How Many Economists Does It Take . . .

How Many Economists Does It Take To Change A Lightbulb America?

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              They say it’s always good to start with a joke.  Here’s another.  Theres this married couple.  The husband says, “Robots, that sounds like something out of science fiction.”   His wife replies, “You live in a spaceship, dear.”

              You may be cringing a little because of the joke, or you feel like science fiction isn’t your thing.   But that’s the point of the joke.  Whether you like it or not, you have been living out a science fiction story, or, more accurately, competing science fiction stories, all your life.

            The authors of these stories aren’t names you would generally associate with science fiction or any type of fiction, for that matter -- they are economists.  (Insert your own joke here.)  But one of the many “jobs” economists have is to tell stories, based on economic theory and methodology, about our future.  The really funny thing is people in power believe these stories, and they shape, or try to shape, our economies and lives around them.  

            If you have gone to college, odds are it is in part a result of the science fiction story told by the economist, philosopher and management guru Peter Drucker. In The Landmarks of Tomorrow (1959), a title which just begs for a cover with vintage 50's sci-fi art, Drucker coins the term "knowledge workers" to describe a new class of workers who get paid to think for a living.

            Knowledge workerThink for a living?  These ideas may sound as clunky and retro as Robbie the Robot but they were actually some of the guiding economic stories for Americans in the twentieth century.  Search the phrase "knowledge worker" and you will find it used not just by economists, but authors in every field with anything to say about the modern workplace. 

            In 2003 younger economists were still finding huge success just by riffing off Drucker's work. Take economist Richard Florida, whose The Rise of The Creative Class  was a national best seller. (Trust me the words "economist" and "national best seller" don't happen in the same sentence all that often.)  But the people comprising Florida's creative class are really just knowledge workers with sexier jobs- think, programmer, graphic designer, audio engineer, etc.  In other words, Florida has made a really lucrative career just by updating the graphics in Drucker's original knowledge worker sci-fi classic. 

            It’s a classic that has spawned not just creative imitations, but millions of college degrees and related careers. Ask most people why they went to college and they will say something like, "to get a better job" or "I needed the degree for my career." Whether they know it or not, what these people mean is they went to college to become knowledge workers.   Until very recently, the college + knowledge worker = upward mobility calculation was considered more of a social science fact than an economic science fiction.  But increasingly obvious economic realities have called the validity of this story into question. 

            Like all science fiction, The Landmarks of Tomorrow sets its story in a world with a specific set of technologies.  Any science fiction writer will tell you today’s futuristic technology often looks old and busted just a few years down the road because of actual technological advances.  For example, had Rufus just given Bill and Ted iPhones and skipped the whole bogus phone booth cliche, I dare say their adventure would have been most triumphantly more excellent!

            A year before The Landmarks of Tomorrow was published, the technology that eventually destroys Drucker's visionary tomorrow land, and the reason so many of you went to college, is already at the working prototype stage.  By 1961 the first microchips were being commercially sold.

            Given its starting speed and growth rate, it took the microchip decades to become seriously world-changing. Even as it approached a point of power where it began to gain  broad public attention( think video games or the personal computer of the 1980’s) most saw it only as a long overdue bit of the shiny future the television had been promising them since birth.  There were no flying cars.  We were expecting flying cars!

             Explaining the larger implications of emerging technologies often falls to two groups of writers-economists, who usually explain it to old people in formal wear, or science fiction writers, who explain it to teenagers in trendier clothes. The teenagers,  usually years later, explain it to the old people in formal wear.  Rarely is it explained by an economist using science fiction, but it will be this time. 

            Paul Krugman is perhaps the best known economist in America.  In addition to winning the 2008 Nobel Prize for Economics, he teaches at Princeton, writes a bi-weekly column for the New York Times, is a best-selling author, and the only economist I know of who is the subject of a viral music video.  What you may not know about Paul Krugman is that he is very open about his love of science fiction.

            In fact, he has attributed his love of science fiction as the reason he eventually became an economist.  “I read [Isaac Asimov's] Foundation back when I was in high school, when I was a teenager . . . and thought about the psychohistorians, who save galactic civilization through their understanding of the laws of society, and I said ‘I want to be one of those guys.’ And economics was as close as I could get.

            It must then have been something of an adolescent pyschohistorian dream-come-true when the New York Times Magazine commissioned Krugman to write for its hundredth anniversary edition.  As requested, White Collars Turn Blue (September 29, 1996) is a speculative piece set a hundred years in the future. Krugman uses his opportunity as a professional economist/science fiction writer to answer the question of "why pundits of the time (1996) completely misjudged the consequences" of globalization and digital technology.

