Jaron Lanier's Ignorance Of History, Basic Economics And Efficiency Is Getting Ridiculous

Economics

from the please-make-it-stop dept

So… we’d already taken a stab at debunking Jaron Lanier’s “gobbledygook economics” a few weeks back when it started appearing, but since then there’s been more Lanier everywhere (obviously, in coordination with his book release), and each time it seems more ridiculous than the last. Each time, the focus is on the following economically ridiculous concepts: (1) there should be micropayments for anyone doing anything free online because someone benefits somewhere (2) modern efficiency via technology has destroyed the middle class. Both of these claims make no sense at all.

Let’s start with Lanier’s interview with fellow hater of the internet, Scott Timberg, at Salon, in which Lanier trots out this catchy line that is so braindead it made me wonder why Salon would sully its reputation by publishing something so easily proven stupid:

So Kodak has 140,000 really good middle-class employees, and Instagram has 13 employees, period. You have this intense concentration of the formal benefits, and that winner-take-all feeling is not just for the people who are on the computers but also from the people who are using them. So there’s this tiny token number of people who will get by from using YouTube or Kickstarter, and everybody else lives on hope. There’s not a middle-class hump. It’s an all-or-nothing society.

The Kodak/Instagram comparison comes up over and over again, and it’s moronic. It makes no sense. To demonstrate, let’s take something else that’s old and something else that’s modern that sorta-kinda seems similar, and compare the two: Very, very, very few people make money “auctioning” goods via Christie’s. Yet, a few years ago, eBay noted that 724,000 Americans made their primary or secondary incomes from eBay sales, with another 1.5 million supplementing their income. In the simplistic world of Jaron Lanier, this should be proof that eBay is good, and Christie’s is bad, right? But, of course that’s silly.

The fact that Instagram only employed a few people and Kodak employed a lot says nothing about the impact of technology on modern society or the economic status of the middle class. Even if we take the ridiculous leap and pretend that the two companies are somehow equivalents (and they’re not even close), you could just as easily point out that Instagram created a lot more value for people than Kodak did. First off, it didn’t involve toxic chemicals that create massive amounts of waste and pollution. Second, because people don’t have to buy expensive rolls of film to take pictures any more, they get to save money and put it to better use. Third, because we no longer have to worry about the expense of each photo, people are free to take many more photos and capture more memories and generally enjoy photography more. Fourth, because instagram makes the sharing of photos much easier, it enables much greater communication among family and friends, building stronger community bonds. I mean, you could go on and on and on.

But I’ll let economics professor Donald Boudreaux go even further and explain how just because one company or industry employed a lot of people at one time, it doesn’t mean crap about how modern technology is “destroying jobs” because it’s just not true.

Mr. Lanier sounds profound, I suppose, to people unfamiliar with history. So let’s re-write Mr. Lanier’s prose just a bit in order to put his fears in historical context:

“At the height of its power, agriculture employed 90 percent of the population and produced output worth vastly more than half of U.S. GDP. It even invented countless plant hybrids and animal breeds. But today nearly all farms of the past have gone bankrupt (or, seeing the economic writing on the wall, were transformed to other uses). Agriculture today employs only about one percent of the workforce. Where did all those jobs disappear? And what happened to the wealth that all those good agricultural jobs created?”

Economic efficiency often shifts jobs around, but creates a much larger pie, which leads to new job creation. We can reasonably question whether the there are people who get left behind, or what kinds of skills are favored as industries become obsolete, but the idea that it destroys a middle class is just silly.

But it gets worse. Lanier repeatedly claims that the only reason we have jobs today is because of some sort of “social contract” that has been broken:

We kind of made a bargain, a social contract, in the 20th century that even if jobs were pleasant people could still get paid for them. Because otherwise we would have had a massive unemployment. And so to my mind, the right question to ask is, why are we abandoning that bargain that worked so well?

When did “we” make this “bargain” and, honestly, what is he talking about? There was no such bargain made. Jobs have nothing to do with whether they are “pleasant.” And we didn’t create jobs to avoid unemployment. We created jobs because there was demand for work, meaning there was demand for products and services, just as there still is today. But he doubles down on this crazy thought and says that when old jobs became obsolete it was this non-existent “social contract” that created new jobs:

Of course jobs become obsolete. But the only reason that new jobs were created was because there was a social contract in which a more pleasant, less boring job was still considered a job that you could be paid for. That’s the only reason it worked. If we decided that driving was such an easy thing [compared to] dealing with horses that no one should be paid for it, then there wouldn’t be all of those people being paid to be Teamsters or to drive cabs. It was a decision that it was OK to have jobs that weren’t terrible.

