Monday, April 11, 2016

Economics of the Digital Age 1 - maintenance

Just some musings today of future costs rather than benefits.

So as a follower of innovation studies and also a collector of serious attempts to look into the future it seems to me that one of the serious flaws in the way we bean count is to only focus on growth. It always seems that studies overshoot the future partly for lack of technical advance but partly because they undervalue the economics of the system. These dimensions are inextrricably link - make enough technical advance and the economics improve - however perhaps the upfront costs of that technical advance are too high to begin with.

It seems to me that in understanding this conundrum our national accounts have categories which are next to useless in the modern economy.

So for example I have often wondered about the accumulated techno-system in societies. So inspired by the great read
here are a few jottings.

That blog immediately triggered so many tangential thoughts. Assimov's comments in the Foundation trilogy that as the Galactic Empire slowly collapsed it could not longer maintain its technologies.

Another was a throw away comment in the current U.S. 'great wall' debate about the cost of maintaining the wall. includes an estimate of $750m - per annum for maintenance. If the wall cost $12b even without accounting for inflation you are paying for the equivalent of a new wall every 16 years.

Out of sheer curiosity I looked up the accounts of the local public transport body and it was hard to discern what their actual final maintenance costs are.

But let's just assume that gradually over time not only are our societies accumulating more infrastructure but that as technology is more fully embedded the costs rise.

How to read the image. As we rarely discard technologies entirely or when we do, we replace them with ever more complicated ones. So we add to the techno-system and rarely take away. If you read the chart vertically you can read it that past structures are past onto future generations. Roads build pre-1950 are largely still in use today as entities and locations although they have been upgraded in quality significantly. Therefore the pre-1950s column goes vertically upwards. In the pre-millennial period we started introduced significantly new and varied technologies and we currently stand on the cusp of IOT of things. The graph tries to take account of some efficiencies and productivity improvements from gains from embedded technology - but there will still be more of it. 

So over time the costs of maintenance rise - but it is difficult to determine whether this is proportionate or disproportionate to the rest of the economy. We know that in the USA it is failing. In Europe where taxes are higher infrastructure maintenance is better.

Of course early on councils and governments will embed sensors on everything from water mains to roads - but here is the question - what will break first the sensor or the pipe. If it is the pipe how quickly will cash strapped councils replace the sensor.

With the current obsession with new technology - we only study the system around the production of the new technology - not the technology system itself. Oh and BTW costs are only one element - you actually have to have a techno-system that values education for the skills necessary to maintain the societal infrastructure.