Technology and Inequality

The new book arriving July 2017 from Palgrave Macmillan

Chapter Abstracts

Here are the summaries of each chapter.

Chapter 1. Why Is Inequality Increasing in a Digital World?

This chapter reviews arguments about the relationship between technology and inequality, the evidence for rising inequality in the most technologically-advanced economies, and why rising inequality in a digital world is surprising. It presents two main schools of thought about the relationship–the ‘technological’ school, and the ‘institutional context’ school. Finally, it proposes identifying new mechanisms for restoring technology as an engine of opportunity.

Keywords: Technology; Wealth Inequality; Eras of Technology; Institutional Context; Opportunity.

Chapter 2. Information Technology and Wealth Concentration

This chapter describes shifts in private wealth in the United States since 1980, away from real assets towards financial assets, and away from the energy and commodity sectors of the economy toward information technology and finance. We describe how major digital technology companies, despite their variety, share basic similarities in terms of financial characteristics, such as profits, ownership, and a variety of business models. The chapter also explores how the scalability of digital technology affects the concentration of wealth.

Keywords: Wealth Concentration; Changes in Wealth; Information Technology Sector; Financial Assets; Scalability.

Chapter 3. The Digital Economy: New Markets, New Gatekeepers

This chapter reviews debates about the Internet and the new digital economy. A unique aspect of digital technology is its potential to transform not only every stage of production, distribution, and consumption, but also the very mechanisms used to coordinate and regulate the economy. A digitally-mediated economy, where digital technology, data, and algorithms sit between buyers and sellers, is contrasted against more traditional ‘perfect,’ or ‘free’ market theory. The unique features of digitally- mediated markets include network effects and winner-take-all dynamics, the drive to own exclusive data, and the use of secretive algorithms.

Keywords: Perfect Markets; Digital Intermediaries; New Economy; Winner-Take-All; Algorithms.

Chapter 4. Regulation and Taxation: The New Digital Advantage

The relationship between technology companies and aspects of their institutional context, such as regulation and taxation, is a less explored area in discussions of technology and inequality. This chapter discusses the role of intellectual property in wealth concentration, and technology companies’ use of it for tax-avoidance purposes. Specific forms of political lobbying, within states and in global trade regimes, are also used to help explain the wealth effects of digital technology in an era of globalization.

Keywords: Information Technology Industry; Tax Avoidance; Intellectual Property; Lobbying; Globalization.

Chapter 5. Models, Mediation, and Mobilization: A Framework for Analyzing Technology and Inequality

This chapter builds a simple conceptual framework for analyzing technology and inequality, bringing together aspects of both the technological and institutional context schools. Drawing from the Science and Technology Studies (STS) literature, the framework begins with a ‘practice’ view of technological systems, including technology practice (how technology choices are embedded in specific artifacts and processes), and business practice (how business model choices lead to specific value creation and capture activities). The conceptual framework draws attention to how technology mediation, the business model, and the mobilization of key stakeholders affect the creation and capture of value, leading to shifts in wealth, or wealth effects.

Keywords: History of Technology; Sociology of Technology; Technological Mediation; Value Creation; Value Capture; Business Models.

Chapter 6. Technology and Inequality Case Study: Search

Using our simple conceptual framework of mediation, model, mobilization, and wealth effects, we analyze the case of online search. Search is a high-stakes commercial activity that strongly influences consumer attention and action. The mediation of search is an evolving contest between search companies trying to provide results that serve their business model needs, and expand their reach, while other players attempt to understand the secretive algorithms behind search engines for their own promotion purposes. The business model of search, tied to advertising auctions, has been highly profitable, and resulted in a highly-concentrated search industry.

Keywords: Google; Search Engines; Electronic Commerce; Secretive Algorithms; Business Models.

Chapter 7. Technology and Inequality Case Study: Social Media

Using our four-part framework of mediation, model, mobilization, and wealth effects, this chapter analyzes social media as a case study of technology and inequality. The digital mediation of social relationships has evolved from personal profiles and networks of friends and followers to an information feed that keeps users updated about new content in their social network. Without a doubt, the attractiveness of social media as an online activity is unprecedented. Like the search industry, social media has found a lucrative advertising-based business model that requires careful decisions about how commercial messages are injected into people’s social news streams. Social media information feeds are now controlled by proprietary algorithms that try to highlight enticing and commercially relevant content, making the resulting social media industry highly concentrated (though not as concentrated as search) and highly profitable.

Keywords: Social Media; Facebook; Business Models; News Feeds.

Chapter 8. Technology and Inequality Case Study: The Sharing Economy

Using the four-part framework of mediation, model, mobilization, and wealth effects, we analyze the case of the sharing economy. The digital technology used to mediate the sharing economy platforms has evolved to attract and maintain the trust of a diversity of buyers and sellers, while meeting the expectations of multi-billion dollar investors. The sharing economy model was often in conflict with local regulations when it began, so developing a capacity for regulatory change has been a key mobilization challenge. In contrast to its communitarian roots, the business model of the sharing economy has raised massive amounts of capital from wealthy investors, but has yet to create substantial operating profits. The ultimate effects on wealth inequality remain to be seen, but evidence of significant wealth decentralization is difficult to find.

Keywords: Sharing Economy; Uber; Airbnb; Venture Capital; Business Models.

Chapter 9. Restoring Technology as an Engine of Opportunity

This chapter uses what we have learned about technology and inequality to find new opportunities for reducing inequality in a more digital world. Our key strategy is to focus on the ways financial value is created by the digital technology sector, and the specific ways that value is captured. Digitally-mediated markets are a new and growing phenomenon, and new digital business models have created valuable products and services through their unprecedented abilities to experiment, amass unique data, and deploy to huge populations, offering new ways to capture and concentrate that value on a seemingly unprecedented scale. Inequality can be addressed through the remedies proposed by the technological and institutional context schools, but we think these will be incomplete without paying attention to the business models being used to deploy these technologies. Specific technological mediation choices, or the mobilization of stakeholders that technologies depend on, may be part of the strategy, but these issues in the end always return to the question of how to invent alternative business models that will share the value captured more evenly. Whatever path we choose, the wealth shifts associated with digital technology are too large to ignore if we want to seriously reverse increasing inequality and create more widespread opportunity.

Keywords: Digital Technology; Technology and Inequality; Technology and Opportunity; Wealth Concentration; Digital Mediation.