
Should economists be more concerned about AI? - nickgrosvenor
https://bankunderground.co.uk/2017/03/01/should-economists-be-more-concerned-about-artificial-intelligence/
======
jdoliner
Something interesting that I learned recently from a former Dean of the
Industrial Labor Relations School at Cornell:

Worry over automation destroying jobs is almost as old as automation itself.
Researchers have yet to find solid evidence that automation has ever destroyed
jobs. Now, that of course, doesn't mean that this is some immutable law of the
universe that automation will never destroy jobs. But it does mean we should
look very skeptically at all the hand wringing over the impending robot job
stealing.

It's also important to note that this result is global, not local. The
employment situation in the US is obviously different today than it was in the
70s. That may well be due to technology / automation. But jobs haven't been
destroyed, they've just moved to different places.

~~~
sigmar
>Researchers have yet to find solid evidence that automation has ever
destroyed jobs.

This is completely untrue. Ball State University found that job loss in the
2000s due to automation dwarfed the loss caused by free trade[1]. There is
tons of other research that corroborates that[2].

[1]
[http://projects.cberdata.org/reports/MfgReality.pdf](http://projects.cberdata.org/reports/MfgReality.pdf)

[2] [https://www.nytimes.com/2016/12/21/upshot/the-long-term-
jobs...](https://www.nytimes.com/2016/12/21/upshot/the-long-term-jobs-killer-
is-not-china-its-automation.html)

~~~
phkahler
It's easy to see and I've said this here before. As a business owner doing
manufacturing (for example) replacing manual labor with automation costs less.
That's less in terms of TCO, so that includes setup, operation, energy, and
maintenance. The idea that the low-skilled assembly jobs are just replaced by
high-skilled jobs is untrue. Those high-skilled jobs pay more - perhaps 2-5x
more, and if the TCO is actually less that means significantly fewer man-hours
due to the higher hourly rate.

The notion of replacing low-skilled jobs with high-skilled, better paying ones
is true. However since the TCO to the one purchasing the automation is LOWER
it says a lot about the total number of people to maintain the system.

This of course neglects any secondary effects where lower costs may increase
volume and wider use of the product. But to a first approximation automation
destroys jobs. Obviously.

~~~
winstonewert
I think you are engaging a straw man here. Obviously, given a fixed amount of
output, automation will reduce the man-hours required. That's the whole point.
And yes, that will, by itself, reduce the amount of work available. Who do you
think is saying otherwise?.

The question isn't whether automation decreases the amount of work neccessary
to produce the same output, obviously it does. The question is whether we can
reallocate workers somewhere in the economy so that we can produce even more
output with the same input.

~~~
phkahler
>> The question is whether we can reallocate workers somewhere in the economy
so that we can produce even more output with the same input.

I alluded to that in my last sentence. You can only reallocate workers to
something else if there is demand for that something else. As I said to
another poster, there is an upper limit to consumption so at some point there
just won't be anything else for people to do/produce. Consumers have an upper
bound on their consumption based on the number of hours in a day.

~~~
winstonewert
Yes, your last sentence alluded to that. But your whole post was still
engaging a strawman.

But pointing out a limit in the amount a single person can consume doesn't
change the essential situation. It simply means that instead of reallocating
worker time to different production, people's time is reallocated to
consumption.

If those who have jobs have enough money to hit the limit on what they can (or
choose to) consume, they will cease working, leaving those jobs to others.

~~~
phkahler
>> It simply means that instead of reallocating worker time to different
production, people's time is reallocated to consumption.

Well, people out of work can't really allocate their time to consumption. This
is the basis for an argument that we need a shorter work week and a need to
enforce it (high Europe, screw you US tech industry). When we are efficient
enough to provide everything people want to consume in their 24 hour day and
have leftover people without work, we need to make them work less so it will
require more people to do all the work. I think there are limits to that as
well.

