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Foresight Update 8

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A publication of the Foresight Institute


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The Economics of Rapidly Changing Technology
(Part II)

Opinion by Jeffrey C. MacGillivray

[See Part I in Update 7.]

What might serve as a medium of exchange in a nanotechnological society?

The need for a medium of exchange will not disappear; bartering labor becomes very inconvenient in multi-party transactions, and there needs to be a unit of account for land transactions.

The medium of exchange cannot be the traditional gold or silver, since their special value as materials will disappear when superior new materials can be constructed out of common building blocks such as carbon atoms, and their rarity will disappear when the cost of separating them from seawater or other low-concentration sources becomes negligible.

The most likely medium of exchange would be based on land, the only remaining physical item of enduring value. Shares in collections of rented land could be kept in checking accounts and checks written against them, or certificates could be issued for use as cash. Land will always be rented, due to the persistent demand for transient lodging, especially with increased time and resources available for travel.

The concept is little different from writing a check against a money market fund balance today. Indeed, a checking account balance in today's society could feasibly be denominated in something other than dollars--another national currency, grams of gold, shares of corporate stock, or shares of a group of corporations. Multiple units of exchange can easily coexist provided that all units are conveniently divisible and mutually convertible. A simple mechanism for converting paper assets to direct ownership of some of the land would eliminate the current problems of closed-end mutual funds trading at a discount to asset value.

I will not attempt to predict the relative values of land and labor in a nanotechnological society.

The birth rate in a nanotechnological society is likely to decrease. Time will be of value to people who are not bored, and children will generally be viewed as a burden by those whose purpose in life is to alleviate boredom. Only people with a strong desire to spend their time bringing up children will continue to reproduce. The desire for children will not be solely due to religion; some will look upon child rearing as an esthetic, artistic challenge.

Many of today's remaining economic incentives to have children will disappear. There will still be psychological pressure from parents to produce grandchildren, but many people will choose to ignore such pressure once economic incentives such as current financial help or future inheritance become less tempting, and the transportation costs of moving further away from relatives decrease.

The rapid decrease of the death rate--to near zero--will produce more sociological problems than economic effects. People today have trouble accepting the evolution of relationships with people as their circumstances change. People form a mindset of their relationship with a particular person-- especially a perceived inferior--and don't willingly or lightly change it. Older relatives often find it difficult to accept mature relationships with younger relatives whom they knew as infants. More experienced colleagues in business or leisure activities often find it difficult to accept the rise past them of a person previously lower in the pecking order.

All of these problems will be aggravated in duration, and increased in frequency, by increased longevity--and in particular, by increased longevity in prime condition. People in uncomfortable positions in such relationships may find it easier to move elsewhere and start over.

Space settlement will occur, spurred by such pressures as increasing population, the urge for adventure, and a desire to get away from past personal relationships. Space settlements will not destroy the value of land; land will be of value on all planets, and not everyone will want to move off any particular planet. Even if the population of a single planet were to decrease, land would not lose all of its value.

Before nanotechnology or another technological advance makes space travel really inexpensive, space settlements might become less free than Earth. If the cost of emigration to space is high, requiring years of saving, and the cost of emigrating again is high enough to restrict individual choice, tyranny could flourish. The advent of nanotechnology will drastically reduce the cost of space travel, restoring the individual option of repeated migrations, and drastically reducing the likelihood of such tyranny.

One side effect of space settlement will be the end of the brief era during which instantaneous communication with any other member of the human race has been possible. As Arthur Clarke pointed out in a 1976 speech, ours is the only generation for which this instantaneous communication will exist.

However, space settlement will still occur. Some people will not mind the loss of instantaneous communication; others will actively seek to lose it. The human race will regain some of the diversity that it has lost in the last 50 years, especially after interstellar settlement occurs.

Interstellar settlement will not be stopped by the fear that separation is permanent. Some will seek such separation; others will accept it, just as emigrants leaving Europe for America 100 years ago did. Finally, increased longevity will make separation less likely to be permanent.

Such a nanotechnological society will be very different economically from today's society. But many of its economic changes are already well under way as a result of technological advances already achieved.


