The Second Machine Age

　　MIT Sloan members Erik Brynjolfsson and Andrew McAfee wrote a book called ”The Second Machine Age.” It is the sequel to their previous work, “Race Against the Machine.” It optimistically discusses whether humans can coexist with machines.

 　

　　“Chapter 8: Beyond GDP” is particularly important. Through the Internet things have become convenient, fun, and efficient; but that is not reflected in GDP. The book states that economic views which focus on GDP cannot analyze the current situation. The chapter has seven main points.

Point 1
         Due to the Internet, music proceeds declined 40% in four years and disappeared from economic statistics; however, quality rose, and people have come to listen to great quantities of quality music.

Point 2
         How can we measure the consumer surplus created by things and services? If a good thing bought at $1 becomes free, GDP has dropped $1 and consumer surplus has increased; but what is the relevant indicator?

Point 3
          If a price is zero, the numerical value is zero, but that does not mean it is worthless. Free things like Internet searches and transactions are beneficial to life satisfaction and the shareconomy, but such things are not reflected in GDP. The book says that economic satisfaction is not reflected in GDP.

Point 4
           The information sector accounts for 4% of GDP, which has not changed since the latter half of the 80s. ”The official statistics are missing a growing share of the real value created in our economy.”

Point 5
            How can we measure the resource known as time? Americans’ Internet usage has doubled in ten years. The value of time is turning to the Internet. In 2012, Facebook usage time was ten times as many person-hours as were required to construct the Panama canal. This is not being counted in GDP statistics.

Point 6
            Production hereafter will rely upon the four abstract goods of intellectual property, organizational capital, UGC, and human capital, all of which GDP statistics entirely ignore.

Point 7
            Thus, people are seeking solutions and new methods of index creation, examples of which can be seen in the United Nations Development Programme’s Human Development Index and OECD projects.

　　　　There is a question of whether to stress IT-related industry expansion or consumer surplus, and there is an identical dispute between the Internet and content.
                Ten years ago, I objected to the government’s installation of a landmark “industrial scale expansion” policy. Stress should have been placed on such things as content production and consumption amounts.

　Ultimately, the scope of the Japanese content industry plan is being curtailed, but we cannot conclude that content is becoming obsolete. Everyone is transmitting an exponentially increasing volume of information.

              This was also pointed out ten years ago when Stanford Japan launched a pop power project for pop culture soft power: Stanford needed to create an index with a focus not on GNP, but GNPP!

               Of course, GNPP (Gross National Pop Power) was imitated at the onset Cool Japan, Douglas McGray’s  Gross National Japan Cool. But indexification was beyond my capabilities and it did not go well.

                I anticipate the creation of new indexes implicated by “The Second Machine Age,” such as those of the UN and OECD; but I am even more strongly wondering whether I should try again to create an index for the new Internet age.

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What of the Economists Who Damaged the World?

In “Seven Bad Ideas: How Mainstream Economists Have Damaged America and the World,” New York Times economic analyst Jeff Madrick cuts economics down. He says classical economists are the criminals of the 2008 financial crisis and the following major recession.

The book invokes Milton Friedman’s principle of laissez-faire from a Keynesian point of view.

       It obstinately repudiates Adam Smith, Alfred Marshall, Léon Walras, Vilfredo Pareto, David Ricardo, John Stuart Mill, Milton Friedman, Paul Samuelson, Kenneth Joseph Arrow, Robert Lucas Jr., and other great men, as well as those I learned about through textbooks such as Irving Fisher and Rudi Dornbusch, without considering their arguments. It feels like drinking strong prohibited alcohol.

        He calmly explains how Presidents Nixon, Reagan, Clinton, Bush, and Obama, as well as Federal Reserve Board members Paul Volcker, Alan Greenspan, and Ben Bernanke went wrong through the fault of economic doctrine (especially that of Friedman). He also concludes that Thatcher’s privatization and Reagan’s deregulation were blunders in the long term. It is incredible.

      He also criticizes globalization. He determines that the reason wealthy countries advanced was not tariff repealment, government nonintervention and floating rate exchange systems; rather, it was high tariffs, government investment in industry, and fixed currency value. The TPP was settled at great pains, but how should this be untangled?

       His criticism of economics as a science is invigorating. The substantiation of economics does not reach the standards required to be a true science. Even if results exactly the opposite of those predicted arise in the real world, there is an escape route. Physics theories change in response to experimentation and analysis, but economics does not do so. In short, it is not a science. Even if economists make mistakes, it does not harm their reputation, he argues.

There are surely criticisms to be made of this book from neoclassisist, montarist, and Marxist views, as well as from linear rational expectation schools of thought. If so, it seems the book would have persuasive power. Yet I think its instability cannot be readily handled. I graduated from an economics school, but if you are not at home in that environment, you will become disoriented.

　 I pray for the active efforts of all the world’s economists.

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The New Outlook for TV and IT

 　The broadcasting business world released a report entitled, “The Potential for Information Technology to Completely Change the Face of Broadcasting.”

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　 The concept of fusing broadcasting and communications was discussed over 20 years ago. Ten years ago, the IT business wanted broadcasting stations, which was a surprise. But there was no great movement. Broadcasting stations holds the twin strengths of an abundance of programs and reliable radio waves. Thus, those in the broadcasting world basically felt that there was no need to upset those strengths or change their business.

     Thereafter, IT took hold in the world, and circumstances made an about-face. Japanese officials likewise squared off against the foreign invasion of YouTube, Apple TV, and other smart TV services. But with VOD (Video On Demand), the video transmission market is expanding as smartphones also promulgate. Here lies opportunity. 

    Commercial broadcasts are also becoming common in IT interfaces. The strategy this time is to utilize strengths. I have worked as chairman on the “Commercial Broadcast Internet and Digital Relationship Business Project” for the past four years. What I share with persons in the broadcasting industry is my sense that Japanese smart TV services will not gain by opposing American smart TV services, but rather by leading. 

    However, when prospectively considering 2020 we must not be limited to past concerns. That year will overtake the simple matter of broadcasting programs using communications and arrive at a new stage. There are three points.

     First, the environmental changes caused by smartification. The proportionment of large-screen TVs as the main device and smartphones as subsidiary was reversed, and in 2020 smartphones may become the number one screen. Or screens may stretch beyond 8K, around the whole town, rousing Olympic crowds with a live atmosphere. A living room object like TV may give way to devices in de-living space.

    Second, internationalization. We can expect pressure to show hospitality to visitors from around the world by making it so that any country’s smartphones can show Olympic broadcasts. If Wi-Fi viewing is a given, there is also a possibility for broadcasting to become the IP base. This means content will be internationally distributed, and there will be greater and greater drive for the overseas expansion of TV.

    Third, de-smartification. The real wave of the IoT (Internet of Things) and AI (Artificial Intelligence) is on its way. Broadcasting will probably not be unrelated. What sorts of information and data will be transmitted by watches, glasses, and other wearables; automobiles; robots; etc.? How can we best make use of data from sensors embedded in downtown areas and the countless drones flying about? This has the potential to completely reshape the future of broadcasting.

   Further, AI can operate for both audiences and broadcast stations. The AI agent in my smartphone will select programs I ought to see. AI is beginning to perform automatic compositions, but let’s also see AI that generates videos. Surely AI will also perform news compilation. This is still a fantasy now, but the potential of technology will likely be more visible in 2020.

    Terrestrial digital broadcasting has been established, but after it links with the Internet, its role will once again be called into question. It is a question of finding the resolve to pioneer new fields rather than protecting assets.

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