MIT bods' digital economy babblings are tosh. C'mon guys, Economics 101 We've one of those lovely open letters floating around. Where the Great and the Good, the Wise Thinkers, tell us all how we've got to organise the world to accord with their prejudices about how it should be ordered. This particular one, an “Open Letter on the Digital Economy” (versions here and here) is about what we've got …
If the pin factory workers are unskilled and unable to do anything more technical than cutting the wire, for example, what happens to them?
I say this not from a luddite perspective, but I want to know the mechanism by which these low-skilled people suddenly become yoga teachers or whatever.
Is the fact that there is unused labour ( outside of a recession where capital is scarce ) a driver in itself for creating new jobs where none previously existed? Or do these things even themselves out over a generation ( ie: the children of the unemployed wire-cutter won't go into wire-cutting, but yoga teaching ) ?
If it is the availability of large pools of unused labour, is this an argument against a target of full employment?
As so often, it depends.
"but I want to know the mechanism by which these low-skilled people suddenly become yoga teachers or whatever."
The economist's answer is "entrepreneur". If you can spot something that people would like done, and you can also spot the resources with which that thing can be done, stick 'em together and you've got a business. If there's lots of spare labour floating around then people will think about new businesses that use labour.
The depends is in this:
"a driver in itself for creating new jobs where none previously existed? Or do these things even themselves out over a generation"
The jobs churn in the economy is immense. I always thought it was 10% of all jobs are destroyed each year, 10% created, but I've just seen figures of double that. Obviously, some of those jobs created are very similar to those destroyed. But almost none of them are exactly the same. So, while any one job might only be slightly changed from the previous one, at 10-20 % of all jobs every year we get a substantial shift over the decades in what jobs are being done.
That's to be cheerful: the robots would only be a minor addition to that normal churn. One estimate is 45% of jobs over 20 years. Not a lot if 20% each and every....
On the other hand, a lot of miners never did do anything else again. Leaving only that generational change to do it.
If there's lots of spare labour floating around then people will think about new businesses that use labour.
Simplistically, yes. However that ignores the distortive affect of the welfare state and minimum wage. You now have two hurdle rates to clear before you can consider the labour based activity a business - it has to pay more to the "cheap" labourer after tax than welfare would or they won't take the job, and it must also pay a set minimum rate per hour. After that it must make sufficient profit for the business owner that it clears the cost of capital too, again after taxes. Only then can it be a business.
This is all hand-waving and finger-pointing on the Titanic. Robots and AI will displace all forms of manual labor and eventually intelligent work. Sure, you can join the legion of creative poets, novelists and artists. Just post that work of yours up on Amazon Kindle Direct Publishing. Maybe you can scrape $25 a month from that if you are not a superstar.
Retraining/education is a myth too. Many existing jobs don't require a high school level education or vocational training. There will always be a large pool of people who are unable to attain significant skills and education, even if it was paid for by Obama. If there's no McDonald's jobs, and no driving jobs, what then?
Sex work could be a lucrative choice, until such time that you have to compete with sex bots. Lower your fees and prepare every hole for entry. Drug dealing is another good choice. However, cannabis legalization could cut your profits, and watch out for the violent competition and your poorer and increasingly underemployed clientele.
Robot and AI improvement will immediately benefit those with lots of capital. Without the need for laborers, most use of human workers will be charity rather than necessity. Without high taxes (which could be easily dodged), the rich will keep accumulating wealth and moving what they need offshore or even off-planet (getting a billion people to Mars may be hard, but a few dozen? Elysium here we come). Today's "income inequality" will look like a beautiful dream. The only way to salvage modern life is to substantially cheapen the cost of living through technology. Eliminate health care costs with regenerative medicine, eliminate energy costs with cheap solar. Eliminate calorie costs with an automated home garden. In the absence of a comprehensive welfare scheme to take care of the coming unemployment crisis, you should consider off-the-grid subsistence living. Put those increasing GMO crop yields to work for you.
@PleebSmash
That seems a very odd position to take. AI is far from being capable of emulating a human, if that's every going to be possible. There are very, very specific things that robots can do, and we use them to good effect in those, but outside that, not possible.
