A Resource Based Economy - the Beginning

- by Dror Hilman -
In a world of accelerated and unexpected development, we should start to separate from the models that dominated society over the past century, and get ready for a dramatic change. What will the new paradigm look like? It is impossible to predict exactly. But here are some changes borne on the wings of the new technological revolution, signaling to us what the transition period might look like. An era where money and politics are still important, but less so..

Robert Lucas, winner of the Nobel Prize in Economics in 1995, is considered one of the ten greatest economists and founder of modern macro-economics. Lucas became famous in part because of the harsh criticism he expressed about the underlying economic models of the 20th century. Summarizing his criticism he said: "Given that the structure of an econometric model consists of optimal decision rules of economic agents, and that optimal decision rules vary systematically with changes in the structure of series relevant to the decision maker, it follows that any change in policy will systematically alter the structure of econometric models."

Or in other words: It is not really possible to build a great economic model that predicts how people would behave in an economic system, since any change in the details of this model, whether a change among the people or among the decision-makers, would bring a change in the rules upon which the model is based, and therefore will make the model useless. Although economists would not admit it, Lucas in his work effectively cut off the branch upon which the macro-economics of the 20th century was sitting.

It is even more difficult to predict changes in the economy, with technological and social changes making the future unpredictable and clearly different from anything we have seen before. Or as Lucas described the first industrial revolution which took place in Europe about 200 years ago: "For the first time in history, the living standards of the masses of ordinary people have begun to undergo sustained growth... Nothing remotely like this economic behavior has happened before".

Well, of course this is not accurate. About ten thousand years ago our ancestors shifted from a society of nomadic hunter-gatherers engaged in daily survival and in a chase after food sources, to an agricultural and urban society. It took our ancestors almost 2 million years to develop agriculture, but once it was established, the extra time that was freed-up made it possible for people to develop art, music, rich language, writing, commerce, state laws and religions, all of which broke into the world during only five thousand years, a short comma on the time axis of humanity. Would it have been possible to predict the economic and political behavior that resulted after the invention of agriculture, with the models and world-conception that preceded it?

Today it is easy to see how technological change, which increases the abundance available to humans, was a significant factor, and perhaps the main factor, that drove the wheels of human history and brought the really big revolutions and major social changes. Would there have been cities and countries without agriculture? Would there have been a blooming of culture and religion without a script? Would trade have evolved and developed without the wheel and the large ship? What about the invention of the printing press, electricity, medicine, aviation? This is all well and good. But it is dwarfed immeasurably in comparison to the change happening before our very eyes almost instantaneously. When the change is so great, we should abandon for a moment the economic models that govern our social order over the last 100 years and get ready for the change. It is coming, whether we like it or not.

Here comes the change

We live in a world where there are four times more people than were living at the height of the industrial revolution. In the "progressive" Western world every resident can naturally expect to have access to water, electricity, sewage, garbage disposal, refrigerator, cheap food and medicine without thinking this expectation is too high. And the "developing" world is closing the gap rapidly. We are connected more than ever. In less than five years were laid infrastructures that place in the palm of our hands knowledge and computing power that were not contemplated by the wild imagination of the greatest NASA engineers just three decades ago. A ten-year-old kid with a smartphone in Africa, holds in his or her hand access to more information than was available to the President of the United States only twenty years ago. We are linked through a system of search and retrieval of information that no one predicted just a decade ago. And we see a real change in the way we interact with the world and maintain social relationships, through social networks with millions of users, that no one imagined just a few years ago. These networks were strengthened so fast that they managed to collapse regimes which imposed fear on their subjects for half a century. And this is just the beginning.

Despite what the pessimists - the developers of the outdated models of the previous century - say, in the last decade technologies were developed that can really change human welfare in a level not yet seen: technologies were invented for water purification, which are only awaiting some further development in order to take-off. The required ingredients were invented to produce energy from the sun, the wind, the ocean waves and the Earth's heat. Cheap energy storage means were invented. All these are not science fiction, they are happening now, and it is possible we are only a few years away from the moment these new sources will replace forever the old energy sources from the 19th century. And that's only the beginning.

Society moved from village-based agriculture to industrial agriculture. It is more efficient and faster. Agriculture today produces enough food to feed everyone on the planet in the coming years, if we only distribute the food correctly. Today's biotech crops are more durable and efficient than those nature has ever created. A new generation of medical treatments is at the door, and it is projected to yield medical services at a level not yet seen. And finally, larger computing power allows the building of truly intelligent machines that can perform complex functions with speed and efficiency much higher than those of humans, cheaply, and its connection to the "real world" through advanced robotics leaps forward in giant steps.

Because most of us (those born in the twentieth century) got used to capturing changes over much longer time frames, we are not able to capture the large size of the revolution sizzling at our door. We still think in national and political terms that characterized the world after the industrial revolution, and in economic concepts invented hundreds of years ago, that were established into basic economic models at the beginning of the twentieth century. Apparently almost all of these are no longer relevant.

In short time the money-based economic system would no longer be needed, and the world would switch to a different economic model. Which model? As Lucas said, it is impossible to predict. But here are some changes borne on new wings of the new technological revolution, perhaps signaling to us how the transition period might look like. An era where money and politics are still important ... but less so. Granted these are only swallows heralding the beginning of the revolution, but they are already here. How will they bring the revolution, that's a topic for another article...

