Economic returns from the internet

Robert Gordon wrote a much discussed article titled Is U.S. Economic Growth Over? (PDF) in which he concludes it is. One of the arguments he makes, which echoes some of what Tyler Cowen wrote about in The Great Stagnation, is that the economic impact of the 2nd Industrial Revolution (electricity, plumbing) will far outweigh those from the 3rd Industrial Revolution, the one we live in now, which has brought us computers and the internet.

As a thought exercise to support his claim, Gordon offers readers this choice:

With option A you are allowed to keep 2002 electronic technology, including your Windows 98 laptop accessing Amazon, and you can keep running water and indoor toilets; but you can’t use anything invented since 2002. Option B is that you get everything invented in the past decade right up to Facebook, Twitter, and the iPad, but you have to give up running water and indoor toilets. You have to haul the water into your dwelling and carry out the waste. Even at 3am on a rainy night, your only toilet option is a wet and perhaps muddy walk to the outhouse. Which option do you choose?

Gordon assumes Option A is the obvious and overwhelming choice. That makes Kevin Kelly's dissent all the more interesting.

Option A is not obvious at all.

The farmers in rural China have chosen cell phones and twitter over toilets and running water. To them, this is not a hypothetical choice at all, but a real one. and they have made their decision in massive numbers. Tens of millions, maybe hundreds of millions, if not billions of people in the rest of Asia, Africa and South America have chosen Option B. You can go to almost any African village to see this. And it is not because they are too poor to afford a toilet. As you can see from these farmers' homes in Yunnan, they definitely could have at least built an outhouse if they found it valuable. (I know they don't have a toilet because I've stayed in many of their homes.) But instead they found the intangible benefits of connection to be greater than the physical comforts of running water.

Most of the poor of the world don't have such access to resources as these Yunnan farmers, but even in their poorer environment they still choose to use their meager cash to purchase the benefits of the 3rd revolution over the benefits of the 2nd revolution. Connection before plumbing. It is an almost universal choice.

This choice may seem difficult for someone who has little experience in the developing world, but in the places were most of the world lives we can plainly see that the fruits of the 3rd generation of automation are at least as, and perhaps more, valuable than some fruits of the 2nd wave of industrialization.

The question is when we'll see the fruits of the 3rd Industrial Revolution. Kelly argues we haven't given it the same amount of time as we gave the first two Industrial Revolutions to bear fruit. More specifically, Kelly believes it's the networking of things that is the true 3rd Industrial Revolution, and it's just getting underway.

That's just one of his arguments in a long and excellent essay. I am personally excited for the benefits to mankind that will arise from computers coordinating with each other without human intervention. It will make life wonderful until the Skynet and the computers take over and enslave us all.