It also misses the point on where and by whom people are employed. Companies are 'legal persons', so they can make contracts, but that doesn't make them real. They are fictional social constructs that we find it convenient to keep around.
People are the only thing, the market is made of individuals acting out their desires. Companies act the way they do as an aggregation of the humans owning them and those working in them.
What this boils down to is that, if there were mass layoffs, then those people will build a new economy for themselves.
The UK economy is not dominated by large employers, far from it. SMEs employ around 60% of all the workforce, up to 10% (according to some estimates) are freelancers and self employed.
All of them together are focused on finding something to do that people will pay them for, creating new value where before there was none.
A robot could be a useful tool in making that more efficient, but replace the people entirely?
Not. A. Chance. What would be the point? You'd destroy the economy, which is made up solely of the people.
Welfare is not the answer, it's a temporary fix. Education on how economies work, and how you can work that to your advantage is.
Employers are going to avoid using cheaper and more efficient robots that don't require wages or benefits because they are thinking of the macroeconomic consequences? I don't think so.
Driving is just dead. It's too easy to automate driving compared to even putting a burger together by robohand. Driving will be followed by dexterous robots in agriculture, fast food, cheap retail, manufacturing, mining/mineral extraction, and even construction. Maybe you'll see 5-10 humans in those sectors whittled down to 1-2 humans and robot friends. Many scientists will be displaced by competition within their fields, automation of rote tasks, and even computers "doing science". Many doctors will be displaced by preventative medicine, telemedicine, tricorders, and robot surgery. Good for the patient, so long as the bill is paid.
People will build an economy for themselves... if they can find the land and starting capital needed to exploit technological advancements for themselves. Where's your plot of land? Where's your mineral rights and logging permits? What about your water supply?
Employers are going to avoid using cheaper and more efficient robots that don't require wages or benefits because they are thinking of the macroeconomic consequences? I don't think so.
Neither did Dawson, apparently, because he said nothing of the sort. He said that robots and AI are nowhere near as advanced as you seem to think they are.
Driving is just dead. It's too easy to automate driving compared to even putting a burger together by robohand.
A perfect case in point. If you'd ever seen a self-driving car trying to operate anywhere outside of a very controlled environment, or some of the many vending machines that can make anything from pizza to mashed potatoes, you wouldn't have made such an absurd claim. The rest of your examples are similar hogwash that "futurists" have been banging on about since before I was born. But hey, keep banging that drum. One of these centuries, you're bound to be right.
Maybe the current state is exaggerated but I think the point still stands: Businesses will use the cheapest labor they can find. Self-driving cars are a bit off but look inside a car *factory* - mostly robots - with some people to push buttons and scratch their nuts. I think between automation, computers the overall amount of labor required by the market is shrinking. Then add 10^9 people to the labor market with nothing to lose and we in the west are having labor pains. In previous centuries this lead to lowering work weeks and/or increased standard of living (goods get cheaper). In the US, at least, we seem to be unable to consider lowering the work week to say 30hrs and hiring more people.
The only ones who will be able to afford to consume will be those who already own the robots, or at least own the rights to their output. The rest of us get to starve.
We're already at the stage where industry doesn't really need consumers, and in fact the financial sector doesn't really need industry, just QE and other forms of government welfare/bailouts. Socialism for the rich, etc.
"The only ones who will be able to afford to consume will be those who already own the robots, or at least own the rights to their output. The rest of us get to starve."
This isn't possible. Because, if that production of the robots isn't being shared with us then we'll still be doing the sort of stuff we're doing now in order to feed ourselves, won't we?
It's just not possible to have a highly automated and highly productive economy and have people unable to consume stuff.
What this boils down to is that, if there were mass layoffs, then those people will build a new economy for themselves.
Please can you expand on how you see that being possible?
Sure, you can dump money in its current form in favour of some other means of labour exchange, but if we reach the stage where AI works, then literally anything a human can do a machine could learn to do, for all large scale practical purposes.
