
Robot Macroeconomics: What can theory and economic history teach us? - jburgess777
https://bankunderground.co.uk/2016/09/06/robot-macroeconomics-what-can-theory-and-several-centuries-of-economic-history-teach-us/
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Animats
Yes, that's the conventional wisdom from economists.

The real problem is simple: there are a lot of people now, and more in the
future, who cannot generate enough value by working to be self-supporting, let
alone have a good life. They're competing with machines which are better than
they are.

The conventional wisdom used to be that more education would fix this. That
failed. Unemployment and underemployment of college graduates is high and
growing. Trade schools like ITT, which went out of business yesterday, were
even less effective. The number of educated people needed is limited, and we
have more than enough.

There was the assumption that new kinds of jobs would appear. They did, but
not in large numbers. Information technology is only 1.8% of US employment,
down from 2.2% ten years before. The only big growth area is health care and
social assistance, which is a consequence of an aging population.

Where this takes us, under standard economic assumptions, is the favela model
- giant slums where most people are just surviving, with a small core group
that's doing well. This is what many third world countries look like. The US
is headed there, but is more spread out - the decaying slums are far from the
successful cities. (That's where Trump voters come from. They're angry, and
they found a demagogue. That's common worldwide, and seldom ends well.)

Remember, capitalism is not optimizing for individual income. The fitness
function is return on capital.

Alternatives? Welfare was tried from 1960 to the mid-1980s; it ended up with
third generation welfare mothers in giant housing projects. Having a large
non-working group of poor people leads to a dysfunctional society. Higher
minimum wage? Worth a try; the places that are doing it now should be
monitored to see who gets laid off. Basic income? Same problem as 60s welfare.
WPA-style government as employer of last resort? Maybe; Saudi Arabia does
that, and they have a massive number of useless workers.

Somebody had better think of something.

~~~
andrenth
I'd like to offer some quotes from the book "Economics in one lesson", a book
from the 40s that is still very relevant today. Specifically, from the chapter
called "The curse of machinery":

 _Among the most viable of all economic delusions is the belief that machines
on net balance create unemployment.

Let us turn to Adam Smith’s Wealth of Nations. The first chapter [...] is
called “Of the division of labor,” and on the second page of this first
chapter the author tells us that a workman unacquainted with the use of
machinery employed in pin-making “could scarce make one pin a day, and
certainly not twenty,” but with the use of this machinery he can make 4,800
pins a day. In the pin-making industry there was already, if machines merely
throw men out of jobs, 99.98 percent unemployment.

Arkwright invented his cotton-spinning machinery in 1760. At the time it was
estimated that there were in England 5,200 spinners using spinning wheels, and
2,700 weavers - in all 7,900 persons engaged in the production of cotton
textiles. The introduction of Arkwright’s invention was opposed on the ground
that it threatened the livelihood of the workers, and the opposition had to be
put down by force. Yet in 1787 [...] the number of persons actually involved
in the spinning and weaving of cotton had risen from 7,900 to 320,000, an
increase of 4,400 percent.

[...] Technophobes will assert: “That may have been all very well in the past,
but today conditions are fundamentally different; and now we simply cannot
afford to develop any more labor-saving machines.”

If it were indeed true that the introduction of labor-saving machinery is a
cause of constantly mounting unemployment and misery, the logical conclusion
to be drawn would be revolutionary, not only in the technical field but for
our whole concept of civilization. Not only should we have to regard all
further technical progress as a calamity; we should have to regard all past
technical progress with equal horror.

There is also an absolute sense in which machines may be said to have
enormously increased the number of jobs. The population of the world today is
four times as great as in the middle of the 18th century, before the
Industrial Revolution had got well under way. Machines may be said to have
given birth to this increased population; for without the machines, the world
would not have been able to support it. Three out of every four of us,
therefore, may be said to owe not only our jobs but our very lives to the
machines._

~~~
js8
This is a pretty good theory but it lies on certain implicit assumptions that
are becoming untrue. One is that there is abundance of energy and resources to
exploit, so there is always more to be done (demand for labor) to transform
it. But with automatization, we are coming to a state where limitation of
economic activity is not labor, but resource consumption (mainly energy).

Also, what is the definition of job? But what the people worrying about
automation are saying, there will not be more jobs that satisfy both of these
conditions:

(1) Economic efficiency - the job is required to sustain the same level of
production.

