How optimistic is the brave new world?

Posted by: Paul Donovan

09 Oct 2020

Weekly Updates

  • The pandemic has accelerated the structural changes of the fourth industrial revolution. Economists have tended to focus on the economic shifts of home working and online retail. These matter, but there is another possible impact—people may be more optimistic.
  • Technology tends to be exciting. Industrial revolutions by definition have a novelty value. Novelty and excitement is how bubbles build. However, studies also suggest that new technology tends to lead to a very optimistic view of what technology can do—and how much money can be made.
  • The fourth industrial revolution presents a very democratic change. Economic barriers to entry have been lowered. Making and distributing a film used to be expensive. A smartphone and YouTube turns everyone into a filmmaker today. Unlike past industrial revolutions, today's technological change and associated optimism directly affects everyone, not just large companies.
  • This optimism may account for some of the astonishing growth of small business creation. Technology has created new opportunities, and with optimism that has led to individuals setting up new businesses. Throughout the pandemic it has been fear of the virus, not the virus itself that has driven economic developments. If a more rapid introduction of technology means more optimism, that may further weaken the fear factor.

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