Economics of the Fourth Industrial Revolution

Internet, Artificial Intelligence and Blockchain

Nicholas Johnson, Brendan Markey-Towler

• Editorial: Routledge
• Año: 2020
• ISBN:
  9780429771699
• Edición: 1
• Categoría: Betriebswirtschaft
• Categoría: Informationsmanagement

This book applies cutting-edge economic analysis and social science to unpack the rich complexities and paradoxes of the Fourth Industrial Revolution. The book takes the reader on a bold, refreshing, and informative tour through its technological drivers, its profound impact on human ecosystems, and its potential for sustainable human development. The overarching message to the reader is that the Fourth Industrial Revolution is not merely something to be feared or survived; rather, this dramatic collision of technologies, disciplines, and ideas presents a magnificent opportunity for a generation of new pioneers to rewrite "accepted rules" and find new avenues to empower billions of people to thrive. This book will help readers to discern the difference between disruption and transformation.

The reader will come away from this book with a deeply intuitive and highly contextual understanding of the core technological advances transforming the world as we know it. Beyond this, the reader will clearly appreciate the future impacts on our economies and social structures. Most importantly, the reader will receive an insightful and actionable set of guidelines to assist them in harnessing the Fourth Industrial Revolution so that both they and their communities may flourish.

The authors do not primarily seek to make prescriptions for government policy, but rather to speak directly to people about what they can do for themselves, their families, and their communities to be future-proofed and ready to adapt to life in a rapidly evolving world ecosystem.

1
Introduction

How and why to understand the Fourth Industrial Revolution

We might be tempted to think that we’re living out a Dickens novel. We could well say of our times that “it was the best of times, it was the worst of times.” We might be tempted to say that our lives increasingly resemble the unfeeling, harsh world of the industrial revolution painted by the great author in Hard Times. Our rustic, comfortable past is increasingly being swept away in a torrent of industry and innovation. The world around is constantly, radically changing as new technologies replace old ways of doing things with which we were comfortable.

It’s no accident that we might feel this way. We are currently experiencing the beginnings of the Fourth Industrial Revolution. In this, the first fifth of the twenty-first century, we are observing the convergence of innovations which are changing the technological basis for our industrial systems at their most fundamental level. Globalisation seems to have become less of an idea and more of an everyday reality as we increasingly live in a global marketplace through the medium of platforms like Amazon, Google, and Facebook. Where the Luddites felt the cotton weaver might be threatened by the advent of the loom, the machines we’re now inventing are creating fear that humanity itself might be superseded. We’re just beginning to observe the advent of technologies which challenge the very notion of nation-states to which we have become so accustomed. And every which way it seems we have prophets of doom and of glory telling us about our dystopian or utopian future.

One thing is for sure as we observe radical changes to the technological basis for our industrial systems – the economy of the future is going to look substantially different to the economy of the present. As with the third, second, and first industrial revolutions before it, the Fourth Industrial Revolution will radically alter the structure and function of our socioeconomic systems, and what was a successful or even viable way of life and doing business in the past will by no means necessarily be so in the future. The Fourth Industrial Revolution will present profound opportunities for harnessing technology to extend the range of human capability in the production and distribution of resources. But it will also present profound challenges for individuals, organisations, and communities whose systems for securing the necessary goods and services for life and its enjoyment will be disrupted by the emergence of these technologies. In order to be able to seize the opportunities the Fourth Industrial Revolution offers, and substantially mitigate the challenges it presents in terms of disruption for everyday people, we need to understand the dynamics of how the technologies which characterise it will affect the structure and function of our socioeconomic systems. Hence our purpose in this book.

Our purpose in this book is to bring economic analysis to bear on the convergent innovations which are fundamentally changing the structure of our socioeconomic systems as the Fourth Industrial Revolution emerges. We seek to form a view of the dynamics by which they are affecting that structure, project a likely future from those dynamics, and identify opportunities to be seized and challenges to be mitigated against. We also seek to develop a high-level perspective on what can be done by individuals, groups of individuals within organisations, and communities to so seize those opportunities and mitigate those challenges. In doing this we don’t pretend in any way to have established the final word on the economics of the Fourth Industrial Revolution – far from it. We hope, with this book, to contribute to an ongoing conversation about how we can harness the technologies converging to create the Fourth Industrial Revolution to seize the profound opportunities they offer, while mitigating against the profound disruptive challenges they will present to existing socioeconomic systems.

We were motivated to write this book as an extension of Klaus Schwab’s The Fourth Industrial Revolution (2016). Schwab was among the first to recognise the convergence of innovations we are observing as an industrial revolution, coining the term “Fourth Industrial Revolution,” and the first to give a comprehensive overview of the technologies driving it. Schwab’s work has contributed to a substantial literature discussing and debating various aspects of the technologies which comprise the Fourth Industrial Revolution, and is a superb introduction to it. Where we hope to extend that contribution is by bringing a coherent and unique theoretical perspective from economics to bear on what we call the “mega-technologies” which underlie the convergent innovations which are driving the Fourth Industrial Revolution.

