Chapter Ten

In the Dust of This Planet

The Economic Future of Our World

Can We Grow Forever?

GDP per Capita only started to rise in industrialized countries around 1800, but some historians believe that the Romans were close to having their own industrial revolution a little before 400 A.D. If they had managed it, and GDP per Capita there started to rise by 1% each year from about $1,800 per year at the time, today their average income would be around $15 billion per person. Is that a total fantasy, or will our descendants be so wealthy we can hardly imagine it?

Open Video Transcript

Economic growth is a relatively new paradigm for humanity, and ever since we stumbled upon it, we have collectively been obsessed with it. The “economy” is almost always the top issue on voters’ minds when they decide who they will vote for in elections. The rapid change from decade to decade brought on by economic growth has been a new source of storytelling for movies like Back to the Future, The Curious Case of Benjamin Button, and Forrest Gump. There is a whole new genre of stories that offer foreboding warnings about the collapse of economic growth, like Mad Max, Interstellar, and the Day After Tomorrow. We want this economic growth to continue, but ever since it started people have been worried that it will come at some terrible price down the road. --In order to see the power of economic growth, we need an equation for it. If you want to figure out what the end result of growth will be, you can use this growth formula. Our income at the end of the time period will be equal to our income at the start multiplied by the quantity one plus r raised to the power of t, where r is the rate of growth, and t is the time period. Let’s learn by looking at an example. In 1850, average income worldwide was around $1,500. From 1850 to 2020, a period of 170 years, the economy grew by an average of 1.5% each year. With this information, we can figure out what average income worldwide should be in 2020. We just need to plug in our values into the equation. Y-start, or our initial income, is $1,500. The rate of growth is 1.5%. Remember, 1.5% is in percentage form, but for an equation we need to put it in decimal form, which is 0.015. You just move that decimal place over to the left twice to go from percentage form to decimal form. And lastly, our time period is 170 years, so we put in 170 for t. I can simplify what is in the parentheses here. One plus 0.015 is 1.015. Then, we can use a calculator to raise 1.015 to the power of 170, which is 12.56687. When doing these calculations on your own, I recommend doing it all at once in a calculator, so you don’t have to round anything. With economic growth, even small differences in how many decimal places you include can make big differences in the result. In this case, when we multiply the result by $1,500, we get our average income for 2020 which is $18,850. This is a little bit higher than reality but gets us close enough to see how this formula can be used to calculate the result of economic growth. --Let’s use our formula and the trends of the past to make some predictions about our future. Most of the time we have used GDP per capita, which is a country’s average income, but to get an even better sense of what it will be like for a typical person, we can use the median income. So, in the United States in 2020, half of the population earned $44,225 or more. Let’s see how economic growth will impact that number. If we stick with our 1.5% growth rate, then 100 years later, in 2120, the median income will be $196,007. I want to emphasize that none of this change would be due to inflation. This is a real, genuine increase in living standards. In 100 years, at 1.5% growth, people will be four times richer than the typical person in the U.S. today. Give it another 100 years, and in 2220, the median income will be $868,713. And again, that is measured in today’s dollars. Imagine what it would be like to have a salary that high these days, and that is what it will be like for a majority of people in 200 years. 300 years later, in 2320, the median person will be a multi-millionaire, with an income equivalent to a $3,850,175 of income today. In 2420, the median income is over $17 million per year. Again, this is how rich a majority of people will be. It may sound bizarre, and it can be difficult to imagine. But think about how hard it would be to describe what life is like for the typical person today to someone like living in 1620. They would be saying, “What thou sayest is impossible, not everyone can live like the King!” Yet indeed, we do. --The thing is, we are probably underestimating the growth a rich country like the United States will see. That 1.5% growth rate was the global average since 1850, and most of the globe was not growing. Only the industrialized countries were. In the U.S., since around 1950, the average growth rate has been more like 3%. Let’s look at see what doubling the growth rate does to our forecasts. Does it double the results? No. It does a lot more than that! In 2120, after 100 years of 3% growth, median income will be around $850,000 per year. This would put you in the top 0.3% of income earners today, but in a century, half of all workers will make that or more. In 2220, with 200 years of growth, median income will be over $16 million. Fewer than 15,000 people in the U.S. today make that much money, but hundreds of millions will make that much in 200 years. And after 300 years, the numbers just get bonkers. Imagine earning over $300 million every year. Yachts to sail the ocean on. Homes on every continent. Lots of leisure time. That’ll be the norm. Of course, the goods and services people will be using in 2320 will probably be very different than the goods and services we have now. But it won’t be totally foreign. About 60% of what we consume today was available 100 years ago. But let’s look at 2420. After 400 years of modest, achievable economic growth, the median income will be over $6 billion. This will mean the median income earner, your regular middle-class folks, will be living better than the very wealthiest people alive today. As the Nobel prize winner Robert Lucas said, once you start thinking about economic growth, it’s hard to think about anything else. What we are saying here is that after several hundred thousand years on this planet, homo sapiens are a few short centuries away from solving the economic problem and living lives where our every material need and want is satisfied.--Most people find this sort of thing hard to believe. As the activist Greta Thunberg told a conference on climate change, “we are in the beginning of a mass extinction and all you can talk about is money and fairytales of eternal economic growth.” Is the promise of economic growth too good to be true, as Greta suggests? Are we inviting disaster on ourselves? --Or is it like the economist Tyler Cowen says? That our top moral priority should be preserving and improving humanity’s long-term future. Cowen believes the way to do that is by maximizing the rate of sustainable economic growth. Tyler Cowen is worried about climate change and is concerned about humanity doing things that threaten our very existence, but he believes that the best way to handle the problem is by becoming richer. That growth in GDP will overwhelm any other change we might worry about. When you see the numbers like we have, would you mind so much if even a full half of your $6 billion income had to go to keeping life on earth sustainable? Maybe not. --In this chapter we are going to be futurists and wonder about the fate of our economy. Will our civilization collapse? Will the growth stall? Or can it really be that we will grow forever? What will the next few hundred years bring?

