Home > Old Paradigm Economics, The Economics Profession > The attack of the robots: economists’ silly fantasies

The attack of the robots: economists’ silly fantasies

from Dean Baker

Economists are not very good at economics. We know this because we had a huge housing bubble that collapsed, which almost none of them saw. The pre-crash projections from the Congressional Budget Office imply that this downturn has already cost us more than $7.6 trillion, or $25,000 per person. This could have been prevented if we had economists in policy positions who understood how the economy worked.

But even if economists aren’t very good at dealing with the economy, they still can provide value to society. In particular they can be a great source of entertainment. That’s how we should view the story that robots will take all of our jobs and leave most of the population unemployed.

This story has become a popular theme lately among Washington policy types. There are important people from across the political spectrum running around town wringing their hands over the prospect that the economy may not provide jobs for large segments of the labor force.

The first aspect of this story that should impress people is that many of the same people have been wringing their hands about the exact opposite problem, most likely without even knowing it.

Remember the story about how the aging of the baby boomers will bankrupt us because we will have too few workers to support the surge of retired baby boomers?

In that story, all of us aging baby boomers will be left waiting around for someone to change our bedpans. But now we are supposed to be worried that we won’t have any work for people to do because the robots will be there to do it faster and cheaper.

Either of these stories could in principle be true, but they cannot both be true. If robots are capable of doing most of the tasks that humans now do, then we don’t have to worry about declining ratios of workers to retirees. We will have plenty of robots to do the work for us.

Alternatively, if we are facing labor shortages because there are too few workers to support a growing population of retirees, then clearly robots will not have taken everyone’s job. At worst we have to worry about one of these problems, but not both.

Let’s assume robots are the problem. This would actually not be a new story. The robots might be new, but this is the story of productivity growth that we have dealt with for centuries. Ordinarily we think productivity growth makes us richer, since we can produce more goods or services in every hour of work. This can lead to rising pay and living standards or alternatively more leisure time.

However, the robot story is somewhat different or so its proponents would claim. Robots are supposed to lead to such rapid increases in productivity that there will be no way for all the displaced workers to be reemployed. The problem in this case is not productivity; rather the problem is that all the benefits are going to the owners of the robots.

Before evaluating the logic of this one, it’s first worth noting that we have yet to see any evidence to back up this picture of the economy. In the last six years, productivity growth has been notably slower than in the years from the beginning of the productivity speed-up in 1995 to the beginning of the downturn in 2008. There also is no evidence that robots and other technological change is responsible for the upward distribution of income in the last three decades.

But there is a more fundamental problem with this robot-driven inequality story. The owners of the robots won’t directly get rich from owning the machines: robots will presumably be relatively cheap to make. After all, we can have robots make them. If the owners of robots get really rich it will be because the government has given them patent monopolies so that they can collect lots of money from anyone who wants to buy or build a robot.

Patents are not given to us by the gods or nature, we write patent laws. If patent monopolies are making most of us poor and a small number rich, then we can just write the laws differently. It’s very simple; we make patents shorter and weaker. That could mean 10 years rather than 20 years. And perhaps more importantly, we make patent enforcement more difficult.

That means interpreting the patents more narrowly. For example, the next time some character like Jeff Bezos tries to claim a patent on something like one-click shopping, we not only turn down his patent suit, but we fine him really big bucks for trying to beat his competitors in the courts rather than the marketplace and for wasting everyone’s time.

If we adjust patent laws to better serve the economy we can ensure that robots and other technological breakthroughs make most of the world richer not poorer. The economists might tell us that the problem of inequality is just the natural progress of technology and the economy, but the bubble and its collapse should have taught us better than to take this crew seriously. The problem is really just one of the rich writing the rules to make themselves richer.

See article on original website

  1. Al
    February 11, 2014 at 1:22 pm

    “But there is a more fundamental problem with this robot-driven inequality story. The owners of the robots won’t directly get rich from owning the machines: robots will presumably be relatively cheap to make. After all, we can have robots make them. If the owners of robots get really rich it will be because the government has given them patent monopolies so that they can collect lots of money from anyone who wants to buy or build a robot.”

    You might be engaging in the same fantasies of which you accuse economists… Economies of scale favour concentration of ownership. Concentrated ownership of land and natural resources may also favour big capital.

  2. BC
    February 11, 2014 at 6:25 pm

    It’s not robots per se but the accelerating automation of remaining services sector employment and loss of paid employment and subsistence purchasing power for the bottom 90%+ associated with the increasing integration of robotics, smart systems (AGI/SAI), Big Data, biometrics, bioinformatics, ubiquitous nano-electronic sensors and 24/7 surveillance, etc.