We believe that this contribution is important because it is necessary at some point, when faced with a phenomenon so massive and complicated as an industrial revolution, to simplify it as much as possible and apply a coherent theory to discover what dynamics give rise to it. A good deal of the literature on the Fourth Industrial Revolution to date has been motivated by a close analysis of various case studies of the technology using a diverse toolbox of theories. This has been valuable but can have the effect of losing sight of the proverbial forest for the trees, and can leave people arguing about what they do not realise to be different trees. That is to say, we feel that it is now important to delve deeper beyond case studies of particular technologies to see what we can say about the core dynamics of the way the convergence of technologies is causing socioeconomic systems to evolve.

By bringing a coherent and unique theoretical perspective from economics to bear on what we believe to be the “mega-technologies” of the Fourth Industrial Revolution from which the various innovations which comprise it emerge, we reduce the complexity of the problem greatly and reveal the core dynamics of the phenomenon. By this contribution to the literature we hope to obtain a coherent perspective on the dynamics underlying the evolving structure of socioeconomic systems in response to the emerging “mega-technologies” of the Fourth Industrial Revolution. By bringing that theoretical perspective to bear on these “mega-technologies” we hope also to respond to and extend Schwab’s contribution in particular by identifying, in a systematic manner, the opportunities and challenges presented by these technologies, as well as high-level strategies to seize the former and mitigate the latter. By this contribution to the literature, in short, we hope to offer readers an understanding of the dynamics of the Fourth Industrial Revolution which allows them to adapt their approaches to life and business in response to its disruptions and to realise its profound advancements.

1 Our approach to the economics of the Fourth Industrial Revolution

To develop an economic analysis of the convergent technologies of the Fourth Industrial Revolution, we will apply two theoretical perspectives. The first allows us to identify and justify a focus on the “mega-technologies” of the Fourth Industrial Revolution, while the second, unique perspective allows us to think about how those technologies will affect the structural evolution of the socioeconomic system. The first allows us to significantly reduce the complexity of the problem of analysing the convergent technological innovations which comprise the Fourth Industrial Revolution surveyed by Schwab (2016) in particular, among others, and the second allows us to then understand the function of those technologies within a theoretical economy.

The first theoretical perspective we adopt is that of “General Purpose Technologies,” particularly as outlined by Richard Lipsey in Economic Transformations (Lipsey, Carlaw and Bekar, 2005). A General Purpose Technology is one which has wide scope for application across an economy, and becomes a core part of the technological basis for its structure and function. It is one from which a range of more specific technologies emerge as a sort of “spillover.” We might think of it as the core “theme” to a cluster of different technologies – the common technological structure underlying a group of specific technologies. As those various specific technologies cause the socioeconomic system to evolve as they emerge, we can observe commonalities in the evolution they cause due to the commonality of their technological structure. We can thus analyse the evolution of socioeconomic structures by analysing the way the common technological structure brings about sufficiently similar evolutionary dynamics within the structure of socioeconomic systems. That is to say, we can analyse a General Purpose Technology to come to an understanding of the common, core dynamics technologies which emerge from it bring about.

We applied this perspective to the range of different technologies which Schwab (2016), among others, have identified as comprising the Fourth Industrial Revolution, and believe it to be constituted by the convergence and interaction of three General Purpose Technologies, which we call the “mega-technologies” of the Fourth Industrial Revolution. These three technologies, we believe, and we argue throughout, underlie the more specific technologies from which the Fourth Industrial Revolution emerges, and are generating large scale evolutionary change across our socioeconomic systems. Hence the subtitle of this book. We believe that the Fourth Industrial Revolution is characterised by the emergence, convergence, and interaction of three General Purpose Technologies, “mega-technologies”: internet, artificial intelligence, and blockchain.

When we say that the internet is a General Purpose Technology underlying the Fourth Industrial Revolution we are aware of the fact that it can rightly be said to have been one underlying the Third Industrial Revolution as well. What we think makes the internet a part of the troika of technologies converging to create the Fourth Industrial Revolution is the switch of its application from being, properly speaking, a communication technology, to a technology which provides the basic infrastructure for socioeconomic interaction. The first iteration of the internet as a technology involved its capabilities as an information communication technology. In this application, the internet made the communications processes upon which any economic system relies significantly faster. It could have been said to have made our socioeconomic systems vastly more efficient, rather than changing their core structural dynamics. The internet as a mega-technology of the Fourth Industrial Revolution is a technology which is used as an infrastructure for economic exchange, as a technology for supporting new forms of economic interaction rather than making existing ones more efficient.

What transformed the technology radically enough for this to be the case, and for the internet to become a mega-technology of the Fourth Industrial Revolution as well as the third, was the rise of the smartphone. The smartphone’s effect was to embed internet access points in mobile devices which could be accessed readily and conveniently at any point and in any space, and therefore to make the internet ubiquitous and pervasive in everyday life and not just a network to connect to when necessary. As a mega-technology of the Fourth Industrial Revolution, the internet in this form makes social media possible and ubiquitous; similarly with e-commerce platforms, it facilitates the spread of “apps” to manage everything from your finances to your fridge, and serves as the backbone of the Internet of Things. It is what helps to make Big Data sets possible, as well as augmented reality. It is, essentially, the basic infrastructure for the Fourth Industrial Revolution, providing the base technology with which our future socioeconomic interactions will be enabled.

