ENERGY FUELS STAR TREK ECONOMY
Joshua Gans: Over the past 150 years, the biggest impact on the economy has clearly come from technology. Predictions that technology would bring with it improved living standards have been staples of long-term economic forecasts. But most of those predictions have been accompanied by a belief that technological progress will decelerate and peter out, raising the question: What comes next?
Editor’s note: 2017 marks the sesquicentennial of Confederation. While the anniversary is a chance to reflect on the past, The Conversation Canada asked some of our academic authors to look down the road a further 150 years. For our “Canada +150’’ series, we want to know what our world will be like in 2167. Economist and innovation guru Joshua Gans looks at the intersection of technology and energy and what that could mean to Canada in the future.
Canada is poised to commence an age of abundance that will see its citizens living in a virtual utopia by the country’s tricentennial.
Over the past 150 years, the biggest impact on the economy has clearly come from technology. Predictions that technology would bring with it improved living standards have been staples of long-term economic forecasts. But most of those predictions have been accompanied by a belief that technological progress will decelerate and peter out, raising the question: What comes next?
Karl Marx and Joseph Schumpeter believed that when technological progress reached its limit, something else would replace capitalism. John Maynard Keynes believed that work would diminish and leisure would take over. And in the modern day, Northwestern economist Robert Gordon has carefully documented a case for progress in the next 150 years set to be a mere shadow of the previous 150.
If we are going to get dismal about it, we remove all of the fun. Moreover, I don’t want to pretend to forecast technological progress, otherwise I might end up saying stuff like Paul Krugman did in 1998: “By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.’’
New energy
Instead, let me imagine — without foundation and with a large dose of hope — a future 150 years from now that still has another technological revolution to come. And if I am going to inject a big hit to the economy, that revolution needs to occur in one area: Energy.
Everything we have gained in the last 150 years has come because we discovered how to use new sources of energy.
We can turn coal, oil, gas, water and nuclear materials into industrial-scale energy. That has powered everything physical (our machines) and intangible (our software). It has led to construction (giving rise to cities, potable water supplies and sanitation), transport (bringing the world together) and weather control. To be sure, we have learned to use our energy better, but there is only so much you can pull out of existing natural resources. So, to be optimistic about technology is to believe we will discover a new energy source.
I’ll leave it to others to speculate about what that new source might be, but imagine that it’s plentiful and also clean. And just to make it simple, suppose that energy becomes essentially free and easy to distribute, whether it is through long-lasting batteries, fantastic light or something even more grand.
This would solve the basic economic problem of not enough to go around. In the process, most of the things that we consider to be jobs today will make no sense. Here, I quickly fall into the same prediction that other economists have made: Without jobs as we imagine them today, then what?
More leisure
For Keynes, the likely scenario was a move towards a minimal amount of work each day and then leisure time. He wondered if people were educated enough to know how to fill their idle time. With the better part of a century of experience, we can confidently say that they worked it out. Let’s face it: There has been no entertainment device as powerful or as sticky as television no matter what other options have presented themselves.
The idea of increased leisure time dominates conclusions in a recent book of famous economists speculating on what the world would look like in 100 years. But in that book, Nobel Laureate Bob Solow noted that there was no evidence that leisure time would increase.
For the last five decades there has been an increase in work hours, especially in North America. This is an enduring puzzle if only because casual observation suggests a lot of people do not like many aspects of their jobs.
While I, as an academic, can rejoice in my relative job satisfaction, even hardworking professionals seem to wonder about their work-tolife balance. If we look to the super-rich, there are surprising numbers who do things that are leisure-averse, such as running to be a head of state or ending up in public service.
What does this mean? It means that we economists truly have no idea about what to predict regarding work when the economic problem is relegated to history. Some distract themselves worrying about inequality — that is, that the economic problem may be solved but powerful people prevent it from being widely distributed.
Other economists suggest there will be a shift in demand towards labour-intensive work, such as artisanal products valued because they are made by people.
One reliable prediction borne out by history is that unemployment has been surprisingly low relative to technological changes that have occurred. People seem to have always found something to do.
Star Trek
If I had to guess, for many people, solving the economic problem on Earth will draw them into space where the challenge of scarcity will reassert itself. Given the current laws of physics, they will do so in the knowledge that they are confining their own descendants to lower living standards rather than the current presumption that people work to make their children better off. In other words, I continue to place weight on a Star Treklike economy of the future even if 150 years only takes us to the beginning of the Final Frontier — and I am far from alone in that view.
In reality, there is a good chance there won’t be a solution to the energy problem, allowing living standards to skyrocket. In this scenario, Canada is nevertheless surprisingly well-placed.
Climate change is likely to cause large populations to move north to escape the heat. And despite recent moves away from globalization, it’s entirely plausible that free trade will come about because ideas are all that need to move across borders when Star Trek-like ‘replicator’ on-demand fabrication becomes possible.
If I wanted to bet on providing good economic possibilities for my grandchildren (and in a way, I have), then placing them in Canada is a pretty good one.
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