Robot Macroeconomics: What can theory and economic history teach us?

https://bankunderground.co.uk/2016/09/06/robot-macroeconomics-what-can-theory-and-several-centuries-of-economic-history-teach-us/

by jburgess777 • 10 years ago

44 33 10 years ago

bankunderground.co.uk

keyjsgnsgdgn• 10 years ago

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.

mrslave• 10 years ago

Then you'll just love Krugman's imagine we're at war with aliens economic stimulus!!!

UK-AL• 10 years ago

Empirical evidence is also on the side of not creating unemployment.

mandem2• 10 years ago

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

AstralStorm2• 10 years ago

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.

Animats3• 10 years ago

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.

oddpxl• 10 years ago

Basic income may be the solution...if done right: focus on providing real independence and choice (unlike benefits).

..and someone did think of something:

http://userpage.fu-berlin.de/~roehrigw/kennedy/english/

js82• 10 years ago

Not that I would disagree with the general gist of your comment, but:

"Information technology is only 1.8% of US employment, down from 2.2% ten years before."

Isn't this caused by globalization and outsourcing?

contingencies• 10 years ago

Yes, that's the conventional wisdom from economists. [...] Somebody had better think of something.

Well said. :)

dharma1• 10 years ago

Perhaps machine learning can also disrupt economists and politicians and come up with better theories, models and solutions how to best re-allocate labour, capital and education for common good :)

Societies in general are quite adaptive, but with robotics/ML one issue is that the shift will potentially happen within one generation - it's harder to retrain/adjust adults.

yummyfajitas3• 10 years ago

Ok, where's my Robo-maid who's better than any human? How about my Robo-Taco-Truck, my robot laundry guy, and my robot driver? As other nations demonstrate, these are all things that humans could do.

https://www.chrisstucchio.com/blog/2016/robots_didnt_take_ou...

People aren't competing with machines, or with each other. Valuable work is just not getting done for a variety of reasons: people prefer to live off welfare/disability fraud, people are afraid of summary execution by the police for doing certain valuable jobs, etc.

Technological unemployment may happen some day. But it hasn't happened yet.

rskar2• 10 years ago

Technological unemployment may happen some day. But it hasn't happened yet.

That's the crux of the matter: Whether "some day" happens sooner rather than later. Also, what to do when "some day" comes.

You know it's coming, there's big money and serious effort into making things like Robo-Maid, Robo-Taco-Truck, Robo-laundry-guy, Robo-Driver, etc., a practical reality. We know that Robo-Burger-Maker is rather real today: http://www.eater.com/2016/7/1/12077990/robot-burgers-san-fra....

Your blanket statement regarding on why "valuable work is just not getting done" is overall a side-issue. Welfare may be gaming a system. Disability fraud is certainly criminal. Let's add to that: Living off a pension; Born a "trust-fund baby"; Fully retired on investments. There are plenty of other reasons that certain somebodies do not seek employment income, and perhaps do not have to.

People have good reason to fret about the availability, attainability and retain-ability of gainful employment. There's plenty of history and recent events to make such fretting reasonable (e.g. http://www.usnews.com/news/articles/2016-02-04/what-happened...).

nerdponx• 10 years ago

Why not teach people skilled trades and crafts instead of sending them to get a STEM degree? That will keep people busy while UBI keeps them fed, housed, and healthy.

andrenth6• 10 years ago

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.

mandem2• 10 years ago

Greater abundance devalues the relative productivity of labour to machinery. But in the contemporary case, there is not enough demand (ie. low/no economic/population growth in the rich world) to valorise the greater abundance, hence the relative devaluation of labour is to a much greater extent.

In the same way that computers can beat the best human chess and go players, machines are beating a large (and ever increasing) proportion of human labour. This is lost ground. We will end up doing labour for 'fun' (ie. non-economic ends) since we cannot compete on economic grounds.

js82• 10 years ago

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.

rubidium• 10 years ago

I've often wondered about returning to more rural, subsistence-farm living. I'm very likely naive about a number of factors involved, but with the massive agricultural advances of the last 100 years it seems like setting up a subsistence farm for a moderate sized family/community should be do-able.

The Amish do it fairly well, and they even "handicap" themselves by not employing many of the modern farm automation capabilities.

maxerickson• 10 years ago

If you are trading for fuel/energy to run your automation you aren't quite doing subsistence farming anymore.

eli_gottlieb• 10 years ago

Frankly, I think machinery isn't necessarily the best explanatory factor. Have we compared it against levels of private indebtedness, concentration of asset ownership, labor-union density, and aggregate demand as factors in the behavior of the economy broadly and labor markets in specific?

jackcosgrove• 10 years ago

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• 10 years ago

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• 10 years ago

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.

Robot Macroeconomics: What can theory and economic history teach us?

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