    The largest disruptions to paid employment and purchasing power ahead by the aforementioned incremental innovations will occur in “education”, “health care”, and gov’t, which are the sectors of the economy that have grown employment and wage and price inflation the fastest for 30 years.

    Moreover, “education”, “health care”, and gov’t employ females disproportionately at respectively 80%, 80-85%, and 60-65% of the sectors’ employees. Consequently, females will experience disproportionately larger effects from job and purchasing power losses from the technological disruptions in the years ahead, i.e., experiencing what males in the goods-producing sector have experienced for 25-40 years.

    Additionally, the Fortune 25-300 firms have revenues equivalent to 40-100% of US GDP at revenues/employee of $450,000, with the likes of Google and some peers as high as $1 million/employee. However, the Fortune 300 employ as few as 13% of the US labor force, which is about the share that gov’t employs. No small business nor gov’t service can compete at scale for resources, market share, and talent at such prohibitive requirements for revenues/employee.

    Therefore, to maintain or increase revenues/employee with real GDP per capita slowing or declining, the largest firms will likely consolidate global capacity still further, reduce workers, and accelerate automation at increasing scale to employment, wages, and GDP, receiving a growing share of their revenues from selling goods and services to one another and to the US gov’t.

    No human can compete with increasingly integrated intelligent systems and robotics operating in the dark at the speed of light 24/7 and requiring none of the needs of human workers.

    Just as agricultural employment declined from a majority of the population to around 1% today, and goods-producing employment fell from 40% to one-third that level and further falling today, the services sector is now at risk of a similar large-scale diminution over the course of the next generation.

    Unfortunately, there are no emerging sectors with the capacity to absorb more than a tiny fraction of the net job losses from accelerating automation in the services sector.

    The larger super-secular/permanent effect is the evolution of an economy, society, and “division of non-labor” that will increasingly not serve the subsistence needs of the vast majority of us, irrespective of “education”, skills, experience, adaptability, and ambition. There simply will not be a need for most paid employment.

    Unless there quickly emerges innovative means and self-organizing, self-sustaining institutions to sustain a socially acceptable subsistence purchasing power for the bottom 90%+ of households who will lose paid employment and subsistence purchasing power over the next 10-20 years, the mass-consumer economy and society risks collapse and most of the associated institutions with it.

  3. Norman L. Roth
    February 12, 2014 at 1:11 am

    Feb. 11, 2014

    M. Dean Baker, You really should read TELOS & TECHNOS, The Teleology of Economic Activity & the Origins of Markets. Among other lapses in your grasp of how human psychology affects economic behaviour, you don’t seem to have an understanding of the spontaneously evolved [over 400 years] institutions behind the laws of Intellectual property:
    And how they have they have impacted the interaction between the “Promethean Imperative” [i.e. Technos] and the psychology & evolution of Consumer Demand. a.k.a. The Current Conception of the Standard of Life. [Chapter 2 of the 197 page edition] .The Laws of Intellectual Property aren’t really an example of “Big Capital” concentrating everything & anything into their insatiable hands as “Al” & you have opined. Besides, what could be any more “concentrated” and “consolidated” than the Leviathan state owning all the land, resources and means of production, a la “scientific socialism” ? AND; Which “WE” will “adjust the patent laws” ? The same “We” who will ‘enforce’ the flattening of “robot-driven inequality” ? Gerald Winstanley, the most bloody-minded of the “DIGGERS” would certainly have appreciated your sentiments.
    I think that “BC” has at least scratched the surface of what TELOS & TECHNOS is about, more deeply than you have. Even if he or she or you have never heard of it. Technological Time is much more than ‘automation’, the rise of the robots, or imperfectly concocted ‘measures’ of ‘productivity’. [As in “Total Factor Productivity”]. Nor can the evolution of modern complex quasi-organic economic systems be simplistically described as the consequences of “technological determinism” or the clash of the classes. M. Baker, “Al” & ‘BC’; I stand ready to answer any of your well meant questions about how economic life really works & how economic life has developed.[Note my avoidance of the word, ‘growth’] Mr. Baker do you happen to know Paul Cockshott ? His impressive capabilities are greatly respected by many, especially ourselves. But he has misdirected them towards a cul-de-sac: Which we at this end, hope can be turned around to everybody’s advantage, entertainment & enlightenment. He would be a welcome & esteemed participant in these exchanges.

    Norman L. Roth, Toronto, Canada. Please GOOGLE: [1] Origins of Markets, Norman Roth
    [2] Economics of Technos, Norman Roth [3] Norman Roth, New Economic Paradigm [4] Telos & Technos, Roth

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