These problem all lie on a path to a possible utopia where the machines take
care of the people and we're free to do whatever we want. I'm not sure how you
get there from here or what that would even look like.

~~~
winstonewert
You have pretty much agreed to my point. Its not a matter of running out of
work, its a matter of reallocating the work.

However, I do not think we will have to force people to work less. If someone
has hit the limit of what they want to consume, why are they still working? If
there is really nothing more that money can buy, why would they be trying to
earn more money?

------
skruzel
As a former portfolio manager who also runs a "machine learning for economists
company", I have seen many examples where AI and better data can help
economists quantify their intuitions and more rigorously test their models. My
product is even called the "AI Economist"

Let's face it, humans are great at organizing problems and hypothesing about
the future, but we are terrible at quickly reasoning about complex
interactions and finding patterns in highly noisy data.

One area I'm pretty excited about here is using better machine learning
algorithms to organize global production, employment and trade data to improve
out definitions of business cycles. We have relied on 'high-level stylized
facts' to describe the complex and fascinating global economy for too long.

If you like geeking out on this stuff, my recent post goes in to it more:
[https://astrocyte.io/2017/01/11/ml-redefining-business-
cycle...](https://astrocyte.io/2017/01/11/ml-redefining-business-cycles/)

------
glangdale
I wonder sometimes whether there's another accelerating factor at work;
specifically, as this kind of technological advance accelerates, that the
prospect of interfacing with _another human_ to get a task done becomes less
and less pleasant for people. I've already noticed that quite a number of
people of my acquaintance, including occasionally myself, would rather spend 5
minutes poking at radio buttons on my phone to order food vs 45 seconds
talking to a human.

There may be a _premium_ associated with an absence of human interaction in a
task. I'm sure many people would pay more for a robotic cleaner per unit of
effectiveness than they would for a human cleaner, just from the perspective
of privacy.

~~~
rpcorb
Can confirm. I've noticed this social trend as well.

However, interestingly, there also seems to be critical threshold (different
for every task) beyond which the opposite urge takes hold. Take, for instance,
customer/technical support hotlines. The feeling of, "Please just let me talk
to a human..." In that case there's a premium on the presence of human
interaction. It almost seems like an "uncanny valley" of technological problem
solving. In other words, machines are useful but usually brittle. Humans have
a flexibility and creativity which won't be easy to replicate.

~~~
glangdale
Yes indeed. Unfortunately one often finds that you are talking to a human who
is sitting on the same side of the "uncanny valley of technological problem
solving as you". That is, some pleasant and would-be-helpful call center
worker who is now just banging their head on the same problem you were. I've
had more than a few calls where you can actually hear them getting stuck on
the same web page, experiencing the same bug/timeout/whatever that you were
getting on the 'public' site. Flexibility and creativity aren't much use when
we're all just wrestling with the same brittle machine on the same terms...

------
ThomPete
Yes they are because they treat tech as an externality.

This has a double negative effect because that also means that politicians
arent being presented with the right scenarios as they are guided by the very
economist models that doesent factor tech in.

It boggles my mind that the arguments i hear from economist is basically the
same tired horse cariages argument. Thats litterally all they have.

~~~
Swizec
The question isn't "What happened to horse carriages", they're now cars.
Obviously.

But where did all the horses go?

~~~
Almaviva
Horses haven't shown the same level of adaptation to different skill sets that
humans have.

~~~
ThomPete
And neither have humans. How many +40 will be able to change career?

I find the dismissive attitude really unfounded and blind to the realities we
live in.

~~~
Almaviva
The problem is fundamental and serious, what to do when a growing number of
people have literally nothing valuable to contribute to an economy. But horses
aren't a good analogy to shed light on it.

Horses are more analogous to steam engines than people, in their historical
function on the economy.

~~~
ThomPete
Horses are a bad analogy if you want to prove that AI wont take over most
jobs.

They are however a great analogy if you want to see how technology once it
reaches a certain point renders biological beings sub-par useless as part
wealth creation.

------
mrfusion
I was thinking about automation and job loss recently. I tried to make a
simple model to understand what happens.

Can you guys critique this thought experiment? It makes it seem like it won't
be a problem.

There are three people on an island. One catches fish. One bakes bread and the
other one owns the land and takes a portion of the of the fish and bread.

Let's say one day the land owner recieves a machine that makes bread and
catches fish. He can either continue collecting rent plus his new production.
Or he can not collect rent since he doesn't need it. But in either case the
other two people are no worse off.

~~~
scottmf
Why will he continue to let them live on his land?

It's a gross oversimplification regardless.

~~~
vorotato
I'd say it was an appropriate level of simplification given that you arrived
at the correct answer and he wasn't able to :P.

