Paul Tero a member of our Emerging Fellows program proceeds with his marvelous journey to the land of digital economy in his third blog post. The views expressed are those of the author and not necessarily those of the APF or its other members.
Work. Whether we sit in an office, walk in a manufacturing facility, or perform some other task, those of us who work are living examples basic economic theory. We are all playing our part in turning an input into an output. We could be making sales calls to increase demand for a product, driving a truck to deliver raw materials, or even developing software to make the process better. Whether our organisation produces goods or services, we are all being paid to perform our part somewhere along the value chain.
The economy of tomorrow, the time when teenagers of today have teenage grandchildren, is more than likely to be a fully digital economy. We can see evidence of this transition already. The value chain decades ago was all about atoms, all about making and using physical goods. Today it is a mix of atoms and bits, it is an economy where value is created in the digital sphere as well as the physical sphere. Tomorrow the value chain may well be dominated by that which is digital.
Consider the primary industries. Aren’t mines and farms becoming more automated? What about the secondary industries of manufacturing and construction? Isn’t automation taking hold there as well? Even for higher value sectors such as finance, health and professional services we are witnessing inroads being made by either automated or intelligence-laden digital processes. It can be argued that there will be less employment in industry sectors that create value out of atoms. Even though the value of these sectors is growing across the OECD, related employment is largely stagnant.
Where is value created in the digital economy and what part do workers play in it? Value in the digital economy is created in the manufacture of ICT hardware, in the creation of software and services that use software, and in the collecting, processing and disseminating of data and information.
Regarding the manufacture of ICT hardware, it is not too hard to see full automation in production and logistics. But in the research, development and design phases we humans will still be critical for success. Regarding the creation of software and software-based services, is it not too far-fetched to contemplate software writing software? Where designers set the input and output requirements for new software or a new service, and the computer creates and tests the complete set of algorithms and interfaces. Finally, regarding the management of data and information. Apart from employees performing regulatory oversight, it is possible to imagine the only other scenario in which human involvement is necessary is where faulty data collection sensors need to be replaced. Given this, what then is the response to the headline question?
The answer is a qualified yes. While there are many factors that should be taken into consideration, and which are being ably explored by my Emerging Fellow colleagues, the foundational truth is that an economy is there to serve society. For we grow things, we produce things, we teach things, we regulate things and so on for our individual and collective benefit.
Even though you may accept the propositions that (a) we are moving to an economy that is dominated by bits and, (b) just like production involving atoms having become more automated, so too will bits-based production. We will still be human. And even though what we value and how we pay for it will more than likely change, there will still be economic production to serve the needs of the population. So yes, the factory will still be around to produce physical goods, but the types of work that are open to humans are those that are less automated. And yes, the office-desk job will still be around, but it too will involve non-automated people and thinking skills.
Even though what will be available and how it is produced will be different from today, basic economic theory will still apply. No matter the industry sector, in a fully digital economy people will still have roles as productive links somewhere in the value chain.
© Paul Tero 2019