Technology can bring substantial welfare benefits, including economic

growth and better health

Accompanying and underlying the broad discussion on ethical boundaries for AI is
anxiety
about technology�s potential disruption with negative outcomes for well-being. This
can lead
to risk aversion, which in itself can have significant adverse effects.6
At the same time, technological innovations over the ages have brought major
welfare gains
in the form of better and longer life as well as higher incomes and extended
leisure (see Box 2,
�What we mean by welfare and well-being�). In 1870, in the era of the steam engine
and the
telegraph, life expectancy at birth was 40 years in the United States and 36 years
in Europe. If
they made it to adulthood, the average worker in the United States spent more than
60 hours
on the job every week, for a relatively modest income.7
By 1970, life expectancy at birth had
more than doubled, US citizens� revenue per capita was almost ten times higher, and
the
workweek had fallen below 45 hours a week. In Germany, the printing and metal
workers� union
in 1995 negotiated the introduction of the 35-hour workweek. Today, no country in
the world has
a lower life expectancy than the countries with the highest life expectancy in 1800
(Exhibit 3).8
6 Economists have long recognized that risk aversion can have a negative effect on
individuals� utility or firm profit. In
general, they model uncertainty using an expected utility framework, in which
utility, or profit, is reduced by the amount
of risk aversion attached to uncertain events. A typical metric of this risk is the
Arrow-Pratt measure, which is directly
related to the variance in outcomes linked to the distribution of uncertainty. The
finance literature looks at covariance
of outcomes as systematic risk or beta; the welfare literature we leverage in this
research uses a standard measure of
variance. We apply this measure to estimate the negative welfare consequences of
consumption inequality and of risk
of unemployment. See John W. Pratt, �Risk aversion in the small and in the large,�
Econometrica, January�April 1964,
Volume 32, Number 1�2, and Kenneth Arrow, �Aspects of the theory of risk bearing,�
in Essays in the Theory of Risk
Bearing, Chicago, IL: Markham Publishing Co., 1971. See also Daniel Kahneman and
Amos Tversky, �Prospect theory:
An analysis of decision under risk,� Econometrica, 1979, Volume 47, Number 2. 7
Robert Whaples, Hours of work in US history, Economic History Association,
eh.net/encyclopedia/hours-of-work-in-u-shistory/. 8 Max Roser, Our world in data,
ourworldindata.org/life-expectancy.
Exhibit 2
2.5B 2.3B 51%
smartphones
in the world
active social media
users globally
of payments
made digitally
47% >2M 9.1B >90%
penetration of mobile internet,
projected to reach
industrial robots,
will grow to
Connected IoT devices,
expected to exceed
of internet data was generated
over the last 2 years
61% >4M $25B >5x
by 2025 by 2025 total value of IoT technology
by 2025
expected growth
by 2025
Technology permeates every aspect of society and is an important instrument of
change.
Source: Why digital strategies fail, McKinsey & Company, March 2018; GSMA 2019;
Domo; IDC; McKinsey Global Institute analysis
Tech for Good: Smoothing disruption, improving well-being 7
Exhibit 3
Source: McKinsey Global Institute analysis
1 Maddison Project database 2018; World Bank; McKinsey Global Institute analysis. 2
Data until 1990: James C. Riley, �Estimates of regional and global life expectancy
1800�2001,� Population and Development Review, Volume 31, Issue 3, September
2005. Data 2000 and later: WHO, World Bank, assembled by Max Roser. 3 Data before
1870 from the United Kingdom only. For 1870�2000, data are an average of Australia,
Canada, Denmark, France, Germany, Ireland, Italy, Netherlands,
Sweden, United Kingdom, and United States. Bank of England; OECD; Michael Huberman
and Chris Minns, �The times they are not changin�: Days and hours of work in
Old and New Worlds, 1870�2000,� Explorations in Economic History, July 2007;
McKinsey Global Institute analysis