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We Grow More Equal as Technology Dematerializes the World

At this year’s Federalist Society student symposium Richard Epstein and I spoke on a panel on Innovation and Inequality.  We agreed that the innovation created by capitalism has hugely benefited the poorest in society.  We disagreed over the extent to which the very nature of modern innovation itself has a tempering effect on inequality.

In my view, modern innovation helps reduce real inequality both around the globe and in the United States. And it does so for fundamental reasons. Information technology creates value by better arranging material resources.  And because of the nature of our accelerating technology, the know-how for such information technology rapidly becomes common property benefiting everyone.

Another way of putting this point is that modern information technology dematerializes the world and thus democratizes it, because it is material things that are scarce. The move from its to bits is also a move to equality, because bits can be enjoyed by the many simultaneously. Income inequality gives a misleading picture because we all enjoy the benefits of a growing pool of expressions of ideas.

Let me give some concrete examples. Watson, the machine that beat the best players at Jeopardy, is going into medical diagnostics. When it becomes a routine part of medicine, it will help level the standard of health care, because the rich’s access to the best doctors becomes relatively less valuable than it was before. We will see similar advantages for legal consumers, as machines enter the legal space, creating documents, like wills and trusts, and predicting the outcome of legal cases.

Another way of understanding how modern innovation improves equality is to consider how much faster innovations move down the income scale. After the clock was invented, it took hundreds of years for timekeeping devices to become affordable to the middle class. Even in the last century, for a long time, only the relatively well-to-do had refrigerators and televisions. Today, new technologies circulate throughout the population far more quickly. Five years after the introduction of the smart phone, about half of America’s population had one. Today is it seventy percent and rapidly growing. Outside the United States, smartphones have been a source of substantial improvement for the poor as people in developing nations use them to interconnect and make money.]

My last example is personal. I have had good the fortune to become acquainted with Peter Thiel, the justly celebrated Silicon Valley entrepreneur and sage. Now it will not surprise you to know that Mr. Thiel’s net worth far exceeds mine.  In the middle ages, perhaps the relevant comparison would have been between a Duke and a fellow of an Oxford College. Because of their difference in wealth, their daily lives would have been utterly different. But the way Mr. Thiel and I live today looks a lot more similar than our medieval counterparts. We both spend much of our day in front of computer screens, which have pretty similar capabilities. It is true that Mr. Thiel’s residence is a lot nicer than mine. But as virtual reality takes hold (sooner than you think!), that difference too will diminish. The dematerializing world of innovation is a world of growing equality.

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