KENNETH ROGOFF: Chess gives clues on narrowing of income gaps

UNTIL now, the relentless march of technology and globalisation has played out hugely in favour of high-skilled labour, helping to fuel record-high levels of income and wealth inequality across the world.
Published: 2011/07/20 07:29:37 AM

UNTIL now, the relentless march of technology and globalisation has played out hugely in favour of high-skilled labour, helping to fuel record-high levels of income and wealth inequality across the world. Will the endgame be renewed class warfare, with populist governments coming to power, stretching the limits of income redistribution, and asserting greater state control over economic life?

Income inequality is the single biggest threat to social stability , whether it is in the US, the European periphery, or China. Yet it is easy to forget that market forces, if allowed to play out, might eventually exert a stabilising role. The greater the premium for highly skilled workers, the greater the incentive to economise on employing their talents.

The world of chess illustrates the way in which innovation in the coming decades may have a very different effect on relative wages than it did over the past three decades.

During the late 18th and early 19th centuries, a brilliantly inventive chess-playing “automaton” toured the world’s capitals. “The Turk” won games against Napoleon and Benjamin Franklin, while challenging many great minds to penetrate its secrets. Concealing a human player in a shifting compartment amid a maze of gadgetry, it took decades for outsiders to correctly guess how the Turk really worked.

Today, the scam has been turned on its head: chess-playing machines pretend to be chess-playing humans. Desktop-based chess programmes have considerably surpassed the best human players over the past decade, and cheating has become a scourge. The French chess federation recently suspended three of its top players for conspiring to obtain computer assistance.

Of course, there are many other examples of activities that were once thought to be exclusively the domain of intuitive humans, but that computers have come to dominate. Many teachers and schools now use computer programmes to scan essays for plagiarism, an ancient transgression made all too easy by the internet. Indeed, computer- grading of essays is a surging science, with some studies showing that computer evaluations are fairer, more consistent, and more informative than those of an average teacher, if not necessarily of an outstanding one.

Expert computer systems are also gaining traction in medicine, law, finance, and entertainment. Given these developments, there is every reason to believe technological innovation will lead to commoditisation of many skills now seen as precious and unique.

My Harvard colleague Kenneth Froot and I once studied the relative price movements of a number of goods over a 700-year period. To our surprise, we found that the relative prices of grains, metals, and many other basic goods tended to revert to a central mean tendency over sufficiently long periods.

We conjectured that even though random discoveries, weather events, and technologies might dramatically shift relative values for certain periods, the resulting price differentials would create incentives for innovators to concentrate more attention on goods whose prices had risen dramatically.

More here.

Chess Daily News from Susan Polgar
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