Bryan Caplan  

The Fourth Sector

My Review of Jeff Friedman's W... Random Mortgage News...
Economists traditionally partition output into agriculture, manufacturing, and services.  In this framework, the appeal of "stagnationist" claims is relatively easy to see.  None of these three sectors seems amazingly innovative anymore; the visible progress is "just in computers."

But is it reasonable to conceive of computers as a single product?  No.  Computers provide communications, entertainment, and even transportation.  A computer is a videophone (e.g. Skype), a movie theater (e.g. iTunes), and a personal megastore just seconds way (e.g. Amazon).  The computer is a wise match-maker, a super-sonic social butterfly, and a Einstein-level-IQ gas station attendant.  It verges on Rubber Science.

My challenge: Isn't it time we gave the computer its rightful place as our Fourth Sector?  It might seem like a purely nominal change, but it's more like truth-in-labeling.  Modern civilization and culture require the computer.  We owe our way of life to the computer.  We owe our friendships themselves to the computer!  Knighting this Fourth Sector is a great way to focus our attention on all its subtle, unmeasured benefits. 

Final thought: If you aren't supremely grateful for the benefits of the computer, I submit that flying cars wouldn't have impressed you either.  There's just no pleasing some people.

Comments and Sharing

COMMENTS (11 to date)
Pandaemoni writes:

I came to the same conclusion on that point. While there is obviously between the computerization of the western world and both manufacturing and services, the computer sector has such a widespread and varied impact on almost every aspect of all three sectors, that it's strange to try to relegate the being just another component of the manufacturing sector.

I also agree that people should be less jaded about them. Even the very wealthy of ages long past could not afford the benefits we take for granted. If I wanted to hear the latest hit Korean pop music, or for the first time in my life was curious about the culture of rural people in Kazakhstan, I could have that music or information in front of me in minutes, if not seconds. That's almost magic. I wouldn't trade the internet for any stinking flying cars.

Eric writes:

Information Technology

Kevin H writes:

Bells and whistles. I want my flying car dammit!

ajb writes:

I'd make the following tradeoff: I'd give up 90% of the computer revolution since about 1990 (only allowing a slow, text based sorta Web and email) in exchange for all transportation being thrice as fast, a lot cheaper, and of higher quality (esp airplane travel).

I also don't think there's any evidence that measuring the impact of the computer properly would come close (esp for the American who doesn't even have a smart phone or mostly does texts) to the changes introduced in going from biplanes to jet planes, the model T to the Corolla, from no antibiotics to antibiotics, or from the telegraph to phones circa 1970.

Phil writes:

I struggle with the definitive article. One's car cannot function without a computer, neither can the city water system or the public library. It is a technology as well as a thing. It is more a means than an end.

Scott Wentland writes:

I thought the fourth sector was already government.

J Storrs Hall writes:

"Burke said there were Three Estates in Parliament; but, in the Reporters' Gallery yonder, there sat a Fourth Estate more important far than they all."

RPLong writes:

Those three sectors leave a lot more to be desired than just "what about computers." What about extractive industries? Is mining the same thing as agriculture? Is the food services industry food (agriculture) or services? Is digital advertising a product or a service... or is it "computers?" Is bio-fuel agriculture or manufacturing?

Separating all human action into just three categories is bound to leave a lot to be desired.

John F. Opie writes:

Um, there really is, already, a classification schedule for the supply side of the economy. In Europe, it's the NACE (now in rev 2.0), in the US NAICS. Let's not talk about how the Japanese and Koreans do gets ugly.

Fundamentally, divvying the supply side of the economy into only those three sectors does massive injustice to the complexity of the economy, since it leaves out construction, retail and wholesale trade (which, strictly speaking, aren't services as such, since the latter deals largely with immaterial goods and services). It's a completely artificial and to be honest, intellectually lazy way of viewing the supply side of the economy (aka "output").

If you are going to do it right, you need Agriculture, Mining, Manufacturing, Public Utilities, Construction, Trade (as in wholesale and retail), Transportation and Logistics, Information & Communications, FIRE (Financial intermediation, Insurance, Real Estate), Technical Services, Public Administration (aka government), Education & Training, Health Services, Entertainment & Recreation, Other Business Services, (imputed) Household Services and finally the output of extraterritorial institutions located in that country (UN, etc). That's 17 sectors. If you want to get into more detail the number goes up. Way up. If you are going to do this right and proper, you need around 500 sectors.

The problem is that your traditional economist can't be bothered to build a model that represents even these 17 sectors that cover the entire supply side of the economy. Come on, it's only 17: 15 if you basically ignore the extraterritorial folks and use the households as a residual value. It's as much a part of NIPA as the demand side of the economy (and that even more ignored part of NIPA, income!).

Like I said, viewing output as being only 3 sectors does serious injustice to understanding the economy. Sort of liking saying that there is only private and public demand, plus trade: you can do that, but the quality of your analysis on the demand/usage side will be just as limited.

Of course, I'm biased: I am an industrial economist with 100+ sector models for multiple countries. I'd venture the thesis that you can't understand the workings of the economy without understanding how it actually produces output, rather than concentrating almost virtually on usage, and that this is one of the reasons economists have missed so many developing problems.

James Oswald writes:

We have flying cars- they are called airplanes.

jb writes:

for all you "computers aren't that awesome" people - high-powered computers and the associated software are the enablers for virtually every technological advance of the modern/future age. And even more critical to all the "up and coming" technologies (Nanotech, fusion, etc). Experiments cost a lot less money than they used to, because of computer systems that analyze data and exercise simulations, that reduce false starts and dead ends.

In addition, computers provide opportunities for rapid and continuous development in system automation.

The first activity creates jobs, the second destroys them. Unfortunately, the first activity creates advanced jobs that only very smart people can perform, while automation eliminates low skill jobs.

Ultimately, it seems to me that what you're describing is how much the computer is contributing to lowering the cost of activities and creating new activities. But that really is innovation, which is R&D - it seems to me that the Fourth sector would properly be called Research and Development, rather than Computers.

Comments for this entry have been closed
Return to top