The Digital Era, Viewed From a Perspective of Millennia of Economic Growth

Abstract

I propose a synthetic theory of economic growth and technological progress over the entire human history. Based on this theory as well as on the analogies with three previous eras (the hunter-gatherer era, the agricultural era and the industrial era) and the technological revolutions which initiated them, I draw conclusions for the contemporary digital era. I argue that each opening of a new era adds a new, previously inactive dimension of economic development, and redefines the key inputs and output of the production process. Economic growth accelerates across the consecutive eras, but there are also big shifts in factor shares and inequality. The two key inputs to the digital-era production process are hardware and software. Human skilled labor is complementary to hardware and substitutable with software, which increasingly includes sophisticated artificial intelligence (AI) technologies. I also argue that economists have not yet designed sufficient measurement tools, economic policies and institutions appropriate for the digital-era economy,