Accelerating technological change results in a shorter-term
economic horizon

Accelerating technological change results in a shorter term economic horizon--for sound economic reasons. Production-oriented capital equipment can always become technologically obsolete, reducing its value. This can occur either because new technology performs a task better, or (more dramatically) eliminates the need for the task. Since the value of such equipment is tied to the value of the future production to which it contributes, accelerating technological change implies accelerating technological obsolescence. As an example, a computer need not be very old before its annual operating costs exceed the purchase price of a more capable machine. Therefore, equipment need not be built to last as long as it was 50 years ago.

Similarly, any human production skill--any type of production labor--eventually becomes technologically obsolete. Any person who does not continually learn new skills should expect to see a decline in relative standard of living, unlike the clerks of 100 years ago who had a fairly high relative standard of living with very little change in skills during their careers. The increasing ability to automate repetitive manual labor and, more recently, repetitive mental labor, reduces not only the value of such labor, but also the quantity required.

An increasing average level of education will cause the gap in value between the most educated labor and the least educated labor to narrow, not widen. This economic turnaround will occur when the number of people who are not well educated decreases faster than the number of people still needed to do undesirable jobs which have not yet been automated; this appears to be occurring in Japan today. However, the decreasing gap in rewards between educated and uneducated labor in the US is a political artifact, not an economic effect.

Information becomes less valuable when people value appearance, conformity, and other people's opinions more than quality. Capitalizing snob appeal--often, in effect, past advertising expense--becomes more important than capitalizing production technology. As an example, consider the balance sheet of a beer producer. Economies of scale in production are far less important than economies of scale in advertising. The "goodwill" referred to in corporate takeovers is a reflection of the capitalized value of past advertising which will sell more beer tomorrow.

Entertainment labor which can contribute to sales of anything--even more entertainment--becomes relatively more valuable, and production labor, relatively less valuable.

Thus, with or without nanotechnology, accelerating technological change will encourage the movement from an information society to an entertainment society. Most of these current trends in value are simply results of advancing technology in general. While some have been exaggerated by political forces, the direction of change is likely to continue with future advances in technology.

The most stunning specific effects of nanotechnology will be the magnitude of the changes, and the near disappearance of value of physical goods.

Unfortunately, not all of the effects of nanotechnology will be purely economic. Humans are not only economic animals, they are also political animals. They will attempt to acquire by means other than fair exchange. Political systems distort values, and produce distributions of wealth and income other than what one would expect from a purely economic analysis; these distortions will affect relative values in a nanotechnological society.

Some human wants are political, not economic. Too many humans have a desire to control others, without paying for the privilege by economic exchange. They wish to control others not to advise them of what might be in their best interest, but to force them to behave for the benefit of the controller.

Unfortunately, there will be no end to the religious and ethical disputes which have plagued the human race throughout history: religious practices, abortion, and mind-altering drugs. However, some political control will be more difficult once such drugs can be produced in individuals' basements; an improvement in surveillance technology will not completely compensate for this. Fanatics will still want to stamp out these "evils" everywhere, even when they take place entirely in individual homes; and fanatics will continue feuds to death over religious and racial differences.

Another form of political want is the desire for relative status, as opposed to absolute economic affluence. The vast increase in the standard of living will not make some people happy as long as any member of the human race has more income or wealth than them. One form of this want is the desire of some members of the upper class in a society to stay on top, even at the expense of foregoing absolute improvements in their own standard of living; this phenomenon explains the persistence of both "Mercedes Marxists" and anti-technology Luddites among this class. The proportion of such people seems to have increased, not decreased, in the last two centuries even as affluence has grown to unprecedented levels. We should not expect it to disappear.

One effect of political forces will be to decrease the value of land relative to labor. It is easier to confiscate land than labor, and coercively obtained land is much more valuable than uncooperative coercively obtained labor. This skewing of values will be strongest where the ethics of governments are weakest.

Individual desires to control others will also lead to the formation of groups to control others. Governments have attempted to control the masses, for the benefit of the rulers, over most of the planet for most of history. Technological advances will make monumental repression more practical. Before the introduction of large-scale agricultural technology in the last 150 years, the lack of technology limited government repression. If the government killed a sizeable fraction of the peasantry, less food would be produced, and the bureaucrats in the cities would starve.

