Home > Uncategorized > Back to the future?

Back to the future?

from David Ruccio

When it comes to artificial intelligence and automation, the current White House seems to want to have it both ways.

On one hand, it warns about the potentially unequalizing, “winner-take-most” effects of the economic use of artificial intelligence:

Research consistently finds that the jobs that are threatened by automation are highly concentrated among lower-paid, lower-skilled, and less-educated workers. This means that automation will continue to put downward pressure on demand for this group, putting downward pressure on wages and upward pressure on inequality. In the longer-run, there may be different or larger effects. One possibility is superstar-biased technological change, where the benefits of technology accrue to an even smaller portion of society than just highly-skilled workers. The winner-take-most nature of information technology markets means that only a few may come to dominate markets. If labor productivity increases do not translate into wage increases, then the large economic gains brought about by AI could accrue to a select few. Instead of broadly shared prosperity for workers and consumers, this might push towards reduced competition and increased wealth inequality.

But then it invokes, and repeats numerous times across the report, the usual mainstream economists’ nostrums about the “strong relationship between productivity and wages”—such that “with more AI the most plausible outcome will be a combination of higher wages and more opportunities for leisure for a wide range of workers.”

Except, of course, historically that has not been the case—certainly not in the United States.  

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source

For example, from the early 1970s to the present, workers’ wages have not kept pace with increases in productivity. Not by a long shot. As is clear from the chart above, productivity since 1973 has risen much more than workers’ compensation—72.2 percent, compared to a paltry 9.2 percent.

hours1

And while over the same period hours worked have in fact fallen, the decrease in the United States (a minuscule 5.6 percent) has been far less than the increase in productivity—and much less than in other countries, such as France (24 percent) and Germany (27.3 percent).

So, yes, whether the use of artificial intelligence leads to improvements for U.S. workers—in the form of higher wages and fewer hours worked—”depends not only on the technology itself but also on the institutions and policies that are in place.”

But the experience of the past four decades suggests it will not benefit the American working-class.

And there’s nothing to suggest that trend won’t continue—unless, of course, there is a radical change in economic institutions and policies, which allow workers to have much more of a say in the technologies that are adopted and how wages and hours are set.

  1. patrick newman
    December 31, 2016 at 4:30 pm

    The kind of policies that are not unknown in the advanced economies of Western Europe – continually rising statutory minimum wage rates and basic terms and conditions, restrictions on hours (WTD – EU), generous compensation for technology induced structural unemployment, readily available opportunities for re-training, expanding public services to provide job alternative to what may be a diminishing pool in the private sector (n.b. there is no lack of need for such jobs in an ageing, ecologically failing and poorly educated society). However these would obscenities for the new Trump administration and the only hope is that they can accept the logic of the technology – automation imperative!

  2. December 31, 2016 at 6:04 pm

    The time may have come for Social Credit, or some variant thereof. Check it out: http://albertamoneytalk.blogspot.ca/

  3. December 31, 2016 at 8:19 pm

    This is all about legitimate rights, or to use the pejorative that right-wingers love, entitlements. Who has a legitimate right to work, to be paid, to have an income in old age? And who has a legitimate right to speak freely, to have a substantial voice in government, to be a citizen? There’s a pile of money and other so called valuables available in any society. How is this pile legitimately divided, and who and how is that decided? These are the questions facing us. You all know the answers given by most economists. Underlying their answers is a certain moral commitment and an assembly of assumptions about the purpose of humans and human life. Now being a science (not) these economists would never admit to such origins of their pronouncements. But looking closely (and in some cases not very closely) these commitments and assumptions show quite clearly. And many are not friendly to the vast majority of society’s members.

    • January 1, 2017 at 1:08 am

      I would hesitate to agree that orthodox economics — based as it is on ability to pay and utterly unconcerned with those without that ability in any ‘market’, and also based on ceteris parebus assumptions that ignore how external forces influence economic decision-making, individually or together — can be said to have any moral commitments. ‘Orthodox’ economics is devoid of human beings :: that is, human beings are themselves external to economics as it has been constructed, and, because of this should be characterized as amoral in its axioms and assumptions.

      Willing to discuss if you wish. And, Happy New Year!

      • January 1, 2017 at 4:43 am

        We need to return to the concept of “political economy” rather than “economics” which, as you point out, ignores the human element and panders to the exploiters. Right now, we are in the process relegating some 50% of our youth to the economic garbage heap by allowing predators to dominate our financial system.
        Oh, aren’t we going to pay the price for that, and our children and grandchildren too!!

      • January 1, 2017 at 7:24 pm

        We definitely need to return to the classical ideas of political economy rather than principles of economics. We need also to differentiate between values-in-use, values-in-exchange, and how the latter fuzzily determines not only consumer budgets for various goods but also the mix of what is ‘affordable’ relative to relative nominal prices.

