Economics in Information Technology. Хрестоматия для студентов бакалавров направлений «Бизнес-информатика», «Прикладная информатика»

To compete in the years ahead, organizations -- whether they are for-profit businesses, service-oriented entities, such as healthcare systems, or nonprofit and government institutions -- will need both leaders and employees who are able to innovate.

They will need to leverage today's emerging technologies, such as IoT and prescriptive analytics, to better connect with existing and potential customers and to be more responsive while also being more efficient and effective.

Moreover, they'll have to be prepared to explore how best to develop or use emerging technologies or risk being left behind as the digital economy moves forward.

What the Industrial Revolution really tells us about the future of automation and work

https://theconversation.com (September 1, 2017)

As automation and artificial intelligence technologies improve, many people worry about the future of work. If millions of human workers no longer have jobs, the worriers ask, what will people do, how will they provide for themselves and their families, and what changes might occur (or be needed) in order for society to adjust?

Many economists say there is no need to worry. They point to how past major transformations in work tasks and labor

11

markets – specifically the Industrial Revolution during the 18th and 19th centuries – did not lead to major social upheaval or widespread suffering. These economists say that when technology destroys jobs, people find other jobs. As one economist argued:

“Since the dawn of the industrial age, a recurrent fear has been that technological change will spawn mass unemployment. Neoclassical economists predicted that this would not happen, because people would find other jobs, albeit possibly after a long period of painful adjustment. By and large, that prediction has proven to be correct.”

They are definitely right about the long period of painful adjustment! The aftermath of the Industrial Revolution involved two major Communist revolutions, whose death toll approaches 100 million. The stabilizing influence of the modern social welfare state emerged only after World War II, nearly 200 years on from the 18th-century beginnings of the Industrial Revolution.

Today, as globalization and automation dramatically boost corporate productivity, many workers have seen their wages stagnate. The increasing power of automation and artificial intelligence technology means more pain may follow. Are these economists minimizing the historical record when projecting the future, essentially telling us not to worry because in a century or two things will get better?

12

Reaching a tipping point

To learn from the Industrial Revolution, we must put it in the proper historical context. The Industrial Revolution was a tipping point. For many thousands of years before it, economic growth was practically negligible, generally tracking with population growth: Farmers grew a bit more food and blacksmiths made a few more tools, but people from the early agrarian societies of Mesopotamia, Egypt, China and India would have recognized the world of 17th-century Europe.

But when steam power and industrial machinery came along in the 18th century, economic activity took off. The growth that happened in just a couple hundred years was on a vastly different scale than anything that had happened before. We may be at a similar tipping point now, referred to by some as the

“Fourth Industrial Revolution,” where all that has happened in the past may appear minor compared to the productivity and profitability potential of the future.

Getting predictions wrong

It is easy to underestimate in advance the impact of globalization and automation – I have done it myself. In March 2000, the NASDAQ Composite Index peaked and then crashed, wiping out US$8 trillion in market valuations over the next two years. At the same time, the global spread of the internet enabled offshore outsourcing of software production, leading to fears of information technology jobs disappearing en masse.

13

The Association for Computing Machinery worried what these factors might mean for computer education and employment in the future. Its study group, which I co-chaired, reported in 2006 that there was no real reason to believe that computer industry jobs were migrating away from developed countries. The last decade has vindicated that conclusion.

Our report conceded, however, that “trade gains may be distributed differentially,” meaning some individuals and regions would gain and others would lose. And it was focused narrowly on the information technology industry. Had we looked at the broader impact of globalization and automation on the economy, we might have seen the much bigger changes that even then were taking hold.

Spreading to manufacturing

In both the first Industrial Revolution and today’s, the first effects were in manufacturing in the developed world. By substituting technology for workers, U.S. manufacturing productivity roughly doubled between 1995 and 2015. As a result, while U.S. manufacturing output today is essentially at an all-time high, employment peaked around 1980, and has been declining precipitously since 1995.

Unlike in the 19th century, though, the effects of globalization and automation are spreading across the developing world. Economist Branko Milanovic’s “Elephant Curve” shows how people around the globe, ranked by their income in 1998, saw

14

their incomes increase by 2008. While the income of the very poor was stagnant, rising incomes in emerging economies lifted hundreds of millions of people out of poverty. People at the very top of the income scale also benefited from globalization and automation.

But the income of workingand middle-class people in the developed world has stagnated. In the U.S., for example, income of production workers today, adjusted for inflation, is essentially at the level it was around 1970.

Now automation is also coming to developing-world economies. A recent report from the International Labor Organization found that more than two-thirds of Southeast Asia’s 9.2 million textile and footwear jobs are threatened by automation.

Waking up to the problems

In addition to spreading across the world, automation and artificial intelligence are beginning to pervade entire economies. Accountants, lawyers, truckers and even construction workers – whose jobs were largely unchanged by the first Industrial Revolution – are about to find their work changing substantially, if not entirely taken over by computers.

Until very recently, the global educated professional class didn’t recognize what was happening to workingand middle-

15

class people in developed countries. But now it is about to happen to them.

