THE LIGHTS IN THE TUNNEL / 234 CopyrightedMaterial–Paperback/Kindle available @ Amazon Trouble in China IfconsumerspendingintheU.S.andtherestofthe de- veloped world remains depressed, China may ultimately find itdifficultto sustain thegrowthit needsto keep its workersemployed.GiantretailersintheUnitedStateswill likelycontinuetoexertextremepressureonChineseman- ufacturers to produce ever cheaper, better and more so- phisticated products. These businesses may have little choicebuttoturnincreasinglytoautomationasawayto improveefficiencyandtrimcosts.Inasocietythatoffers littleinthewayofasafetynet,thesavingrateamongChi- neseworkersmightremainveryhigh,orperhapsevenin- crease, in spite of the government’s efforts to somehow spur consumer spending. All this may lead to increased incidentsofcivilunrestandinstability.  Continuing Instability in the Financial Markets Aseveryoneknows,thecurrentcrisisbeganwiththesub- primemeltdown.Acasecancertainlybemadethatstag- natingwagesplayedaroleinthecauseofthatmeltdown. Obviously,lowwagesmadeitdifficultforthesepeopleto repaytheirloans. Beyondthat,Ithink itisalsotruethat,to some de- gree,themotivationbehindsubprimeloanprogramswas theideaofthe“ownership society.” Basically, inlightof increasingevidencethatwagespaidtoaveragepeopleno longerofferalikelypathtosuccess,weturnedinsteadto thepromiseofrealestatespeculationandtriedtoextendit toasmanypeopleaspossible. Appendix / Final Thoughts / 235 CopyrightedMaterial–Paperback/Kindle available @ Amazon Itdidn’tturnoutwell,andthelessonisthatvirtually allassetvaluesinoureconomyarebasedontheassump- tionthatwearegoingtocontinuehavingavibrantmass marketeconomysupportedbyrobustconsumerspending. Ifthatbasicassumptionisthreatened,weareverylikelyto see increased risk, volatility and, ultimately,deflating val- ues. The “ownership society” idea just isn’t workable— consumersneedincomes(andconfidenceinthecontinuity of those incomes) to support the sustained discretionary spending that powers the economy. Remember: Every- thingthatisproducedbytheeconomyis ultimatelycon- sumedbyindividualhumanbeings. *   Ugly and irrational political battles IftrendssimilartotheonesI’velistedabovedodevelop, andifthereisnocoherentunderstandingandreasonable consensus regarding what is occurring, a dark scenario may develop. Political battles will become even more heated,partisanandirrational.Manypoliticiansmayactin evenmorepurelyself-interestedwaysastheycometoge- nuinelyfearthespecteroftheirownunemployment. Conservatives will likely cling to the idea that taxes should be cut on business even as it becomes clear that such cuts will result in little or no job creation. Liberals   *  GDP is equaltoPersonalConsumer Spending + Business Invest- ment (which occurs in anticipation of future consumer spending) + NetExports(consumer spendinginothercountries) +Government Spending(moneythatthegovernment spendstoprovideservicesto individual people). It all comes down to individual people buying stuff. THE LIGHTS IN THE TUNNEL / 236 CopyrightedMaterial–Paperback/Kindle available @ Amazon may callfor increased job training evenastheprospects formoreeducatedworkersarediminishing.Theymayalso throw their weight behind organized labor, and this will leadtoacontinuingbalkanizationoftheworkforceintoa protectedeliteversusafarlargernumberofhighlyvulner- ableworkers. Appendix / Final Thoughts / 237 CopyrightedMaterial–Paperback/Kindle available @ Amazon Outsmarting Marx Thecentralthesisofthisbookisthat,astechnologyacce- lerates, machine automationmay ultimately penetrate the economy to theextent thatwages no longer provide the bulkofconsumerswithadequatediscretionaryincomeand confidenceinthefuture.Ifthisissueisnotaddressed,the