Technology and the Market

0:00Our next speaker is the editorial vice president of the Ludwig von Mises Institute. If you like Mises.org, he is the guy to thank, and thank profusely. He is the adjunct scholar at the Mackinac Center for Public Policy, teaches at Acton University every summer, and I believe you're talking to the fee folks this summer. So, a frequent writer for Mises.org. In fact, he has written the most popular article in the website's history. You may wonder what that is. It's called Officer Kanepsky, is it? So anyway, check that out in his archives. It is the most read article in Mises.org history.

0:46He writes a column, of course, for The Wanderer. And I always have to bring this up. And he's got a book called Sing Like a Catholic. So for those of you interested in Gregorian chant, we do not sell this book. It is not free online. But a book that is coming, a book that is coming from the Mises Institute will, what, in the next couple of weeks, I believe, Bourbon for Breakfast, Living Outside the State is Quo. I'm sure you parents can't wait, but today he is talking about technology in the market. He is Jeffrey A. Tucker.

1:31Thank you so much, Doug. I get the fun topic about technology, and when you talk about technology, you have to use technology. It's really important. And when you use technology on a board like that, you have to choose a theme that looks sort of high-tech-y, right? So, I chose that theme there with the little grids. I don't know what it all means, but there it is. We're very fortunate to be living in times that define a revolution. Technologically, we live amidst the digital revolution. I remember when people first started talking about this idea 15, 20 years ago, I was something of a debunker of it. Like, oh sure, we're living in a revolution. That's what everybody says in every age and all times. Well, it turns out to be absolutely true. We're living through incredible upheaval that's improving our lives every minute.

2:20I mean, just the fact that I was able to bang out this PowerPoint in two minutes this morning and show it to you right now, and that there are, last I checked, about 75 people watching this speech from around the world on the website is kind of amazing. I keep repeating these things. Every day I think, I can't believe it. I'm holding a thousand-page book in my little digital palm reader here, you know? We're just amazed by technology. We get to try them out all the time. I made the mistake of getting my son an iPhone. Now he has 80 pages of apps. You have to scroll through them. It's so bad, he has to search for them. What's fun too about it is that we get to try out all these things and rate them all the time, evaluate them, see the revolution in progress, which is a great privilege that you all have.

3:07I hope that all of you at some point in your lives will be able to participate in it. So I want to talk a little bit about the meaning of technology and its relationship to markets and society. I said we live in the digital age. We're defining ourselves in that sense. My children often ask me, Dad, were you born before the internet was invented? And I'm embarrassed to admit that it's true. I was. 1963 was the year. But we will define our times by our technology, but this is hardly unique. All people in all times have defined themselves by their technology. The first generation to drive cars around thought that they alone had inherited the great thing of history and that everybody that came before them was somehow inferior.

3:57It was the same thing with flight and so on, all the way back in history. The first people to make boats and trade in the ancient world improve their lives by doing so, and in some sense we're a new generation. So we're a new generation. So much of our lives are defined by our technology. And the reason is that it affects our daily lives profoundly. I'm just going to be going through this list here if you want to follow along. What is the purpose of technology? The purpose is to serve us in what we do and how we live. I'm going to be talking about some of the myths about technology in the next section, so I won't go into it here, but so often when you pick up histories of technology, it's strange how people can write about this topic while leaving people out of it, as if the technologies just emerge, you know, as if some sort of historical inevitability.

4:52It's not the case that that technology that is used by people is somehow emerges in abstraction from the people themselves, it emerges from within society to serve us. Technology defines our professional lives and this is ever more true today. Today, most everybody, today going out into the workforce, most everybody in this room, once you get out in the workforce, you will be using some form of computer digital technology in some way, most likely. In the 19th century, almost everybody was a farmer and they were getting used to the equipment that was available then. When machine, agricultural equipment came along, it was very controversial. The older generation rejected, the young generation embraced it. That's the way history is always gone. It defines our daily lives, defines our professional lives. One of the reasons that technology is fun to study is that it does leave a historical footprint. If we could look at it any time in history and what do we find? We find the tools that they use and we learn something about the people by the

6:03tools that they use. This is a major way we've come to understand history and it's the way Technology is always an organic outgrowth of our desire to live better lives. This is the crucial deciding factor, whether a technology stays or dies, is whether it serves people. I should add a proviso that this is only true within a society that is relatively free. If it's not, and you have a central state imposing technologies or taking them away from you, that's not true. But technology that stays is the kind of thing that is an organic outgrowth of society itself and is always a consequence of innovations that are chosen by consumers that stick around because they're economically viable.

