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Eureka : New technologies and the economy
by Jay Gutman
2017-04-15 10:20:20
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What comes to mind when you think technology is information and communication technology. Technology as “tools” rarely come to mind, but one can say that technology can be used as three things: to get information, to communicate or to be used as a work tool.

tech01_400_02In the end, the best way to look at the effects of new technology on the economy is by looking at the effects of old technology in the economy. First you had newspapers, the radio and television, telephones, fax machines and cell phones, and all sorts of tools that were used in medicine, in agriculture, in industry, in administration or at home that proceeded from technology. Just as refrigerators revolutionized the way we stored and ate food and drinks, today new technologies revolutionize the way we work, communicate and are informed.

The main feature of today’s technology is that new technology often connects and mixes information, communication and tools. So while the older tools came in one-size-fits-all packages, new technology adapts tools by gathering information and using communication tools so the tools can come in different shapes and different forms. Furthermore, traditionally in old technologies you would get one tool, now you often have tools that can create tools that are available in the market, as in 3D printers for example. That is you can now create your own tools, or even create tools that will create tools and so on.

So how do these new information, communication and work tools affect or impact the economy? One way they affect the economy is that they are rather cheap and can be a cheap investment that can produce high returns. In the past, to start a newspaper, you needed to sign agreements with a print shop, that would have been a significant investment. But today, if you want to start an online newspaper, the investment is significantly lower. Same goes for if you want to start a communication platform or business. In the past, that meant you had to buy a significant amount of wire, now it’s just a few servers.

This has meant that over the years some of the most profitable companies were new media, new communication and new technology tool companies. The sales approach is that it enables users and consumers to spend significantly less on information, communication and tools, while having in some cases a larger number or better quality communication than had been the case previously. I know it can be hard to admit, but mailing lists can be a lot more effective than having a list of mail boxes or phone numbers that could take days if not months to reach.

What do new technologies mean at the macroeconomic level? They may mean lower investments on information, communication and work tools, which means that a lot of people try their luck starting businesses since they don’t have to make as many initial investments as they once would had. Unfortunately, other investments such as land, electricity, water, gas, human resources, furniture and other bills are relatively the same, meaning that investors, although seduced by the low initial investment and opportunity cost, end up being surprised by how much running and maintenance costs they end up having to spend money on.

To illustrate this point, let’s say that’s like having a mortgage with a significantly lower down payment but significantly higher monthly costs. That would mean that more people would get loans for housing, but would be surprised at the portion of their paycheck that goes to making the monthly payments.

Sound familiar? The idea is just as with the US mortgage crisis, the start-up crash, like it happened in 2001, could happen again, and the culprit would again be low down payments and high running costs.

So how do we fix this? Investments with low down payments but high running costs are probably a bad idea.

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Emanuel Paparella2017-04-16 09:11:33
What somehow is forgotten here is the tremendous problem of robotics which is already rendering people obsolete and increasing unemployment. Could it be that what needs to be imagined and changed is the very concept of work and remuneration? To do that we may need more than technology.

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