The World After Capital by Albert Wenger

Like many, I'm struggling to make sense of where we are going.  There seem to be so many opposing forces adding to uncertainty -  rising inequality vs global economic growth;  technological progress vs AI / surveillance state pessimism; improved tools for individual expression and communication vs political polarization; climate crisis vs consistently rising Human Development Index.

Should we be optimistic or pessimistic?  Why?  And, more importantly, where should we allocate time and attention best to improve global outcomes in the future?

Amidst this, it's fashionable to be 'more foxy' than a hedgehog.  Two thinkers I admire Nate Silver and Phil Tetlock both recommend following a strategy of knowing many small things and constantly updating your beliefs ('fox') rather orienting your world around one big idea ('hedgehog').

Albert Wenger's excellent The World After Capital is distinctly one big idea.  He makes the case that digital technology is moving us from the Industrial Age to the Knowledge Age.  The implications are profound.  

We have not yet appreciated the full implications of the zero marginal cost and universality of digital goods. As we move more and more of the economy from analog to digital, our ability to share knowledge, products and services around the world at minimal cost moves the constraint from capital to attention.  If we are no longer constrained by finite capital, our economics, politics and sociology must change.

The book is full of examples and data building the argument. Wenger goes on to make predictions and recommendations flowing from this central premise.  I found myself agreeing with some of these and disagreeing with others, but these points seem minor to to the broad assertion that the Knowledge Age is here and will change how humanity lives.  

Three broad implications from Wenger's work that deserve immediate attention:

GDP is Increasingly Problematic

This insight is not new, but is critical to highlight because we have made so little progress moving past GDP as the most important indicator of our collective prosperity.  

In 1968, Robert Kennedy said:

"Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play.  It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.

It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile."

A half century later, quarterly GPD measurements are still front page news. Wenger highlights how problematic this is as we move into the Knowledge Age:

[GPD] ignores both positive and negative externalities. For instance, on the side of positive externalities, making education and healthcare radically cheaper could lower GDP while clearly making people better - World After Capital, p113

Our policies will be misguided, our resources misallocated and our goals misdirected as long as GDP remains an important economic measure.  To use but one other example, how can we effectively tackle climate change when a hurricane damaging thousands of homes records as a positive GDP event because of the expense of rebuilding?

We know this, but yet there is still no credible alternative.  How will we move economics and politics away from this misguided measurement?  Developing a plan to conceive of such an alternative - and have it adopted widely - should be a top project of the Knowledge Age.

Limits of Markets

Just as the Industrial Age has been full of negative externalities, such as pollution, resulting in overproduction, the Knowledge Age is full of positive externalities, such as learning, which implies underproduction. - World After Capital, p85

Wenger's insight that markets provided efficient resource allocation in the Industrial Age but are not well suited for the Knowledge Age has long reaching implications.   The increased importance of positive externalities, rather than the traditional negative externalities associated with the Industrial Age is one example.

We are only few decades post Cold War, when the outcome of market driven economic growth vs communism was very much in doubt.  While we see widespread discontent today from both the left and the right in the US, and internationally against the market focused Washington Consensus, we don't have language yet to define how and when markets should be limited.  

The defining questions are:  where are markets limited, by whom and what replaces them as a mechanism for resource allocation?   Ezra Klein explores these questions in several of his podcasts, including this terrific conversation with Richard Powers.

Many will be leery of the state making these decisions, though several of Wenger's recommendations involve national level policy changes to limit the market.  I align with those that point to sociology.  

The market has filled in where churches, civic groups, and local community has receded in daily life for so many Americans.  It will be limited through a change in norms and behaviors, rather than regulation and mandate.   We see this emerging already in areas like Conscious Capitalism and Stakeholder Capitalism (advocated by the world's largest shareholder here), both non-governmental, bottom up movements to limit market extremism.

Wenger's work connects with this through his focus on psychological freedom, but my sense is the project has a broader focus than on individual change.  David Brooks writes about this as well in The Second Mountain.  

How will shifting norms and behaviors develop into stable institutions that support and accelerate these balancing forces on markets?  I don't know. But, as we move to the Knowledge age, the work to find a better balance point between market and non-market forces is urgent and important.

The Knowledge Loop Matters

Before reading the World After Capital, I read David Warsh's terrific Knowledge and the Wealth of Nations about Paul Romer's work on Endgeneous Growth Theory.  Wenger doesn't cite Romer directly, but his ideas flow directly from this work:  the positive spillover effects of a knowledge based economy lead to prosperity.

When the world is connected, especially at zero marginal cost for finding and sharing new ideas, we can collectively make progress not only on economic measures, but also in environmental, social and individual human purpose.  

Wenger cautions on the 'promise and the peril' of having two to three billion people participating in a digital knowledge loop of learning, creating and sharing information in a global collective.   Romer's work is more optimistic, demonstrating how the increasing size of this network directly leads to human progress through the positive spillover of knowledge.

Perhaps Romer, too, would temper his case in light of the social and political realities of globally connected communication networks (he published in 1990, before the commercial internet).   We must pay attention to how these networks develop for prosperity, inclusivity and safety.   Like any tool, communication technology can be misused (as we widely see today with disinformation campaigns).  

I land on the side of increased communication improves human potential.  The Knowledge Age opens the path for a global commons of information and discovery, creating more meritocratic and efficient access to opportunity.  Developing the norms, legal and social, to allow more safe adoption and participation in the global sharing of information is an important project of the early Knowledge Age.

Wenger raises several provocative policy ideas here, including limiting copyright and patent protection in service of accelerating knowledge dissemination.   I haven't heard those ideas articulated as pointedly before.  I'd love to see others pick up on this work, linking it to the New Growth Theory provided by Romer and others to make an integrated economic argument for a new intellectual property rights regime and other policy proscriptions that accelerate a safe knowledge loop.

An Individual In the Knowledge Age

Beyond policy, it is a useful frame to recognize we are all, for the first time, in a globally connected network of knowledge creation.

When we write online, words or code, we add to the human project, opening the possibility for new connections and creative sparks that could have far reaching implications. Creativity abounds.

We also must look past consumption for meaning.  Wenger writes:

The extraordinary success of capitalism has made us confused about work and consumption.  Instead of seeing them as a means to an end, we now see them as sources of purpose in themselves.  Working harder and consuming more allows the economy to grow, so we can...work hard and consume more. Though this sounds crazy, it has become the default position.  World After Capital, p157

and, as a call to arms for all readers

As we leave the Industrial Age behind, we can no longer derive purpose from a job or an ever-growing consumption of material goods. Instead, we need to find a purpose compatible with the Knowledge Age. - World After Capital, p9

The sentiment connects with what we see in the Great Resignation, the Creator Economy and Adam Davidson's terrific exploration of the Passion Economy.    

I am on this journey myself.  And found comfort and inspiration placing my own questions and concerns in the frame of The World After Capital.