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How will the focus on technology for leisure (e.g. consumption of apps like Instagram and TikTok) impact the economy?originally appeared quora: A place to gain and share knowledge, helping people learn from others and better understand the world.
answer Written by Lukasz Rachel, Assistant Professor, University College London (UCL) quora:
The dawn of the 19th century brought a revolution that dramatically reshaped the economies of the Western world. The reins of economic growth shifted from a Malthusian focus on land and agriculture to a neoclassical framework built around capital accumulation and increasing factor productivity. After that, the standard of living rose to an unprecedented extent.
More recently, another change has occurred in the nature of economic growth. Innovation is increasingly focused on capturing the ephemeral commodity of user attention. In this new era, products are cross-subsidized and often free, with real prices paid in the currency of consumers’ attention, time, and data.
At the same time, measured growth rates in output have generally been disappointing, except for a brief rebound in U.S. growth in the late 1990s and early 2000s. Meanwhile, billions of people have changed the way they spend their time and interact with technology. Data shows that time spent on screens has increased significantly, but this phenomenon is so widespread that we hardly need data to know its significance.
In recent research, I refer to this phenomenon as “leisure-enhancing technological change.” I’m interested in some important issues. In particular, how best to conceptualize new kinds of technologies that increase our leisure time, what are the incentives to develop those technologies, and what will be their broader implications for the process of economic growth? I mean, is it?
The first insight is that, unlike traditional technological improvements that raise households’ real wages, leisure technology improvements may be better thought of as changing preferences and increasing the marginal rewards of leisure time. That’s it. As we have seen over the past decade, these have the potential to significantly alter the allocation of time and overall welfare, even if the hands of money do not change. When leisure technology becomes important, GDP becomes less reliable as an indicator of welfare.
But what drives the continued development of leisure-enhancing innovations? From a macroeconomic perspective, engagement competition appears to be related to the accumulation of intangible capital by firms in the economy. Some forms of intangible capital, such as brand equity that companies accumulate through advertising, effectively transform user engagement. As businesses in the business world want to register in the consumer consciousness, technologies that capture consumer attention are required and are being developed through profit-driven leisure research and development.
There is currently a large body of research focused on the individual-level effects of social media and other technologies of this type. But the long-term macroeconomic effects could be just as important.
One effect is the transition between different types of R&D activities, many of which occur in the area of high-profile products and less so in traditional economies. The other occurs through changes in time allocation patterns. Mainstream endogenous growth models combine technological improvements with a pool of resources devoted to problem solving. To the extent that screen time displaces or distracts from these productive activities, it can have a negative impact on long-term growth (though it can be positive for well-being). .
In summary, the current technological revolution is driven by the enrichment of leisure time. These not only affect the amount of time we spend looking at screens, but also the overall macroeconomy.
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