The Great Filter

Since economic growth got started (and even before), people have been predicting the inevitable collapse of our civilization. Pessimism is fashionable. But is it wise? Humanity faces many existential threats like planet-killing asteroids and super volcanoes. We also face enormous challenges like climate change, which could wreak havoc on our well-being and our economy. But humans have overcome challenges this big before. Perhaps the thing which should concern us the most is that, when we look out into the night sky, we don't see any evidence that these problems have been overcome by any kind of life on other planets. Where are all the aliens?

Open Video Transcript

When researchers at the University of Vermont used a text-mining computer algorithm to analyze more than 1700 novels, they found that pretty much all of them can be described by one of six story arcs. One of them is rags to riches, where the main characters experience a steady rise from bad to good fortune. Perhaps that is the story that best fits our economy after the Industrial Revolution. But one of the other story arcs is Icarus, the Greek god who flew too close to the sun and melted his wings. In stories like Icarus, there is a rise, and then a fall. Will that be the story of the next few centuries? Are the doomsayers right, and humanity is destined to pay for our economic glory with economic collapse? --These predictions of an impending apocalypse are nothing new. It was fashionable even before economic growth was lifting billions out of poverty to suggest humanity’s good luck was certain to end. We already talked about Thomas Malthus, and his predictions that humans would never escape subsistence level living due to slow technological change, and the inevitability of war, famine, and plague. His model for the economy worked for a time but has been a poor predictor of late. Nevertheless, many an academic has become rich from the sales of books about our collective demise. Paul Ehrlich’s best seller The Population Bomb earned him a lifetime of being taken seriously as a public intellectual, despite being wrong in every prediction he made about the decades that followed its release. The book The Limits to Growth was another best seller which confidently claimed – with the backing of sophisticated computer analysis – that we would completely use up many essential resources by the 1990s. None of those predictions were even remotely correct. Over and over again, people have suggested that human ingenuity would not be enough to save us, and that our market economy would not adapt fast enough to changing conditions. They were wrong every time. --Norman Borlaug is considered the father of the “green revolution”, which was a series of initiatives in the 40s, 50s and 60s which increased agricultural production worldwide. He helped develop high-yield wheat crops and introduced them to poor and developing nations. He is often credited with saving a billion people from starvation. In 1970, he was awarded the Nobel Peace Prize for his work. Paul Ehrlich understood trends and numbers well enough to see a problem down the road. What he didn’t account for was Norman Borlaug and others finding clever ways to buck the trend. --We are still riddled with worry, though. Perhaps the environment will kill us. Climate change is a real problem, and perhaps it will be severe enough to wipe us out or at least send us back to the stone age. Or perhaps a giant asteroid will smack into the face of the earth and bring an end to us all. Or maybe we need to be worried about these super volcanoes which could erupt at any time. We really should take these things seriously. Extinction level events, which threaten humanity’s entire existence, are worth making large sacrifices to avoid. Climate change will likely cost future generations 10% of their income or more, and so if mitigating climate change costs us less than that, there is a significant moral argument to be made that we should mitigate those effects. And we probably want to invest more in asteroid defense and monitor those volcanos. But even all together, these risks are pretty low. Climate change is unlikely to throw us back to the stone ages, and the others are just very unlikely to happen. So, what should we be afraid of? --Robots and aliens might be bigger threats to human beings. The creation of artificial general intelligence, which is an artificial intelligence as capable as a human, could destroy humanity. As could an alien invasion. That is no