Where the internet provides the basic infrastructure with which our future socioeconomic interactions will be enabled, artificial intelligence is the General Purpose Technology underlying the Fourth Industrial Revolution which provides its production technology. Artificial intelligence, especially that endowed with machine learning capabilities, is a mega-technology of the Fourth Industrial Revolution which radically reduces the labour required for a given production system to function and thus radically expands production capabilities. Obviously enough, it makes radical automation possible, not only of physical tasks but also of tasks which traditionally involved human information processing. But artificial intelligence also makes the “drone” economy possible by endowing machines with artificial intelligence which allows them to complete tasks from delivery to development of draft documents. It further enhances our computing power to stupendous degrees, allowing for advances in scientific discovery, especially when coupled with the Big Data generated by the internet, as well as with biomedical sciences, where it can be used to improve diagnostic and genetic sequencing procedures. It is, essentially, the basic production technology for the Fourth Industrial Revolution, allowing any activity which can be reduced to the operation of an algorithm to be automated.

The Fourth Industrial Revolution is not only a revolution of platforms for socioeconomic interaction and production techniques, however; it is also a revolution of governance technology, and this is why we include blockchain as a General Purpose Technology underlying it. Blockchain is an institutional technology which allows for privatised governance to emerge on internet-based platforms for socioeconomic interaction. As a mega-technology of the Fourth Industrial Revolution, it allows communities to design and develop governance structures organised around the keeping of a decentralised, immutable book of true records of socioeconomic facts which are bespoke to their needs. It has applications from cryptocurrency, to smart contracts, to the keeping of voting records and identity. Where the internet provides the basic infrastructure for socioeconomic interaction in the Fourth Industrial Revolution, and artificial intelligence provides its production technology, blockchain will provide the technology for institutional, privatised governance of the socioeconomic systems which emerge from it.

With this simplification of the convergent technologies underlying the Fourth Industrial Revolution in hand, we adopt a unique theoretical perspective on socioeconomic systems and their evolution: the “Brisbane Club” model. The reason for this is that the technologies of the Fourth Industrial Revolution lend themselves not so much to an analysis which focusses on the increased outputs for similar inputs which are made possible by new technologies, but rather to an analysis which focusses on the evolutionary pressures they introduce to the structure of socioeconomic systems. The Fourth Industrial Revolution will be characterised by the disruption of existing structures within socioeconomic systems and the building of new ones even more so than the increase of output for given inputs. The Brisbane Club model is suited to analysing these dynamics because it was developed in order to understand how new technologies introduce evolutionary dynamics to the structure of socioeconomic systems.

The Brisbane Club model is so named because it was developed in the early twenty-first century by a group of evolutionary and behavioural economists interested in complex systems theory at the University of Queensland. It crystallised around The New Evolutionary Microeconomics (2000) by Jason Potts, and was further developed in contributions from John Foster (2005), Kurt Dopfer (Dopfer, Foster and Potts, 2004; Dopfer and Potts, 2008), and Peter Earl and Tim Wakeley (2010). It was substantially formalised by one of the present authors (Markey-Towler) in his doctoral thesis, and it is this model that we apply in the present work. The Brisbane Club model presents the economy as a complex, evolving network system of value-creating exchange formed by individuals acting on the basis of their psychology and socioeconomic environment enabled by technology. It allows us to take a technology, examine the manner in which it expands human capabilities, then place it within a model of the economy as a complex evolving network of value-creating exchange and observe the effects it has. We adopt this model here to analyse and project the likely dynamics created by the mega-technologies of the Fourth Industrial Revolution on our socioeconomic systems. In each case we will identify what the technology is and how it expands human capability for action, and then apply the Brisbane Club model to this in order to analyse the likely dynamics the technologies will create as the Fourth Industrial Revolution progresses.

As a result of the approach we took to the economic analysis of the Fourth Industrial Revolution, we arrived at a different, but complementary, analysis to that offered by Brynjolfsson and McAfee in their 2017 book Machine, Platform, Crowd. Brynjolfsson and McAfee (2017) take a rich set of case studies and academic work in technology, psychology, and economics, and continue to develop the view of the trends being br...

Índice

• Cover
• Half Title
• Series
• Title
• Copyright
• Contents
• List of figures
• Acknowledgments
• 1 Introduction: how and why to understand the Fourth Industrial Revolution
• Part I Industrial revolutions: what they are, why they matter, how to analyse them
• Part II Internet: hyper-competition, hyper-growth, and the struggle for attention in global markets
• Part III Artificial intelligence: radical automation and expansion of human capability
• Part IV Blockchain: decentralising power, authority, and the design of systems of governance
• Part V Discussion and conclusions: harnessing the Fourth Industrial Revolution in systems building
• Index