6:52So it's impossible to separate technological advancement from economic considerations. It's also always tied to time and place. You know, you have to ask yourself whether or not Constantine could have used an iPhone. Probably not, because it wouldn't work. That's the main problem. You've got to have technologies emerging from within a certain time and a place in a certain sequence of events. One technology always growing out of another. Let me just give you a quick example. Let's say you're stranded on a desert island somewhere and you don't have any food, you don't have any shelter or clothing and you're trying to make a way for yourself and you discover that you can survive by catching three fish a day.

7:42And that's hard work, but you do it. And you do this for months and you think, you know, there's got to be a better life out there somehow. You know, you begin to dream big dreams. You think, well, how about if I make a net? The Theory of Money and Credit

8:24and you have to invest and then you've got a whole day free to make the net that's the way it works now what if you had the whole day free and instead of making a net you made a PowerPoint presentation that that would be regrettable in some way because because you wouldn't be able to do anything with that so you see that that high technology is not always better technology what the good kind of Technology is that that you need when you need it. That's the most important consideration. And by the way, this is why sometimes we make a mistake. We look at poorer societies around the world and say, look how pathetic their lives are. Why don't we just deliver a bunch of laptops to them? You know, this happens all the time.

9:18The final point in this first section, the path of development of technology is not always known in advance. This has been true for all of history. Everything has to go through a trial and error period. An example that just occurs to me right now is, some years ago, well, I bought one of the early printers. It was like a dot matrix printer. You probably don't remember this. The G wouldn't even go below the line. It was so pathetic. But the technology improved. At some point there were laser printers that came along. They were are very expensive and it looked obvious to me that laser printing would displace any other form of printing, any kind of spray inkjet kind of printing. And sure enough inkjet printers went down in price and laser jet printers stayed very high in price. Laser jet got displaced temporarily as the dominant market player. So I was marvelling about the fact that suddenly We have these inkjet things that are all over the place, even though laser printing is clearly superior in every way, and why is that?

10:23It's for economic considerations. Well, that was a few years ago. In the meantime, everything's flipped again. Now you can go out and buy a laser printer for virtually nothing, and inkjet printers are pathetic. Unless, of course, you want color, and so on and so on. But you don't know in advance which is going to be the winner in this struggle. You can't look at it and go, well, look, here's one page printed with laser, here's one printed with inkjet, This is very interesting chart, I just want to get you to look at it in passing, because I know people who have gone their whole lives and never seen anything like it.

11:20What we have here is starting with year zero, this is life expectancy, years of life expectancy starting with year zero, going all the way up until, what is that about, you know, I guess that would have been the 19th century, probably the 19th century and then you look and see what happens to world life expectancy. Our technology has a lot to do with the change. It's remarkable, isn't it? It's an amazing chart. As I say, most people have never seen it. What happened at that point in history? You'd think that more people would ask this question. What happened? What changed everything? It's not enough to say, well, we discovered life-saving drugs or, you know, I don't know, people started going to health clubs or, you know. I mean, there's a lot of considerations here, but essentially what you have is a growing prosperity and better tools and better technology, all of which combined to dramatically increase It's stunning to me, maybe because I'm 45 years old, the first part of that line disturbs me profoundly.

12:22You wouldn't have any speakers here today if it were the year 500. You don't have to be speaking for yourselves. You'd have 25 years to do it and then, you know, out. Actually, the data is a little bit skewed by the infant mortality rate, which used to be huge. This is huge. Throughout most of human history, most people died very early. It's astonishing to think about. So this is the consequence of the Industrial Revolution, the accumulation of capital, the lengthening of production processes, the creation for the first time in world history of a middle class, and access to food and clean living conditions so that diseases weren't prevalent, all of which comes about as a result of prosperity and every bit of these effects can be traced to the first cause which is the advance of the division of labor within the structure of the free market economy so, you wonder why we obsess about the free market economy around here how come you guys just only talk about free market economics all the time?