(2) Sustenance - the job must be capable to give person doing it enough money
so he can live on it and participate in society.

For instance, we can always create jobs that break the condition (1), because
we can always have more people being security guards or checking expense
reports. Or we can always create jobs that break the condition (2), you know,
you can always be a personal servant to somebody for really miserable pay.

I would actually argue that we are well past the point where (1) is true. But
since our societies are so obsessed with jobs, we cannot really openly admit
it.

~~~
andrenth
I'm not sure if I understood your points correctly. There is always more to be
done. There is not a fixed set of things humanity needs that will one day be
fulfilled. We didn't know we wanted cars, computers and smartphones until they
were invented. This is regardless of scarcity, possibly even because of it
(scarcity of resources will drive the need to be more efficient handling
them).

I also don't understand your two points since (1) automation increases
efficiency and thus production levels and (2) as a result of that increased
productivity, there is a raise in wages.

~~~
Animats
_" (2) as a result of that increased productivity, there is a raise in
wages."_

That stopped years ago. Ask any auto worker.

There's no economic reason that increased productivity should lead to an
increase in wages. The benefits of increased productivity accrue to capital,
not labor. What produced the increase in wages with productivity was labor
activism, and fear of government intervention.

It's hard to imagine now, but there was a time when American companies were
seriously afraid of what workers could do, both through unions and politics.
Communism was considered a serious competitor to capitalism from about 1930 to
1980. That's what kept wages rising.

Once Ronald Reagan successfully made the case for unbridled capitalism, that
ended. Now the US has "just in time" workers, few unions in the private
sector, and weak worker protections. Competition between employees keeps wages
down.

~~~
andrenth
Of course there are economic reasons for wage increases with productivity.
They are the same reasons that explain any other increase in prices.

First, employers don't want to lose their more productive employees, and they
have to compete with other employers offering jobs at higher pays. Second,
once productivity rises, employers increase their earnings and can therefore
hire more. This creates more demand for employees, and the price of work
rises.

It's in fact the view that companies should be "afraid" that create
regulations and restrictions that are usually what's responsible for reduction
of wages and quality of life in general for workers.

See also:
[http://www.heritage.org/research/reports/2013/07/productivit...](http://www.heritage.org/research/reports/2013/07/productivity-
and-compensation-growing-together)

Finally, I find it really unbelievable that someone can claim in a serious
conversation that the US have anything remotely similar to "unbridled
capitalism".

------
keyjsgnsgdgn
>Technological progress won’t create mass unemployment ... In Krugman’s
celebrated example, _imagine there are_...

Stopped reading right there. Hypothetical scenarios are not a replacement for
empirical evidence. I can just as easily imagine a scenario that runs contrary
to the one given.

This kind of baseless speculation cheapens economics as a science and is why a
lot of people don't take macroeconomics seriously.

~~~
mandem
If reasoning based on 'empirical evidence' were so good, economists and
politicians would know everything that is going to happen. Yet they don't.

~~~
AstralStorm
1) They lack data and 2) sometimes they choose to ignore it.

First happens because sociological data collection is hard, slow and
expensive. Second usually due to various kinds of politics and lobbying.

------
jackcosgrove
The article is blithe about how we overcome economic dislocation. During the
first industrial revolution, farmers were made obsolete and had to crowd into
cities looking for wages. Children worked in factories and poorhouses. I don't
know if this was worse than farm life, but the art of the period depicted it
as such.

Some people never recover from economic dislocation. They either abstain from
having children because they sense how marginal they are, or they have
families anyways and raise children with few opportunities.

I am using genetic propagation as a measure of human success, which of course
is arguable, but which means a lot to many people. More importantly if a human
line dies out, there is no voice for it anymore. Such losses are silent and
largely ignored by the historical record. So this economist is gravely
undercounting the human suffering that technological change can bring.

~~~
TheCoelacanth
Saying that farmers were made obsolete kind of glosses over the real reason
that they were forced into cities: enclosure. Land that they were previously
free to use for subsistence farming was taken and combined into larger
landholdings. Had they been properly compensated for the loss of the land,
they would have been less desperate to rush to cities.

------
anotheryou
So what are we doing with 33% additional hot dogs? I'm full already.

Why should the market need the additional capacity? This is where i stopped
reading.