good for humans, but it wouldn’t be the same as an economic collapse. After all, the robots and the aliens would likely continue in our stead, and it probably won’t be you and me enjoying multi-million dollar incomes in a couple centuries time anyway, so who cares if its robots or aliens enjoying it instead? Well, ya, some people will care. --There is a big problem though. When we look out into the stars, we don’t see anyone else. The universe is vast, dark, cold, empty, and dead. If we met aliens, we might be afraid of them, and afraid of what they might do to us, but we should be more afraid of the fact that we don’t see aliens out there. Because it means no other civilization has made it far enough to colonize space, which means it is probably unlikely that we will get there ourselves. And it’s not just that no aliens have come and said ‘hi’. Life does not look like not life. Lichen looks different then the rock that it grows on. Human civilization looks different than earth and you can tell we are here from a good distance out into space. But we don’t see any intergalactic superhighways streaking across our night sky. --This is a problem known as the Fermi Paradox, named for Enrico Fermi. Fermi noted that when we look to the stars we see countless other galaxies, each with billions of stars and billions of planets. And yet, out of a billion billion planets, we haven’t noticed any unnatural changes to the universe. No stars covered by Dyson spheres. No experiments which warp space. No massive artificial eruptions of energy. Where is everyone? --The Economist Robin Hanson proposed the following framework for thinking about the Fermi paradox. On the path to becoming an intergalactic species, life has to pass through a series of hurdles, or filters, and some just don’t make it. Certainly, one big filter is having life at all. When we look at the other planets in our solar system, they seem to be completely dead, with no signs of life of any kind. So, just getting life is a big step for a planet. Then that life has to become multi-cellular. Maybe this is inevitable for any life which manages to break past a certain threshold. It could be that once a planet has life, seeing the life become multi-cellular is pretty likely. Not every filter has to be as challenging as the other. But on and on the filters would go, with life passing certain milestones on the way to building an advanced civilization, as we humans have done here on earth. But there are filters still ahead of us. We need to survive the asteroids, volcanoes, and climate change, as well as each other, before we can advance far enough to go on our galactic conquest, spreading through the cosmos. There are many different filters we could add, but the question is: have we gotten through the toughest filters already, or are they still to come? This is why it would be very bad news if we found life on Mars or one of the moons of Jupiter or somewhere else close by. We know that the filters life has to pass through to make a visible dent in the universe are so strict that no aliens in the visible universe have accomplished the feat. If the toughest filters are behind us, that bodes well for the filters still ahead of us being easy to get through. But if the filters behind us were easy, then it means the ones still left are almost impossible. Finding life on Mars would mean getting life started isn’t such a hard filter after all. So that raises the chances that the ones ahead are impermeable, and that there is something out there that is going to kill us all. But even without life on Mars, the news is not good. We don’t know whether advanced civilizations are easy to reach, as we have, or hard. But we do know that we are a lot more likely to be living in a universe where they are easy than where those filters in our past are hard. This is called the Anthropic principle, and essentially it tells us that we should expect to be in the universe most likely to produce us. And that would be a universe where reaching civilization is easy. So, odds are good that eternal economic growth really is a fairytale, and that there is something out there that will put an end to our advancement. As noted, just probabilistically, it isn’t likely to be asteroids, super volcanos, or climate change. So, what should we be worried about. Probably each other. War, pandemic, or a totalitarian world government which simply puts an end to our growth and stellar dreams are the more likely candidates. I’ll be keeping my fingers crossed though.

