This century will be quite exciting, and I am not (only) referring to blockchain as a disruptive technology, although it will play a significant part in the turbulent decades to come. The world economy and its models will change, and what we end up with is very difficult to predict. It is however a very interesting thought experiment.
Self-learning algorithms, buzzword “AI”, is now growing rapidly and being applied in a vast variety of industries. A common use case that get a lot of exposure in media is self-driving cars, and focus tend to be on how it will increase traffic security. Another example is inventory management and packing, where autonomous machines can store and retrieve items with incredible speed and low cost. Improved efficiency by autonomous machines is naturally good for economic growth on macro-perspective, but the debates around these developments are often focused around “what will happen with the vast work force that is no longer needed?”. It is a very valid concern; a large part of our work force are for example dedicated to driving, and this work force in particular seem to increase in number with the freedom and ease to be a Uber or Didi driver. Truck drivers are of course also included in this group; transporting by truck usually follow a pre-defined route and will likely be one of the first driver-categories to be replaced by self-driving vehicles (as it’s easier to implement autonomous driving on a pre-defined route). Moreover, self-driving trucks will not need to stop to let the driver sleep, being able to cover larger distance in shorter time.
Similar developments are seen in the manufacturing industry, especially in developed countries where labor costs are comparably high. Any product that is an assembly of several parts is rather easily automated. Even business controllers and other more administrative roles will be replaced step-by-step, as the availability of data together with self-learning algorithms will be able to make predictions and decisions much more accurately than any individual can do.
There are discussions that a universal income may be necessary to battle the high unemployment during AI revolution (again, especially in developed countries). There are many opinions on if this is a good or a bad idea, it would however very likely speed up the AI development even more, accelerating the amount of jobs that are being replaced by machines. The logic to that is rather simple; with universal income, persons with jobs that doesn’t stimulate them enough will choose to live on universal income instead. With less people wanting to do these “boring” jobs, the salary for doing the “boring” jobs will increase, thus giving higher incentive to automate these jobs as well, just to cut the cost. To cover the expense of an increasing number of people on universal income, taxes need to be increased. This is not very easy to do in a situation like this. Raise VAT and you will increase population wealth gap. Raise corporate tax and the corporates will relocate to another country. Raise high income tax and high income earners will move their residence to another country so that you cannot tax them at all.
So are we moving towards a bleak future owned by the few one who know computer science and machine learning? I do not think so. By the nature of psychological well-being, we will all find things to spend our time on, even on universal income. We will just value these things very differently than we do today, even in economic value. With more people having spare time, they will choose to spend it on activities they enjoy. I expect creative persons to spend more time on art, and along a growing art industry, we will get a more eye-catching world with wealthy organizations and societies willing to spend more for pleasant environments.
There will be vast growth in other industries as well. I expect the entertainment industry to grow rapidly to fill the spare time of people on universal income, and digital entertainment is of course a large part of it. Here is where it gets really interesting. Digital entertainment, such as video games, offer certain things that not everyone can get in their material lives. They offer a sense of natural progression, growth, improved skill, and if you are really good, you can even get a reputation and a high social status within the game. Some may say that “it’s not real”, but for all the brain is concerned, it is very much real. It is the very same biological triggers that a person would get from “real” rewards. With more people joining digital entertainment, the demand and difficulty to reach the “social top” in the game will increase. In parallel, a digital economy is developed; trading of items, trading connections, even digital jobs such as training other players to improve their digital skills.
The behavior of a digital economy has already been seen in online games, for example Eve Online and World of Warcraft. The small inconvenience with these games is that the game publishers are acting both as a self-elected governors and a self-elected federal banks. The power of game publishers will gradually be transferred over to the players themselves through blockchain technology, allowing for truly player governed games and player driven economies — even across different games — and naturally across to the real world as well. The border between material items and digital items will be removed and interchangeable without the approval of a bank and without the approval of a game publisher.
The digital entertainment industry will mark the start of our Future Economy of Value. It is interesting in the way that it in one sense is a step back in trading — bartering items for other items. The really exciting part is that you will be able to do this with chained transactions and get change back when the items are not of equal worth — and get the change in whatever Item of Value you prefer. The Future Economy of Value is unlikely to need or be measured by USD, as of now, it seems likely to be BTC. This could however change depending on global regulations, for example to be measured by the tokens in whichever Smart Contract platform that finds the sweet spot between regulation, decentralization, and ability to do chained transactions with 100% finality.
Nonetheless, we are moving towards a fully digital economy that may not even require a base currency. I expect that it starts within entertainment industry and then gradually transform our whole economy. AI development and potential universal income could speed up the transition, whereas opposition towards universal income may slow it down. Token economy will however evolve into a fluid economic system based on automated value exchange instead of trading against currencies; it’s just a matter of time.