History

I will now provide a highly abstract account of human history that focuses on how technology has shifted scarcity over time and how those shifts have contributed to dramatic changes in human societies.

Homo sapiens emerged roughly two hundred and fifty thousand years ago. Over most of the time since, humans were foragers (also referred to as hunter-gatherers). During the Forager Age, the defining scarcity was food. Tribes either found enough food in their territory, migrated further or starved.

Then, roughly ten thousand years ago, humanity came up with a series of technologies such as the planting of seeds, irrigation and the domestication of animals that together we recognize today as agriculture. These technologies shifted the scarcity from food to land in what became the Agrarian Age. A society that had enough arable land (on which food can be grown), could meet its needs and flourish. It could, in fact, create a food surplus that allowed for the existence of groups such as artists and soldiers that were not directly involved in food production.

More recently, beginning about four hundred years ago with the Enlightenment, humanity invented a new series of technologies, including steam power, mechanical machines, chemistry, mining, and eventually technologies to produce, transmit and harness electricity. Collectively we refer to these today as the Industrial Revolution, and the age that followed as the Industrial Age. Once again, the scarcity shifted, this time away from food and towards capital, such as buildings, machinery and roads. Capital was scarce because we couldn’t meet the needs of a growing human population, including the need for calories, without building agricultural machines, producing fertilizer and constructing housing.

In each of those two prior transitions, the way humanity lived changed radically. In the transition from the Forager Age to the Agrarian Age we went from being nomadic to sedentary, from flat tribal societies to extremely hierarchical feudal societies, from promiscuity to monogamy (sort of), and from animistic religions to theistic ones. In the transition from the Agrarian Age to the Industrial Age we went from living in the country to living in the city, from large extended families to nuclear families or no family at all, from commons to private property (including private intellectual property) and from great-chain-of-being theologies to the Protestant work ethic.

What accounts for these changes? In each transition the nature of the scarcity changed in a way that made measurement of human effort more difficult, which in turn required more sophisticated ways of providing incentives to sustain the necessary level of effort.

In the Forager Age, when the key scarcity was food, the measurement and incentive problem was almost trivial: everyone in a tribe sees how much food the hunters and gatherers bring back, and it is either enough to feed everyone or not. In so-called immediate return societies (which had no storage) that is literally all there is to it. With storage the story gets slightly more complicated, but not by much. I believe that this explains many of the features of successful foraging tribal societies, including the flat hierarchy and the equality of sharing.

In the Agrarian Age, when the scarcity was land, the measurement problem got significantly harder: you can really only tell at harvest time (once per year in many regions of the world) how well-off a society will be. Again, I believe that this explains many of the features of successful agrarian societies, in particular the need for a lot of structure and strict rules. It is crucial to keep in mind that these societies were essentially pre-scientific, so they had to find out what works by trial and error. When they found a rule that seemed to work, they wanted to stick with it and codify it (much of this happened via the theistic religions).

In the Industrial Age, when the scarcity was capital, the measurement problem became even harder. How do you decide where a factory should be built and what it should produce? It might take years of process and product innovation to put physical capital together that is truly productive. I believe that this explains much of the success of the market-based model, especially when contrasted with planned economies. Effectively, the solution to the incentive problem moved from static rules to a dynamic process that allows for many experiments to take place and only a few of them to succeed.

These changes in how humanity lives were responses to an increasingly difficult measurement problem, as technological progress shifted scarcity from food to land and then from land to capital. But the transitions don’t occur deterministically; they are the result of human choice driving changes in regulation. For example, when it came to the scarcity of capital, humanity tried out radically different approaches between market-based and planned economies. As it turned out, competitive markets, combined with entrepreneurialism and the strategic deployment of state support (e.g. in the form of regulation), were better at allocating and accumulating capital. Similarly, the Agrarian Age contained vastly different societies, including the Athenian democracy, which was hugely advanced compared to much of Northern European society in the Middle Ages.

The other important point to note about the previous transitions is that they took quite some time and were incredibly violent. Agriculture emerged over the span of thousands of years, during which time agrarian societies slowly expanded, either subduing or killing foraging tribes. The transition from the Agrarian Age to the Industrial Age played out over several hundred years and involved many bloody revolutions and ultimately two world wars. At the end of the Agrarian Age, the ruling elites had gained their power from controlling land and still believed it to be the critical scarcity. For them, industry was a means of building and equipping increasingly powerful armies with tanks and battleships to ensure control over land. Even the Second World War was about land, as Hitler pursued “Lebensraum“ (literally “room to live”) for his Third Reich. It was only after the Second World War that we finally left the Agrarian Age behind for good.

We now, once again, find ourselves in a transition period, because digital technology is shifting the scarcity from capital to attention. What should be clear by now is that this transition will also require dramatic changes in how humanity lives, just as the two prior transitions did. It is also likely that the transition will play itself out over several generations, instead of being accomplished quickly.

Finally, there is a historic similarity to the transition out of the Agrarian Age that explains why many governments have been focused on incremental changes. To understand, we should first note that capital today is frequently thought of as monetary wealth or financial capital, even though it is productive capital (machines, buildings and infrastructure) that really matters. Financial capital allows for the formation of physical capital, but it does not directly add to the production of goods and services. Companies only require financial capital because they have to pay for machines, supplies and labor before they receive payment for the product or service they provide.

Just as the ruling elites at the end of the Agrarian Age came from land, the ruling elites today come from capital. They often don’t take up political roles themselves but rather have ways of influencing policy indirectly, exposing them to less personal risk. A good recent example is the role of the billionaire hedge fund manager Robert Mercer and his family in supporting groups that influenced the outcome of the US Presidential election in 2016, such as the right-wing news organization Breitbart (Gold, 2017).