Practice Questions

1. Rupert has decided to be cryogenically frozen at the time of his death so that he can be resurrected once medical science has advanced far enough to keep him alive. In preparation, Rupert places $100,000 into an investment account which earns an 8% rate of return per year. To his amazement, he is one day brought back to life. "How long has it been?" he asks. "210 years" the strangely dressed person replies.

How much money is sitting in Rupert's investment account?

Reveal the Answer

We start with the growth equation:

Y_end = Y_start(1 + r)^t

In this case, the starting amount of money is $100,000, the rate of growth is 8% or 0.08, and the time period is 210 years. Plugging those numbers in, we can solve.

Y_end = $100,000(1 + 0.08)²¹⁰

Y_end = $1,044,692,922,000

On a calculator, you may have seen a result like this:

1.044692922E12

That is called "Scientific Notation". The "E12" part means that they have moved the decimal place to the left 12 times. If you undo that, you would get the result I put above, which is 1 trillion, 44 billion, 692 million, 922 thousand dollars. Not bad.

2. Suppose that there is a 1% chance a planet will develop life, a 5% chance that the life will evolve into complex organisms, a 10% chance that complex organisms develop into advanced civilizations, and an X% chance that the advanced civilizations become intergalactic.

If there are 1 million planets, and we observe only 1 intergalactic civilization, what is the expected value of X?

Reveal the Answer

Each of the probabilities given are the conditional probabilities of making it past the next filter. So, the overall probability that any given planet becomes an intergalactic civilization is:

1% * 5% * 10% * X%

The observational data provided suggests that these overall odds should be equivalent to 1 out of 1 million. That would be 1 / 1,000,000 which is 0.000001 or 0.0001%. So...

1% * 5% * 10% * X% = 0.0001%

Solving for X%, we would get:

0.005% * X% = 0.0001%

X% = (0.0001 / 0.005)%

X% = 2%

This means there is a 2% chance that an advanced civilization becomes an intergalactic civilization.

3. Referring to the previous question, how would your estimate for X change if we discovered simple life on another planet and increased our estimate for the probability that a planet develops life from 1% to 10%?

Reveal the Answer

If we update our first probability, we can re-solve for X%:

10% * 5% * 10% * X% = 0.0001%

Solving for X%, we would get:

0.05% * X% = 0.0001%

X% = (0.0001 / 0.05)%

X% = 0.2%

This means there is a 0.2% change that an advanced civilization becomes an intergalactic civilization, instead of a 2% chance. Because we revised an early filter to be less difficult, we have to revise a later filter to be much more difficult!

Secular Stagnation

Lao Tzu, an ancient Chinese philosopher, said, "He who knows that enough is enough will always have enough." At some point, earning higher incomes just isn't going to be doing much for our well-being, and most people will prefer to work less and have more time for themselves. We may choose not to grow our incomes, preferring leisure instead. There are also many who think that the low-hanging fruit has already been picked, and future growth will be harder to achieve. Society doesn't have to collapse, but perhaps we just stop growing. It might happen, but in all respect to Lao Tzu, I say, "Too much is always enough."

