Tuesday, 18 September 2012

Failure of the internet: Innovation minus Creative destruction = Decline

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The basic model for economic-growth-generating innovation is probably that of a genius generating a breakthrough causing 'creative destruction' - for example, when a new industry or technology all-but wipes-out an existing one.

This is what potentially may increase economic productivity (i.e. economic efficiency, how much necessary and useful stuff is produced per man-hour of work)

And when creative destruction does not happen, it may be that innovations tend to reduce overall efficiency: such as the internet.

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An example: education. Fifteen or twenty years ago I was reading many articles about how the internet would wipe out most residential universities and colleges; but there are more people in higher education than ever before.

And they are using the internet pretty much all the time - indeed, we now have the situation where students go and reside in the vicinity of a college yet most of students' 'teaching' comes from the internet, they spend most of their time using internet communications (including supposed teaching time time) and most of students' 'work' comes from the inernet.

If the internet has wiped-out anything in education, it is not residential schooling but education itself.

Thus, since the internet did not all-but wipe-out most residential higher education in a conflagration of creative destruction, instead it made higher education (even) worse.

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And that has been the general effect of the internet with respect to economic efficiency. The theoretical effect on improving efficiency has remained exactly that: theoretical - while any economic benefits have been overwhelmed by other factors. 

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It seems that there are very particular requirements for the kind of productivity-enhancing breakthrough that led to the Industrial Revolution and the emergence of modern societies based on growth and the expectation of growth.

The breakthroughs that enable the continuation of modernity must be big, frequent, relevant, and destructive to the status quo - if they are to overcome the powerful anti-efficiency trends which are also unleashed by modernity.

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