The Future Is Here

Top Article: The Future Is Here
General purpose technologies reshape the nature of production and service activities irreversibly. They open up new opportunities, create complementarities and necessitate reorganisation of production. They share characteristics like wide scope for changes and elaboration, applicability across a range of uses and potential for use in a variety of products and processes. They change human capital requirements and alter the skill mix in the economy by biasing it towards higher-skilled people.

Human history is replete with instances of how diffusion of general purpose technologies transformed societies. Take the US where electricity changed the way factories were organised in the 19th century, while assembly lines transformed manufacturing. In communications and logistics, the telegraph enabled rapid conveyance of goods in stock and instructions to employees, forever changing the way businesses were managed. More rapid communications between firms prevented resource misallocations. Employees could work from more convenient locations. Railroads and the logistics revolution transformed retailing. An entire nation could become the market for a firm located in any corner of the country.

The replacement that occurred of unskilled human and obsolete fixed capital by skilled human capital and new technology catalysed productivity growth in the 19th century. It led to the US's emergence as the world economic power, with gains accruing to human capital responsible for implementing these technologies.

The impact of general purpose technologies on individual productivity is profound thanks to changes in the organisation of production. Their diffusion raises the returns for cognitive skills and education. As these are deployed, there is demand for higher skilled human capital and higher-order mental skills. These include interpersonal and management skills, and skills to operate autonomously and exercise judgment.

In contemporary...