Open Video Transcript

A typical U.S. household today is able to enjoy a comfortable economic life. The median household income – meaning we combine the incomes of everyone living in the same household – is upwards of $70,000 per year. It’s enough for a nice home, plenty of good food, clean water, great entertainment, some travel, and more. I mean, at what point do we say enough is enough? Perhaps we don’t grow forever, but we don’t have to collapse either. Maybe we reach a new era where economic growth stops, but we still maintain our nice high standard of living.--There are good reasons to think this might happen. Consider this little thought experiment. Some of you viewers out there might have a job, some may not. But consider a scenario where, either way, I offer you a new job where you get to set your own hours and I will pay you $25 per hour of work that you do. If you took this job, would you work more hours than you currently do, or less? There isn’t a right answer, it just depends on your preference. Some people want more money to buy more things with, but others are content with what they have and would rather enjoy more time not working than putting in those extra hours. In theory, everyone should hit that limit at some point. At $25 per hour, it would take you 2,000 hours to make $50,000, which is close to the median income in the U.S. But what if I raised your wage to $100 per hour. Would you still want to work the full 2,000 per year, which is about 40 hours per week? Maybe not. Maybe you are happy with making $50,000 per year and would rather cut your hours down to 10 a week, or only work full time three months out of the year. Imagine if I paid you $10,000 per hour. Do you really need to work full time still? A 40-hour work week would earn you $20 million per year. What are you gonna do with all that money? Maybe it would be better to take half the year off and spend your $10 million traveling the world. When we forecasted incomes for a few hundred years from now, we predicted that if economic growth continues, soon the typical person would be earning billions of dollars per year. That would mean they are making upwards of $1 million per hour of work. If I was earning $1 million per hour these days, I would probably put in a solid week at work, and then head home for a 51-week vacation rather than keep on working for money I couldn’t even possibly find a way to spend if I wanted to. --While earning a million dollars per hour is a bit extreme for our century, over the past couple centuries people have chosen to use their higher wages to buy more free time and work less. Looking just at those who have jobs, the typical work week in 1830 was close to 70 hours. People tended to work 10-hour days, seven days a week. And that was likely the case for the farmers and laborers before the Industrial Revolution. But with the onset of rising wages, the hours worked per week has been falling even since. These days, the typical worker only works about 34 hours per week, and that’s projected to keep falling. One common prediction for the post-pandemic world is that more workers will be able to work from home, and many will be able to work fewer hours per day as a result. And more and more businesses are starting to give employees three-day weekends, rather than a two-day ones. --But if you recall, adding up income is one way to measure Gross Domestic Product. If people choose to reduce their hours rather than working more and producing more and earning more money, than our economy won’t be growing as fast without bigger and bigger increases to labor productivity. So, as people choose more leisure time over labor time, we should expect economic growth to slow down. --Importantly, if we stop growing the economy, then we run the risk of returning to the Malthusian trap, where population growth slices our economic pie smaller and smaller until we each get a subsistence-level piece. But as incomes increase, population growth has gone down. Most forecasts suggest that the human population will continue to grow until it hits about 11 billion people in 2100 and then start to level off. If that happens, then we won’t have to worry about the Malthusian trap, and stagnation really will be possible. --This idea is not a new one. It has its roots in the Great Depression, when an economist coined the term secular stagnation. In this case, the word secular comes from the Latin word meaning ‘long term’. Secular stagnation is a condition when there is negligible or no economic growth in a market-based economy. The idea really is that we have pretty much picked all the low-hanging fruit of innovation, and that there are few innovations left to make which will substantially increase worker productivity and real incomes. Looking at the past six decades, we can see that the average growth rate in real GDP per capita has been slowing down. The 1960s saw higher growth rates than the 70s or 80s, which saw higher growth rates than the 90s. And economic growth since the year 2000 has been slowing even more. The thing is, this is what people predicted after the first industrial revolution, but then there was a second industrial revolution which reinvigorated growth, and a third, and a fourth. Economic growth isn’t as smooth as we might hope, and it takes some periodic breakthroughs to reignite, but so far it has kept going. Stagnation may be in our future, but I would bet against seeing it any time soon.

Post-Scarcity

Maybe there is cause for optimism though. With so many promising technologies like virtual reality, self-driving cars, mRNA vaccines, bio-tech, and more, it seems like there is much more innovation and economic growth ahead of us. And while it is obvious that we cannot have infinite growth in production on a finite planet, economic growth has never been about how much we can produce, but rather how enriched we can become.

