Notes: URAP Project 5: Fall 2005: Offshoring
Notes: URAP Project 8: Fall 2005: Monetary Policy After the Bubble

Notes: URAP Project 7: Fall 2005: Nanotech

I'm looking for a research assistant to help me think about nanotechnology:

Let me simply assert that a fruitful way to analyze the social and economic impact of every technological revolution that has taken place over the past two and a half centuries is to seek the answers to four different questions, and then to draw out the implications of those answers:

  1. What commodities--what goods and services--become extraordinarily cheap as a result of the technological revolution?
  2. What human activities--what jobs and skills--become key bottlenecks, and thus become remarkably valuable and well-paid?
  3. What risks blindside the society as the technology spreads?
  4. What risks do people guard against that turn out not to be risks at all?

These are the four questions.

Let me expand on my assertion, by applying them to the case of the original British Industrial Revolution, at the heart of which was the application of automatic machinery and steampower to the tasks of spinning and weaving--key handwork tasks for every human society since the domestication of the sheep. Over the forty years that were the heroic phase of the British Industrial Revolution, the price of spinning a cloud of cotton wool or wool wool into thread fell at an average of 5% per year. By 1830, the real cost of spinning thread was only 1/8 of what it had been 40 years before, and textiles--especially cotton textiles--became absurdly cheap. This was extremely good news for clothes-wearers in Britain and elsewhere. This was extremely bad news for first handspinners and then handweavers--whether in Scotland, Silesia, or Southeast Asia.

As textile production prices fell, the volume produced in Britain expanded perhaps thirtyfold. And this huge leap in demand pulled up the earnings of engineers who designed and maintained the textile factories, the metalworkers who built the textile machinery, and the merchants and salesmen who distributed the finished products. For the first two generations, little gain accrued to the factory workers themselves: factory workers were unskilled, and population growth plus large scale migration from the countryside meant that unskilled workers were not in short supply. But for those with places in the division of labor that made them essential complements to factory production, the Industrial Revolution was a true bonanza.

And there were other large-scale losers as well. Consider that in 1800 slavery in the United States was largely considered to be on the way out: few objected to Thomas Jefferson's prohibition of slavery in the Northwest Territories, or to his partial and anemic emancipation of his own slaves. But slaves could grow cotton. And as the Industrial Revolution took hold, the demand for cotton by British factories grew extraordinarily large. The value of what American slaves grew soared. The value of slaves soared. And in the American south emancipation became illegal, and unthinkable. This was a consequence of the British Industrial Revolution that nobody foresaw, and that nobody took any steps to guard against.

On the other hand, Karl Marx and Friedrich Engels saw a risk that wasn't really there at all. They looked at the factories of Manchester. They saw stagnant real wages, and horrible public health conditions, accompanying the extraordinary boom in productivity. They concluded that there was something very wrong with the market economy: that it could not generate an acceptable distribution of income. And so they founded world communism and dedicated it to collective ownership of the means of production and to the abolition of use of the market as a social allocation and planning mechanism. In retrospect, however, we can see that they sought to guard against a danger that wasn't there: the share of total production paid to workers has been remarkably constant over the past two centuries--the predictions of the immiserization of the working class were completely wrong.

That's how these four questions would guide an analysis of the original British Industrial Revolution. It seems a useful framework.

Now, assuming it is a useful framework, how would it guide our thinking about nanotechnology? What's going to become absurdly cheap? What human activities are going to turn out to be bottlenecks, and become well-rewarded indeed? What risks are we failing to guard against? What risks that aren't really there will wind up warping our society? And how big will it be? The computer-and-communications technology revolution we have been living through transforms twice as large a share of the economy as did the British Industrial Revolution, looks to last three times as long, and proceeds at a pace three times faster than the revolution in spinning and weaving: it is, relative to the size of the economy, eighteen times a bigger deal than the original. Will nanotechnology be a set of tightly-focused technologies revolutionizing small discrete sectors of the economy, or will it be broad and long-lasting?

I speculate that nanotechnology will come in three waves: a first--materials--wave over the next two technological generations, a second--biologicals--wave between one and four technological generations from now, and a final--Drexlerian--wave that may or may not ever come to be (for if engines of creation are possible, hasn't evolution had enough time to build them?). Things that know where they are, know what they are, can figure out where they need repair, and that for the first time ever possess macro strength and other properties that are the simple scaling-up of the strength of their covalent bonds--that is enough of a technological revolution in itself. The greater durability of "smart commodities" alone promises a halving of the size of the manufacturing workforce, coupled with the vanishing of large chunks of that part of the service sector that is concerned with diagnosis, maintenance, and repair. This is likely to give a further upward kick to income inequality: you don't need as many fence-painters when the paint is smart, you don't need as many warehouse workers when things can be programmed to tell their container to move them to where they need to be.

The human specialties that are going to be in short supply are likely to be some sort of analogues to programming: how to modify and install the new materials, and how to program the smart materials will be tasks that require considerable technical knowledge and information-processing skills. Virtually the entire twentieth century was marked by an extraordinary pace of American investment in education, as documented by Goldin and Katz. This extraordinary educational effort kept the supply of skilled and educated workers in America well in front of the skill requirements of current technology. Now American politics has shifted: this extraordinary educational effort is flagging, and there are no signs of the political will to restore it.

If information technology caused a sharp upward leap in the skill- and education requirements of the labor force that has caused a large chunk of our upward leap in income inequality, is not nanotechnology likely to do the same? And is not the pace of economic growth--the spread and use of nanotechnology-generated materials--likely to be constrained by a shortage of the highly educated and skilled materials technicians and programmers that we will need?

In this context, it is worth thinking about the role of foreign educational institutions. We do believe that each extra person educated in America is a national asset--boosting average productivity, and also helping to improve the income distribution by reducing the skill- and education premiums. Is it not in the American--although perhaps not the world--interest to incorporate this belief into our immigration policy? One of the chief things that has made America great, after all, is that we are the only country in which enthnicity is not closely linked to nationhood.

Within this framework, it seems possible that the coming of nanotechnology will act as a further wedge driving apart the American income distribution. In order to keep the income distribution tight, the premium on skilled and educated workers must fall--which means the supply of such workers must increase rapidly as nanotechnologies promise yet another shift of labor demand toward the highly-skilled and well-educated. Yet there are no signs in American politics of the renewal of the extraordinary educational effort which gave America such a huge edge over other advanced industrial economies in the twentieth century.

If it is indeed in the national interest--both for equity and for growth reasons--to take steps to greatly increase the supply in America of highly-skilled and well-educated workers, then immigration policy may turn out to play a key role. America is, after all, the only society that does not define its citizens substantially in ethnic terms.

About risks I will say nothing: I don't know enough yet...