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The Political Economy of Technology

The economic outcomes we experience have never been wholly the consequence of markets efficiently allocating resources to their optimal uses. On the contrary, how the costs and benefits of technological progress are distributed is a matter of social choice – even if it does not always seem so.

CAMBRIDGE – Daron Acemoglu and Simon Johnson’s new book, Power and Progress, joins a number of other grand narratives that address a key question for the world economy today: How did the United States – and, somewhat in parallel, the United Kingdom – get into their current mess? Other worthwhile contributions include Jonathan Ira Levy’s Ages of American Capitalism, J. Bradford DeLong’s Slouching Towards Utopia, Gary Gerstle’s The Rise and Fall of the Neoliberal Order, Helen Thompson’s Disorder: Hard Times in the 21st Century, and Martin Wolf’s The Crisis of Democratic Capitalism.

All these works address a fundamental tension between the industrialized Western world’s two systems for distributing and exercising power: political democracy and the market economy. Each, in its own way, documents how the dynamics of capitalism have concentrated economic and financial power, which then is used to influence and even dominate the political process.

What distinguishes Power and Progress is the authors’ own professional habitat. Both are MIT economists – Acemoglu with the Department of Economics, and Johnson with the Sloan School of Management. Acemoglu is one of his generation’s leading economists. The sheer breadth, diversity, and quality of his contributions to economic theory and empirical analysis are extraordinary, and he has done important work on the differential impact of technology as it liquidates existing jobs and generates new ones. Johnson is a former chief economist of the International Monetary Fund, well known for his analysis of how the financialization of the US economy set the stage for the 2008 global financial crisis.