Looking at the profit of companies like Google and Facebook overstates the impact for them. They are making tons of money, but a lot of that is just a shift in the location of advertising dollars. Amazon has lowered prices, and there's real economic impact there, but what is the actual percentage?
In my current line of work, transportation management software, we're giving companies tools to be more efficient and reduce their freight expenditure, but the reductions are really very modest--good enough to keep customers happy, but nothing revolutionary. That seems to be the pattern for an awful lot of software: if you can beat an established industry by a little bit, that's enough for a business, but that's not the kind of revolution that you'd think there is listening to people hyping startups.
And if you think I'm wrong, ask yourself why GDP growth has been so anemic in the age of the Internet.
That said, your example of curing disease is a bad case of the broken window fallacy. No longer having to combat specific diseases 1) leaves people healthy and able to contribute to economic activity, and 2) leaves the people previously employed in medical fields able to take other jobs.
Maybe in 2016, where there's a seeming lack of jobs in the developed world, that's not a clear driver of economic growth, but in 1916, it was.
Global GDP growth has been fairly steady for 40+ years. http://www.worldeconomics.com/papers/Global%20Growth%20Monit...
And yes, GDP is suffering from some problems. There's huge informational resources that can not be valued the way GDP is calculated. There are many other criticisms of it[1]. OTOH, is somebody gets money for digging a trench in the morning and filling it up at the evening, GDP increases, even though nothing useful were done, the money was just wasted. Don't get me wrong, GDP is a useful indicator, but it doesn't show everything.
[1] https://en.wikipedia.org/wiki/Gross_domestic_product#Limitat...
GDP is the wrong figure. As we've pulled up the ladder and pushed people out of the workforce our net GDP has leveled off, but non-farm labour productivity has continued the rapid pace characteristic of the US economy, hitting an all time peak in 2015. We're getting more value out of fewer people. Some part of that has to be attributed to advanced communications, including the Internet.
Krugman has established a long history of embarrassingly bad predictions; this is merely one of the most demonstrably terrible. Also sometimes cited is his advocacy for 'housing bubble' policy and subsequent denials. Krugman doesn't know whats going on. He writes economic red meat for his fellow leftists inside his New York echo chamber. The real world is paying no attention.
P.S. Attacks on Krugman seem pretty non-responsive to what I said, but this is 1998, prior to Krugman's heavy involvement in partisan politics, an involvement which may not have made him more...careful.
This year especially should drive that point home. It's best to only make bold statements when you are sure, and when you do so, put your money where your mouth is ("Skin in the game", as Nassim Taleb says). And most definitely do not become a paid opinion writer, or even bother taking any of their pontificating seriously.
[0] http://www.businessinsider.com/paul-krugman-responds-to-inte...
From the book:
When do judgments reflect true expertise?
An environment that is sufficiently regular to be predictable an opportunity to learn these regularities through prolonged practice. (aka not economics)
When both these conditions are satisfied, intuitions are likely to be skilled.
Intuition cannot be trusted in the absence of stable regularities in the environment.
If the environment is sufficiently regular and if the judge has had a chance to learn its regularities, the associative machinery will recognize situations and generate quick and accurate predictions and decisions. You can trust someone’s intuitions if these conditions are met.
When evaluating expert intuition you should always consider whether there was an adequate opportunity to learn the cues, even in a regular environment.
It's possible that growth would have been even more anaemic without the internet, but that's hard to argue from the data.
On team academia, Linus Pauling, Edward Teller, Bertrand Russell, Paul Krugman, etc. On team Hollywood, Jane Fonda, Clint Eastwood, Al Franken, Madonna, etc. Being tremendously prominent in one domain has only a loose correlation with expertise in something else quite different.
That's easy to say if all you read are his opinion pieces rather than his academic work.
The article the economic impact of the internet quote came from wasn't a scholarly article or his normal column, it was a fun, let's make some provocative predictions type article.
Whether I agree with him or not, I find his haughty, didactic tone very off-putting.
Knuth was published in the very unprofessional Mad Magazine. What's your point?
I am also disappointed in how closed and centralized the applications that run on the internet have become since the internet was privatized. Where we used to have decentralized systems in the 80s to late 90s, we now have huge star (wheel and spoke) networks.
The days you get your internet from the weird guy down the street running a rack of servers in his closet are long gone.
We have also re-created old medium and I seriously doubt people like Alan Kay are impressed with that. We have invented the most important tool in the history of humanity and it's being used by billions of people to look at Facebook instead of say, solving real problems like climate change. As Alan Kay said "The computer revolution hasn't happened yet".
Is a big part of this what exactly economists are measuring, and either they're right and we're just too close to see it, or they're missing important stuff when they measure.
And to be fair, I think the fax was pretty big in it's day for business to business communication.
This article was written before the net bubble.
So far all I see in the economics of internet is netflix replacing DVDs, twitter/facebook/online presence (which is advertising, which means little to me), and... that's it. Other domains like online gaming are not that great in term of economic impact.
Amazon is closing book and movie stores.
