The Big Boom: Lessons from 200 000 Years of Accelerating Growth Jakub Growiec January 28, 2020 For Antoni may he live in an awesome world Contents 1 Introduction5 1.1 What to expect from this book.....................5 1.2 Customers who bought this item also bought................9 1.3 Five eras, initiated by five revolutions.................. 11 I The Drive for Development 16 2 Enter local control 17 2.1 Evolution: brought us to life and left all alone............. 17 2.2 The meaning of life............................ 18 2.3 Instrumental convergence......................... 21 2.4 Like it or not, you're in it........................ 24 2.5 Local control and the hierarchy of needs................ 26 2.6 Origins of the human civilization.................... 28 3 The force unleashed 30 3.1 Filters behind and before us....................... 30 3.2 Evolution, here's a surprise!....................... 33 3.3 Technology and human control...................... 34 3.4 Will AI become a filter?......................... 36 II The Growth Mechanism 41 4 Hardware and software 42 4.1 A new model of growth.......................... 42 4.2 What's in hardware, what's in software................. 44 4.3 What outputs do we produce?...................... 48 4.4 Hardware and software in pre-industrial eras.............. 50 4.5 Engines of modern growth........................ 53 4.6 What's coming next?........................... 56 2 CONTENTS 3 5 Mechanization, automation and the labor market 60 5.1 Human skills: augmented or replaced?................. 60 5.2 Will humans go the way of horses?................... 63 5.3 Complex tasks and economic linkages.................. 65 5.4 Human control and the useless class................... 68 6 Scale of operations 71 6.1 Increasing returns to scale........................ 71 6.2 Technological accelerations........................ 74 6.3 Making of the global research network................. 76 6.4 Making of the global economy...................... 78 6.5 Institutions, scale and growth...................... 81 6.6 A case for global digital policy...................... 84 III The Great Leaps 88 7 Accelerating growth in the past 89 7.1 What is development?.......................... 89 7.2 New dimensions of development..................... 90 7.3 Revolutions in energy, revolutions in learning.............. 94 7.4 Accelerations? By orders of magnitude!................. 98 7.5 Feedback loops across the eras...................... 103 7.6 Inequality between and within the eras................. 104 8 Accelerating growth in the future 107 8.1 Global data accounts........................... 107 8.2 Inputs and outputs of the digital era.................. 110 8.3 Evidence of a data explosion....................... 111 8.4 Singularity is near?............................ 113 8.5 Secular stagnation? No, thank you!................... 116 IV Lessons for the Digital Era 120 9 Side effects of growth 121 9.1 Local control implies side effects..................... 121 9.2 Ecological consequences of human local control............. 123 9.3 Psychological consequences........................ 125 9.4 Information overflow........................... 127 CONTENTS 4 10 Digital economy and policy 131 10.1 Automating R&D............................. 131 10.2 Addressing moral challenges of the digital era............. 134 10.3 Managing global inequality........................ 137 10.4 Augmenting representative democracy................. 141 10.5 Addressing the scale mismatch between economy and policy..... 143 11 Bracing for artificial general intelligence 148 11.1 The last invention we will ever make.................. 148 11.2 Existential threat............................. 150 11.3 AGI is an alien kind........................... 154 11.4 Assumptions of a doomsday scenario.................. 156 11.5 Human civilization without humans?.................. 161 11.6 Transhumanism is modesty........................ 162 11.7 Selected alternative scenarios...................... 165 11.8 How long is the long run?........................ 170 Acknowledgments 174 Bibliography 175 List of tables 189 List of figures 189 Chapter 1 Introduction The consequences for human welfare involved in questions like these [i.e., regarding the pace of long-run economic growth { JG] are simply stag- gering: once one starts to think about them, it is hard to think about anything else. Robert E. Lucas 1.1 What to expect from this book This book aims to shed new light on the questions, what drives technological progress and economic growth over the long run and at the global scale? What made it possible for the single human species to conquer the world, build a global digital economy, and still want more (Figure 1.1)? And how will technological progress, economic