In 1982, a Commodore 64 desktop computer boasted 64 kilobytes of RAM and a processor speed of 0.985 megahertz. Today, an iPhone trumps these figures by several orders of magnitude, with 512 megabytes of RAM and a 1 gigahertz processor speed. The former cost 178 hours’ work at the then minimum wage in the United States; the latter costs 90 hours’ work today. This trend is the ultimate explanation for why revolutionaries across North Africa and the Middle East have been so effective lately. More people there can afford more communication technology, and there may be related spinoffs here in the West.
The growth in computer power feeds another exponential trend: The value of communication networks rises exponentially when people move from being passive receivers to potential broadcasters. In traditional media ( e.g., newspapers, radio), the number of possible connections is the same as the number of recipients, but when everyone can broadcast to one other person (e.g., a telephone network), the number of possible connections is the number of people squared divided by two. For a network where everyone has the potential to be a mass broadcaster (think Facebook or Twitter), there are 2x possible connections. Practically, a network with 20 members can have 20,400 or 1,000,000 possible connections. Cheaper communication technology has qualitatively changed communication.
This development has driven the current uprisings in the Middle East and North Africa in two ways. First, it is impossible for the state to control information when everybody is a potential mass broadcaster. Second, effective revolutionary leaders and ideas are going to be discovered much more quickly with an open network than with traditional media. The results in the Middle East have been dynamite.
There is reason to hope the political dynamics in developing countries have changed such that hundreds of millions will now find they push against an open door into political emancipation. However, the story need not end there. Better communication technology might just help those of us in the West who think that we, too, could use some relief from the dead hand of the state. In transport and urban planning, in the workplace, in social attitudes to the state and in fiscal competition, communication technologies could shift the political pendulum from state action toward individual liberty.
For instance, a war exists in urban planning. The authoritarians would have us hemmed into romanticized “new urban” idioms with multi-unit buildings, public transport and mixed working-shopping-living environments. The rest of us value mobility, space and the freedom to work, live and shop wherever we please. As city after city adopts longer-term and more prescriptive urban planning, the authoritarians are winning.
They are winning because, like media in developing countries until very recently, transport has long been a sitting duck. There have been no game-changing innovations in private transport since the development of the freeways after World War ll. Nevertheless, Moore’s law – the number of transistors that can be placed inexpensively on an integrated circuit doubles approximately every two years – may yet deliver a new generation of technology that will make private transport a moving target again.
Imagine a world of privately owned (but shareable) vehicles that drive themselves and respond to prices on a pseudo-market that values the use of space and infrastructure in real time. These cars can drop someone off at his or her destination and park themselves elsewhere, saving on the need to have redundant parking space wherever a person could be but mostly is not. They would influence behaviour to avoid congestion and better use scarce resources generally. They could become semi-public at times, optimizing their routes to take multiple passengers who identify their transport needs and willingness to pay using GPS-enabled smartphones.
Science fiction? Everything in the previous paragraph already exists. In Sweden, Stockholm has had major success in reducing congestion, emissions, fatalities and commute times using electronic road pricing. San Francisco has begun to experiment with electronically communicating parking meters that dynamically price car parks. Google (they are diversifying) and BMW have both developed working prototypes of driverless cars, while GM bosses have said the challenges to mass marketing them are no longer technical or economic but legal. Avego Driver is a GPS-enabled smartphone app that has been used in real-life situations to facilitate more-efficient ride sharing than traditional communication could achieve.
It is more a question of when rather than if these technologies will be integrated into a single package. Whenever that is, they will improve the efficiency of private transport beyond anything that current private or public transport has achieved. The authoritarians who would have us cram into tiny apartments to save emissions, energy and infrastructure will end up redundant in the face of these innovations.[i]
The workplace is another area where the great decentralization will empower the individual and castrate the bureaucrats who would regulate our lives. Ronald Coase’s landmark paper “The Nature of the Firm” contends that a company should expand until the costs of its internal transactions exceed the costs of its external ones.[ii] For a long time, the cost of finding people to do business with and then making and enforcing contracts justified keeping things in-house (and in reach of employment regulations). However, as the authors of Wikinomics have noted:
… the Internet has caused transaction costs to plunge so steeply that it has now become much more useful to read Coase’s law, in effect, backward; Nowadays firms should shrink until the cost of performing a transaction internally no longer exceeds the cost of performing it externally.[iii]
For the same reasons youth in Egypt are able to organize much bigger demonstrations than they were able to only a decade ago, Western workers are able to organize themselves for work with less need to be employed by large companies. Web sites such as www.guru.com and www.freelancer.com host hundreds of thousands of workers; they perform one-off contracts much the same way as eBay has made everyone a potential retailer. This more atomized workforce will be harder for bureaucrats to regulate. There will be less and less point in politicians trying to deliver benefits to constituents through employment regulations when firms and independent contractors simply undercut the costs of these benefits through non-employment arrangements.
If better and cheaper communication is opening up greater competition for workers, then it is having an even more widespread effect on consumers. If I hear a song I want, I pull out my iPhone and it records a few seconds of the song and then matches it to a remote database. It then gives me the option of buying it for about two minutes’ wages and one touch of the screen. If I want to check where that leaves my bank balance, I can do so just as quickly with the same device. Back when banks were stuffy paperwork factories and music had to be carried home physically from an actual store, publicly funded, bureaucratically rationed, one-size-fits-all government services may not have seemed that bad. To someone in my generation (Y), encounters with government are a form of time travel. Policies such as medical savings accounts and school vouchers will be much more palatable to generations who are not only used to choice but feel cheated when they do not get it.
Tax collection is set to become more difficult, as business oozes across traditional national and sub-national borders. Traditional borders evolved long ago in such a way that a government could monopolize almost the entirety of a person’s life within them, but communication technology is expanding each of our commercial spheres beyond them. And so we see a location-based bookstore (Borders) going into Chapter 11 bankruptcy while Amazon expands into more and more product lines. What is the point in taxing sales within a border when people will just buy from beyond it? The same applies to income taxes when work is atomized in the ways described above. Therefore, we see an inexorable decline in business taxes across the world and high-taxed welfare states in Western Europe unconvincingly moralizing about the “tax havens” as their revenues slowly seep away. Communication technology is changing the game in favour of individual liberty by spreading our commercial lives beyond the pens that governments drew for us in more technologically stable times.
The events in North Africa and the Middle East are complex in their causes. Nevertheless, one condition necessary for their occurrence is the proliferation of ever cheaper electronic communication and the dispersive, ungovernable networks they create. The rise of these networks has a neat physical explanation that applies just as much in the West as it has there. If I am right, then the effect of this great decentralization will be a great force for liberty here as it has been “over there.”
[i] Alternative energy sources will likely bring similar efficiency gains, but my core argument is that more-efficient markets and greater individual liberties are being driven, ultimately, by Moore’s Law.
[ii] Coase’s theory of the firm emerged after Coase, as a young, self-described socialist, set out from Britain to Detroit to find out why, if the free market was so efficient, did people form firms that were (to his mind) islands of socialism in a free market economy? Coase’s powerful and original resolution to this paradox was that the formation of firms is driven by the need to minimize transaction costs, and so firms should grow and encompass more and more functions “in-house” until such a time as the marginal transaction would be more costly to do internally than it would be externally.
[iii] Tapscott, D. and Williams, A. (2008). Wikinomics: How mass collaboration changes everything.