science fiction economics

Paul Krugman and Charlie Stross had a chat at the Worldcon in Montreal last week, and it’s fascinating from start to finish. The link to Charlie’s blog lets you either download audio of the talk, or it also leads to a transcript.

Paul Krugman and Charlie Stross

There’s something to be said to just getting a couple of really smart, highly interesting people into a room and letting them talk – it certainly works well here. Science Fiction is pretty much by definition about innovation – and linking these two up makes that connection more clear. So they ended up addressing several important innovation-related themes:

  • They talk about the s-curve of innovation diffusion in a couple of places. This is central part of the innovation diffusion process, and one of the results of it is that it seems like things arrive suddenly when in fact they have been growing slowly for a time before taking off.

    Charlie Stross: There’s a huge latency in information technology. For example, one of the reasons we don’t have driverless cars yet is because the car has to be able to sense its surroundings in three dimensions, including hazards, in real time. Right, and that’s a lot of computing power required. I mean, we just saw about two years ago the DARPA Grand Challenge was won for the first time by a vehicle that drove 200 kilometers across the desert under its own control. Now I’ve got a hypothesis incidentally about where this is going. It’s going to be one of these things where there is going to be a sudden step change. One moment, self-driving cars are science fiction, the next self-driving stuff is going to show up very rapidly once it falls below a certain price point. Initially in luxury cars, but within five years in cheap ones.

    We see this pattern with nearly everything – one of the things that I really like about Stross’ books is his skill at taking ideas that exist right now on the fringes of technology and extrapolating plausibly to try to figure out what happens once they’re everywhere…

  • Then there’s Krugman on the impact of innovations:

    Paul Krugman: There’s a favorite story about this among the economic historians and it’s about electricity. Which is that electrification … widespread electrification is a phenomenon of the 1880’s and particularly factories were electrified in the 1880’s and it did nothing much for productivity because they were still building factories the way … a 19th century factory was a five story brick building … very tight spaces … which has a steam engine in the basement … driving trains and pulleys and shafts and it took about 30 years for them to figure out that, hey!, with each machine having it’s own electric motor, we can have a wide spread out single story floor plan with lots of space and we don’t have to be moving stuff up and down these stairs and we can have plenty of room for material flow and … we saw a little bit of that in IT, but the thing was it was terribly disappointing because although it actually does show in the GDP numbers, what was the first place where people really figured out what do with IT in a way that was productive, and the answer was Wal-mart. It turns out that all this unglamorous stuff like inventory management, basically knowing what exactly is left on the shelves the moment it is checked out of the counter being able to plan your whole system for something big box stores brought in and actually you can see that’s where the GDP growth …

    Innovations almost always play out in ways that are different from our expectations – even if their our ideas!

  • And a long exchange on intellectual property and copyright:

    PK: We still haven’t figured out the economics of easy information dissemination. Even though the Internet is all old hat, we still haven’t seen the economics of it play out. One of the big problems is we don’t know how do people get compensated for producing information when it can be …

    CS: This is a personal preoccupation of mine, shall we say.

    PK: It’s to some extent mine, although more of one of my employers. The New York Times has got enormous web presence, four million or so people read it online and yield the corporation very little in the way of revenue in the process. Whereas the dwindling number of people who want the dead tree paper are the source of … and the thing survives to some extent because people still like a piece of paper with their breakfast coffee but also to a large extent because you still can’t online get quite the visual quality of color advertisements for luxury goods that you can get in the New York Times Magazine. But you’re relying upon a very thin lag in technology to make the whole enterprise of creating and disseminating information viable. And if that starts to apply to lots of physical goods as well, we’re going to see whole sectors just implode.

    CS: Oh, yeah. On the other hand, with physical goods, you’re still going to need mass and energy to assemble the frames. As for the intellectual property, I try not to get too worked up about it. There’s a lot of people angsting about piracy and copying of stuff on the Internet, publishers who are very, very worried about the whole idea of ebook piracy. I like to get a little bit of perspective on it by remembering that back before the Internet came along, we had a very special term for the people who buy a single copy of a book and then allow all their friends to read it for free. We called them librarians.

    PK: Which is why … we used to work the professional journals, something I do know something about, professional journals sold about a couple of thousand copies worldwide, at an enormous price because every university library felt it had to have them and still does to some extent, but that’s an enterprise near to collapse because everybody reads the things online now.

    CS: If it was up to me, I’d figure what we’re looking at with copyright today is a smoking hole in the collective landscape. It doesn’t work. Attempts to patch it don’t work, attempts to enforce it leads to travesties such as 32-year old single mothers being sued for several million dollars by large record companies. This is not good. We need to get away from this model. But the model is locked in through international treaty laws. We can’t simply wave a magic wand and change the copyright laws to something sensible. So probably a better solution would be to encapsulate it below some other layer and shove it off to onside so it doesn’t affect people. Now the best thing I’ve been able to come up with is an idea for doing this is a tax on bandwidth. Basically, if you have a mobile phone, if you have a broadband connection, if you have a modem connection, a chunk of what you pay goes in tax. The tax goes into a pool which is then distributed to content creators on the basis of some kind of sampling or rating mechanism that’s sampling the traffic that’s going across the network. How to enforce this, let alone deal with it internationally is mind-numbingly don’t-go-there, I’m not paid to go there, but at least it has the one supreme advantage that if you have such a regime in place, you can legislate that if you’ve paid your tax, you are then immune from prosecution for copyright violation. Yes, we can cuff the whole copyright issue off to one side and just do … there is a tax base here and it will be distributed to the creators of the content that is trafficked over the network.

The whole discussion is worth checking out.

(it was transcribed by Edwin Steussy)

(photo by Cory Doctorow, who was there)

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

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