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Economic Growth and Personal Privacy Is technological progress undermining personal privacy? Your first impulse may be to answer this question in the affirmative. After all, with retailers keeping track of our credit card purchases, the FBI's project carnivore giving it the power to read our e-mails, and global positioning systems already being used to keep track of parolees, new technologies certainly do not appear to be helping us increase our privacy. But such a view may be completely wrong, according to Toby Lester, "The Reinvention of Privacy," Atlantic Monthly, March 2001, pp. 27-39. Mr. Lester asks: "Do we have less privacy than ever before or do we have more? The answer is not obviously "yes." Think about some of the great innovations of the past. The invention of writing allowed people to communicate in private without being overheard. The invention of the gummed envelope added privacy to mail, and modern mail carriers like Federal Express and UPS have further added to the security that your mail and packages will arrive at their destinations without anyone knowing what you are communicating or sending. Modern modes of transportation are inherently less personal than older forms: You can travel halfway around the world through large airports and on large jet aircraft without ever talking to anyone other than a occasional airline check-in clerk, but to travel even a few hundred miles by stagecoach or sailing ship took extensive periods of time during which you could hardly avoid becoming well known to your fellow passengers. The automobile has further made travel a very personal affair. Modern houses have separate rooms for every member of the family, quite a gain in privacy compared to the one-room huts of old. Party lines were the norm for telephone service not half a century ago; now you can |
communicate completely in private. The internet, radio, and television bring the news
anonymously, and no one need ever know how much you know! That is not to say that we should assume that technology will further increase out privacy. The statement by Scott McNealy, the CEO of Sun Microsystems is disturbing: "You have zero privacy anyway, get over it." But Mr. McNealy may be wrong. Technology has generally made us less dependent on other individuals and given us much more choice about who we talk to and deal with. If you have any doubts about this, imagine living in a small primitive village many thousands of years ago. You could escape into the wilderness, where you were likely to perish at the hands of wild animals or hostile humans, or you could remain part of a closely organized clan, village, or tribe. The latter was your only relatively safe option, but you had no privacy. !!! An interesting question is: Does privacy enhance your welfare? There is more on privacy in the Economist Technology Quarterly, which is available on-line at www.economist.com. The Invention of Electric Light Joyce and Richard Wolkomir, "When Bandogs Howle & Spirits Walk," Smithsonian, January 2001, pp. 39-44, describe life before the invention of electric lighting. How easy it is to forget how much better life became when we invented a cheap way to turn the night into day! Darkness was a real barrier to many activities that we take for granted today. Traveling in the dark was dangerous, and crime was often high at night because darkness protected the criminals from detection and identification. Many people were afraid to go out at night. |
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Economic growth
changed that situation somewhat as increased wealth permitted more and more people to begin
using oil lamps in the 1700s. Factories began to operate at night using artificial lighting. "Thomas
Edison nailed the last nail in the old night's coffin," states one of the historians interviewed
by the Wolkomir's in this article. Electric light was more practical and it was infinitely cheaper
than oil and gas lamps. Even the poor could
afford lighting after 1900. Today, night is an
artificially illuminated extension of the day, we
hardly change our behavior. We seldom hear
anyone postponing some activity "until daylight."
We just turn on the lights and do it now. This discussion of lighting brings up another interesting point: How do we measure the benefits of electric lighting and calculate true improvements in human welfare in light (no pun intended) of such a technological breakthrough? Do we just count the increased use of lights in terms of lumens? How do we count the complete transformation of how we organized our lives after darkness ceased to be a major limiting factor in what we did at different times of the day? What is the ability to read a book at night worth? What is the elimination of fear worth? Clearly there is no easy answer to this, but think of how easy it is to underestimate the true value of innovations if you ignore the increased choices of activities, the reduction in danger, and greater productivity in work and pleasure. Increased GDP need not at all overstate the true gains in human welfare. How Good Are Our Figures on Growth? The figures on economic growth that Maddison compiled are probably about as good as we can get for the last 200 years. Obviously, the figures for the 19th century are not as good as those for more recent periods. After all, we compile much |
more data now, and our methods are much better.
Are they really? An editorial in The Economist
(2000), "Safety in Numbers," May 27, suggests
that today's figures are not as accurate as we like
to think they are. "In recent years, American statistics have systematically overstated inflation and understated productivity growth. Japanese numbers are a nightmare, with big discrepancies between different measures of GDP." The editorial goes on to mention that the sum of imports reported by all countries of the world exceed the sum of all countries' reported exports by 3 percent, which implies the world runs a trade deficit with itself, a logical impossibility! The blame for the poor numbers on today's economic activity falls on a variety of sources. First of all, the editorial points out that the growth of the service sector relative to manufacturing and agriculture makes it harder to measure output. The liberalization of international trade and international investment also makes it harder to keep track of international transactions. The rise of the internet promises to make it even harder to estimate economic activity. The Economist also blames governments for not providing enough resources to gather data. Financial markets already attach too great a weight to the numbers that governments currently provide. "When the value of something seems excessively high, the appropriate market response is to boost supply....The more numbers there are, the less important any individual one would seem." More numbers, and hopefully better numbers, would sure make economists' lives easier. |