With no need for any production labor, a tyrannical government in a nanotechnological society could proceed to kill off a very large fraction of its population. A pessimist would argue that only the desire of the rulers to have an audience of slaves left to admire their handiwork would keep the level of slaughter below 100 percent.

In the unlikely event that all of the means of production of nanotechnology were in the hands of a small percentage of the planet's population, there would still be a large demand for labor. After all, one percent of billions of people is still tens of millions, and ten million people have a large quantity and variety of needs. People would still be able to acquire a very high standard of living compared to today in exchange for very little of their time. However, this would not be true if the number of people in control of the technology were extremely small--tens or hundreds of people--as it might be if governments control the technology.

Another disturbing possibility is that nanotechnology will likely shift the balance of power between attackers and individual defenders from the defense to the offense--a shift which traditionally has benefited the state at the expense of the individual. Between 1000 and 1400, the offense prevailed--an armored knight on horseback could attack a random individual, with no significant likelihood of the individual inflicting any damage in return. Individuals were forced by this into seeking protection from other armored knights, and a feudal society resulted. Between 1500 and 1900, the bow, the musket, and the rifle gave the individual a chance of inflicting damage in return. When raids on individuals were no longer riskless propositions, they became less frequent.

The enormous advantage which nanotechnology appears to give to the attacker should not lead us to expect the revival of a feudal society. A group defensive effort does not appear to be more likely to prevail against nanotechnological attack than individual efforts; thus the protection motivation for the rebirth of a feudal society appears to be absent.

To evade attack, some people may leave the planet--and the solar system. The most successful defense may be to simply spread across the galaxy, thinly enough to avoid detection, without leaving records of where one went. After all, technology places limits on the size of an empire. The Roman and Chinese empires of antiquity never exceeded a size that could be spanned by communication in weeks, or by transportation of troops in months. Empires larger than this would be too likely to successfully rebel. Thus planetary-system empires, with communication measured in hours and transportation in days, would be very possible, but interstellar empires are implausible in the absence of faster-than-light travel and communications.

Should one be optimistic or pessimistic? Well, if the human political animal does not prevent it, the human economic animal will enjoy life in such a technologically advanced society.

Dr. MacGillivray is a member of the MIT Nanotechnology Study Group with a background in physics.


Foresight Update 8 - Table of Contents

 

Thanks

In a past issue we requested help with quantum chemistry calculations; thanks to Prof. Peter Lykos of the Illinois Institute of Technology Dept. of Chemistry for offering assistance.

For arranging lectures on nanotechnology in Switzerland we thank Prof. H.-J. GŁntherodt (University of Basel), Heinrich Rohrer (IBM Zurich), and Thomas Rauschenbach (World Economic Forum). For arranging lectures in Japan, we thank Prof. Naomasa Nakajima of the University of Tokyo.

We appreciate receiving technical news and other information from Jim Conyngham, Jerry Fass, W.C. Gaines, Marie-Louise Kagan, Leonard Micko, Ed Niehaus, Anthony Oberley, Mark Reiners, Frederick Reynolds, E. Clayton Teague, and Michael Weber. Thanks to Chris Fry for recommending the book Molecular Machinery.

Thanks to all those who commented on our last issue; many felt it was the best so far. Especially favorable comments were received on Jeff MacGillivray's piece on economics (completed in this issue) and Dan Shafer's profile of Marvin Minsky. Russ Mills's technical column continues to be a favorite feature.


Foresight Update 8 - Table of Contents

 

FI Wish List

In setting up a new office, FI finds itself in need of the following equipment, new or used: a small photocopier, two fax machines, and a second Laserwriter printer. Note that donations of equipment or funds are tax-deductible as charitable contributions. If you can help, call our office at 415-324-2490.

Also needed are volunteers to translate a small number of German and Italian news articles on nanotechnology.


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From Foresight Update 8, originally published 15 March 1990.


Foresight thanks Dave Kilbridge for converting Update 8 to html for this web page.



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