At this year’s Federalist Society student symposium Richard Epstein and I spoke on a panel on Innovation and Inequality. We agreed that the innovation created by capitalism has hugely benefited the poorest in society. We disagreed over the extent to which the very nature of modern innovation itself has a tempering effect on inequality.
In my view, modern innovation helps reduce real inequality both around the globe and in the United States. And it does so for fundamental reasons. Information technology creates value by better arranging material resources. And because of the nature of our accelerating technology the know-how for such information technology rapidly becomes common property benefiting everyone.
Another way of putting this point is that modern information technology dematerializes the world and thus democratizes it, because it is material things that are scarce. The move from its to bits is also a move to equality, because bits can be enjoyed by the many simultaneously. Income inequality gives a misleading picture because we all enjoy the benefits of a growing pool of expressions of ideas.
Let me give some concrete examples. Watson, the machine that beat the best players at Jeopardy, is going into medical diagnostics.