resultwillbeadownwardeconomicspiral. Itmustbeacknowledgedthatthisideaisquitesimilar tothepredictionsthatweremadebyKarlMarxinthemid tolate1800s.Marxpredictedthatcapitalismwouldsuffer from a relentless “accumulation of capital,” resulting in massive unemployment and wages that would be driven downbelowsubsistencelevel.Thisinturnwouldresultin diminishedconsumerdemand,fallingprofitsandultimate- lyeconomiccrisisorevencollapse. Iftheargumentsinthisbookprovecorrect,thenwe may bein thesomewhatuncomfortablepositionofcon- ceding that Marx was, at least in some ways, perceptive aboutthechallengesthecapitalistsystemwouldeventually encounter.That,ofcourse,doesnotmeanthatweshould consideradopting Marx’s solution. He advocated theab- olition of private property, acentrallyplanned economy, and perhaps most chillingly, the overthrow of govern- mentsanda“dictatorshipoftheproletariat.”Inthewake of the collapse of communism, these ideas have been shownunequivocallytobe non-starters. They deserveto besweptintothedustbinofhistory. Theanswertotheproblemisclearlytoadaptoursys- tem.Thefreemarketeconomyisnotanaturalphenome- THE LIGHTS IN THE TUNNEL / 238 CopyrightedMaterial–Paperback/Kindle available @ Amazon non.Itisreallyamachinethatwehavebuiltandrefined overcenturies:itisanenginethatisfundamentallydriven byincentives.Marxwantedtotakeasledgehammertothat engine.Ourjobistotuneit,andevenre-engineeritifne- cessary,sothatitwillcontinuetopowerprosperityindefi- nitely.  Appendix / Final Thoughts / 239 CopyrightedMaterial–Paperback/Kindle available @ Amazon The Technology Paradox Mostpeoplewhowatchmoviesorhavereadsciencefic- tionnovelsarefamiliarwiththepotentialparadoxesasso- ciatedwithtimetravel. Forexample,ifyouwereableto travelbackintimeandthendosomethingtopreventyour parents from meeting before you were born, or perhaps killayoungerversionofyourself,thenyouwouldpresum- ablyceasetoexist.Whileweobviouslydon’tneedtowor- ry too much about the practical problems of owning a timemachine,Ithinkthatthereisasomewhatanalogous issueassociatedwiththefutureoftechnology. Manytechnologistswhothinkdeeplyaboutthefuture believethatgenuinelyamazing thingsare possible.These visions include things such as truly intelligent machines and advanced nanotechnology that would allow us to transform matter, generate abundant clean energy and perhapscreatetangibleobjectswiththesameeasethatwe nowcreategraphicsonacomputerscreen.Thereisalsoa greatdealofspeculationaboutfantasticmedicaladvances thatmightcuremajordiseasesandperhapsevendramati- callyextendthehumanlifespan. *    *  While many diet books are a bit ambitious in terms of what they promise,RayKurzweilandTerryGrossmantakethingstoanentirely newlevel with two books (Fantastic Voyage: Live Long Enough to Live Forever and Transcend: Nine Steps to Living Well Forever) based on the premise that ifyou can justhold on longenough to make ittothe point of extraordinary technological acceleration (the “Singularity”), you should be abletotakeadvantageofthecontinuous medicalad- vancesthatwillensue,andthenmanagetobecomeessentiallyimmor- tal. You won’t find many other books that discuss subjects such as THE LIGHTS IN THE TUNNEL / 240 CopyrightedMaterial–Paperback/Kindle available @ Amazon TheessentialpointIwanttomakeisthatallthistruly amazingstuffwillrequireenormousinvestment.Certainly,tril- lionsofdollarswillneedtobeinvestedinordertomake such technologies a reality. As I have pointed out throughout this book, such investment cannot occur in theabsenceofrobustconsumerdemand.Withinthecon- textofthefreemarketeconomy,noinvestorwouldmake suchaninvestmentunlessheorsheanticipatesavibrant marketfortheresultingtechnology. IwouldalsoarguethatthelevelofautomationIhave beendiscussinginthebook—inotherwords,theideathat a substantial fractionof