FT Alphaville would like to survey the following statement:
Economists are failing to account for mass technological innovations when making forecasts and constructing models.
Our reasoning is simple. Economists may have PhDs. Economists may be very good at maths. Some economists might even be web savvy. But, we wonder, are economists and central bankers fully aware of the technological advances that are going on around them? And how these techonolgies might impact economics — especially with regards to payment and monetary systems, social platforms, knowledge sharing, life-extension technology, trade efficiencies and virtual working places?
Are they, to be blunt, applying 20th century economics to 21st century economies? And is this perchance why so many models have been going awry.
To get a bit more Kurzwelian on the matter — let’s consider for a moment that the world really is on the verge of a technological revolution equal to, if not greater than, the industrial revolution of the 19th century. The singularity, if you will.
We’re talking epic sci-fi mega trends.
Looking at just a few of the technologies futurists tell us might be common place by the time today’s 50-year
US Treasury bonds gilts mature…
…let’s start with the one that would undoubtedly have the most striking impact on conventional economics — life extension.
We’re talking about a world where every child born will have the potential to live for at least 200 years, if not more. A world where medical advances crossed with developments in biological nano technology, bionic limbs and robotics mean life expectancy becomes limitless.
Now imagine a world where the human brain has been reverse engineered in such detail that all memory content can be routinely downloaded and backed up, and eventually re-uploaded to new synthetic bodies, time and time again. Eternal life, or transhumanism, for want of a better word.
Plausibility of the latter aside, life extension of no more than 10 years alone would have dramatic enough consequences on pension funds. Anything more, especially in the current low yield environment, and the pension model starts to be threatened.
So, imagine managing pension liabilities in a world where everyone lives forever?
Of course, futurists say this will only be a transitory problem. Life extension will be coupled with working life extension too. Even the socially immobile will be able to continue working thanks to the development of virtual offices, virtual working environments and other technological advances.
There’s also the fact that more and more of our ‘work’ will be outsourced to non-human cybernetic organisms — a.k.a near-sentient robots.
Then there are the efficiencies which will be gained from developments associated with the internet of things. Supply chains matched real-time to demand and supply fluctuations, adjusted as and when needed. Unused surpluses and inventory wastage becoming a thing of the past, as do destocking and restocking episodes. Everything produced will be used. Nothing will be overproduced.
Social networking developments and intelligent inteconnectivity, meanwhile, will compromise the role of all professions related to mediation… as well as those benefiting from the market’s current obfuscation, fragmentation or asymmetry. The roles of travel agents, brokers, bankers, estate agents, not forgetting the traditional media — will all arguably become increasingly obsolete.
Collaborative peer-to-peer payment systems, barter networks and investment platforms, meanwhile, could replace banks and traditional currency systems altogether.
Then there’s the impact of the rise of the prosumer generation, open source distribution, and the diminishing advantage of being first to market as intellectual property rights and copyright become tested or out-innovated ever more quickly.
Kodak, after all, was top of its game for a good century. Nokia just about a decade.
At some point first mover advantage might even turn into first mover disadvantage, with the west experiencing what could be described as the ‘London Underground effect’. Its 20th century infrastructure being much harder to replace and update in line with new technologies than just building from scratch, meaning the most pioneering and tech savvy cities will be found in those regions which have bypassed 20th century technology completely, mostly in emerging markets. Or perhaps those built from scratch in the sea?
Is it time for economists, investors, and central banks to start factoring these sorts of long-term trends and shifts into GDP forecasts?
We think so.
Until they do, though, here are a few futuristic visions to ponder over.
A Future Timeline for Economics – The Futurist
Davos wowed by device that reads ‘code of life’ in hours – AFP
Michio Kaku about future civilization – YouTube
Is instant translation in any language now possible? – Smart Planet
Petri dish to dinner plate, in-vitro meat coming soon – Reuters