I am skeptical of the technological singularity ever happening–or happening soon, as people like Kurzweil predict–but it’s possible. And, something less is possible too–a substantial increase in the effect of technolgy on productivity–perhaps enough to counteract the bust. See the figure below: this is a sketch of how I have long pictured the business cycle.
In this chart, imagine a free market emerging at the left axis. GDP increases, with ups and downs, before a central bank is formed. When the central bank with fractional reserve banking is introduced, it inflates the supply of money and credit which sets in motion the first boom, and the recurring boom-bust cycle described by Mises and Hayek. The Austrian insight is that not only does this hurt some and harm some (by redistribution or uncertainty effects), but that it also destroys wealth (because of malinvestment). This means that even if there is an underlying average growing GDP (the lower dashed line)–that is, the GDP increases over time despite the cycle–it is less than it would have been if the cycle had never been imposed (that’s the upper dashed line). The cycle in effect exerts a drag on growth; or it reduces the slope of the rate of increase in GDP over time, in addition to making it more volatile and causing redistribution due to inflationary effects.
Now see the right elbow of the curve–if some super-advances in technology, or even a technological singularity, occurs, so that it boosts the average rate of growth of productivity and GDP enough, it is conceivable that the “down” or bust part of the cycle would be relative only. We are still worse off than we would have been, but in this case a “recession” would be a period of, say, 4% annual GDP growth instead of, say, 20%.
I am not predicting this. I am only saying it’s an effect. Even on the middle part of the curve, which is what we appear to have had from about the 1910s to the 1970s or so, the average upward growth of GDP ameliorates the bust because it is relative to that general upward trend (which is partly due to increasing technological advances). As a crude example, if we experience a bust, while at the same time the price of computers and electronic devices keeps falling and their qualities are rapidly improving due to technological progress, then consumers experience less of a bust than they would otherwise. It’s just an empirical question of the comparative downward slope of the bust, and the upward average slope of GDP grown. They could cancel out, or one could dominate the other. Up till now the bust of course always dominates, and I don’t expect it to reverse, but it could, or could be signfiicantly ameliorated.