routine,average jobs willbeau- tomated—representsamuchlowerpointonthetechnolo- gycurvethanall thisreallyfantasticstuff.Therefore,itwill occurfirst.AsIhavepointedout,iftechnologypermanently eliminateshugenumbersofworkers—and createsperva- sive fear in the minds of those who still have jobs— consumer demand would surely suffer dramatically. The bottomlineisthat,ifoureconomicmodelisnotadapted to the new reality, technology could essentially kill itself off.Itisquiteeasytoimagineascenarioinwhichtechnol- ogyreachedacertainpoint,butthensloweddramatically orevenhaltedbeforegettingtothereallyamazingthings.   advancedartificialintelligenceandcybernetics—andalsohaveplenty ofrecipesforhealthydishes.  Appendix / Final Thoughts / 241 CopyrightedMaterial–Paperback/Kindle available @ Amazon Machine Intelligence and the Turing Test Thisbookhasprimarilybeenconcernedwiththepotential economicimpactofwhatresearchersinthefieldofartifi- cialintelligencewouldcallnarrowAI.Inotherwords,ma- chinesandsoftwarethatarecapableofsophisticatedanal- ysis,decisionmakingandreasoningwithinarelativelynar- rowfieldofapplication.Suchmachinesarenotreallyintel- ligentinanymeaningfulsense—buttheyarehighlycom- petentatperformingspecificcomplextasksandmaywell exceedthecapabilityofahumanworker. NarrowAIapplicationsarealreadyinwidespreaduse; expertsystemssuchasthesoftwarethatcanautonomous- lypilotandlandairlinersandmanyoftheadvancedfea- tures built into Internet search engines and multiplayer role playing games fall into this area. Narrow AI is the practicalsideofartificialintelligence,andforthatreason, we can expect that it will attract substantial commercial investment.AsIhavearguedinthisbook,machinesexhi- bitingvastlyimprovednarrowAIcapabilitymayultimately be poised to permanently take over a great many of the moreroutinejobsintheeconomy. WhilenarrowAIisincreasinglydeployedtosolvereal worldproblemsandattractsmostofthecurrentcommer- cialinterest,the HolyGrailofartificial intelligenceis, of course, strong AI—the construction of a truly intelligent machine.TherealizationofstrongAIwouldmeantheex- istenceofamachinethatisgenuinelycompetitivewith,or perhaps evensuperiorto,a human beinginitsabilityto reasonandconceiveideas.TheargumentsIhavemadein THE LIGHTS IN THE TUNNEL / 242 CopyrightedMaterial–Paperback/Kindle available @ Amazon thisbookdonotdependonstrongAI,butitisworthnot- ingthatiftrulyintelligentmachineswerebuiltandbecame affordable, the trends I havepredicted here would likely beamplified,andtheeconomicimpactwouldcertainlybe dramaticandmightunfoldinanacceleratingfashion. ResearchintostrongAIhassufferedbecauseofsome overlyoptimisticpredictionsandexpectationsbackinthe 1980s—long before computerhardware was fast enough to make true machine intelligence feasible. When reality fellfarshortoftheprojections,focusandfinancialback- ingshiftedaway fromresearchintostrongAI.Nonethe- less,thereisevidencethatthevastlysuperiorperformance andaffordabilityoftoday’sprocessorsishelpingtorevital- izethefield. ResearchintostrongAI canberoughlydivided into twomainapproaches.Thedirectcomputationalapproach attemptstoextendtraditional,algorithmiccomputinginto therealmof true intelligence. This involves the develop- ment of sophisticated software applications that exhibit generalreasoning.Asecondapproachbeginsbyattempt- ingtounderstandandthensimulatethehumanbrain.The Blue Brain Project, 57  a collaboration between Switzerland’s EPFL (one of Europe’s top technical universities) and IBM, is one such effort to simulate the workings of the brain.Onceresearchersgainanunderstandingofthebasic operating principles of the brain, it may be possible to build an artificial intelligence based on that framework. Thiswouldnotbeanexactreplicationofahumanbrain; instead,itwouldbesomethingcompletelynew,butbased