growth, and the overall prosperity of the human civilization unfold in the future? These are very old and often addressed questions. The answers, however, are a mixed bag. On the one hand, the scholarly literature on economic growth can boast many successes in identifying proximate causes of growth, from the accumulation of physical and human capital to political institutions and cultural norms, and in designing mechanisms that explain how new ideas can spur lasting growth. The literature has also come a long way in describing and theorizing about the two key technological revolutions in human history, that initiated agriculture and industry. On the other hand, my experience with this topic also leads to a feeling of discontent with how partial and shaky our understanding of global growth processes still is. First, there appears to be a growing dissonance between the documented prop- erties of the contemporary global economy and the way in which it is traditionally analyzed in the macroeconomic literature, both empirically: e.g., in growth and development accounting exercises based on National Accounts data (Jorgenson and Stiroh, 2000; Timmer and van Ark, 2005; Jorgenson, 2005; Fernald, 2015; Gordon, 5 CHAPTER 1. INTRODUCTION 6 Figure 1.1: World population and GDP, 25 000 BCE { 2012 CE. Population GDP Notes: GDP per capita assumed constant until 0 CE. The values: 603 million people and 495 billions of euro, PPP-adjusted in 2012 prices, pertain to the year 1700 CE. Sources: Kremer(1993a) for data points before 0 CE, Piketty(2014) otherwise. 2016; Cette, Lecat, and Ly-Marin, 2016), and theoretically, in formal models of eco- nomic growth and technological change (Romer, 1990; Kremer, 1993a; Jones, 1995, 1999; Ha and Howitt, 2007; Madsen, 2008; Bloom, Jones, Van Reenen, and Webb, 2017; Kruse-Andersen, 2017). Economics literature still lacks a coherent theory that would reconcile past growth experiences with emerging new global trends such as declining labor shares (Karabarbounis and Neiman, 2014), increasing profit shares (Barkai, 2017), increasing markups and market power (De Loecker and Eeckhout, 2017, 2018; Diez, Leigh, and Tambunlertchai, 2018), increasing within-country in- come inequality (Piketty, 2014; Piketty and Zucman, 2014), increasing market con- centration (Autor, Dorn, Katz, Patterson, and Van Reenen, 2017), skill polarization and the elimination of routine jobs (Acemoglu and Autor, 2011; Autor and Dorn, 2013), the overall increasing susceptibility of jobs to automation (Frey and Osborne, 2017; Arntz, Gregory, and Zierahn, 2016), and the fact that biggest fortunes these days are made in the software business. Second, the actual scope of consequences of these new trends may be even under- estimated because we're looking at the global economy through the lens of obsolete measurements and theories. The economy has become globally interdependent and propelled by the flow of digital information, whereas our thinking and reasoning remains locked in times when it was, for most part, country-specific and propelled by the flow of industrial commodities. Our picture of the world economy lags behind reality by about a generation. It's time to bridge that gap both in terms of facts (see Rosling, 2018) and theory. The new angle of this book consists in borrowing a few ideas from physics, anthropology, psychology, history, moral philosophy and the studies of artificial intelligence (AI), and connecting them in a brand new economic growth theory { the \hardware{software model". What distinguishes this book is its a-historical and a- CHAPTER 1. INTRODUCTION 7 geographical approach. My challenge is to build an overarching theoretical structure that is valid universally, across all time and space. To this end, I deliberately move away from the usual \wealth of nations" perspective and, in particular, stop asking questions like why some countries are richer than others or why the Industrial Revolution was initiated in England rather than somewhere else. I also deliberately take an informed view on the past, equipped with modern concepts and notions, and all the positive knowledge that we have today. Instead of trying to understand the conscious motivations behind the actions taken by our ancestors, I just look at these actions and study the broad patterns that emerge from them. Offering a bird's eye view on past development processes, I intentionally disregard phenomena that appear only locally (like the phenomenal growth experience of \Asian tigers" in the late 20th century) or that are short-lived (like business cycles). In Part I of this book I argue that human expansion, technological progress and economic growth have the same fundamental driver: the mechanism of local control maximization. This mechanism emerges