13:27what's your obsession with the free market? well, you know, if you want people to live longer better lives you better get obsessed with the free market Okay, now I would like to talk to you about a few myths about technology. How much time do I have? Thirty minutes exactly? Yeah? About four hours. Okay. Okay, myths about technology. I'm just going to march through these, because I began to think about them, but read a lot of books on the topic, and these keep jumping out at me. One is that technological advance reduces jobs and every time there's a big change in technology, a big advance of some sort in the tools we use, everybody panics about the future.

14:14Oh, what are we going to do? Let me just quickly tell you a story about what happened to the invention of the printing press because I think it crystallizes the point. The printing press came along and who did that displace from the job market in the market for books? The scribes, these were people who hand wrote books, well the scribes were in fact very upset, very upset about it and they resisted printing technology for as much as a hundred years as a matter of fact in some monasteries, but early on some monasteries figured out this was actually a great advantage to them because to the extent that the scribes weren't spending day in and day out for years and years and years writing books, scribing books, they could actually master things like the printing press This principle applies not only internationally. In other words, if China is better at making firecrackers than people in Auburn, we should buy our firecrackers.

15:29Section of China. Because it leaves us free to do other things. You always want to look for these things. It is true internationally. It is true nationally. It is true socially. It is also true individually. You will find this true in your own work. If you are working with somebody who is better at a task than you are, even if they are not better, even if they can do it at all, sometimes it is better to offload things to people next to you. So it gives you more time to do the things that you can specialize in. This is the way the division of labor works. The more widespread the division of labor is, the more opportunities there are for you to be truly productive. And that's what technology does. It makes us truly productive. It doesn't eliminate jobs. We all have the impression, I'm going down to the second myth here, that technological advance is always onward and upward.

16:17I promise you probably every young person in this room is under the impression that as an adult, as you reach midlife, And I want to name the specific examples of Cuba, Russia, East Germany and North Korea. In Cuba, for example, you go there today and most people are driving cars from the 1940s. It's a remarkable thing to see. It's very strange. It's like going back in a time machine or something.

17:05And it was true also in Russia. Everything reverted and actually living standards fell and even lifespans fell. East Germany, it was a fascinating case because you had a wall separating a highly prosperous society, West Germany, which had capitalism, free markets, private property, and then the socialist economy of East Germany, two completely different Worlds. I remember taking a friend of mine who lived in East Germany, what was then East Germany, over to a hotel policy here in Alabama, which is one of the most thrownback places that's been preserved just like it was in like, you know, 1850 or something like that. And we walked in and he said, ah, it reminds me of home. North Korea is another case. So do not let yourself believe that somehow technological advance is inevitable. It's only going to to happen under conditions of freedom.

17:55Another impression that people have is that technology is really all about invention and not really marketing. I'm sure you've had this happen to you where people will say you'll be using a post-it note or a piece of velcro and then the person next to you will say, well, you know, as a matter of fact, I invented that thing and somebody just came up with the idea later and marketed it. Well, I've had people say this to me, well, you know, it doesn't really matter at all what you think you invented in the privacy of your own room. What matters is what you're able to get to market. That's the critical thing. I remember my very creative son invented a drink, which I think was a combination of orange soda, Coke, Sprite, a root beer and several other things. And he said, look dad, I invented a new drink. And I said, well, That's wonderful, now what are you going to do about it?

18:52We talked about how you would go about marketing this drink, and it turns out to be a little more difficult. This is a real challenge in marketing, you call it the Coke Company, I invented it into a drink, I don't know how you're going to do this. Marketing is the critical issue, it's not just about invention. Another myth is that technology just happens to societies, that it just somehow emerges, and so many books always speak in the passive voice about technology, it's not true. are invented by people, marketed by people, purchased by people and used by people. The next myth I want to mention here is that collectives make new technology. This has been a policy priority since about the 19, I don't know, maybe it was Truman, probably before then, probably FDR, always talking about how government needs to subsidize new technologies and we We need more math and science majors in order to make these things happen.