onasimilararchitecture. Appendix / Final Thoughts / 243 CopyrightedMaterial–Paperback/Kindle available @ Amazon When might strong AI become reality—if ever? I suspectthatifyouweretosurveythetopexpertsworking inthefield,youwouldgetafairlywiderangeofestimates. Optimistsmightsayitwillhappenwithinthenext20to30 years. Amorecautiousgroup would placeit 50or more yearsinthefuture,andsomemightarguethatitwillnever happen. True machine intelligence is an idea that, in many ways,intrudesintotherealmofphilosophy,andforsome people,perhapsevenreligion.Whatisthenatureofintel- ligence? Is intelligence algorithmic? Can it be separated fromconsciousnessorself-awareness?RogerPenrose,one of the world’s top mathematical physicists, has written severalbooks 58 suggestingthattrueartificialintelligenceis unattainableusingconventionalcomputersbecausehebe- lieves that intelligence (or at least consciousness) has its rootsinquantummechanics—theareaofphysicsthatgo- vernstheprobabilistic,andseeminglybizarre,interactions thatoccurbetweenparticlesofsubatomicsize. IfstrongAIdoesarrive,howwillweknow?Thatisa question that was first askedbyAlan Turing nearlysixty years ago. Turing, a legendaryBritish mathematician and codebreakerduringWorldWarII,isoftenconsideredto bethefounderofcomputerscience.In1950,Turingpub- lishedapaperentitled“ComputingMachineryandIntelli- gence,”inwhich he proposed atesttoanswer theques- tion:“Canmachinesthink?” Turing’stestwasbasedonagamepopularatparties at the time. In today’s terms, it amounts to a three-way instant messaging conversation. One participant is a hu- [...].. .THE LIGHTS IN THE TUNNEL / 244 man judge The other participants are another person and a machine—both of whom attempt to convince the judge that they are human by conducting a normal conversation If the judge can’t tell which participant is which, then the machine is said to have passed the Turing Test The Turing Test is perhaps the most well-known and accepted method for measuring true machine intelligence... Farrar, Strause and Giroux, 2005, 2006 40 China’s high saving rate the result of government policy, see: Eamonn Fingleton, In the Jaws of the Dragon: America’s Fate in the Coming Era of Chinese Hegemony, NewYork, St Martin’s Press, 2008 41 Pietra Rivoli, The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power and Politics of World Trade, John Wiley and Sons, NewYork,... intelligence In practice, the rules would need to be further refined, and it seems likely that a panel of judges would be required rather than a single person In my opinion, the main problem with the Turing Test is that it is, as Turing pointed out in his paper, an “imitation game.” What it really tests is the ability of an intelligent entity to imitate a human being—it is not a test of intelligence... 2: Acceleration Punch cards at the University of Michigan: The university by then had a very advanced interactive time-sharing system called the “Michigan Terminal System” or MTS Most students in advanced computer science and engineering courses used interactive terminals However, 7 Copyrighted Material – Paperback/Kindle available @ Amazon THE LIGHTS IN THE TUNNEL / 248 interactive computer time was... Many technologists believe that the exponential progress of information technology will ultimately level off In other worlds, the graph will somedaybecome an “s-curve,” somewhat similar in shape to the graph of human capability that appears later in the “Diminishing Returns” section (see page 4) However, there is no way to knowhowfar in the future this might occur, and there is little evidence to suggest... Material – Paperback/Kindle available @ Amazon THE LIGHTS IN THE TUNNEL / 252 Blinder, Alan S., “Is