Present Day

Okay, so that’s enough about the past. What about now?

Well, monopolization of land and housing via the housing crisis has done tremendous harm:

In 2015, two talented professors, Enrico Moretti at Berkeley and Chang-Tai Hsieh at Chicago Booth, decided to estimate the effect of shortage of housing on US productivity. They concluded that lack of housing had impaired US GDP by between 9.5 per cent and 13.5 per cent.

In a follow-up paper, based on surveying 220 metropolitan areas, they revised the figure upwards – claiming that housing constraints lowered aggregate US growth by more than 50 per cent between 1964 and 2009. In other words, they estimate that the US economy would have been 74 per cent larger in 2009, if enough housing had been built in the right places.

How does that damage happen? It’s simple. The parts of the country with the highest productivity, like New York and San Francisco, also had stringent restrictions on building more homes. That limited the number of homes and workers who could move to the best job opportunities; it limited their output and the growth of the companies who would have employed them. Plus, the same restrictions meant that it was more expensive to run an office or open a factory, because the land and buildings cost more.

And that is just one form of rent-seeking. Imagine the collective toll of externalities (e.g., the climate crisis), monopolistic/oligopolistic markets such as energy and communications, monopolization of valuable intellectual property, etc.

So I would tend to say that — unless we change our policies to eliminate the housing crisis, properly price in externalities, eliminate monopolies, encourage the growth of free and open IP (e.g., free and open-source software, open research, etc.), and provide critical public goods/services such as healthcare and education and public transit — we are on a trajectory for AI to be Gilded Age 2: Electric Boogaloo. AI merely represents yet another source of productivity growth, and its economic spoils will continue to be captured by the already-wealthy.

I say this as someone who works as an AI and machine learning research engineer: AI alone will not fix our problems; it must be paired with major policy reform so that the economic spoils of progress are felt by all, not just the rich.

Joseph Stiglitz, in the same essay I referred to earlier, has this to say:

My analysis of market models suggests that there is no inherent reason that there should be the high level of inequality that is observed in the United States and many other advanced countries. It is not a necessary feature of the market economy. It is politics in the 21st century, not capitalism, which is at fault. Market and political forces have, of course, always been interwined. Especially in America, where our politics is so money-driven, economic inequalities translate into political inequality.

There is nevertheless considerable hope. For if the growth of inequality was largely the result of inexorable economic laws, public policy could do little more than lean against the wind. But if the growth of inequality is the result of public policy, a change in those policies could lead to an economy with less inequality, and even stronger growth.