What Is The Economic Impact Of Technology On Monetary Policy?

in LeoFinance2 months ago

Over the last couple weeks, I asked this question on a number of occasions. It is one of the most vital that is out there today yet few are considering it. I guess this makes sense since it blast through most ideologies and other programming people are carrying with them.

It is no secret that technology is affecting most aspects of society, industry, finance, business, and economies. With each passing year, the impact is only getting greater.

Thus, shouldn't we at least discuss the impact of technology on our long held beliefs? Why do we favor concepts that we applied 50 or 70 years ago believing they are valid in a world which is radically different.

Here is a look at the United States GDP. Before COVID-19, the economy was appreciating at a nice pace.

gdp.png

There is a reason why 2018 is highlighted. The next two charts will offer up some interesting facts about the economy we are in now.

According to Statista, this is what the digital economy as the overall share of GDP.

gdp.png

As we can see, the digital economy, in 2018, hit 9% of the economic GDP. This means we were near $2 trillion. This is vital because it deals with a segment that puts enormous pressure on economic theories we used for years.

When it comes to software, we see this:

The software industry contributed $1.6 trillion to the total US value-added GDP in 2018. The industry has expanded by 19 percent since 2016, nearly two times faster than the overall economy.

https://software.org/blog/software-growing-us-jobs-and-gdp/

Here we see an important stat. The $1.6 trillion amounted to 7.8% of the total United States GDP in 2018. This is a figure that was likely to increase over the past year and a half but we will deal with the last stats we have.

Can anyone guess what having such a large portion of the economy being made up of software means? Think about that for a second, 7.8% of the global economy is software. That has to have serious implications on all aspects of economic thought?

It is interesting to note that California alone contributes more than a quarter of a trillion dollars.

gdp.png

https://software.org/wp-content/uploads/CA-2019SoftwareJobs.pdf#page=2

Can anyone guess what the economic impact of technology is on monetary policy? If you can, you are well ahead of central bankers and economists. They still have not solved the technology productivity paradox. It is estimated that $185 trillion was printed over the last 20 years to get $46 trillion worth of growth. That is a terrible ROI.

Or is it?

If we take a look around us, the reality of the situation is different. Lives are improved by technology. So where is the difference? How can all this be?

Sometimes the answer is so simple it screams out at us.

Can anyone see what is being yelled at all of us?


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Can anyone guess what having such a large portion of the economy being made up of software means? Think about that for a second, 7.8% of the global economy is software. That has to have serious implications on all aspects of economic thought?

I'm not much of an economist, but I'm guessing this means that the more automation we have the more "traditional" jobs will be replaced by technology? On the other this might also create new jobs, meaning new studies and or specializations will also emerge. If the new and traditional will balance each other out is the real question.

The emergences of technology might also have other beneficial implications in other sectors other than the economy, I think.

All of that is true @rarej and cannot be disputed. I think you have a firm grasp as to what is taking place from a technological standpoint.

However, take it a step further: what is the impact of that on monetary policy? How are things affected in the situation you describe?

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I'm guessing consumer products affected by automation will get cheaper and maybe other products might get more expensive? This may have an impact on the average consumption power. Not sure what you're hinting at exactly to be honest. 😅

Research new technologies always has inmense costs but the benefits are undoubted, not all in this world is money, there are new medical treatments that save lives, how do you measure that?, the benefit is not only economic but goes way beyond that.

There is always an economic impact. The question is how are things impacted especially to those who are making policy?

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This is a very powerful trend. The current state of affairs is that while a huge proportion of the products that we consume have value created through software embedded in them in one way or another, too much of that software is developed by a handful of giants. Together with open source crypto is the mechanism by which these powerful oligopolies can be broken up.

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