------
hacker_9
There have been trials of basic income though, so people are thinking about
it. Additionally the term 'robot' is very handwavey and could mean anything
intelligence wise, so difficult to say what jobs will get replaced and when.

~~~
monk_e_boy
Bill Gates said that no nation on earth is rich enough to afford basic income.
It's a long way off.

~~~
speedboat
Bill Gates just want doesn't want to pay more in taxes. That's what UBI
requires: more taxes. Considerable tax increases, but there it is. Tax the
economic beneficiaries of the economy and divest to everyone to bring the top
and bottom closer to GDP per capita.

~~~
massysett
Gates is worth $76 billion. US population is over 300 million. So if we
liberated Gates of every penny he has, there would be a one-time payment of
less than $253 to every American.

The rich do not have enough money to pay for everyone else to be on the dole.

~~~
speedboat
Would Bill Gates personally fund a UBI? No. The claim wasn't is Bill Gates
rich enough to personally fund an American UBI. He would still see his taxes
rise considerably and would fall within the tax net to fund a UBI. Those taxes
would reach far down the income and wealth ladder, but as long as your UBI is
below GDP per capita, it's feasible and a nation could fund it, if it so
chose.

~~~
dragonwriter
While I support a universal income gradually reaching up to (and eventually
perhaps well above) the level at which it could fairly be called a UBI, it is
not at all the case that any UBI level up to the pre-UBI GDP per capita is
affordable.

A universal income will affect behavior, and through that real GDP; at some
levels, it may actually improve GDP by reducing job market friction and better
allowing people to retrain, retool, and optimize their contribution and their
own returns; OTOH, there's certainly a level at which it draws people out of
the labor force in large enough quantities to overwhelm any advantage from
reducing friction, crashing real, post-UBI GDP.

------
valuearb
We should have done something about automation in 1800, we had a country where
95% was gainfully employed in agriculture and those jobs are now gone.

------
vorotato
If only there were some entity with the capacity to take that surplus produced
by mass automation and help those displaced by it.

------
js8
I believe AI (and automation) are just special cases of growing income
inequality (between labor and capital), so it's a little unfair, perhaps, as
many economists _are_ worried about that.

You can get surplus of labor (and so decreasing its value relative to capital)
in two ways - by having too much automation, or by having too much people. The
first is the current scenario (of automation), the second is the classic
Malthusian one, which I am sure happened many times in history.

------
Sudharsankp
Am a big fan of my CEO, in one of his intranet blogs he said something
_similar_ to this "AI will make a huge unemployment is a very big claim and an
overstatement.. 20 years ago before the computer era people were worried about
computers will lead to unemployment and especially all the bank jobs
(prestigious jobs back then) but then it is the opposite now, technology
always helps you never know in which form" i strongly feel he s right.

------
branchless
No idea why the link is to the utterly shallow BB article rather than the BoE
blog.

Here is another good entry from the same blog about how banks create money
when they lend rather than being intermediaries:

[https://bankunderground.co.uk/2015/06/30/banks-are-not-
inter...](https://bankunderground.co.uk/2015/06/30/banks-are-not-
intermediaries-of-loanable-funds-and-why-this-matters/)

------
monk_e_boy
A small thought. When AI gets good-ish then would it work sort of like this:

You go to a supermarket and ask it where the beans are, it tells you. It
reminds you to pick up toothpaste. You go to the checkout, but to the AI
enabled one because the AI is nice and chatty and asks how your day was.

You pop into mcdonalds and the AI greets you, asks you what you'd like to eat
(I imagine it will be on a screen as you walk in)... questions - am I talking
to mcdonalds AI, or will my personal AI follow me into the store? How will my
personal AI interact with mcdonalds - via APIs or something?

Or will each store have its own AI, so if I pop to Tesco then Tesco AI will
talk to me.

I find it weird that on android I have one AI, on my desktop I have Cortana
and Google/Chrome, on my iPad it's Siri... I don't want to be interacting with
a thousand as I show and game and browse the internet. I want one that follows
me around.

~~~
ThomPete
I am pretty sure we will see a move to nationalize basic production. If you
think about it it actually make sense as there is no more competitive
advantage to be had if the entire ecosystem is automated.

~~~
WillPostForFood
Automation doesn't mean no competitive advantage.

