While revising my lectures for the coming academic year I had some thoughts about the shape of economics in the Knowledge Economy that I thought I’d put down. These are just some initial ideas, not fully worked out.Eric Reasons has an interesting perspective on his blog about how the new economy of free is undermining the old and destroying our current measures of wealth and economic growth. One of the common themes of my teaching is how what’s happening now can be understood better if we consider what has happened before (not quite the Mormon/Battlestar Galactica “this has all happened before. It will all happen again”). Looking at the development of the telegraph helps us understand the social and economic impact of the Internet. Looking at the industrial revolution helps us to understand the information revolution. Reasons is right in that current economic changes are radically undermining our current measures of wealth, which are principally based on atoms. Of course in the pre-industrial age wealth was based primarily on hectares. Not all hectares were equal and good management/work could improve (to a physical limit) the value of existing hectares. But Marx’s analysis that labour is the missing element of economic analysis in the mercantilist commodity economics of the day was a significant insight (I’m with Karl Popper in that Marx did brilliant work on observing and analysing the state of his time but a terrible one with his predictions of the future). Reasons makes some similar mistakes. He claims that the 20th century gave us free time we’d never had before. Actually, if one looks at agrarian economies, stable economies had significant free time, i.e. time which was not spent on subsistence labour for one’s family, for many though not all. This free time wasn’t spent watching soap operas because television didn’t exist. It was spent doing things beyond the immediate needs of the individual and family. Some of it was spent enriching the feudal lords. When a peasant had to spend two or more days a week working the lord’s land, that was their free time. Another way this free time was spent was the construction of the major cathedrals, many of which still stand today as features of the urban landscape. Wikipedia is, I contend, the modern equivalent of the medieval cathedral. These days, particularly in Japan, many employers act as feudal lords and expect such “free” time to be gifted to the company with long working hours and presenteeism. The late industrial economy and particularly the early knowledge economy have been characterised by a diminution of free time for a large part of the population. The 9-5 job has become the 8-7 job with email, mobile phone calls and international travel added on top. For others, as documented by Naomi Klein, flexible hours have become a millstone around the necks of the manual worker, with Starbucks or McDonalds requiring shifts of 7-10am and 4-7pm making up the working day and no recompenses for the double commute (many of their stores are in locations their employees can’t affford to live in and the early and late public transport they rely on also extends travel time).

Reasons talks about the deflationary pressures of innovation and claims that the new “free” economy that Anderson talks about in Free (and that Doctorow criticises as on half-analysed in his Guardian piece) will be one in which we will have less money, but goods will cost less, and we’ll have more free time. The kicker according to Reasons is whether, and possibly for whom, the balance betweeen reduced income and reduced outgoings will balance or improve. However, if we look again at the shift from the agrictulural to the industrial economy, we see that those things which were represented by money in the agricultural economy (land) were supplanted by movable goods (cars, televisions, washing machines). As Charlie Stross pointed out in the Introduction to Toast, a conversation with H. G. Wells in which one is limited to yes/no answers would quite probably give Mr Wells some very strange ideas, because he would be focussed on the things that mattered in an early industrial economy: coal, steel, warships. He couldn’t know about aircraft, nuclear weapons, computer software, and would not regard international finance, insurance, tourism as significant economic indicators. Similarly as we move from the industrial economy to the knowledge economy our measure will need to change. Money is currently still the main mechanism of exchange and will probably remain necessary for physical goods for a long while until and unless we can develop Star Trek-style replicators from today’s crude 3-D printers, and even then the raw materials going into them may keep monye important for a while. But already we see that issues such as reputation may be far more important to the new economy than physical structures. The banking collapse was driven at least in part by a bubble in reputation as over-inflated values poisoned a realistic lending market. All I think at this point that we can reasonably say about the economy of two or three decades down the line is that the commodities that will be important then are as opaque to us now as the microprocessor would have been to H. G. Wells.