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Science/Tech See other Science/Tech Articles Title: Economic impact of evolving communications technology Open source unemployment. Here is a very serious thought. As far as we know few people have written about it. Few have even thought about it. And no one has figured out what it means. But it could mean that the whole nature of the economy...and how we measure it...will have to change. More immediately, it is another cigarette for the wheezing Middle Class. The seed was planted by a headline from the Wall Street Journal. We didn't read the article. But we noticed the headline. "Porn industry profits down," or something like that. Hmmm.... surely, the demand had not decreased. We began to think about why the porn industry might be less profitable. We'll take a guess -- open source technology. It's now so cheap and easy to make and distribute dirty pictures that the profit must have gone a little limp. An amateur with an I-phone or a $100 filming aparatus can make a fairly clear movie. He can send it over the internet at no cost. So, the recipient can view it in the privacy of his home for nothing...or almost nothing. This is very different from the old days. You needed a whole crew to make a film of any sort...and expensive cameras, lights -- all sorts of things. Then, when you had made the film, you put it on a reel and sent it all over the country...to physical theatres in dingy parts of town, where people drove in their automobiles to buy tickets and watch smut. Lots of middle class jobs involved. In the old days, the enterprise consumed large expenditures of energy -- human and mechanical -- to produce what was recorded as an increase in GDP and considered an increase in living standards. Energy = GDP = Standard of living = jobs. Now, very little energy is expended. Very little money is spent. No increase in GDP is recorded. Nor is there any measurable increase in standards of living. And jobs have been eliminated (no film crews, no drivers, no gasoline sold, no theatres built, no popcorn sold, no carpets cleaned). From an economic standpoint, the switch over to internet-based porn looks like a net loss. And yet, the pleasure of the viewer is as great or greater than ever. The clients are getting the same bang, so to speak, for many fewer bucks. Now, imagine this same principle applied to, say, warfare. The US spends trillions on defense. This is great -- or so it seems -- from an economic point-of-view. Lots of jobs making big ships and big tanks and big airplanes. Lots of energy used moving them around. Lots of money spent. Lots of support personnel and profits in the contractors' pockets. Lots of bribes (campaign contributions) for Congress too. But now imagine that, say, China figures it will challenge the US empire in a different way. Let us imagine that it spends just a little bit and figures out a way to scramble communications. Its signals crossed, the US battleship runs aground. The US airplane bombs the wrong city. The tank gets lost, runs out of fuel...and is abandoned. This is a purely hypothetical example, but it is how things work. Old imperial forces get fat and stupid. They are always ready to fight the last war! New challengers have to figure out new techniques and try new technology. But if it were to work out this way, communications technology would have done to the defense industry what it has done to books and pornography. It will have de-materialized it. Fewer jobs. Less energy. Less money. Fewer resources. Again, you get the same bang...with many fewer GDP bucks. Already, terroristas have noticed. Here's an article about how new open source communications technology is being used by England's rioters: Lots of the activity going on in London is based on open source warfare precepts. Much more going on here than a simple riot or looting. It's a learning lab. Communicating via BlackBerry instant-message technology that the police have struggled to monitor, as well as by social networking sites like Facebook and Twitter, they repeatedly signaled fresh target areas to those caught up in the mayhem. They coupled their grasp of digital technology with the ability to race through London's clogged traffic on bicycles and mopeds, creating what amounted to flying squads that switched from one scene to another in the London districts of Hackney, Lewisham, Clapham, Peckham, Croydon, Woolwich and Enfield, among others -- and even, late on Monday night, at least minor outbreaks in the mainly upscale neighborhood of Notting Hill and parts of Camden. NYTimes. Facebook example: Riot page. When property can be so easily vandalized, the benefit of owning it goes down. Asset prices fall. Lower asset prices make building and investing less attractive. But that's what Open Source does. It lowers the value of traditional capital -- theatres/bookstores/battleships and so forth. And it kills jobs and wipes out GDP. The new economy may yield the same pleasures...the same quality of life...more or less. But it may also produce a nightmare: very high unemployment for a very long time. Here's Jeff Jarvis at the Huffington Post and on the case: We're not going to have a jobless recovery. We're going to have a jobless future. Holding out blind hope for the magical appearance of new jobs and the reappearance of growth in the economy is a fool's faith. Politicians who think that merely chanting the incantation "jobs, jobs, jobs" will bring them and the economy back are fooling us if not themselves. When at least a tenth of Americans are out of work, for Wall Street to get momentarily giddy at the creation of 117k jobs is cognitive dissonance at its best. No one can make jobs out of thin air. Jobs will not come back. A few new jobs reappearing won't fix anything. Our new economy is shrinking because technology leads to efficiency over growth. That is the notion I want to explore now. Pick an industry: newspapers, say. Untold thousands of jobs have been destroyed and they will not come back . Yes, new jobs will be created by entrepreneurs -- that is precisely why I teach entrepreneurial journalism. But in the net, the news industry -- make that the news ecosystem -- will employ fewer people in companies. There will still be news but it will be far more efficient, thanks to the internet. Take retail. Borders. Circuit City. Sharper Image. KB Toys. CompUSA. Dead. Every main street and every mall has empty stores that are not going to be filled. Buying things locally for immediate gratification will be a premium service because it is far more efficient -- in terms of inventory cost, real estate, staffing -- to consolidate and fulfill merchandise at a distance. Wal-Mart isn't killing retailing. Amazon is. Transparent pricing online will reduce prices and profitability yet more. Retail will be more efficient. The housing market has imploded and is not likely to reinflate for a long time to come. So the market for new homes will not recover and construction jobs will not come back. Bill Bonner, for The Daily Reckoning
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#1. To: Tatarewicz (#0)
Supply goes up, prices go down.
*Before anyone gets their panties in a bunch, I invite you to compare the number of Irish, Italian, German, and Scandinavian political philosophers who have written on liberty and limited government with the number of English philosophers who published works on the subject" - Vox Day
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