19:47It turns out that collectives do not make technologies, only individuals do. Government subsidies for technology have been notorious flops throughout all of human history. But I would also like to mention that there is another myth out there that only isolated individuals can make new technologies. This is not true either, it's usually people, all the great inventions in human history Technology that are brought to market are those that are discovered by individuals working with others in a context of a learning environment. It doesn't always have to be in the same firm but it's always in a social setting in which people are constantly emulating others and learning from other successes and failures. I've already talked about this, the myth that any society can handle any technology, it's not true. Technologies come along at a certain point in time for a reason.

20:43I really have to ask you honestly, because I don't know, how much time do I have? Okay. And finally, among the myths, technological advance is a human right. It is not a human right. It is a condition of the market society. It may or may not happen. Nobody has a right to any particular and Technological Advance. So how can the societies encourage or discourage technological innovation provided that that's what we need? And by the way, you know, I remember a couple of years ago being at a conference and talking to a very nice man from a small village in Africa and he told me, he came up to me and Now I just spoke about economic development and he said everything you said today was very interesting but I just don't have the sense that people in my community really want development of the sort that you want, that you're talking about. They want happy lives, they want freedom and they want to be healthy and they want to eat and they want to live

21:53in security but I don't think they want a relentless advance of gizmos. I don't think I think that that's what my people really want. What do you have to say to that? And I gave him the same answer that Murray Rothbard gave to this, which is that if that's what people choose under conditions of freedom, that is what's best for them. So it is not the case that development is always the thing you choose. Even in this country, we have communities like the Amish that set out and decide on their own that they prefer a simpler life for their lifestyle reasons, and there's nothing at all wrong with that. There is something wrong with a person like Stalin or FDR, who decides that society must develop technologically.

22:43This is what happened to the American South, of course, you know, forcefully industrialized. Maybe the South would have industrialized, surely it would have, but it was something imposed at the point of a gun in many ways. and you think about Stalin's campaigns or even Lenin's campaigns for electrification of all of Russia, you know. These are aggressive and contrary to social welfare to force technologies on people. Okay, how do we encourage technology? Well, one of the most important things is to eliminate taxes on new discoveries and on risk-taking. Right now taxes are a heavy discouragement for for investment, for trying out new things, and I would mention here not just income taxes, corporate taxes or capital gains taxes, but most in particular the taxes that affect our paychecks from which is taking money to pay Social Security and other kinds of payroll taxes of this sort.

23:42These make hiring people very expensive and everybody, every young person in this room is going to be paying a heavy price for all these programs right now. You know that the youth unemployment rate is astronomical and rising all the time. It is higher today than it was a year ago and a year ago is higher than it was a year before. And depending on the category you're in, you can measure youth unemployment up to 25 percent. and part of the reason for this is the taxes that make it so expensive to hire young workers if you can't have young workers around you can't develop the technologies you need so in in the end taxes are discouragement to investment far better to cut taxes rather than give a bunch of stupid subsidies to some no-brainer technology is going to flop anyway regulations of all of all sorts harm innovation you need to get rid of all barriers and that's precisely Regulators always assume that they know the right way forward and they're always putting

24:44up these roadblocks in the way or telling you you should go this way and go that way. Real innovation in a real market follows an uncertain path and regulations can only serve to wreck it. Another one is this idea of patents and copyrights, what's called intellectual property laws. Our understanding of the development of technology since the beginning of the Industrial Revolution is very much distorted by the invention of the patent. Most all great innovations in human history take place by people whose names you've never heard of. That goes on today, you know. You find a new app on your iPhone, you don't know the name of the guy who developed it, but most histories of technology march through a series of great inventors.

25:33Why is this? Where do we get these names? It's mostly because they're the people who got to the patent office first and got the monopoly protection. Patents are not necessary at all for innovation. As a matter of fact, they discourage it. What patents do is they take a single sort of slice of time and freeze it for a period of years and forbid anybody else from developing that idea further. Patents are not necessary. Intellectual property laws end up stagnating investment. Subsidies, as I mentioned earlier, end up attempting to pick winners and losers in the marketplace. What they do is they pick losers and they overlook winners. This is a big problem with medical research, for example, of the type that Doug was talking about earlier. Medical research assumes that there's a certain path forward and we know the answers. It's true with all kinds of subsidies for research and development. You've heard about global Development is not always the free market answer. It could be that societies prefer slower and faster paces of development.