I can see that the internet changed many things, but was it improvement? I don't know. When you account music and movie piracy, credit card fraud, scammers, online security, it doesn't seem so great.
The only improvements I can see is porn (being able to channel your sexuality) and dating websites (more people being able to risk a little more to find somebody).
This article was written before the net bubble.
> When we assess the impact of technological changes, we tend to downplay things that happened a while ago. Of course, the internet is great – I can now google and find the exact location of this restaurant on the edge of Liverpool or whatever. But when you look at the impact of this on the economy, it's mainly in the area of leisure.
> By liberating women from household work and helping to abolish professions such as domestic service, the washing machine and other household goods completely revolutionised the structure of society. As women have become active in the labour market they have acquired a different status at home – they can credibly threaten their partners that if they don't treat them well they will leave them and make an independent living. And this had huge economic consequences. Rather than spend their time washing clothes, women could go out and do more productive things. Basically, it has doubled the workforce.
[0] https://www.theguardian.com/technology/2010/aug/29/my-bright...
I also wonder what we would find if we measured the productivity gains of the washing machine; I'm not sure we would see the rise that economists want to see from computing technology.
The internet encompasses vast video game experiences, nearly realtime communication from politicians and public figures (without hauling around a C-SPAN 2 camera team), and has even taken on a life of its own with YouTube stars and internet celebrities, completely bypassing the traditional media channels that were usually dominated by the whims of their producers.
Even now I think our impression of the internet is roughly in line with the people of the early 20th century who could not have begun to imagine the vast possibilities provided by mass electrification.
If you're going to put your predictions out there in the public sphere as an influencer, then I think it's fair (in fact necessary) to judge people on those predictions and their record.
However, I doubt many of us would do better if held to the same level of scrutiny. Two examples from these boards: Dropbox ("it sucks!") and Theranos ("game-changing!") would embarass at least a few of us.
Except he's correct. The web has become a disinformation, fake news, and conspiracy theory bonanza. Finding good information still takes legwork, 22 years after this article was written.
Also to be fair to Cliff, this article was written well before sites like wikipedia had prominence. So yes, back then putting something in a search engine was asking for trouble. The results were very poor because the content was very poor.
>What's missing from this electronic wonderland? Human contact.
Thus the rise of social media.
I think this essay was unusually prophetic and insightful in many ways.
By analogy to "net-negative producers" at what point do the conspiracy theories incubated by the internet detract from it's good points enough that it is overall negative, or perhaps only as positive as say, the fax machine?
Yes, conspiracy theories like Russia hacked the election.
Sort of dwarfs any validity in the article.
Do you remember when you had to .com after every company or had to put www. before every company, because almost no one knew how to search (on AltaVista or redirect in a DNS record), or just restarted their computer to get back to the Yahoo! home page?
If not, then you don't remember this time... but almost everyone remembers the DotCom bust 3 years later, when the nerds got their comeuppance!
Within two or three years, the current mood of American triumphalism--our belief that we have pulled economically and technologically ahead of the rest of the world--will evaporate. -Krugman
[0] https://en.wikipedia.org/wiki/The_Road_Ahead_%28Bill_Gates_b...
Why was the OP posted to Hacker News today? Is it in response to Krugman's dire warning about American democracy and how the GOP is putting us all at risk?
Be careful about politics on Hacker News. The tech industry has an important role to play in media, and we know that the GOP has spent substantial sums to create bias in the media. [1] There is a strong incentive for the GOP to astroturf Hacker News and we should all be careful.
It's true that "reality often has a liberal bias" - and that's because the leaders of the GOP -- politicians and their big donors -- are trying to create their own reality, where they can cut taxes to keep more money in the pockets of the 0.01%. Use your own head when you see links like this.
[0] http://www.nytimes.com/2016/12/19/opinion/how-republics-end.... [1] http://www.salon.com/2008/09/24/mccain_letters/
edit: I expect the vocal right-leaning minority here to vote heavily; if you agree with the above and you're not a frequent voter please upvote posts here you agree with.
I feel like this is more a failure of critical thinking than anything else. There has been nonsense about flying cars on the cover of Popular Science since I was in diapers (early 1980's). I am 36 and I think the the progression of technology during my lifetime has been amazing. If you could travel back 20 years and show someone a Google search on an iPhone they would be gobsmacked. (Or maybe they'd just say, but "what about my flying car?")
The web finally recovered with things like Chrome that got browser competition going again, and Facebook Apps that reminded us we can make our own stores and ecosystems of import.
The next big hit setback was the cloud transition. Servers are just super useful and they are orders of magnitude harder to administer than a PC. This consolidated power amongst sysadmins (and away from users and coders). That has driven the slide back towards proprietary web apps.
But we have been slowly chipping away at the complexity differential between administering a server and using a laptop. See Heroku, etc. We're not there but we're very close to the world where you can spin up a server as easily as you download apps.
Then of course the most recent hit is Apple and the App Store. We eealized there is some value to having a trusted third party curate a collection of software.
And again, we don't have tools to allow people to do that in a decentralized way, but we'll get there.
