Are self-driving cars really all that?

The self-driving car holds much promise. But it might not be taking you to any destination just yet.

The self-driving car has been invented, but is it likely to be widely adopted by as a mode of transport? Will we really buy self-driving cars? Or will we hire them like taxis, or even hop on and off them (or in and out of them) like buses? What would have to change in the way we live our everyday lives in order for us to adopt this strange interloper? And what sort of other things and services might we need to support travelling around in driverless cars?

Some of these questions go so far into the future that we can't possibly know the answers. So let's start with what we do know, and that is, perhaps surprisingly, the technology behind a self-driving car.

The concept of the self-driving (or, more alarmingly put, the driverless car) relies on the clever assembly of many existing technologies. There are several versions of the driverless car in existence, so let's focus on one of them. Google's car is perhaps the most widely covered. Developed through their long collaboration with Stanford University, it cleverly combines a raft of technologies that most of us, in one way and another, are fairly familiar with.

The car uses data gathered from Google Street View with artificial intelligence software, inputs from video cameras installed inside the car, a light detecting and ranging sensor (LIDAR) on the roof, a radar sensor on the front and positioning sensors on the rear wheels. Interestingly, the self-driving car looks suspiciously similar to any other car (only with a few extra gadgets). This is likely to change as the physical constraints presented by these technologies are overcome by the skills of designers that reconfigure interior car spaces as meeting rooms, cafes or perhaps even playrooms.

Not only does the current Google car look very similar to any other Toyota Prius, but the idea is that it actually behaves like one too. Making use of our existing infrastructure, roads, parking facilities, fuel and service stations, the car is designed to replicate the capabilities of human drivers - without human input.

This could be all for the good, and bodes well for its early adoption. Research shows products that fit in to our everyday ways of doing things are much more likely to be adopted. We need little convincing of this when we consider how Apple introduced a tiny computer into our pockets where a mobile phone used to be.

We took to the iPhone like ducks to water because it fitted in with how we were already trying to live (emails on the move, taking and sharing photographs, synchronised and shared diaries and so on). Will the self-driving car be such a welcome fit? As a society we remain much in love with the car, despite persistent efforts to persuade us to make more frequent use of public transport. With a car we can simply jump in and go wherever we want, whenever we want, with no prior arrangement or planning. This flexibility and convenience is what makes us love our cars and if the driverless car can offer this then perhaps it's in with a shout.

The logic behind the driverless car is also most appealing. By relying on technologies we can tame or even eliminate the human error that lies behind so many horrific road traffic accidents. But change begets change.

If we remove drivers, what else might we surreptitiously lose, gain or need, to make our new automobile system work as well as or better than our existing one? We might lose the need for driving tests. So we may lose the structure which provides both education about rules of the road and the framework for developing the capabilities and knowledge that underpin licensing and traffic regulation requirements.

And what is missing? If we break down now, we call the breakdown services and they come and fix our car by the roadside. When a driverless car malfunctions and takes us somewhere we don't want to go, or stops on the highway and won't move, what kind of breakdown service will we need to rescue us? With the increased sophistication of the technologies of driverless vehicles we will need to access different kinds of services to keep us all motoring.

Similarly, as the sophistication of the technologies increases, will the price increase too? This matters because it affects how the market unfolds. If prices turn out to be prohibitive for mass market consumption, then it is likely to be only the wealthy, businesses (maybe taxi firms, or other public transport providers), or even governments, that first adopt these technologies.

Even with government support and intervention there is no guarantee of success. Take the French government’s ill-fated attempt to introduce Aramis, a driverless light rail car, to Paris in the 1980s. Despite being championed by the French defence company Matra and supported by the government, and despite the successful development of prototypes (boasting some of the most advanced and reliable technologies of its time) the project failed to take off. The experience is described in a wonderful book Aramis or The love of Technology by Bruno Latour.

Could the driverless car meet the same fate? We do not yet know. What is more certain is that there is much work that needs to be done to make the market for the driverless car a reality. There are policy implications associated with developing the right infrastructure, creating a new automotive support system and the right markets for self-drive systems. Manufacturers will need to understand the services and capabilities they need to supply with these new vehicles. Businesses will have to develop new models that connect them with other businesses to form networks of support and they will have to work to imagine, make and shape markets for these new technologies as they unfold. The self-driving car holds much promise. But it might not be taking you to any destination just yet.

Dr Katy Mason is Reader in Marketing & Management at Lancaster University. She is co-author of the paper "Self driving cars: A case study in making new markets", which is part of a series of reports on market making for the Big Innovation Centre.

The Google car. Photograph: Getty Images

Dr Mason is Reader in Marketing & Management at Lancaster University.

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?