A timely argument against the unpredictable effects of technological development: Power and Progress.

This is one of the most thought-provoking books I have read this year. Daron Acemoglu and Simon Johnson present a compelling call to re-examine where we collectively put our efforts in technological development and convincingly argue that the effects of technological development are not unforeseen and unavoidable but rather predictable and, at the very least, we have the ability to corral these effects into those that are for the good of the average human being.

The authors’, in my synopsis, present two distinguishable but interconnected arguments. The first is that, historically, the benefits (or economic rents) of technological development have been shared differently in different societies because of prevailing power dynamics governing the relationship between capital and labour. In one of many deftly explained historical examples, they authoritatively show how the benefactors of the industrial revolution in England were almost exclusively capital owners and financiers and that the prosperity created by the various developments within the contemporary factory were only brought to the wider population once social pressure resulted in parliament enacting more protection and rights to those labouring within.

They show how this is in contrast to the to how the gains of the US’s economic growth in the mid-20th century were distributed. They argue that the seeds for the US’s economic growth were sown with the nation’s industrious population seizing on the development of electricity access in the early 1900s and using it to develop exponentially more productive factories such as Ford Motor Company’s Highland Park Model T factory. Unlike England in the early 19th Century, Acemoglu and Johnson point out the average labourer enjoyed a remarkably large share in the gains from US’s economic growth. Average US real wages grew at close 3% per year from 1949 to 1973 for both low and highly skilled men. Furthermore, by 1960, the share of top 1% of income earners had fallen from 22% of total income in 1920 to 13% in 1960.

The secret to this shared prosperity, they argue, was a direction of technology that created new jobs for workers of all skill levels and a more equitable institutional framework for shared productivity benefits between employers and managers. They show, by way of historical example, how the implementation of advanced machinery in the US’s automobile factories created a demand for labour at all skill levels. They quote a Ford manager in 1967:

“If we had a vacancy, we would look outside the plant waiting room to see if there were any warm bodies standing there. If someone was there and they looked physically okay and weren’t an obvious an alcoholic, they were hired”.

Secondly, they argue that during this time, the average labourer was afforded a larger degree of power through increased representation and stronger bargaining rights which were partly instituted under the New Deal. The creation of new tasks and jobs for workers of all skill levels and the greater degree of representation for the worker translated into the American marginal worker productivity (and consequently wages) keeping pace with America’s staggering economic growth over the same period.

This historical analysis sets the backdrop for their second argument which is that this contemporary notion that we (as a population) have no bearing on direction of technological progress nor that we can let alone influence the consequences of such development is false. They argue that, when we look to the future, we have agency over both the direction of technological development with society (i.e., what goals/problems it aims to achieve/overcome) and we certainly have agency over the effects of these developments.

The incredible current developments within Artificial Intelligence (AI), advanced automation and surveillance are not, in their view, fields of research that we have stumbled into but rather fields of research that are being developed because various interest groups have an incentive to see technological developments in these areas. They argue that without reinforcement of the pluralistic distribution of power (such as the adequate representation of labour interests), the gains or economic rents from current technological developments will not be equitably distributed as they were in the US in the mid-20th century but rather, they will accelerate our progress to a two-tiered society such as the one that developed in England in the late 18th century and early 19th century.

Ultimately, the gains from technological development and its future direction will be influenced by those with power, but how and where does this power come from?

Acemoglu and Johnson deal with this question by way of explaining how it is the power of persuasion (or persuasion power as they call it) that gives certain individuals or groups the leverage needed to influence. They explain that there are two sources of persuasion power: the power of ideas and the power to set the agenda. While I am thoroughly swept by their argument, I believe this deliberation of persuasion power is one of the weak points of their book. Firstly, they attribute that “what determines whether an individual or group has the charisma or resources to push ideas” is random.

The distribution of characteristics that lead to asymmetrical power differences (which in turn affect the prevalence of ideas) is not random. For example, certain groups with more sway over the general population may have more political power (to influence). Certain groups with more military prowess may have more military power (to influence). Furthermore, certain groups which have witnessed more technological development may develop more power over those who haven’t which coincidentally is the main theme of the book.

Now, while one may argue that original derivation of the distribution of political, military, and technological power may be random (such is an argument put forward in Why Nations Fail). To me, this derivation is too far removed to claim that the distribution of power is random. I feel this point is further validated by the authors when they argue that the second source of having the power of persuasion is to have the ability to set the agenda which, they in turn admit, is largely determined by those with economic and political power. While one’s ability to persuade may partially be attributable to the strength of your idea and your inherent ability to persuade, but the focus or framing of this chapter takes away from a deeper analysis on the basic understanding of the origin and dynamics of power as a commodity in society and how this power is derived (which may seem more basic from a political science perspective but would have certainly grounded the analysis). These are important aspects to understand because they are essential elements to the central argument that there needs to be a greater dissemination of power in society to ensure that rapid technological development is economically beneficial for most of society.

Taking this further, at times, it can seem as if the authors are arguing for a normative shift from one where the technological developments are focused on automation (so call ‘so-so automation’) to one where technological developments are focused on machine usefulness (as defined as those developments that improve marginal worker productivity). While this certainly provides a compelling narrative, it appears as if the authors intensions are more subtle then arguing for such an idealistic shift.

The authors point out four different ways in which technology defined as Machine Useful can be developed and while they provide examples for each, it is unclear that focusing on developing ‘machine useful’ technologies would lead to be big jump in marginal worker productivity or whether these technologies exist or can be developed. It is interesting to note, that in the historical examples used to provide evidence for the development of machine usefulness technologies, the initiatives were undertaken by managers who wanted to improve efficiencies either by boosting production or by cutting costs (namely, the development of Ford’s assembly line early-on in the 20th century and the development of Japanese and German manufacturing in the mid-20th century). What is clear is how the efficiency improvements made during these periods were made in a society in which labour had a greater degree of influence and thus could better protect itself (such as championing the upskilling of workers or advocating for the creation of more positions), thus forcing the companies experiencing the productivity gain to internalize more of the societal cost of automation.

My central takeaway then from the argument is not that we need a conscious decision to shift the focus of technological development undertaken by public and private organisations to more equitable objectives. But rather the argument is a call to policy makers to ensure that the incentives for technological development are adjusted so that firms prioritize labour more when implementing such developments. Examples of such policies would be giving greater influence to unions and other labourer organisations to advocate for the effects technological developments will have on the workforce. Thus, protecting a greater part of the labour force ?from the possible/likely displacement effects of the current developments.

The argument is not that we have control over the technological development. It is rather that we have control over how we protect (displaced) labour and that the degree to which we protect labour is the degree to which we incentivise technological pathfinders to factor the currently employed into the conversation (as was successfully done during different time periods in the US, Germany, and Sweden). Thus, limiting the great inequalities caused by technological developments of the past.

Power and Progress by Daron Acemoglu and Simon Johnson is an invigorating and eloquent argument that technological development's outcomes are not unpredictable, and we have the ability to shape them for the benefit of the average person. It is a timely argument and a most thought-provoking book.