The question to me is: will free software always be playing catch up? Is this a forever thing?
I think no: it's a disruptive technology with an inherent differentiating factor (access by default, vs paywall by default). I think we're still getting to feature parity with the proprietary development culture, but when we do I think the fortunes of centralized/decentralized will reverse.
But we'll see! 2043 at the latest, if anyone wants to wager.
I think this is a mis-characterization. The Internet is used for all sorts of "good" causes. I think we just take for granted the ease with which it allows teams of scientists and researchers to connect, communicate, and share research.
When you grow up believing you will be driving flying cars and seeing robots help you around the house, how else are you supposed to feel?
we have flying cars. they're called private jets, but most people can't afford them. we have to take the flying bus! we've had robots in our homes for a while. do they have to be anthropomorphic to count, or what?
I am also disappointed in how closed and centralized the applications that run on the internet have become since the internet was privatized. Where we used to have decentralized systems in the 80s to late 90s, we now have huge star (wheel and spoke) networks.
internet applications may be closed and centralized, but i think you are forgetting about the mountains of free/open software that those systems are built upon. life-changing mountains of software. foss is the foundation that a lot of careers (including my own) are built upon.
obviously it would be better if we were all on an open source distributed net, but its not like it isn't a solvable problem. we just have to be more creative.
We have invented the most important tool in the history of humanity and it's being used by billions of people to look at Facebook instead of say, solving real problems like climate change.
the internet is a communication network that people use for a lot of different things, including working to solve climate change.
i don't think we've figured out social networking quite yet. or the internet for that matter. i think its all quite exciting! so much new shit happening all of the time. not only that, but i have the opportunity to be a part of it. i may not be the person that ends up in the history books, but i'm here at ground zero.
My company does SaaS for logistics. We lower the cost of moving goods for our customers. I count that as economic impact. It's just that the impact is relatively limited. We can get you lower labor costs, faster planning, more optimal routing, and higher utilization, but we can't make a truck move twice as far in the same amount of time.
Even worse than his many errors, is his hypocrisy. He very loudly accused Amazon of being a "monopsony" during Amazon's most recent dust-up with the big publishers, on grounds that its market power would enable it to hurt consumers, although he acknowledged, Amazon hadn't used its economic power that way. https://www.nytimes.com/2014/10/20/opinion/paul-krugman-amaz...
The impetus for Krugman's column was, Amazon's resistance to big publishers using their market power to overprice ebooks. Krugman was on the side of the big publishers for obvious reasons I think. Krugman's own widely-assigned economics texts provide some of the clearest examples of big publishers using monopsony to overprice ebooks. His publisher, presumably with Krugman's support, sells ebooks of these texts for $100 - $200 a copy. A great example of mmonopsony - because students are assigned Krugman's books and therefore don't have choice, Krugman's publisher extracts monopsony profits. This isn't just a little convenient opportunism -- as Krugman surely knows, overinflated textbook prices are a significant burden on many students, who are leaving university with huge debt. Yet, Krugman goes along with this exploitation, and presumably banks very large royalties for himself at student's expense.
I say presumably a couple of times, because I've not seen anything from Krugman explaining or apologizing for the prices of his own books and the way this exploits students.
The entire left side of the aisle? But, not any other people? Hmmm.
> He very loudly accused Amazon of being a "monopsony" during Amazon's most recent dust-up with the big publishers, on grounds that its market power would enable it to hurt consumers, although he acknowledged, Amazon hadn't used its economic power that way.
Well, they are a giant player with immense power that already dictates things to its supply chain...
And the important thing to do is recognize risks before the problems manifest. It wouldn't be any good to tell you your garage was full of flammable rags after your house burned down.
> Yet, Krugman goes along with this exploitation, and presumably banks very large royalties for himself at student's expense.
Compared to wages, speaking fees, etc? I doubt it.
But nonetheless, you do have a good point about textbooks being exorbitantly priced. When we provide student-loans, schools increase tuition. If we gave children a billion dollars a year universities would still be pretending to be broke and asking for more.
IMHO, that's the racket we need to break. As long as there's a government license to print a "right to work" token (a degree), you'll have players entrench around it - like camping spawn spots. And as always, the less effective the school is at teaching the more resources they have for political battles.
I'm also no big fan of these conspiracies where someone like Krugman does something because it may mean a few thousand $ per year for him. That's a cheap attack, and it really doesn't seem plausible that he'd care more about a bit of money than winning the argument.
I suspect it's more likely that we're underestimating the consumer surplus from the internet than we are overestimating it. By how much, I don't know.
Or, to go back to technology, take Facebook for example. Perhaps people would have liked to have a social networking site before, but it simply wasn't available. When it became available, many people used it and enjoyed it in their leisure time. Because it's free, and, while large, does not pull very large revenues per user, it doesn't show up as a major economic activity. And because it's used mostly as an end-consumer leisure activity, it is missed by indicators that don't measure this well. So there can be a substantial total increase in services enjoyed, and we might be missing it. Again - might. I cannot say for sure, but it's worth asking.