[FoRK] When Wealth Disappears

dan at geer.org dan at geer.org
Sat Oct 12 04:34:47 PDT 2013


There three books worth reading, period.

    Hollowing out the Middle, Carr & Kefalas
    Race Against the Machine, Brynjolfsson & McAfee
    Average Is Over, Cowen

I append a review of the latter as it is the most
recent and thus perhaps unfamiliar even to those
who have already invested their time reading the
first two.

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http://online.wsj.com/article/SB10001424052702303342104579097482945031804.html

Average Is Over, By Tyler Cowen 
(Dutton, 290 pages, $26.95)

As a parent of two young boys, who will, I dearly hope, step into the
workforce in the next two decades, I read Tyler Cowen's latest book,
"Average Is Over," with a deepening sense of dread. With every page,
my knuckles whitened, my shoulders sagged and my blood pressure
rose. This is what economists can do to you. They gaze down on the
world from way up there, caress their crystal balls, tell you you're
doomed and retire for lunch.

To sum up, Mr. Cowen believes that America is dividing itself in
two. At the top will be 10% to 15% of high achievers, the "Tiger
Mother" kids if you like, whose self-motivation and mastery of
technology will allow them to roar away into the future. Then there
will be everyone else, slouching into an underfunded future of lower
economic expectations, shantytowns and an endless diet of beans.
I'm not kidding about the beans.

Poor Americans, writes Mr. Cowen, will have to "reshape their tastes"
and live more like Mexicans. "Don't scoff at the beans," he says.
"With an income above the national average, I receive more pleasure
from the beans, which I cook with freshly ground cumin and rehydrated,
pureed chilies. Good tacos and quesadillas and tamales are cheap
too, and that is one reason why they are eaten so frequently in
low-income countries."

So what am I to do to save my sons from this bean-filled future?
The first thing, it seems, is to have them play more chess. Mr.
Cowen is an avid player, and the first half of his book is taken
up with an argument for how freestyle chess, in which humans play
alongside machines, rather than against them, is a model for the
economy. His point, and it is a good one, is that the future belongs
to those of us able to work best with machines. The author roves
broadly and interestingly to make his case, outlining the radical
economic transformations that lie in store for us, predicting the
rise and fall of cities depending on their capacity to adapt to
this machine-driven world and offering policy prescriptions for
preserving American prosperity.

"A potentially valuable worker offers the promise of improving on
the machine, taken alone," he writes. "In the language of economics,
we can say that the productive worker and the smart machine are,
in today's labor markets, stronger complements than before."

In other words, we may not be able to calculate in the way a computer
can, but we are usually better readers of character and emotion.
For all that behavioral science and big data can provide, we remain
the best interpreters of one another. This applies to everything
from consumer products to medicine to Mr. Cowen's own profession
of economics.

The author points out that we often see the promise of technology
long before it delivers. "The advances of genius machines come in
an uneven and staggered fashion," he writes. "For the foreseeable
future, you'll always have to be learning something, reprogramming
something, downloading new software, and pushing some buttons, all
to have the sometimes dubious privilege of working with these new
technological wonders."

You see this every time a company like Apple updates its operating
system. Those of us with iPhones teach ourselves through the bugs,
prodding and rebooting, becoming our own tech support. We have been
trained to educate ourselves, to become complements to our machines.
The better we become at these kinds of behaviors, the more the
economy will reward us. Fail and we'll be outsourced. We needn't
all be programmers, but we do need to be facile in making the most
of the technology around us.

That takes motivation. One of the most interesting sections of Mr.
Cowen's book is his analysis of the future of education. For a
select few, he argues, the traditional college experience will still
be worth the time and money. They will benefit from close proximity
to highly engaged teachers. But for most, a much cheaper model might
work better, one in which most of the material is available online
and young people are provided with motivators instead of professorsthat
is, with people who are part drill sergeant and part yoga instructor,
able to inspire and put the fear of God into students. No more
tweedy snoozers lecturing everyone into oblivion and charging $50,000
a year. Think of college as a gym membership, with trainers to help
you make the most of the machines around you.

Education for the masses, writes Mr. Cowen, "will become more like
the Marines, full of discipline and team spirit." This will help
the young avoid becoming "threshold earners," those "content just
to get by and who do not push ambitiously for a higher wage or
stronger credentials at every step. Williamsburg, Brooklyn, is full
of young threshold earners." I think Mr. Cowen is being unfair to
Williamsburg, which seems to me a hive of economic activity -- from
new, online-only journalistic ventures to artisanal pickle shops.
But his point about the need for a more efficient marriage of
machines and motivation in education is a sound one.

One world that Mr. Cowen does not investigate, but might have done,
is that of high finance. Here you find these two worlds of man and
machine co-existing marvelously. There is room for both computer-driven
trading operations and grizzled veterans like Warren Buffett and
Carl Icahn, with their genius for picking stocks and fights.

In his final chapter, "A New Social Contract?," Mr. Cowen cruelly
lays it all out. "We will move from a society based on the pretense
that everyone is given an okay standard of living to a society in
which people are expected to fend for themselves much more than
they do now." The top 10% will have it better than ever. The majority
will suffer stagnant or falling wages but have more opportunities
for cheap education and cheap fun. The rest will fall by the wayside,
with government less and less able to take care of them. It will
be dazzling at the top, and "meh" to miserable for the rest.

If that doesn't propel you and your children out of bed, you deserve
all the beans you get.




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