The authors begin with the questionable assertion that the most prevalent attitude toward technology today is a heedless optimism. “Every day,” they write, “we hear … that we are heading relentlessly toward a better world, thanks to unprecedented advances in technology.” Their chapters then skip briskly through history—from the agricultural revolution of the neolithic era, to the industrial revolution of the 19th century, to the Western postwar economic expansion of the 20th century—seeking to show how at each turn new innovations tended to empower certain sections of society at the expense of others. The “power” that concerns them, in other words, is private power.
Since the 1920s, economists from John Maynard Keynes to Paul Samuelson to Joseph Stiglitz have been claiming, with increasing self-assurance though with surprisingly little evidence beyond the blackboard, that (1) private arrangements work poorly, (2) the state knows better, and (3) we therefore need more state. Messrs. Acemoglu and Johnson have long believed in this anti-liberal syllogism. Statism recommends a growing Leviathan, as Mr. Acemoglu argued equally eloquently in “Why Nations Fail,” a 2012 book with James Robinson.
We need, in other words, the legislation currently being pushed by left and right to try again the policies of antitrust, trade protection, minimum wage and, above all, subsidy for certain technologies. Messrs. Acemoglu and Johnson are especially eager to regulate digital technologies such as artificial intelligence. “Technology should be steered in a direction that best uses a workforce’s skills,” they write, “and education should … adapt to new skill requirements.” How the administrators of the Economic Development Administration at the Department of Commerce would know the new direction to steer, or the new skills required, remains a sacred mystery.
Choosing a path for a society and its economy is not the only role of Leviathan; distributing economic justice is equally important. “Government subsidies for developing more socially beneficial technologies,” the authors declare, “are one of the most powerful means of redirecting technology in a market economy.” Messrs. Acemoglu and Johnson regard the private economy as an inequality machine.
In former times, they write, “shared benefits appeared only when landowning and religious elites were not dominant enough to impose their vision and extract all the surplus from new technologies.” Today we need the state to use its powers “to induce the private sector to move away from excessive automation and surveillance, and toward more worker-friendly technologies.” Fear of surveillance is a major theme of the book; therefore “antitrust should be considered as a complementary tool to the more fundamental aim of redirecting technology away from automation, surveillance, data collection, and digital advertising.”
“Power and Progress” puts forward a new statist agenda and argues against a foolish reliance on individual discovery and free entry into jobs and markets. Well, so what? What’s wrong with their case for a new Leviathan, so long as it is advised by certain economists from MIT?
For one thing, Messrs. Acemoglu and Johnson use economic history uncritically. When they want to praise Progressivism, they do not mention its fascination with racism, eugenics, compelled sterilization and nativism, detailed in such works as Thomas C. Leonard’s “Illiberal Reformers” (2016). When they want to tar capitalism with slavery, they appeal to the recent “King Cotton” school, popularized in the “1619 Project.” When they want to criticize the practice of surveillance in the early factories, they do not acknowledge the universality of surveillance in any organization, as analyzed for the Royal Navy in the economic historian Douglas Allen’s book “The Institutional Revolution” (2011). When they want to cast doubt on the gains from early industrialization, they speak of “long hours” and “crowded cities” as though traditional jobs in the field and workshop did not have long hours and as if those who chose to go to cities seeking work went there mindlessly.
As an economic historian, I do admire their attempt to bring history to their argument. It’s something Mr. Acemoglu does in all his books. But it’s disastrous for real science to close your ears to the other side. Science advances by conjecture and refutation, both. If history is to be used, it must be tested. Messrs. Acemoglu and Johnson don’t.
The deeper problem in the science of the book is its economics. Look at the numbers. During the past two centuries, the world has become radically better off, by fully 3,000% inflation adjusted. Even over the past two decades the lives of the poor have improved. The “great enrichment” after 1800 and its resulting superabundance has brought us out of misery. Even the poor workers who did not benefit in the short run have done so enormously in the long run. In 1960, 4 billion of the 5 billion people on the planet lived on $2 a day. Now it’s fallen to 1 billion out of 8, and the income average is $50 a day. The state didn’t do it, and forcing short-run egalitarianism or handing power to the Office of Economic Development can kill it, as it regularly has. Messrs. Acemoglu and Johnson see great imperfections in the overwhelmingly private sources of the enrichment. With such imperfections, who needs perfection?
Another way to see the problem is to remember the common sense, refined in Economics 101 and Biology 101, of entry at the smell of profit. Messrs. Acemoglu and Johnson seem to have missed out on those courses. The great fortunes they deprecate have the economic function of encouraging entry into the economy by other entrepreneurs who want to get rich. This competition cheapens goods and services, which then accrues to the poor as immense increases in real income.
Many fortunes, for instance, were made by the invention of the downtown department store. The profit attracted suburban competitors, and at the mall the department-store model began to fail. Jeff Bezos reinvented the mail-order catalog. He is imitated, and the fortunes are dissipated in enormous benefit to consumers called workers.
It’s not the blackboard economics that Messrs. Acemoglu and Johnson proffer. It’s what happened and happens in a liberal economy.
