Evan Soltas
Jun 21, 2012

Two Types of Tech?

"Does Technology Drive the Growth of Government?" Tyler Cowen asked in a 2009 study. Improvements in technology tend to increase the capacity of governments to control social and economic activity, Cowen posited.

Technology tends to be "collectivizing," in other words. But what if the next generation of technology is of a different type -- "individualizing" -- that is, tending to decrease the ability of governments to control social and economic activity?

In his study, Cowen drew an insightful connection between how technology enabled the rise of "Big Business" to its enabling of "Big Government," using the preceding increases in the size of businesses from small enterprises to industrial conglomerates.

Now, however, the United States is seeing the reverse phenomena: technology is enabling firms to be smaller yet still produce at-scale. According to a report by economist John Robertson of the Atlanta Fed, the average new establishment employed roughly 7.5 people in 1994; after a protracted decline, the average new establishment employs less than 5 people as of 2010. Nor do the smaller new establishments grow later on to the size of their forerunners -- they stay small, according to another study published by the Kauffman Foundation.

The window of time is highly suggestive of "individualizing technology," too. The personal computer and the Internet tend to decentralize cultural activities, as compared to how the radio and television created national cultures. The days of everyone knowing the "Top 40" songs, or watching the same TV shows, are dead or dying; Cowen's thesis raises the possibility that government will find collective action ever harder to organize.

We may be standing at the edge of a historic reversal in the growth of government.