The Second Machine Age

Brynjolfsson and McAfee, both at MIT, argue that digital technologies are producing a transformation comparable to the Industrial Revolution, with the difference that the first machine age augmented physical power and the second augments cognitive capability. They organise the argument around exponential improvement in computing, the digitisation of information which makes it non-rival and near-free to reproduce, and recombinant innovation, in which new ideas are combinations of existing ones and therefore accelerate as the stock grows.

The book divides into bounty and spread. Bounty means the increase in total output, variety and quality, which they argue is understated by GDP because free digital goods produce consumer surplus that national accounts do not capture. Spread means the distribution of that output, and here they document the divergence between productivity growth and median wages since roughly the mid-1980s, the falling labour share of income, and the growth in returns to capital and to superstars.

They explain the spread through skill-biased technical change, capital-biased technical change and winner-take-all market structures produced by digital goods with near-zero marginal cost. Their policy recommendations include education reform, infrastructure investment, immigration reform and a negative income tax, and they treat a full basic income more cautiously than later writers.

The book was published in 2014 and predates the current generation of machine learning entirely, so its examples of what machines cannot do have been overtaken. Critics argue that measured productivity growth has not risen as their thesis predicts, which remains the strongest objection. The bounty and spread framing and the argument about non-rival digital goods have held up better than the specific technological claims.