In his book ‘The Price of Tomorrow,’ Canadian technological entrepreneur Jeff Booth engages in the debate about the global effects of digitization on inflation. I talked with him about the central thesis of his book and discussed some of his personal views.
GED reads: Presenting the most relevant debates
In our posts for GED reads, we look at major issues of our time with worldwide relevance. We asked if globalization needs a gender perspective, discussed the consequences of automation here and here, and saw that storytelling plays an important role in the dissemination of economic ideas. This time we turn to the effect of technological advancements on productivity and prices as well as on their societal consequences.
Jeff Booth’s core thesis
What we currently observe in many countries is that while inflation rates are low, central banks have been taking unconventional stances to implement monetary stimuli. Jeff Booth builds on his personal experiences as a technology entrepreneur and argues that this approach will be maxed out at some point. Productivity gains from technological advancements, especially in artificial intelligence (AI), will become so large and drive inflation rates down to such an enormous extent, that at some point, it will become impossible for central banks to counteract this development with the help of extraordinary monetary policies. Therefore, we should allow deflation to expand to its full extent. Even though this can be hard in the short term, it would be better than facing even worse consequences in the future.
Booth proposes an international agreement on a system comparable to Bretton Woods, which was at work after the Second World War and until its collapse in 1973. From his perspective, such a system with fixed or less flexible exchange rates could create disincentives for central banks to implement ever-more expansionary monetary policy measures.
Using basic insights from game theory, Jeff argues in his book that such a solution needs to be internationally agreed upon and that unilateral actions will not lead to the best overall outcome. When nothing is done, people will search at some point for alternatives to official currencies such as the cryptocurrency Bitcoin.
Talk with Jeff Booth about the Price of Tomorrow
I spoke with Jeff Booth about these takeaways from his book as well as about some of his personal views on major debates concerning technological advancements.
Could you tell us something about your career and experiences as an entrepreneur?
I am a technological entrepreneur. In my career, I was always eager to use technology for the sake of improving things. This is challenging because using technology means that you have to constantly advance your business model. As an example, when I was CEO of BuildDirect, we changed the company from an online retailer to a player in the platform economy.
Since I left BuildDirect in 2018, I have tried to utilize my knowledge in the business and technology environment to help start-ups around the globe. What I have learned in all my entrepreneurial experiences is that correct timing is crucial to success and that people tend to put a positive bias on the actions of successful people: We think that successful people know how to do things right. But a large part of the story is that they were in the right place at the right time. Most entrepreneurs are not risk-takers: They are looking at asymmetric bets.
What has been your motivation to write this book?
I was thinking that there is something majorly missing in the public debate, and I wanted to contribute to the avoidance of conflict in the world. Since I work at the front end of business models dealing with AI, I face how fast things are changing every day. It is crazy to see what algorithms can do. On the one hand, I like being on the edge of these technological advancements because it is an incredible experience, and I think that humanity can largely benefit from it. On the other hand, I felt the obligation to write this book to engage in the discussion about how to deal with the societal consequences of technological advancements.
Societies don’t break when people feel safe. They break when people feel anxious. Remove the anxiety about people’s economic futures, and we can curtail the rise of populist forces.
What societal and technological alterations will we see in the forthcoming years?
What is coming with technological advancements is game-changing because their extent is largely deflationary. Coupling the deflationary impact of technological advancement with easy credit is driving asset prices up. Inequality is enhanced as you can see, for example, by looking at rents in the cities which are exploding. This, in turn, leads to growing populism, which we currently observe in the US, but also in many other places around the globe.
Digitization will increasingly put pressure on the labor market. If every job is a function of intelligence, and AI will be superior to Human intelligence at some point, then how would any job be safe. Even the service sector will be largely affected by AI. However, in the long-term, humanity can largely benefit from these technological advancements because they create abundance. But only if you let deflation happen: Prices would go down.Since economics is about scarcity and technology allows lower cost for everyone, if, instead of stimulating, we let the natural order of things happen, prices would fall rapidly. Remember, the most valuable thing in our lives is the air we breathe, but it is free, because it too is abundant. The harder part is how society can deal appropriately with the coming abrupt changes.
Canada and some European countries are five years ahead of the US in this respect because they have a stronger social system. But if nothing is done, we will also observe a rise in populism there too. It is then just about when the unwind happens.
How should society accompany the forthcoming technological changes?
One solution is maybe not enough. We need more. While the derivative of universal basic income is worrying from my perspective because it could create an even larger social divide, its implementation could help for a short transitionary period. No matter what, you need well-financed social security systems to discourage populist forces.
Are you optimistic about the future?
I am deeply an optimist. When humans are most under pressure, they will work together to find solutions.
Booth, J. (2020). “The Price of Tomorrow. Why Deflation Is the Key to an Abundant Future”. Vancouver, BC, Canada: Stanley Press