The future, everyone insisted, would bring an ''information economy'' that would mainly produce intangibles. The good jobs would go to ''symbolic analysts,'' who would push icons around on computer screens; knowledge, rather than traditional resources like oil or land, would become the primary source of wealth and power. . . But even in 1996 it should have been obvious that this was silly.

            For Krugman, two core problems make the information economy a bit of tomorrow land that would never be fully realized.  

            First, as the global standard of living rose, the third world's inhabitants would want the same traditional resources, oil and land, as well as the same standard of living, eating meat and owning a home, long enjoyed by those privileged enough, by chance, to inhabit the first world.  Even the staunchest vegetarian has to concede that a nice steak is really more satiating than a nice icon--even one on a retina display iPad.  

            Second, the computers that powered these screens and icons these symbolic analysts (a.k.a knowledge workers) were going to be manipulating for a living were, by necessity, going to be wildly powerful.  The more powerful the computers got, the fewer knowledge workers a company would need.  There was a bright future for you in this information economy--if you were a computer.

            Which brings us to another misjudged consequence Krugman illuminates--the decline of higher education.  Drucker's knowledge worker mythology inspired the vast majority of people with college degrees to ever consider applying. To be sure socialization, football, finding a mate, etc. were also drivers, but they were intended to be the icing on the knowledge worker cake.  According to Krugman writing from the future, without the promise future of knowledge worker jobs, and more specifically the salary and benefits that came with them, interest in college and universities soon dried up,which meant a decreased need for institutions of higher education and professors and staff.  

            It took a lot less than a hundred years for the information economy, knowledge workers and higher education to begin mirroring the fates outlined in Krugman"s science fiction. In fact, it took less than twenty. In 2013, economists Paul Beaudry, David A. Green, and Ben Sand authored The Great Reversal.  Among the more interesting findings of their article is that demand for knowledge workers actually peaked in the year 2000 -- just four years after Krugman's sci-fi story.  The ever increasing demand for knowledge workers died when the dot com bubble burst, though no one seemed to notice.

            After 2000, those that did notice began championing the idea that there was plenty of work for people with STEM (Science, Technology, Engineering, Math) degrees. You were safe, they would suggest, the college + knowledge worker = upward mobility calculation was still valid as long as you had a STEM degree and not one of those “useless” liberal arts degrees. But, in 2013, the Economic Policy Institute published a paper showing there was no STEM shortage; only half of all students graduating with a STEM degree are able to find a STEM job. STEM degree ≠ STEM job.

            It's not that there were no knowledge worker jobs or no STEM jobs, just not enough to meet the global supply being generated by colleges and universities. So the knowledge worker bubble kept on growing, and the belief in Ducker's mythology kept leading people to attend college.  But the crash of 2008 should have been something of a cultural wake up call.  When the head of Microsoft, a knowledge worker STEM mecca, lays off 5,000 people and says publicly  "Our model is things go down . . .  and they reset. The economy shrinks and then it doesn't rebound, it builds from a lower base effectively,"  maybe that would have been a good time for a little intervention,  a “come to Jesus moment” about the knowledge worker bubble.  But college costs kept rising and students kept coming

            In 2010 Edward Tenner wrote a piece for The Atlantic asking if Krugman's Prophecy  was coming true?  But, no one seemed to notice, and Law School costs kept rising and Law School students kept coming.  This year (2013), Krugman pointed to fellow economist Nancy Folbre, who also suggests parts of his vision for the future coming true. But college costs keep rising and students keep coming

            What happens to all these college educated people who graduate only to find themselves without a choice knowledge worker career?  Are they whisked off by UFO's?   Are they filed away in the X-Files?  No, they cascade.  Cascading is Beaudry, Green, and Sands term for how these college educated non-knowledge workers influence the economy.  Essentially, they just take what work they can find, that they are now competing with non-college educated workers often for entry level positions, or Starbucks gigs, or other jobs they would not consider in the more vibrant information economy they had been counting on. 

            Even a casual look at unemployment data from the last decade will show you that the more educated you are, the more likely you are to be employed -- just not necessarily in a job that required all that education.  The less education you have, the more likely you are to be forced out of the workforce altogether, because everyone is pushing down a rung on the employment ladder, and, as many near the bottoms of the ladder discovered, there were no rungs left for them.

         The final joke is that no one knows for certain where this science fiction story, the one we are living in, goes next. In the 1950’s when Drucker was writing The Landmarks of Tomorrow, Americans had a cultural certainty that future was going to be like The Jetsons or Disney’s Tomorrowland    But for those of us living in that actual future it’s not nearly as wonderful as we were told it would be.  In the year 2000, a date that already feels like saying back in the year 1900, Avery Brooks asked in an IBM commercial,  “where are the flying cars?  I was promised flying cars!”  In 2013 college graduates are asking the same questions about middle class jobs.