Having examined the impact of computers on wages the logical next question to ask is what this means for the returns on capital. Here is the TL;DR version: higher returns in the short run and lower returns in the long run. We are already well into this short run period and we are beginning to see the forces that will shape the long run. Let’s start with the short run. As we are substituting computers (which I mean broadly here including robots) for labor we are increasing the importance of ca...

Having examined the impact of computers on wages the logical next question to ask is what this means for the returns on capital. Here is the TL;DR version: higher returns in the short run and lower returns in the long run. We are already well into this short run period and we are beginning to see the forces that will shape the long run. Let’s start with the short run. As we are substituting computers (which I mean broadly here including robots) for labor we are increasing the importance of ca...

As I argued in my last post, there is good reason to believe that computers are substitutes for labor in general. Their apparent complementarity with skilled labor was the result of substituting skilled labor for unskilled labor rather than being based on a fundamental technological complementarity. The logical next question is what this means for wages. To answer that we need a bit more theory first. How wages get determined has been hotly contested over the years but I think the basic answe...

As I argued in my last post, there is good reason to believe that computers are substitutes for labor in general. Their apparent complementarity with skilled labor was the result of substituting skilled labor for unskilled labor rather than being based on a fundamental technological complementarity. The logical next question is what this means for wages. To answer that we need a bit more theory first. How wages get determined has been hotly contested over the years but I think the basic answe...

Earlier this week I posted about production functions which must have felt very dry but I promise there is a payoff (terms defined in the previous post are linked). Let’s consider a production function with three factors: computers, skilled labor and unskilled labor. What we are interested in thinking about is what happens as the price of computers drops (since that’s what we have obviously observed dramatically over the last decades). Much of the literature seems to suggest that skilled labo...

Earlier this week I posted about production functions which must have felt very dry but I promise there is a payoff (terms defined in the previous post are linked). Let’s consider a production function with three factors: computers, skilled labor and unskilled labor. What we are interested in thinking about is what happens as the price of computers drops (since that’s what we have obviously observed dramatically over the last decades). Much of the literature seems to suggest that skilled labo...

Yesterday I wrote about the depressing lack of engineers and scientists in government. Part of my point was that more than ever we are facing problems caused by and solvable with science and engineering. A sampling of stories from yesterday / this morning is the perfect illustration. The New York Times provided an interesting juxtaposition. One front page story was about the De Blasio administration looking at Sweden as a model for reducing traffic accidents in New York City. The other was ab...

Yesterday I wrote about the depressing lack of engineers and scientists in government. Part of my point was that more than ever we are facing problems caused by and solvable with science and engineering. A sampling of stories from yesterday / this morning is the perfect illustration. The New York Times provided an interesting juxtaposition. One front page story was about the De Blasio administration looking at Sweden as a model for reducing traffic accidents in New York City. The other was ab...

So I have been meaning to write more about what is happening to labor and capital as we transition from industrial society to information society. To do that well I need lay some groundwork first though by talking about the idea of a production function. A function as you may recall from math is something like f(x) = 3x + 1 which takes a value (here x) and transforms it into a different value (here into 3x - 5, so that f(1) = 4, f(2) = 7 …) A production function then is the mathematical abstr...

So I have been meaning to write more about what is happening to labor and capital as we transition from industrial society to information society. To do that well I need lay some groundwork first though by talking about the idea of a production function. A function as you may recall from math is something like f(x) = 3x + 1 which takes a value (here x) and transforms it into a different value (here into 3x - 5, so that f(1) = 4, f(2) = 7 …) A production function then is the mathematical abstr...

… to come to the aid of their country. Here is a supremely depressing chart from Businessweek showing the professional backgrounds of the members of Congress The largest groups in both the House and the Senate are lawyers (yellow) followed by business people (green). On the other extreme there is 1 lone engineer in the Senate and even worse only 2 engineers in the House. There are no scientists in the Senate and 2 in the House. This is a huge problem at a time when many of the issues we confr...

… to come to the aid of their country. Here is a supremely depressing chart from Businessweek showing the professional backgrounds of the members of Congress The largest groups in both the House and the Senate are lawyers (yellow) followed by business people (green). On the other extreme there is 1 lone engineer in the Senate and even worse only 2 engineers in the House. There are no scientists in the Senate and 2 in the House. This is a huge problem at a time when many of the issues we confr...

In Washington DC today the FCC will meet to consider a notice of proposed rule making that has the potential for creating fast lanes, slow lanes and no lanes for your Internet access at home. I have blogged a lot about why this matters and what you can do about it. At Continuations I am participating in a protest aimed at drawing attention to this issue by running code that puts an aggressive “still loading” overlay up with a clear call to action at the end. If you have a site that you contro...

In Washington DC today the FCC will meet to consider a notice of proposed rule making that has the potential for creating fast lanes, slow lanes and no lanes for your Internet access at home. I have blogged a lot about why this matters and what you can do about it. At Continuations I am participating in a protest aimed at drawing attention to this issue by running code that puts an aggressive “still loading” overlay up with a clear call to action at the end. If you have a site that you contro...

The Internet is a most amazing thing that we are unfortunately taking for granted. At its core it is about connecting all of humanity with each other. With it we, the people, have the power to dramatically reduce the cost and expand the reach of education. To conduct research outside of the confines of academia or corporations. To collaborate on art projects and so much more. Yet precisely because it is so disruptive for existing power structures including large corporations and governments, ...

The Internet is a most amazing thing that we are unfortunately taking for granted. At its core it is about connecting all of humanity with each other. With it we, the people, have the power to dramatically reduce the cost and expand the reach of education. To conduct research outside of the confines of academia or corporations. To collaborate on art projects and so much more. Yet precisely because it is so disruptive for existing power structures including large corporations and governments, ...

In 1994 I was a student in Thomas Piketty’s first theory class at MIT. He was a young hotshot professor and I was a not so young student (in fact about 4 years older than Piketty). I still vividly remember the horror that was the first exam in this class. Piketty had vastly overestimated how well we understood the material and the English in his questions was ever so slightly off. There was groaning all around the room, myself included, and I was pretty sure I had failed the test (I didn’t – ...

In 1994 I was a student in Thomas Piketty’s first theory class at MIT. He was a young hotshot professor and I was a not so young student (in fact about 4 years older than Piketty). I still vividly remember the horror that was the first exam in this class. Piketty had vastly overestimated how well we understood the material and the English in his questions was ever so slightly off. There was groaning all around the room, myself included, and I was pretty sure I had failed the test (I didn’t – ...

When I first started talking to Dina who is helping me with research, I explained that I consider myself a technology optimist. By which I mean that I am optimistic that over time we the human species will figure out how to use technology to make things better. Dina rightly challenged me to define what I mean by “better” and by the related word “progress.” And that turns out to be a lot harder than I thought. Let’s start with what it is not. Economic growth as measured by GDP is an increasing...

When I first started talking to Dina who is helping me with research, I explained that I consider myself a technology optimist. By which I mean that I am optimistic that over time we the human species will figure out how to use technology to make things better. Dina rightly challenged me to define what I mean by “better” and by the related word “progress.” And that turns out to be a lot harder than I thought. Let’s start with what it is not. Economic growth as measured by GDP is an increasing...