381. Too shallow to grow?

Economic growth requires investment, in different forms of capital. That requires patience. The deeper the investment, the longer it will take to bear fruit, but the higher the yield will be. Shallow investment for quick returns stunts growth.

That is the gist of the argument in a lecture by Andrew Haldane[i].

he different forms of capital proposed here (not the same as those of Haldane) are: hardware (machinery, instruments, buildings, …), software, infrastructure (roads, pipelines, satellites, …), media, intellect (education, science), culture, institutions (rule of law), and social capital (trust, cohesion, security, …).

The present short-term orientation of investors, and under their pressure that of managers, reduces growth.

Pressures on education and research to produce quick returns do so as well.

Haldane argued that the invention of book printing  provided the basis for slow, methodical, deep thought, and the present shift to more pictorial, iconic forms of expression favours the quick, shallow, and impressionistic. The resulting decay and marginalization of the intellectual, dodging the deep, will slow growth.

It may be worse than that. When fast opinions replace slow arguments, emotion muscles out reason, twitter drowns discourse, and memories are short, there will be increasing waste due to mistakes and their repetition, in lack of memory, incoherence, randomness and noise. Society becomes a play of bumper cars on a fairground.

But can this be avoided? With the explosion of available information on the Internet, surfing the surface, picking up titbits here and there, in the form of images and icons, is perhaps a necessary survival tactic. Going deep no longer pays in the trade-off between effort and the attention and reward one earns. But that is a weak excuse. Look at the waste of time in endless cycling around in social networks, delving and serving up trivia. Boring into the depth is now boring, unexciting.

Stop grumbling, old man, one might say. Accept the new world or drop out. But that does not yet invalidate the argument that shallowness and speed of thought may inhibit growth.

But will that really be the case? In fact, technical progress is accelerating, with untold advances in robotics, in particular, looming soon, perhaps beyond the abilities of humans, bypassing them. Not to speak of other forms of artificial intelligence, genetic engineering, materials science and nanotechnology, virtual reality, and platform services (Facebook, Google, etc.)

Growth also depends crucially on entrepreneurship. While technological innovation does require some knowledge of technology, that need not be deep, and what counts more is daring, willingness to take risk.

Innovation may arise from a variety of contributions from people with different bits of knowledge and skill. The Internet offers limitless opportunities to search and connect things in the novel combinations, between things that were not connected before, which constitute innovation.

Much innovation now requires little capital, since it does not involve large installations for manufacturing, but small outlays in software, knowledge and skill. 

Under the present pace of innovation, speed may not be a hindrance, as Haldane suggests, but a condition for survival in markets.

The capital of hardware and software is exploding, in innovation, while social understanding, for effective politics, and social capital, are declining, accompanied by increasing economic inequality, insecurity of employment, and the erosion of trust, and intellectual capital is eroding in trivialization of thought and communication.

However, innovation does not necessarily suffer from the erosion of social capital. The innovators of Silicon Valley profess an extreme libertarian view of the economy. Their ideal is abolition of state intervention, in unfettered market dynamics. 

So, becoming increasingly moronic we may not be growing slower but faster.

The problem is not lack of growth but our inability to deal intellectually, socially and politically with accelerating growth. Technology trumps the humanities. How, for example,  to deal with limits to genetic engineering, erosion of social security and conditions of work, financial markets that do not allow themselves to be contained, and inequality of income and capital?  

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[i] Andrew G. Haldane, Growing, fast and slow,  Bank of England, University of East Anglia, 17-02-2015