Humanizing an Inhuman Future
The impact that groundbreaking technological advances like artificial intelligence will have on the functioning of our economies and labor markets has been widely discussed for a long time. But proposals for coping with it do not reflect the true scale of the challenge ahead.
WASHINGTON, DC – The impact that groundbreaking technological advances like artificial intelligence will have on the functioning of our economies and labor markets has been a hot topic for a long time. But Jerry Kaplan’s recent book Humans Need Not Apply: A Guide to Wealth and Work in the Age of Artificial Intelligence has impressed upon me the true size of the socioeconomic stakes.
One relatively well-known example of the digital revolution’s impact on the workings of markets is the ability to earn huge returns in high-speed trading by being a microsecond “ahead” of everyone else. Another is the capacity for price discrimination by new electronic market makers like Uber, which thus appropriate every penny of the old “consumer surplus” of microeconomic theory. Soon a new kind of enhanced Uber could emerge, integrating car, bus, ship, airplane travel, and hotel rooms into one super-app. In fact, some car manufacturers are now working on exactly that.
A key question is why good old competition does not whittle away these profits rapidly. The answer often lies in the business model. Companies borrow a lot to start up, accumulate large fixed costs, and offer such low prices at first that they lose money. This enables them to expand their businesses virtually competition-free until they have established what is essentially a monopoly. At that point, they can hike prices and engage in price discrimination relatively freely.