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Flipping through the rule book
of the new economy
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from NewsLink, Vol. 3, No. 2, Winter 1999
Carver Mead, one of the inventors of the computer chip, is famous for saying: “Listen to the technology. Find out what it is telling you.” This dictum is now a hard-wired belief among information-age evangelicals.
For those of us with tin ears, comfortable with our tried and true measures of progress, a battalion of futurists, theorists and journalists stands within an earshot to beat the drum: the fragmented, chaotic, discontinuous change unleashed by the computer chip is here to stay. The world of the hard (durable goods, etc.) is at its twilight and the brave new world of the soft (services, software, etc.) will dominate.
Getting us prepared for the new economy is the raison d’etre of Kevin Kelly’s new book, New Rules for the New Economy.
At times, Kelly’s drumbeat is scattershot, repetitive and over-extended. But he is decidedly provocative. Although he does not dwell on economic policy, Kelly has little patience for those who would like to fine-tune the economy. Thus, policymakers who “continue the grand fantasy” of preserving rust belt/smokestack jobs will certainly be disappointed. The number of factory workers may, within a generation, equal that of farmers. Moreover years from now “many of the jobs that are being fought over by unions today are jobs that will be outlawed within generations as inhumane.” In a connected world the opportunities will be endless.
Between 1990 and 1996 the number of people making tangible goods decreased by 1%, while the number employed in providing “services” (intangibles) grew 15%. The people making automobiles, washing machines, tools and such constitute a mere 18% of U.S. employment. Of those, three-quarters perform network economy jobs — gathering information on how to make cars lighter or appliances more efficient, or searching the globe to find new niche markets or capital.
The evangelicals of the new age audaciously tell us that if we aspire to operate our companies like General Motors, we will be road-kill on the information superhighway. They tell us to give our products and services away for free — or almost free — in order to position other product lines. They tell us that trust and a “gift economy” are just as important as cash.
Moreover, playful, seemingly inefficient surfing on our PCs will pay dividends in the long run because as we explore the Web we follow our curiosities — inventing new needs that can be satisfied. And herein, declares Kelly, lies progress.
Technology, once slow to make its impact upon ordinary life, is now at the center of our lives. Kelly writes, “In classical economics — based on the workings of the brick and smokestack - technology was a leftover. To explain economic growth, economists tallied up the effects of the traditional economic ingredients such as labor, capital, and inventory. This aggregate became the equation of growth. Whatever growth was not explained by these factors was attributed to a residual category: technology. . . We see now, particularly with the advent of the network economy, that technology is not the residual, but the dynamo.”
It is not impossible to suggest that technology could bring disparate discreet computer chips together to form a real-time data network that will shape our lives and create new opportunities. Mercedes Benz is planning to include a Web server in its high-end automobiles so technicians can perform troubleshooting tasks remotely. Privacy considerations aside, soon even clothes, canned fruit and light switches will have embedded chips to relay consumption information to providers.
Ironically today’s farmer illustrates the way technology is transforming American agriculture. His tractor has a telephone, a Global Positioning System location device, and sensors. His PC is connected to weather data and worldwide grain markets. Sensors in his soil speak to his tractor improving production. We may bemoan the loss of farmland but today’s farmers are far more efficient thanks to technology.
Plentitude not scarcity will drive the new economy. Textbook economics declares that the supply of products will increase only if prices increase. But Kelly says that in the new economy supply increases as prices go down. “The quicker the price of transportation drops, the more quality and services and innovation are embedded into cars, planes, and trains lifting the quality of the ‘wants’ they satisfy.”
Among the only thing that is scarce is human attention and this is the center of Kelly’s most radical idea. “Only by giving ‘free stuff’ away can you realize the potential values of services that could arise from that free product.” In the world of the soft, the free software movement is distributing products such as Linux and Apache (erstwhile competitors to Microsoft Windows and Microsoft NT operating systems ). The open standards of both products – as opposed to the proprietary ones owned exclusively by Microsoft – enable software engineers to change and modify the product. The software in and of itself is hardly worth the floppy where it resides. It is the growth industry of training, development and accreditation around such free products that matters.
However, the world as we know it, is much different from the world of software. Current institutions will not always meld easily into the world of the soft. Privacy, trademark and copyright laws will resist Kelly’s move toward the free and the open. Moreover, notwithstanding the Internet Freedom Act which places a three-year moratorium on local, state and federal taxes, the tenacity of the more than 80,000 government jurisdictions within the United States (not counting those worldwide) and their thirst for revenue will not fade anytime soon. For some, free has its price.
NewsLink is the quarterly newsletter of the Beacon Hill Institute for Public Policy Research at Suffolk University. © 1996-2005. All rights reserved.
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