I'm a big believer in education - it afforded me many opportunities in life. However, advanced AI could render that worthless as it'll be smarter than all of us.
Strange understanding of economies here. I don't recognise the world you paint as reality.
Frankly, it's an 'employee' mindset, where you believe the forces of the economy are run for abstract concepts like 'the company', or 'the state'. Not recognising that both of those things are simply convenient labels on groups of people. They are fictional. This is one of the reasons why macroeconomics is essentially guess work, you are attempting to generate a model that describes trillions of human interactions.
The idea that the entirety of the human involvement in the economy could be replaced with an AI is completely fanciful, as it completely misrepresents what that economic activity is for. It doesn't exist for it's own benefit, ultimately there are owners of all companies which are people.
Whether it's pension funds, 'the state', individuals, via other companies. It simply doesn't matter, people own everything. The fact that you feel somewhat powerless when faced with the economy doesn't change this.
So, in any new economy, that wouldn't change unless we give AI ownership rights.
Everything flows from that.
Unless your hyper intelligent AI can displace us as the owners of stuff, the economy will always be run for the benefit of humanity, either in whole or in part.
Before modern economies formed, everyone had to make their own economic activity just to eat. If push comes to shove, that will happen again. AI's may be able to do all jobs, but would they actually do that?
What would really happen is that humans, the drivers and consumers of all economic activity, would be shoved higher up the value chain. Some people won't make it, but the majority of us will. Look around London right now, the population has moved away from mass manufacture into mostly knowledge work. (outside of London, it's more weighted towards light manufacture).
We've had huge automation, really, massive. This should be seen as part of the great industrialisation move. If this didn't happen, we would still, for the most part, be doing subsistence agriculture. That's not a good life.
So, bring on these magical AIs, they will not have the effect you believe they will.
Put those increasing GMO crop yields to work for you.
Won't Work. Monsanto will send sniffer drones round to check your crop out for their Intellectual Property. Then their AI lawyers will send "cease and desist notices". And since you can't pay the license fees witout money, other drones will then spray your crop with Agent Orange!
Okay, that's true - after people have their needs of food and comfortable housing sorted, they will spend more on experiences, such as eating out or entertainment. And if robot combine-harvesters gather our food, and robot housebuilders/concrete-printers keep in shelter, then people will have time to spare to take pride in their burger/steak flipping and active leisure activities. Serving others becomes more rewarding and less like a chore. If nobody has to work more than twenty hours a week, and it doesn't materially affect the experience of the inevitably wealthy people, then all good. It sounds better than what we have now.
How can get to there from here?
"Okay, that's true - after people have their needs of food and comfortable housing sorted, they will spend more on experiences, such as eating out or entertainment."
But if robots have got all the jobs where are the humans going to get the money from with which to pay for that eating out or entertainment? Or just plain staying alive?
"But if robots have got all the jobs where are the humans going to get the money from with which to pay for that eating out or entertainment? Or just plain staying alive?"
If the robots have all the jobs, then that means that we can use robots to produce nearly everything that we want. At this point, there's no use in discussing jobs or economies anymore. If you want something, you don't work for it, you simply ask a robot to give it to you. Alternatively, you could view this as the worst possible end to society, as we would have produced one massive welfare state.
There will, of course, still be exceptions for things that are unique: original Picasso paintings, spouses, etc.
I (seriously) think that one thing we should be doing is taxing robot workers, or at least making them pay National Insurance - after all when we are all learning or teaching yoga that's going to create loads of sprains and injuries, so we need to keep some tax revenue coming in for osteopaths etc.
Yes, I guess my idea of taxing them will lead in short order to giving them human rights, and before you know where we are the daily wail will be bemoaning the seemingly unstoppable influx of unemployed beam benders demanding free WD40 on the NHS . Apologies - obviously a terrible idea.
"That argument is like saying that because we've got cars we must teach humans to run faster than cars so they've still got something to do."
No it isn't at all; the argument is like "if we have cars, then we need people with the skills to produce and maintain cars". OK so when cars replaced horses, we didn't need as many horses or those employed in horse-related industries, but some of the carriage makers transitioned to making cars and now we have a large industrial sector making private vehicles. So maybe the lesson is that those with transferable skills will be OK and those without are screwed?
