Evolution or Revolution? The Economic Consequences of Digitalization

The process of digitalization affects almost every aspect of human life. However, technological change has been ongoing for centuries, when economies were reshaped through groundbreaking inventions such as the steam engine, assembly lines, railways, electricity, chemistry and automobiles.  Is the digital transformation merely the most recent form of technological change that allows for further productivity and welfare gains, leaving well-established economic principles in place? Or is this time different, meaning that the speed and intensity of structural change induced by digitalization is unprecedented? Will workers be replaced by robots and intelligent computers leaving millions jobless and without perspective, or will economies adapt quickly and create new jobs elsewhere? Moreover, how does digitalization alter price setting of firms and what does this imply for monetary policy? What is the true economic value of new digital services, given that there is often no marginal cost of production and their price is relatively low – and what does this imply for measuring economic activity? The 99^th KKG discusses changes, chances and challenges of the digital (r)evolution.