26:40On the point about the internet, this becomes very important. The internet, some people say, was invented by the state, invented by the government. Well, you could say that that was true in the sense that the government built the first initial structures of what we now call the internet. But I would observe just two points about that. One is that the state never did a darn thing with it other than having, you know, military bureaucrats talk over fuzzy lines with each other, you know, in strange ways. It didn't amount to anything. It was the market that commercialized it and made it valuable to society. The second thing is that, as I mentioned earlier, in a free market, technology grows organically piece by piece, bit by bit. And you don't have gigantic leaps forward that are unnecessary, unneeded, and taking priority over things that are needed and necessary.

27:28So the Internet may not have been necessary at the time the government invented or made it. It might be necessary now. There's no way to know in advance. Okay, finally, I just want to apply some of the things we've talked about to your own life.

27:48As far as you're concerned, I think the study of the history of technology is important for laying out a path for how you're going to pursue the future. I've already mentioned the very tight labor market, so you need every advantage you have. One is, as soon as you are able, you should get out into the workplace and get to know a trade really well. Learn how to work with others, learn how to follow the dictates of a boss, learn how a community of a firm really works and get your hands dirty and get to know a trade very, very well. And while you're doing this, look around in your firm and comprehend the fullness of the production structure. So if you're in sales, you might hang around afterwards and see how the people who clean up the store, clean up the store.

29:01to get out there and get to work. Now, I mean, if it were up to me, there would be no such thing as child labor laws, and everybody, you know, from the age of nine up would have a job. I mean, that's, I think it's just pathetic. You have to wait till 16 when you, by the time you're 16, you're obviously burned out alive. You've got a cynical attitude or whatever your heart didn't hit. So when you're 13, you know, you're interesting, you know, you're, you can get, you can work hard, you know, you can be trained. So I don't know, the state says, oh, you can't work until you're 16. Catastrophe. So even if it's not for pay, Get out and get a job. In terms of innovations and improvements, there's no sense in setting out to make gigantic improvements, new inventions that you're going to be heralded for, that you're going to get a patent with.

29:49The way most inventions have taken place in history is small improvements. You take an existing technology and slightly improve it. You will see that this happens every day in the world of the World Wide Web. Just slight improvements in software. Every day make an improvement. That's the way innovation occurs. So don't look for big splashy things to do in life. Just look to every day improve the thing that you're doing, make it a little bit better. And prepare to take risks. Part of the uncertainty of the future of technology involves that you have to, everything goes through a trial and error and there are always risks to life. I don't think we have any speakers speaking about the business cycle today, but this is a reality. If you ever become an investor or somebody who's trying to undertake a big new project, you're going to have to pay attention to issues of macroeconomics and come to understand how things like bubbles happen in an economy and how recessions take place, because you

30:47can get trapped. I know a brilliant, brilliant entrepreneur who had had successes his entire I list here the last point, cooperate, emulate, compete. And this is the way I would sum up my advice to you based on my reading of the history of technology. The first step is to cooperate. What I mean by cooperate means that you trade with people, that you go to work for others, that you work with others in a common task towards a common goal. And during that time, you're learning. That's the second stage.

31:42And that's where emulate comes from. You learn from others. You see how other people do things. You observe technologies, you observe tasks, you could say, you steal ideas, that's good, that's what you're doing right now for me, you're stealing ideas, I hope, right? So when you're working, you're constantly taking in this information. When you get good and ready, it becomes, when the time arrives, then the third step comes along and that's compete. You do better than the people you learn from. You can do better. You see their mistakes too, right? You improve on the mistakes, and that's the way society advances. That's the way you advance as individuals. You cooperate first, you emulate during that period of cooperation, then you compete. And that's the way societies develop also.

32:30They cooperate, they emulate, then they compete. That's the path to social progress, that's the path to technological progress, and it's the path to better lives for us and the shroom and for everybody on the planet. Thank you very much.