The results will be startling, disruptive and potentially longlasting. Political developments of the past year make it clear that the issue of shared prosperity cannot be ignored. It is now evident that the Brexit vote in the U.K. and the election of President Donald Trump in the U.S. were driven to a major extent by economic grievances.

Our current economy and society will transform in significant ways, with no simple fixes or adaptations to lessen their effects. But when trying to make economic predictions based on the past, it is worth remembering – and exercising – the caution provided by the distinguished Israeli economist Ariel Rubinstein in his 2012 book, “Economic Fables”:

“I am obsessively occupied with denying any interpretation contending that economic models produce conclusions of real value.”

Rubinstein’s basic assertion, which is that economic theory tells us more about economic models than it tells us about economic reality, is a warning: We should listen not only to economists when it comes to predicting the future of work; we should listen also to historians, who often bring a deeper historical perspective to their predictions. Automation will significantly change many people’s lives in ways that may be painful and enduring.

16

Are robots taking our jobs?

https://theconversation.com (April 6, 2016)

If you put water on the stove and heat it up, it will at first just get hotter and hotter. You may then conclude that heating water results only in hotter water. But at some point everything changes – the water starts to boil, turning from hot liquid into steam. Physicists call this a “phase transition.”

Automation, driven by technological progress, has been increasing inexorably for the past several decades. Two schools of economic thinking have for many years been engaged in a debate about the potential effects of automation on jobs, employment and human activity: will new technology spawn mass unemployment, as the robots take jobs away from humans? Or will the jobs robots take over release or unveil – or even create – demand for new human jobs?

The debate has flared up again recently because of technological achievements such as deep learning, which recently enabled a Google software program called AlphaGo to beat Go world champion Lee Sedol, a task considered even harder than beating the world’s chess champions.

Ultimately the question boils down to this: are today’s modern technological innovations like those of the past, which made obsolete the job of buggy maker, but created the job of

17

automobile manufacturer? Or is there something about today that is markedly different?

Malcolm Gladwell’s 2006 book The Tipping Point highlighted what he called “that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire.” Can we really be confident that we are not approaching a tipping point, a phase transition – that we are not mistaking the trend of technology both destroying and creating jobs for a law that it will always continue this way?

Old worries about new tech

This is not a new concern. Dating back at least as far as the Luddites of early 19th-century Britain, new technologies cause fear about the inevitable changes they bring.

It may seem easy to dismiss today’s concerns as unfounded in reality. But economists Jeffrey Sachs of Columbia University and Laurence Kotlikoff of Boston University argue, “What if machines are getting so smart, thanks to their microprocessor brains, that they no longer need unskilled labor to operate?”

After all, they write:

Smart machines now collect our highway tolls, check us out at stores, take our blood pressure, massage our backs, give us directions, answer our phones, print our documents, transmit our messages, rock our babies, read our books, turn on our lights, shine our shoes, guard our homes, fly our planes, write

18

our wills, teach our children, kill our enemies, and the list goes on.

Looking at the economic data

There is considerable evidence that this concern may be justified. Eric Brynjolfsson and Andrew McAfee of MIT recently wrote:

For several decades after World War II the economic statistics we care most about all rose together here in America as if they were tightly coupled. GDP grew, and so did productivity — our ability to get more output from each worker. At the same time, we created millions of jobs, and many of these were the kinds of jobs that allowed the average American worker, who didn’t

(and still doesn’t) have a college degree, to enjoy a high and rising standard of living. But … productivity growth and employment growth started to become decoupled from each other.

As the decoupling data show, the U.S. economy has been performing quite poorly for the bottom 90 percent of Americans for the past 40 years. Technology is driving productivity improvements, which grow the economy. But the rising tide is not lifting all boats, and most people are not seeing any benefit from this growth. While the U.S. economy is still creating jobs, it is not creating enough of them. The labor force participation rate, which measures the active portion of the labor force, has been dropping since the late 1990s.

19

While manufacturing output is at an all-time high, manufacturing employment is today lower than it was in the later 1940s. Wages for private nonsupervisory employees have stagnated since the late 1960s, and the wages-to-GDP ratio has been declining since 1970. Long-term unemployment is trending upwards, and inequality has become a global discussion topic, following the publication of Thomas Piketty’s

2014 book, Capital in the Twenty-First Century.

A widening danger?

Most shockingly, economists Angus Deaton, winner of the 2015 Nobel Memorial Prize in Economic Science, and Anne Case found that mortality for white middle-age Americans has been increasing over the past 25 years, due to an epidemic of suicides and afflictions stemming from substance abuse.

Is automation, driven by progress in technology, in general, and artificial intelligence and robotics, in particular, the main cause for the economic decline of working Americans?

In economics, it is easier to agree on the data than to agree on causality. Many other factors can be in play, such as globalization, deregulation, decline of unions and the like. Yet in a 2014 poll of leading academic economists conducted by the Chicago Initiative on Global Markets, regarding the impact of technology on employment and earnings, 43 percent of those polled agreed with the statement that “information technology and automation are a central reason why median wages have

20