I’m just left shaking my head here because this statement is so ridiculous and so ignorant that it, alone, should cause people to assume that Lanier knows absolutely nothing about economics or history. New jobs were created because of demand, and because new technologies create efficiencies which create and enable new jobs. It has nothing to do with “decisions” being made or “social contracts.” It has to do with efficiency and new things being enabled through innovation.

Next up, Lanier did an interview with Eric Been at the Nieman Journalism Lab and it was more of the same, except here he lays out his “theory” for a massive system of micropayments, in which any time you do anything that provides useful data to someone else, they need to pay you royalties. Let’s take one example and think about how insane this process would be:

So, for instance, let’s suppose you translate between languages, and some of your translations provide example phrase translations that are used in automatic translators. You would keep getting dribbles of royalties from having done that, and you start accumulating a lot of little ways that you’re getting royalties — not in the sense of contractual royalties, just little payments from people that are doing things that benefited from information you provided. If you look at people’s interest in social networking, you see a middle-class distribution of interest. A lot of people would get a lot of little dribs and drabs, and it would accumulate over a lifetime so you’d start to have more and more established information that had been referenced by you that people are using. What should happen is you should start accumulating wealth, some money that shows up because of your past as well as your present moment.

Well, if he wants to create jobs, I guess adding the most incredibly massive inefficient bureaucracy and tollbooth for sharing any bit of information is one way to do so. The fact that it would cause the internet economy to come to a screeching halt apparently isn’t figured into all of this. There are tremendous benefits to information sharing and information exchange. Putting a price tag and an ongoing royalty on every single such action would make it incredibly expensive to do anything that involves information, which would mean less information sharing, less information exchange and less benefit from that information.

This is the broken window fallacy exploded exponentially for a digital era. It seems to assume that the only “payment” is monetary. That is, if you do something for free online — share a video or a photo, like a link, listen to a song — that you’re somehow getting screwed because some company gets that info and you’re not getting paid. But that’s ridiculous. The people are getting “paid” in the form of the benefit they get: free hosting and software for hosting/streaming videos and pictures, free ability to communicate easily with friends, access to music, etc. The list goes on and on, but Lanier seems to not understand the idea that there are non-monetary benefits, which is why various online services which he seems to hate are so popular.

Finally, we’ve got Quartz publishing Lanier’s own piece claiming that “free information will enslave us all.” Here he focuses on another one of his myths:

A token few will find success on Kickstarter or YouTube, while overall wealth is ever more concentrated and social mobility rots. Social media sharers can make all the noise they want, but they forfeit the real wealth and clout needed to be politically powerful. Real wealth and clout instead concentrate ever more on the shrinking island occupied by elites who run the most powerful computers.

This is bullshit, plain and simple. Under the “old” system, you had a smaller “token few” who found success via getting a major label contract or having a publisher accept them into the club of published authors. Most people who wanted to create did so as a total hobby and made no money whatsoever from it. You had a tiny tiny few who were able to do so. Today, lots of people can make some money creating — it may not be a huge amount for all, but almost anyone can make some amount, and some of them can make a good amount, and unlike before the creators themselves are in control now. They’re not signing contracts that give away 90% of the revenue and all control over their works. They still control it and they control where most of the revenue goes.

In fact, as I was finishing up this post, I saw the news that Kickstarter had now surpassed 100,000 projects, 44% of which got funded to the tune of $535 million. And the site has only been around for four years (and there are many more crowdfunding platforms). Compare that to the success rate of someone ten years ago who wanted to make a career in music. They likely wouldn’t even get in the door. And, even if they did, the labels admit that nearly all signed musicians end up failing out of the system. This system seems a hell of a lot better.

It’s as if Lanier is talking about a mythical past that never existed to make some point about the future. But all of the evidence suggests that more people are now able to make use of these tools to create new incomes and new opportunities to make money, while in the past you had to wait for some gatekeeper. Lanier, a beneficiary of the old gatekeepers, may like the old system, but he’s confused about history, facts, reality and economics in making this ridiculous argument — and it’s a shame that those interviewing him or publishing his ridiculously misinformed screeds don’t seem to ever challenge him on his claims.

Filed Under: capitalism, economics, efficiency, jaron lanier, jobs, social contract