Open Video Transcript

The year is 2593, not much further in future from the making of this video as the voyage of Christopher Columbus is in the past. A young student is sitting down for their economics class. The professor starts the lecture by telling them all about how rich they are compared to the people of the past. Starting salaries in this time are five times greater than the whole net worth of the wealthiest people alive in the 21st century. To us, these future people are all trillionaires. Is a world like this possible? --The fundamental economic problem is one of scarcity. The reason we care about economic growth is because it allows us to stretch our scarce resources further. The kind of innovation that fuels economic growth is that which reduces how many resources we need to produce something. The popular science fiction show Star Trek envisions a future in which the problem of resource scarcity has been solved. The show focuses on the pioneers of space travel, but the real heroes are the unnamed geniuses that figured out how to generate so much energy from some invented material the characters refer to as dilithium and then how to convert that energy into matter using the so-called replicator. Warp speed is cool but having a machine that just zaps a hot cup of tea, earl gray of course, into existence is amazing. The capacity of the Star Trek economy is limited only by the amount of energy they can produce, and since they don’t seem too worried about energy, we can see how they are living in a post-scarcity economy. While this future sounds pretty great to me, many worry about an economy which is able to automate every task. What would humans do once technology can do all our work for us? One contemporary example is Wikipedia. Wikipedia is entirely free, and while they need donations to keep their servers online, they don’t pay anyone to write the information-rich articles that we all turn to when we want to learn about something. Many thousands of people have given up hours and hours of their time and labor to write these articles for no compensation at all. Some of them spend more time writing Wikipedia articles than they do at their job. Why do it? Well, it makes them happy. They like the community of editors they get to interact with, and they enjoy the process of content creation. And on some level, these creators get a bit of prestige in having contributed significantly to something we all rely on. --Most anxiety people have about robots taking our jobs is misplaced. It’s usually a good thing, since we are able to redirect the energies of our labor towards something else, expanding our production possibilities frontier and growing the economy. But a common claim is that the coming technology is different, and soon robots really will be taking over every job. If artificial intelligence is able to replace lawyers and writers and computer programmers, then what jobs will be left? A lot of this is just hype. As with the technology that came before it, artificial intelligence will likely just make human beings more productive, allowing us to earn more money for the work that we do. --But many are worried about the point at which artificial intelligence is able to match human intelligence. This is often referred to as artificial general intelligence or AGI. If the artificial intelligence is able to understand or learn any intellectual task as well as a human, then there won’t be any reason to hire an unreliable human instead of a highly reliable robot. AGI is definitely something we should be worried about, but the problem isn’t that they will take all our jobs. That would be the benefit of AGI. Humans would all become like retirees today, living off the production of the robots and enjoying our lives. The problem with AGI is that it will very soon thereafter be smarter and more capable than us, because it will be able to rapidly improve on itself. If we ever are successful at creating AGI, we better hope the makers have figured out how to make sure the AGIs goals align with the goal of human flourishing, rather than it becoming purely self-interested and giving us the boot. --Many people who are working on artificial intelligence have started to advocate for a policy called Universal Basic Income. The proposal is that the government would put a tax on the economic gains that come from A.I. driven innovations, and then redistribute that to everyone equally. Essentially, it is like everyone owns a little piece of the automated economy, and we all earn a little dividend income on the side from it. Advocates say that this will alleviate the problems caused by creative destruction by giving people some money to fall back on if they lose their job to innovation. It also gives people a foundation to live on, which will make people more comfortable with taking a risk and trying something new. And given the results of the stimulus checks sent to people during the Covid-19 pandemic, we can pretty safely say that it would help reduce poverty as well. But not everyone is on board. Having this income on the side might incentivize joblessness and drag the economy down. Many also don’t like the universal part of the program, which recommends that everyone, whether rich or poor, in need or not, gets the money. And there is also something to be said for the dignity of work. Most people derive some life satisfaction out of a good day's work, and we have seen with social media and other modern contrivances that sometimes we don’t always do what is best for ourselves when we aren’t given a push. One thing we know for sure though is that good institutions are essential for economic growth, and our economy evolves, and so our institutions need to evolve with it to continue to incentivize innovation and ensure that everyone is able to share in the fruits of growth. --Kenneth Boulding remarked, “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist.” Eternal economic growth is indeed a fairytale. But that doesn’t mean we are anywhere close to the limit now. Popular fiction has already imagined a future where we are able to enter realistic simulations, allowing more digital creations to satisfy many of our needs and wants. Within these digital environments, the physical limits of our earth might not be as constraining. But ultimately, eternal growth is not the goal. Eternal enrichment is the goal. Our desire for economic growth stems from the fundamental economic problem of scarcity. We have finite resources, and so we must choose how we use them. Economic growth is about innovating ways to make those resources go further. But eventually, innovation might solve the problem of scarcity altogether, or at least get us close enough to it that no one can tell the difference. Beyond that, innovation will still be able to find new ways to enrich our mind and our spirit. So long as we don’t kill each other first through war or disease, I think humans stand a good chance at achieving this sort of post-scarcity world. But I am confident that an end to scarcity will not mean an end to innovation. The goal of our economy is to satisfy us by producing the things people actually need and want. Great experiences, social relationships, and meaningful challenges will always be part of that. And there will always be new ways for humans to enrich themselves virtuously with courage, justice, temperance, prudence, faith, hope, and love.