Government too Political?” Foreign Affairs, November/December 1997 Web: http://www.foreignaffairs.org/19971101faessay3815/alan-sblinder/is-government-too-political.html 50 Jeremy Rifkin, The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-Market Era, NewYork, Penguin Group, 1995... Valley-based software development firm He has over 25 years experience in the fields of computer design and software development He holds an MBA degree from the Anderson Graduate School of Management at UCLA and an undergraduate degree in computer engineering from the University of Michigan, Ann Arbor He has a blog at http://econfuture.wordpress.com The author welcomes comments, criticisms and corrections and. .. http://news.bbc.co.uk/2/hi/europe/7293992.stm 57 Blue Brain Project, Web: http://bluebrain.epfl.ch/ 58 Roger Penrose, The Emperor’s NewMind: Concerning Computers, Minds, and the Laws of Physics, Oxford University Press, 1989 and Shadows of the Mind: A Search for the Missing Science of Consciousness, Oxford University Press, 1994 59 For example: John Markoff, “Scientists worry that Machines may Outsmart Man”, NewYork Times,... Material – Paperback/Kindle available @ Amazon Appendix / Final Thoughts / 245 society and economy. * However, there is a more subtle danger posed by the specter of strong AI: it distracts us from the far more immediate economic impacts that will likely result from narrow AI Recent articles in the press59 have pointed out that machines currently exhibit “insectlevel” intelligence In other words, if we were... broadly intelligent machine today, we’d likely end up with something about as smart as a cockroach The problem with that comparison is that it gives us a false sense of security; it glosses over the obvious reality that cockroaches neither land aircraft nor defeat human beings at games of chess When machine capability is focused narrowly, the story is very different I think there is little doubt that in the . simulate the workings of the brain.Onceresearchersgainanunderstanding of the basic operating principles of the brain, it may be possible to build an artificial intelligence. 38 RobertJ.Shapiro,Futurecast:howsuperpowers,populations, and globaliza- tionwillchange the wayyoulive and work,NewYork,St.Martin’sPress, 2008. 39 ThomasL.Friedman, The WorldisFlat:ABriefHistory of the Twenty FirstCentury,NewYork,Farrar,Strause and Giroux,2005,2006. 40 China’shighsavingrate the result of governmentpolicy,see:Ea- monnFingleton, In the Jaws of the Dragon:America’sFate in the Coming Era of ChineseHegemony,NewYork,St.Martin’sPress,2008. 41 PietraRivoli, The Travels of aT-Shirt in the Global Economy: AnEcono- mistExamines the Markets,Power and Politics of WorldTrade,JohnWiley and Sons,NewYork,2005,p40. 42 Ibid.p142. 43 JeffRubin and BenjaminTal,“WillSoaringTransportCostsRe- verseGlobalization?,”CIBCWorldMarketsStrategEcon,March27, 2008.Web: http://yaleglobal.yale.edu/about/pdfs/oil .pdf  44 Revenueperemployeenumbers.Source:GoogleFinance,basedon 2008revenue. 45 “…growthwithoutjobcreation.”, The Economist,August11,2003. Web: http://www.economist.com/agenda/PrinterFriendly.cfm?Story _ID=1985889  46 Huether,David, The Case of the MissingJobs,BusinessWeek,April 3,2006.Web: http://www.businessweek.com/magazine/content/06_14/b397 8116.htm  47 Technicallythismightbebettercalled“regressive”or“reversepro- gressive”since the deductionishigheratlowerwagelevels.However, thosewordshavenegativeconnotations… 48 FareedZackaria, The Future of Freedom:IlliberalDemocracyatHome and Abroad,NewYork,W.W.Norton&Co.,2003,p.172-173. THE. THE LIGHTS IN THE TUNNEL / 234 CopyrightedMaterial–Paperback/Kindle available @ Amazon Trouble in China Ifconsumerspending in the U.S. and the rest of the de- veloped