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Unlimited Wealth.

Unlimited Wealth, by Paul Zane Pilzer. First ed. New York: Crown Publishers, Inc., 1990. Pp. vii, 226, $19.95.

In Unlimited Wealth: The Theory and Practice of Economic Alchemy, Paul Zane Pilzer proposes a "Theory of Alchemy" which contrast with classical economic theory. While the traditional economic model presupposes that a society's wealth depends on its supply of physical resources (land, labor, minerals, and water) and studies how people and society choose to employ and distribute scarce resources, Pilzer's "Alchemic Theory" holds that the impact of technology has converted the world into an environment of virtually unlimited resources and wealth.

While Pilzer's ideas are interesting and worthy of study, he presents them in a manner which trivializes his work. In an effort to make his theories accessible to a broader audience, he veers towards overstatement, self-congratulations, and hyperbole ("Traditional economics has always treated technology as a constant. . . To be fair, there have been exceptions, among them such major figures as Joseph A. Schumpeter . . . John Kenneth Galbraith . . . and Robert M. Solow . . . But none of these men formulated the three major tenets of the Theory of Alchemy") and allocates the second half of his book to a series of oversimplified, inadequate proposals to deal with an excessively broad range of social problems.

Nonetheless, there is enough rigor in the three "tenets" and six "laws" making up the theory of alchemy to stimulate quite a bit of discussion. To briefly recap Pilzer's theory: (1) By enabling us to make productive use of particular raw materials, technology determines what constitutes a physical resource; (2) Technology determines our supply of existing physical resources by determining both the efficiency with which we use resources and our ability to find, obtain, distribute, and store them; (3) The rate at which a society's technology advances is determined by the relative level of its ability to process information; (4) By providing us with new products and processes that change the way in which we live, technology determines what constitutes a need, and hence the nature of consumer demand; (5) Technology determines the level of consumer demand by determining the price at which goods can be sold; and (6) The immediate economic potential for an individual, an industry, or a society can be explained by examining the technology gap, the best practices possible with current knowledge and the practices in actual use.

These six laws are encapsulated within three overall tenets:

(A) Technology is the major determinant of wealth because it determines the nature and supply of physical resources. In an apparent attack on environmentalists, Pilzer notes that the amount of a physical resource (how much physically exists in the universe) is largely irrelevant. What is important is supply (how much is known to exist and is available) and use. He points out that supply-based technological advances led to the discovery of huge Alaskan oil fields, and improved drilling techniques allow for wells with a six mile depth instead of five to ten thousand feet. Auto fuel efficiency has decreased the amount of needed oil and thereby increased the effective supply of gasoline. Pilzer concludes "In the 1980's, for example, our resource base consisted of such relatively familiar commodities such as bauxite, copper, coal, iron, gold, natural gas, petroleum, silicon, timber, tin, uranium, and so forth. A hundred years ago that list would have looked very different--bauxite, silicon, and uranium would have been absent, for example--while ivory and whale oil might have been present. A decade from now it will be different again, no doubt in ways that we cannot today imagine." Pilzer believes that as a result of technology "that can make computers out of sand," we effectively have access to an unlimited supply of resources.

(B) The advance of technology is determined mainly by our ability to process information. The main constraint on continued innovation today is seen as the ability of engineers and entrepreneurs to process all of the technological changes. Pilzer believes that the greatest barrier to progress is the need for an effective information distribution network so that workers can access new information as it becomes available. Following the invention of writing five thousand years ago, and the printing press six hundred years ago, he sees the computer as the third major advance in information processing. The computer's ability to collate data and transmit information through networks is seen as the mechanism that will promote exponential technological growth.

(C) The backlog of unimplemented technological advances (the technology gap) is the true predictor of economic growth for both the individual and society. The term "technology gap" generally implies differences between the industrialized nations and the third world. Not so, in Pilzer's terminology. The author is far more concerned with the lag in implementation of technologies which are theoretically possible, but not yet in current use. While traditional economics might view technological advance as a byproduct of economic growth, Pilzer sees economic growth as a byproduct of technological advance.

The "theory of alchemy" looks at technology through two vantage points: R-I-Ts (ready to be implemented technological advances) and B-R-Ts (basic research technological advances). An R-I-T represents a new process or technology which is already in existence, has been proven as effective, but which hasn't been fully implemented. An example might be the use of point-of-sale scanners in many retailing environments or bar-coding of manufacturing inventory. A B-R-T is seen as a new, real advance in technology. The interaction between R-I-Ts and B-R-T_s is seen as a continuing innovation cycle. Pilzer speaks of the multiplier effect of technology where B-R-Ts beget R-I-Ts which becomes the basis for an array of new technologies as they are implemented by customers.

It is perhaps the affluence created by this rapid technological growth which has altered the global political structure in the nineties. The political disintegration of East Germany (whose residents are said to have traded "the Berlin Mall for the Berlin Wall"), and political conflicts within the Soviet Union have been spurred more by economic disenchantment than a need for political "openness." I believe that Pilzer would characterize the stagnation of communist economies as the failure to: (a) provoke innovation through a sharing of technological information as advances occur, and (b) a gap in the number of R-I-Ts awaiting implementation (he would note the lack of continual incentives for businesses to adapt technological advances in retailing or manufacturing).

It is interesting to contrast Pilzer's insights with those of John Kenneth Galbraith's writings about the "technostructure." Galbraith believes that power and prestige derive from the ownership of a scarce factor of production. In feudalism this scarce factor was land. In early capitalism, it was physical capital. In modern capitalism it is specialized expertise--both technological and organizational.

Pilzer rejects the scarcity. Everything is assumed to be in abundant supply. In overstating the end of cartels, Pilzer ignores that his own point that what constitutes resources has changed. For example, non-strike clauses in police contracts are meant to protect against that "cartel" from abusing the resources of security. The U.S. freight railroads are still seen as enough of a "cartel" that the Congress passed legislation within one day to prohibit them from striking and affecting the distribution resource.

Galbraith believes that modern technology is sophisticated and necessitates such division and subdivision of function that each expert ends up knowing a lot about a little. Since complex processes require ability, intelligence and intuition beyond that in the possession of any one individual, decision-making becomes collective. Pilzer should have thought more about this concept before trying to take on the problems of education, immigration, worker displacement, trade issues, and drug abuse in the second half of the book. Many of his proposed "solutions" are inadequately presented, and ideas are freely used without attribution. The book would have been stronger if the theories were used as a springboard for discussion of their application--rather than trying to identify and solve the immigration problems of the United States in nineteen pages.

In summary, Unlimited Wealth provides some new and interesting ways to look at today's economic world. The concepts in the first half of the book are well worth discussing. Unfortunately, Pilzer too often lapses into overstatement and exaggeration forgetting that sometimes the person yelling the loudest, gets listened to the least. Albert D. Widman Visions/Services for the Blind
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Author:Widman, Albert D.
Publication:American Economist
Article Type:Book Review
Date:Sep 22, 1991
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