The Age of Em

The hunter-gatherers of our ancestral past probably never imagined that one day their societies would be totally reorganized around farming, and they probably would have thought it sounded awful if we could have told them about it. Likewise, the farmers of our past never imagined that one day their societies would be totally reorganized around industry, and probably would have thought it sounded awful if we could have told them about it. So, it is natural to conclude that we folk in the industrial world are failing to imagine what the next big change will be. Let's try to correct this lack of foresight!

Open Video Transcript

When we look at history, we can see a pattern. The foraging era lasted a very long time, and economic growth was imperceptibly slow, with the global human economy doubling every 250,000 years or so. Then came the farming era, which allowed humans to grow much faster, seeing the economy double every 1,000 years or so. Not fast enough to outpace population growth, but much faster than before. Then came the industrial era, and innovation hastened economic growth even more, allowing the economy to grow faster than the population, doubling every 15 years or so. When you look at this trend, you can see that not only is our growth improving in a predictable way, but the time it takes to get to the next era is shortening in a predictable way. If the pattern continues, humanity is due for another big change like this in the next century or so, producing another huge leap in economic growth which would allow the economy to double every month or so. What might this change be?--The next big thing that will revolutionize our economy looks more and more like it will be artificial intelligence. In the near-future, this is likely to just be more productivity-enhancing software that allows people to accomplish more in their jobs, boosting wages and growing the economy. But there is wide agreement that eventually artificial intelligence will reach a point where it is as capable as a human being at any task. Those who know the most about the obstacles ahead believe that this is still a long way off in the future. However, there is one route to this future which may be shorter than the others. --Even before software reaches the point of matching human intelligence, we might develop the technology needed to scan human brains in enough detail and model the interactions of each cell in the brain, that we can then emulate the workings of a brain in a computer. Where software development might take a couple hundred years to reach the point of artificial general intelligence, the technology needed to scan and upload a human mind into a computer and run it might be available within the next century. The economist Robin Hanson, who is also the great mind behind the idea of the Great Filter, thinks that this is the most likely thing to cause a total shift in the economy on the scale of the Neolithic or Industrial Revolution. He has used basic economics to think about what would happen if we were able to scan and upload human minds like this. --There are a number of implications which are immediately obvious. A digital mind would be able to travel through our information infrastructure, essentially going to any place on earth at the speed of light. A brain emulation could be working in a virtual environment on a server in Nevada one minute, and then transporting themselves into the hardware on a physical robot that walks around Tokyo the next. These brain emulations are also, in theory, immortal. With adequate maintenance, the Ems could continue on indefinitely. This has some serious implications for our planet. Human beings are protective of nature, for the most part, because we are worried that if we destroy nature, we will end up destroying ourselves. Certainly, some have concerns beyond that, but for the most part our conservation of the natural world is driven by our need to keep the planet habitable for living breathing human beings. Ems won’t have this same motivation, because they will be able to live by entirely artificial means. And so, if Ems come to dominate the world as the theory would predict, nature is likely doomed. Ems will certainly come to dominate all economic production though because they will be able to make copies of themselves. For this reason, most Ems will not be immortal, but will exist for a very short period of time. An Em who needs to complete some paperwork might just create a temporary copy of itself to do the paperwork while the main Em continues with more important tasks. Once the copy is done with the paperwork, it simply shuts downs. That might sound scary, but the Ems which are most comfortable with that arrangement will be the most productive, and the most likely to be able to pay for its own existence. --The human brain is also