The problem is, not knowing what the 'next' jobs are going to be, no-one can know with any certainty which skills are transferable, or which of the transferable skills are going to be any use.
Which is why I would currently hesitate to push my kids into higher education, because they've probably got a better chance of making a living as a (non-offshore-able) plumber than as an engineer. But as I say, that's only guessing.
Maybe the best bet is to get them learning Chinese :)
In this case I'd say education will be very important in mitigating the effects of change, but it needs to be oriented towards flexibility and skills that can be transferred across industries and environments. Unfortunately the current system here appears to be oriented towards passing the kind of exams that ministers took fifty years ago, which probably won't help develop the adaptability people will need in future economies.
> So maybe the lesson is that those with transferable skills will be OK and those without are screwed?
Surely you mean "replaceable" rather than "transferable", or have you missed the the author's point completely? The rise of the motor car didn't mean that farriers started fitting horseshoes to cars (or transferring their skills to apprentice farriers, for that matter), it meant that most farriers had to replace their skill-set with different skills.
The jobs/ tasks being automated away are familiar to us and its has already been decided that the problems they resolve, or the benefits they deliver, are worth paying for.
Any new jobs will have to under-go the same process of being weighed and valued.
BTW - Other than John Cooper-Clarke can any readers name a commercially successful modern poet?
This post has been deleted by its author
" a write-up of what the world will look like when ultra-realistic sexbots have been invented."
First thought is that rather fewer men will be paying for Jimmy Choos even if the same number of women are wearing them.
Which would seem to mean that we've got the Shoe Event Horizon sported out. Also that I'm a dreadful sexist pig but then we all knew that.
Of course, the poets procurable following the perfection of pin production processes pen pieces like Beasley Street. But later they come up with Beasley Boulevard. Which kind of backs up Mr. Worstall's position.
99.9% agreed with the analysis - but I still have a nagging feeling that it's different this time, that 'robots' are now (or will soon be) so omnicompetent that any job-with-value will be targeted by a roboteneur (rather than an entrepreneur).
The Industrial Revolution saw much hardship amongst displaced workers (and amongst those doing the displacing), but there were alternatives available, if only for the next generation. This time, there aren't likely to be any valuable alternatives available, ever again. We might find other things to do, but is anyone going to pay us to do them?
If we're not working, then where are we going to get the money to "get" the things the robots are making?
The only solution AFAICS that doesn't end with pitchforks and the 0.01% being strung up from lampposts is a universal basic income scheme. It'll either be that or: http://marshallbrain.com/manna1.htm
Every job that can be done by one person can be done half as effectively with at least 50 people performing supervisory, project management, and other paper-pushing roles. The robots will make management happier because responding to dozens of "status requests" a day takes milliseconds for a robot, as opposed to much of the theoretically productive work time for a meatbag.
Crap. Must get off this planet before the singularity.
If we're not working, then where are we going to get the money to "get" the things the robots are making?
Or to approach the issue in another way, if we reach the point where there is nothing that people have to do (all physical needs met for free), what will they find worthwhile to do? What will then have value?
I think the key is education. Not to learn a vocation, but to learn how to learn and adapt.
Getting a degree in Computer Science isn't so you cab be a Computer Scientist. That's just an initial bonus. It's to show that you can learn how to apply and better yourself no matter the challenge. Education provides you the tools to stay ahead of the robots, no matter how fast they advance.
an uneducated individual might not know what to do when a robot takes his job (or indeed another human).. An educated individual will be better prepared for it and will adapt accordingly.
"Getting a degree in Computer Science isn't so you can be a Computer Scientist. ... It's to show that you can learn how to apply and better yourself no matter the challenge...."
Tell that to the recruiters. Better still, repeatedly bludgen it into their brains with a 10-pound hammer. Recruiters point blank absolutely uttely REFUSE to believe that generalised engineering problem solving is a generalised engineering problem solving task. If you aren't currently right now being employed and paid to use BoobleFlip 4.556.5 release x.YY2 you can f*** off as you obviously are completely utterly incapable of being able to notice that the gears go 1-3-5-2-4 instead of 1-2-3-4-5.
