger consumer base. These are winner-take-all markets (Andrew Yang must have read this book), who benefit and cement their status through network effects. In this market, some superstars benefit by proxy (e.g. lawyers who represent these large and rich superstars). I noticed that the spread and bounty narrative that Brynjolfsson and McAfee present is strangely apolitical and very unsatisfactory (no mention of neo-liberal economic policies, for example). For example, they write on page 133 that "in the past couple of decades, we've seen changes in tax policy, greater overseas competition, ongoing government waste, and Wall Street shenanigans. But when we look at the data and research, we conclude that none of these are the primary driver of growing inequality. Instead the main driver is ... the technology that undergirds our economic system" (p. 133). To substantiate this huge claim, they compare growing inequality in Sweden, Finland, and Germany as proof. Very unsatisfactory. Brynjolfsson and McAfee end the book with some recommendations for individuals and policy-makers. I will not go into this in the review. |
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