built in a way that it would be possible to simulate it faster with more hardware. If you double the hardware running the emulation, you will double the speed the emulation is run. That means the subjective experience of time for different Ems will differ. Initially, most Ems will operate at normal human speed, where they experience 1 day for every day in the real world, so that they can interact with humans. But economic forces will guide Ems into forming their own cities which run at different speeds. The rich and productive Ems might be running so fast that they experience 45,000 years for every day in the real world. The CEO of a company would be able to observe every meeting everyone is having, involve themselves in every detail of every operation, and to the Ems running at slower speeds it would seem like they are everywhere all at once. Of course, to the CEO Em running at this speed, the world is extremely stable and changes incredibly slowly. Conversely, those Ems who do not have enough to pay for all the hardware they need to run so fast might clump into cities which run much slower. Very little hardware would be needed to run an Em that experiences only a split second of time each day. To that Em, everything would seem normal, except when they try to interact with the faster running emulations, where things will seem busy and chaotic. Ems will probably retire to these slow worlds, since they will be cheap enough to afford indefinitely. --Once Ems are possible, the transition to an Em economy might take several years, but its dominance will be inevitable. After the Industrial Revolution, economic growth has been fueled by matching human beings with machines. That growth has been slow because it takes time to make another human being. About 18-20 years really. And so, our overall economic growth is constrained by the rate at which our population is growing. --We have gotten around that with innovation. We can grow the economy a bit faster by creating better machines to pair humans with. But there is still a limit to this growth rate. While we can make machines quickly and easily, it is still slow to make more humans to pair with them. But when it becomes possible for an Em to just copy themselves, getting a new human-level operator of capital will be quick and easy too. This will increase economic growth immensely. --On the downside, it means that only the best Ems will survive in the Em world. In our world, you can make a pretty good movie by hiring Steven Spielberg to direct it. But if you want to make a few more at the same time, you’ll have to turn to other less inspired directors. But if Steven Spielberg were just able to make a copy of himself, then he would be able to accept every single directing job on offer. The same is true for accountants and lawyers and software engineers and teachers, I should add. If your company needs a new accountant, you aren’t going to hire just anyone, you are going to hire literally the best accountant in the world because a copy of them is available. But those copies also compete with themselves. And so, wages will once again be driven down to subsistence. As we know, living at the subsistence level was the typical state for human beings for a long time. Ems seem destined for a similar fate, since once again the population growth would be able to keep up with all economic growth. This would be a Malthusian world, where the number of Ems in operation will always grow to split the economic pie as thinly as it can be. And this is likely to be very thin, since these Ems will be living in pretty cheap virtual worlds. They will have to spend pretty much all of their time working, though they will be working in great comfort. --What will happen to the human beings in this world? Well, in the beginning, humans will own all of the capital, and so collectively we will become very rich. But we won’t be able to compete with the Ems. Humans will have to retire. If we have the right institutions in place for sharing the wealth we gain from the rapidly growing economy, this could be quite nice for the people alive at the time, and perhaps going forward as well. Though, if the pattern of epochal change continues, we should expect some new big thing to disrupt this strange new world after just a year or so. Then it will be on to some new mode of production. What kind of change could that be?

Quick Quiz

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Example Question
Suppose that average incomes today were $57,486 and are expected to grow at 2.7% each year for the next 110 years. The president is considering a policy which would increase the growth rate to 4.4%.

How much higher would the average income be in 110 years if this policy is enacted?

Round your final answer to two decimal places.

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