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Digital Business Side Effect: Income Disparity

At Gartner Symposium, MIT's Erik Brynjolfsson praises tech advancements such as self-driving cars, but says the real challenge is to make the digital economy translate into wider prosperity.

The digital economy is often compared to a second industrial revolution, but there's a difference between the two -- and it's not all good for our economy or our society, MIT's Erik Brynjolfsson said in a kickoff keynote at Gartner Symposium in Orlando Sunday.

In particular, he sees the current wave of digital technologies as the most significant cause of widening income disparity -- now greater than it's ever been since before the Great Depression -- as more wealth is concentrated in the hands of those with access to education and capital. The poor are getting poorer, and even those in the middle are getting squeezed -- while superstars and the ultra-rich prosper like never before, he said.

Brynjolfsson, director of MIT Center for Digital Business, is an economist who specializes in the impact of technological change, and he recounted highlights from his recently published book The Second Machine Age, co-authored with Andrew McAfee (another MIT prognosticator whom social collaboration fans may remember as the prophet of Enterprise 2.0).

[Preventing Claims With Infrared Technology]

Digital goods are actually adding more to our economy than is recognized by traditional measures such as the gross domestic product -- for example, free apps don't show up in the GDP because there's no revenue associated with them. Yet the technology bundled into today's smartphones replaces dozens of once-expensive products that had to be purchased separately a few years ago -- computer, answering machine, GPS navigation system, and so on. Based on his research, free digital goods and services are adding roughly $300 billion to the economy. "They're not counted, but we're still getting value from them," he said.

Yet there is no economic law that says the benefits of technological change must be evenly distributed. The rule of thumb has long been "a rising tide lifts all boats," and that seemed to hold true for a long time. For decades, even high school dropouts saw their wages rise steadily, keeping pace with the economy as a whole. Now, high school dropouts have less income in real dollars today than they did in the 1970s (and also lower life expectancy!), while more educated people, particularly with graduate degrees, are drawing farther ahead. Even among those with more education, there's a widening gap between a few superstars and everyone else.

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David F. Carr oversees InformationWeek's coverage of government and healthcare IT. He previously led coverage of social business and education technologies and continues to contribute in those areas. He is the editor of Social Collaboration for Dummies (Wiley, Oct. 2013) and ... View Full Bio

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