Mr. Worstall claims that "Technological advances don't create jobs: human desires do"
I disagree. He is confusing a specific product with a technological advance.
While a specific technological product (the pin making machine in the article's example) may not create jobs, a technological advance is more than just a specific machine. The technological advances that make it possible to build a pin-making machine can also make it feasible to build machines that perform a whole range of other functions as well, many of which are entirely new and create entirely new human desires. And these are the new jobs that are created by the technological advance.
Sure, word processing systems put typesetters out of business, but the technological advances that made word processing systems possible (computers) also created entirely new products and services that did not exist before, along with corresponding new jobs. And this is in fact why you also need education: in order to create these new products and services made possible by the technological advance you need to be educated and informed about them, and to have imagination and business skills.
The part about doing something entirely different like "teaching yoga" seems bogus to me because there was nothing stopping people from teaching yoga profitably even before the technological advance. If there was a human desire for it, people didn't need to wait to be kicked out of the pin factory to do it. It is precisely the technological advance that is the driver for the new types of goods and services that didn't exist before.
"The part about doing something entirely different like "teaching yoga" seems bogus to me because there was nothing stopping people from teaching yoga profitably even before the technological advance. If there was a human desire for it, people didn't need to wait to be kicked out of the pin factory to do it. It is precisely the technological advance that is the driver for the new types of goods and services that didn't exist before."
We desire pins more than yoga. Thus, until we automated the pin making we didn't have the labour available to teach us yoga. Nor the leisure from pin making to take the classes.
Very much my point. The advancing production technology frees us to satiate other human desires.
I would think that the guys with "leisure from pin making" would be the ones that are out of a job and probably wouldn't blow the little money they have saved on yoga classes. Only relatively few people, the manufacturers of the pin-machine, and maybe the pin factory owners might be able to afford it. Everyone else (the newly unemployed workers) would have been worse off than they were before and would not be able to afford this new luxury (yoga classes).
But historically that's not what has happened. Except for the last 20 years in the US (according the MIT paper you critique), technological advances have indeed led to more jobs that are better paid and with more leisure, not just for the factory owners but for workers as well. And this has indeed been driven by new goods and services satisfying new human desires enabled by these technological advances that most humans didn't even know they desired until they saw them (e.g. personal computer, web sites, smartphones, streaming music, etc). And these better paid workers have then been able to afford new luxuries such as yoga classes, which have in turn created a few more jobs.
So what has changed in the last 20 years? Is it something fundamentally different with the recent technological advances compared to the previous ones?
Or is it they way our society/economy has changed so that only a small fraction of society has benefited financially from new technology in recent years? That's a legitimate issue that the paper addresses.
When I saw the phrase "Economics 101" I had to chuckle. I bought a textbook with a title something like that a while ago to increase my understanding of this important subject.
Somewhere on the second or third page it said, "the market drives competition between the suppliers of goods or services and thus the price down to the cost of production of those goods or services".*
So I threw it in the bin.
* I suppose this is true if you're an Uber taxi driver or a care worker on minimum wage, but not for any of the "big fish".
There is a big difference between the mythical "Market" abstraction that economist always talk about and real markets, which are invariably run by "the house" or insiders. Those are the only kind of market that actually exist.
Most economists don't like to talk about real markets; people might get the idea that market outcomes are engineered and that economics is part of an elaborate intellectual fraud to hide- or justify this as "natural law".
To judge solely on the basis of UK experience is myopic. Around the same same time as Wilson, perhaps even a little earlier the French embarked on a series of "grands" plans which brought that country into the 20th century. These weren't always economically viable (but there was considerable technological fallout) but it was a major series of major projects to improve infrastructure (telecoms, atomic, rail) and restructure industry (Renault was / is more successful than British Leyland). This suggests to me that the idea of of state dirigisme is not necessary a bad thing but that it requires competence in execution something which is unlikely of Corbyn et co.
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