1) The Open Source Movement
The information revolution of the 20th century created the possibility for people from around the world to share among them their time and information in a way that allows the creation of software and enormous databases at almost zero cost. This cooperation took place without direct monetary compensation, and the incentive behind it is a matter of ideology, not money. Since the mid-twentieth century, the world of 'open source software' caught momentum, creating an unprecedented range of products that can replace almost all existing software product, for free. The idea also seized huge commercial companies such as Sun Microsystems, IBM and Google which released the code they developed at great effort to the public, with the understanding that the release of the code can bring a huge return on the large investment of time and creativity. The principle of 'open source' is now spreading into many other areas, already yielding results in creating free or almost-free hardware that dramatically lowers the cost of construction of new inventions. The ease with which you can exchange information on the Internet today greatly enhances the open source movement, and we can only expect its strengthening in upcoming years. The principle of knowledge sharing between people from different disciplines to creating a better world is a window to a world where people have more knowledge and interests, and more free time.

2) Crowd Sourcing / Funding
More and more ideas and dreams are coming true in recent years without the intervention of any government body or large organization. People with good and original ideas sponsor various projects by collecting money from the public. The public, surprisingly, is generously willing to support projects without receiving any immediate profit. This economic model would not have been possible without the modern communication systems available today. Although these are usually new methods of funding, they are heralding a new world where there is no more need for the old systems of governance and finance to promote ideas and inventions. The next step will be sharing of real resources such as machinery and materials to create new ideas without the need for money; this will be possible the moment hardware production will be similar to software production.

3) The Maker Movement and 3D Printing
Around the world, we see more and more people, acting as individuals or in groups, building machines and devices at home from widely available and cheap materials in collaboration and knowledge sharing. Within a short time small groups of people, at minimal cost, successfully built robotic technology that equals the technology that until recently existed only as expensive military technology or academic (theoretical) technology. This movement has recently been joined by technology that allows "printing" of components from a variety of materials and sizes, directly and inexpensively. These technologies are expected to revolutionize the way we create things. Things could be built on demand, at any place and any time. In a world like this, almost anything that can be produced, from micro-electronics to buildings, will actually be information, which can be ordered and produced without human intervention, and from here the road to the economic revolution in which we receive the things we need for free is very short. Just connect these technologies to a repository of products designed by people and made open to everyone, and imagine what awaits us in the coming years ...

4) Access to Information and the Revolution in Education
In the twentieth century it was thought that we are at the apex of the information revolution, and that knowledge and education are freely available, but in fact knowledge was still very limited, and few could enjoy it. Knowledge was in libraries and universities and access was expensive and limited. Now the amount of knowledge is orders of magnitude greater than in the past, but it is available, accessible, and is becoming truly inexpensive. Never before has so much knowledge been so accessible, so quickly and with such efficiency. It is still too early to estimate what would be the result of this access to knowledge, but it is clear that all the revolutions that changed humanity revolved around access to information. Today it is possible to acquire almost every skill, knowledge and profession online, in an easier way than was ever dreamed. Universities are opening their doors over the internet to anyone who demands it, and apparently we can expect a revolution in our relations to certificates and academic degrees, in a world where knowledge is no longer confined to storage in the mind of formally educated people as in the past. Soon, people will not be examined based on knowledge accumulated, but based on their ability to use it.
Many in the realm of technology education are pressing for a radical change in education, to make education more individual and more flexible, where each child receives enforcement in the areas where he or she needs it, and learning systems know how to progressively, step-by-step improve the way the child learns. More emphasis would be placed on the acquisition of tools for using the acquired knowledge and the development of creativity. The children of the future, contrary to common belief, will have to be smarter and more creative.

5) The Next Generation
The revolution will happen, more than any other reason, because of the future generation: the generation born into the world of Facebook and the iPhone. It would be clear to the children of the next few decades how to contact anyone in the world. They will communicate from infancy with devices that respond to touch and speech; they are used to screens everywhere. They will see cars traveling automatically and robots that are so intelligent, that it would be difficult to distinguish that they are not alive, even in this decade. These children will not find it strange that their drinking water is recycled, their food is genetically engineered and incredibly cheap, and all manual labor is replaced by intelligent machines. The electric grid will be smart and reliant on a very diverse variety of energy sources. Those born today will not find it weird that software systems update themselves automatically on a daily basis, that computers get faster every year, and that soon people will be able to communicate in any language with anyone, when a computer translates everything in the background. And all this will occur in this decade.

Would our children understand why we worked in a boring job 40 hours a week, for 40 years, just to accumulate enough money for retirement? Will they understand why there were such large gaps between nations and within states? Why we had to take out loans and pay interest only so that we could eat and have a place to live? Why we wasted water and did not recycle it? Why people were short on food? Why we have invested so many resources in armies and wars? Why we needed so many governments to conduct our lives in such ineffective fashion? And why do we need money if you can just produce everything we need, when we need, with free energy, and recycle when finished?

Is it possible to predict the economy of the future? Maybe.
---
Dror Hilman is a doctoral student in biology and bioinformatics at the Hebrew University, Jerusalem, Israel

>> Original article from the Israeli chapter ZM site

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Sun, 12/16/2012 - 1:49pm | One thing to mention (Score: 2 Insightful)
Netirge's picture

Netirge

Karma: 1

One thing to mention though.

This is an extremely good description of current human development. But one thing is missing. Every change started with one or a few people who had the idea and worked to make it reality.
This trend, even this speed isn't just a phenomenon or trend. You see the effect of humans who succeeded in making their idea reality.
Maybe it isn't possible to predict the economy of the future, but it IS possible to work on the change. And if you don't like the current situation, you can just work to build up something better. If manage to turn your idea into reality, you might see it change mankind faster than you can imagine.