We are living in an exciting time where technological innovation is changing the way we live, work, do business, and fall in love. The economy is changing, but does this mean that “economics” itself will change?
Some futurists say so. Writers like Kevin Kelly suggest that artificial intelligence and machine learning are inexorably leading us toward the end of work. With the “inevitability” of automation replacing labor, Kelly and others predict a “third way” of economics that would replace capitalism and socialism. But rather than creating a new economic model, Kelly and some fellow futurists seem to be abusing economic (and political) terms.
Before we imagine an alternative to free enterprise and socialism, we should understand these terms.
In a free market, decisions are decentralized.
The socialist model is often called a “command economy” because the government owns the means of production and dictates what will be produced. A socialist economy is built on compulsory central planning, not consensual cooperation and sharing.
The term “capitalism” was a pejorative bandied about by socialist Karl Marx. To many, it connotes greed and cronyism. More accurate terms are “free market economics” or “free enterprise.” In a free market, decisions are decentralized. Individuals and firms make their own choices based on their subjective values about what they produce and buy, how they work, and how they use their private property. A free market is marked by “freedom” from unnecessary government intervention and regulation. In the tech context, Clyde Wayne Crews Jr. has described the idea of the “techno-libertarianism” as “the separation of technology and state.” When we speak of the free market or capitalism here, this is what we mean.
How Is the Economy Changing?
One economic trend transforming the economy is “sharing.” Prominent examples of the sharing economy are Airbnb, Lyft, and Uber. Some have suggested that sharing represents a “move away” from ownership. However, the success of these companies stems from the deregulated use of private property. The fact that the consumer is renting a property or using a service rather than using his own property doesn’t undermine the importance of private property itself.
Once a product or service can be reduced to digitization, it can be economically commercialized to more consumers.
Another disrupting economic trend is digitization. Once a product or service can be reduced to digitization, it can be economically commercialized to more consumers. Digitization makes some products free or nearly free. As a result, broader segments of the population can enjoy technologies previously reserved to affluent individuals, governments, or large organizations.
Some call this “democratization” and through a sleight of hand, try to tally it as a win for “democratic socialism.” But I believe digitization is more properly called “decentralization.” Decentralization is a free-market trait, not an attribute of socialism. Understood this way, the “democratization” (i.e., decentralization) of technology is a free market success story.
In his book, The Inevitable, Kevin Kelly suggests that open-source technologies (i.e., code that is in the public domain rather than proprietary) are a form of collectivism akin to socialism. Open source code generally derives from coders who publish code to the public commons. Other coders then build on that open source code. It is like an oral history in code. It is owned by no one and can be modified by anyone. A person voluntarily relinquishing rights to lines of code no more undermines the free market than does a person donating to a charity.
Some futurists predict that automation will eliminate most jobs when robots replace human labor. When this happens, Kelly and others argue that it will be necessary to provide a “universal basic income” to everyone (UBI). Suffice it to say, it’s difficult to insist this is an inevitability because the end of work assumes a logical progression along a linear path.
The way forward is manifold, not singular.
F.A. Hayek argues against such presumptuousness in his manifesto, The Fatal Conceit, and refutes the notion that, in the context of socialism, “man is able to shape the world around him according to his wishes.” It doesn’t take much imagination to see alternative scenarios play out that disrupt the futurists' vision; perhaps consumers and voters will choose another course of action. Free markets offer consumers the choice of making many daily economic choices. The way forward is manifold, not singular.
Even if we expect automation to eliminate most jobs, the desirability of UBI is dubious. Social Security is currently insolvent. If it is not reformed, Congress will have to “slash” benefits within the next twenty years. Yet, somehow the government will be able to provide something like Social Security benefits to all people, not just retirees? That “inevitability” strains credulity.
For the sake of argument, let’s assume that the federal government offers UBI to all residents. Even then, the economy and market dynamics would go on. Unless outlawed, entrepreneurship and employment would continue. UBI would be a disincentive for many to work. UBI would subsidize perpetual adolescence. But, many people would continue to desire to learn and innovate. A robot may not yearn to have a meaningful life, but humans do. And even in a world with UBI, enterprise would continue unless outlawed or taxed out of existence.
The neo-socialist futurists do a disservice to young people finding their way in the world. Promising the inevitability that the government will provide cradle-to-grave income support disincentives young people from developing skills and fuels the YOLO mentality. Young people should be encouraged to take control over their lives rather than helplessly ride the wave of inexorable trends beyond their control.