~~~
ThomPete
Full automation do.

------
msluyter
Relevant to this discussion:

A Model of Technological Unemployment
[http://www.danielsusskind.com/research](http://www.danielsusskind.com/research)

------
MegaButts
> BOE Chief Economist Andrew Haldane estimating in 2015 that 15 million
> British jobs and 80 million in the U.S. could be lost to automation

I don't understand. He's predicting how many jobs will be lost in the past?

Besides that, there's not much concrete in this article. Where are the
specific examples of robots that are successfully disrupting industries?
General purpose robotics isn't here yet. Maybe it'll happen next year, maybe
it'll happen next decade, maybe it won't happen in my lifetime. But just
saying "bad things might happen because robots" isn't helpful.

~~~
jdoliner
The estimate was made in 2015, not about 2015.

------
fizixer
As a technologist, and a follower of automation related news for the past 4+
years, I have basically given up on the economists, save for a handful like
Robin Hanson. They will probably realize their folly when it's too late.

Even their claims that "automation based disruption didn't happen in the past"
is simply false. They back their claims by pointing to current unemployment
(or the pre-2007-crisis rate of 4-5%), i.e., obviously unemployment is really
low therefore automation didn't take away jobs.

No you dummy. Automation did take away jobs, and the people whose jobs were
lost were directly affected by it, and millions of families were destroyed.

In recent history we can point to two major time periods of this sort, the
first industrial revolution (around the turn of 19th century), and the second
industrial revolution (at the turn of the 20th century).

In the first one, the subject of economics, and statistics, and more involved
census-taking was still in its infancy, and Europe was in general in a state
of turmoil with warfare more rampant, so it's possible that the harmful
effects of automation were not documented thoroughly.

The second time, things were a lot more stable, economics and statistics were
a lot more developed, and yet:

\- World War I happened! (why do you think things were so agitated around that
time, after many decades of relative peace? Do you not call the events leading
up to it social disruption?)

\- Major recession happened (any chance it had anything to do with the 2nd
industrial revolution?)

\- World War II happened. (again, partly the result of social agitation, WWI,
and recession).

In the mean time, within decades a whole generation of farmers were rendered
obsolete and asked to dismiss themselves. These middle-aged and old farmers
were the bread winners of their families and didn't have quite the resources
to "retrain" themselves and put themselves back into the workforce, something
the economists love to tell you about as a solution. What ended up happening
is that, after a lot of pain and suffering, their younger generation (the
"millenials" of 100 years ago) got themselves educated in the newer trades,
entered the workforce and brought the unemployment back to stable levels.

If you can comprehend what happened in the decades roughly a 100 years ago,
just know that what's happening this time is at least 10x worse if not more!

(I always like to share CGPGrey's 'Humans Need Not Apply'. Go watch it on
youtube if you have 10 minutes to spare).

edit: not sure what happened but I commented in response to the article [0]
not the bankunderground one.

[0]
[https://www.bloomberg.com/news/articles/2017-03-01/economist...](https://www.bloomberg.com/news/articles/2017-03-01/economists-
may-be-underestimating-how-fast-the-robots-are-coming)

~~~
ThrustVectoring
Unemployment isn't a good measure of the thing we care about. Two factors for
this: the politicization of the statistic, and a more fundamental mis-
calibration.

The mis-calibration is that unemployment looks at how hard it is to fill job
openings - basically, it's the ratio of job-seekers to filled positions. When
it's higher, there's more candidates trying to interview for the average
position. When it's lower, there's fewer. This is a very distinct thing from
what percentage of folks are productive members of society; the 40 year old
mill worker that cannot retrain to a non-obsolete role ends up being
"disabled" and not an unemployed job-seeker.

The politicization is why we talk about official unemployment numbers as they
are measured rather than more rough measures of labor participation. The
unemployment rate is used as a measure for the effectiveness of various
economic policies and political entities, so those policy-makers and political
entities have decided to talk about the ones that make them look good.
Goodhart's Law in action, basically.

------
EGreg
Thats why we need single payer systems to take the place of UBI for everyone

------
dang
Url changed from
[https://www.bloomberg.com/news/articles/2017-03-01/economist...](https://www.bloomberg.com/news/articles/2017-03-01/economists-
may-be-underestimating-how-fast-the-robots-are-coming), which points to this.