        At the macro-level, we must focus more upon how the distribution of income, and stability in that distribution, guides what is produced and for whom; and how instability in overall incomes distribution must always destabilizes aggregate economic activity.

        Looking at your conversation with Ken, ‘Divine Right’ (as, er, given by God) has been ‘Market Right’ (as delivered by J.B. Clark).

      • January 1, 2017 at 12:44 pm

        “Orthodox” economists have moral commitments. They’re not, however, commitments that are in line with those of a Judeo-Christian culture. There is love, concern, ethics, justice, fairness, etc. in economics. But morality is about right and wrong. And economics certainly includes guidelines for right and wrong choice and action. Based on your comments I think you consider those guidelines immoral, or as you say amoral.

      • January 1, 2017 at 8:03 pm

        larrymotuz, I do not oppose the approach you offer. But I cannot see a peaceful path from where we are now to where you want to go. The winners in the current arrangements will oppose what you suggest in every way they can. And they have a lot of ways.

      • January 3, 2017 at 1:11 am

        My primary concern, Ken, is to construct more appropriate, evidenced-based micro-foundations which depart from the current axiomatic-deductive pseudo-foundations for the behavior of consumers and firms and aggregate economic activity.

        Fundamental to my view is losing the distinction between ‘consumers’ and ‘firms’, treating each as agents which seek clearly variously defined objective (and subjective) benefits from their use of goods. It is USE FOR A PARTICULAR BENEFIT OR BENEFITS not PURCHASE that is CONSUMPTION ACTIVITY by any economic agent. But ability to pay determines access to purchase any good. Ability to pay is a function of income relative to the mix of essential needs and less essential wants; and this fuzzily determines what is consumed and why. [That some consumers are life forms and some not has major importance in terms of the benefits from use that are being sought through the use of inputs, and also important in terms of what realizing any degree of satisfaction from what one gets to consume actually means.]

        I have no doubt that the primary beneficiaries of today’s economic activities [and of current economics as a mainstream ideological justification for their being those beneficiaries} will fight changes to the structure of ‘markets’ and their effective regulation, and I know that orthodox economists do not want to return to having to distinguish benefits from use/’value-in-use’ from exchange values. Nor do they want to move away from their endowing consumers with budgets to one wherein they must examine budget formation itself: how nominal prices and nominal incomes fuzzily determine what can be consumed and for what purposes.

        Yes, there will be–and is–opposition to any such changes in theory, especially changes that remove all of the current axioms and the divide that creates ‘consumers’ versus ‘firms’.

    • January 3, 2017 at 6:25 am

      Economic actions and structures are created in every historical culture. Relying on slogans, some of constructed based on “to each according to his need, from each according to his ability.” Others are constructed based on “the greatest good for the greatest number.” Others are based on “sharing equally.” And still others are based on “just deserts.” And then we have the one we’re most familiar with, “who has the most gets the most.” Generally, one or two are dominant in any culture and they change with time and circumstances. So, which is MORE appropriate? None are. Each is the result of historical struggles and choices. Examine the struggles and choices and it’s possible to see the construction processes behind each and each change. And sometimes these all get mixed-up, such as during political upheavals, international struggles such as wars, and institutional failures such as banks, governments, etc.

      Humans only live and act in collectives. So, all economic theories and ways of life are created and carried out collectively. Humans’ unique evolutionary advantage is “teamwork.” Human intelligence is literally about acting collectively, as a team. So, benefits from economic life tend to be collective, and dealing with problems also tend to collective. The dominant economic life right now in the west is as you suggest “buying and selling with money or money substitutes.” One of my concerns is that there is little or no discussion of the history that lead us to this arrangement, and what are its pros and many cons. One part of this history is as you suggest how buyers and sellers are created and what actions are permitted for them. We also don’t discuss how some buyers and sellers “win” while other “lose” in the buying and selling. After all, all these arrangements are not accidental. They are created by people in their collective life.

      Finally, changes to any of these needs to be widely vetted and discussed. Otherwise, we run the risk of negative, perhaps even violent reactions. Economic fights have created wars and revolutions before. In my view, we’re on the verge of such a big upheaval in the US right now. And economists are making the situation worse by failing to tell us anything to help peacefully restructure current economic arrangements, which are rejected by almost every American (82% per polling).

  4. January 1, 2017 at 12:58 pm

    Helge, there is a long history of the notion that predatory combat is one effective way to build strong societies and strong economies. The ancient Romans believed in it, as did the knightly society of the European Middle Ages. How well did it work for their children and grandchildren? Rome ruled the world for 600 years. And European knights fought a war of conquest in the “Holy Land,” which they actually managed to win for 100 years. You may be correct, but there is an argument that can be made in support of combat based societies.

    • January 1, 2017 at 4:45 pm

      Yes, combating our oppressors. Otherwise, we are treated like disposable garbage.

      • January 1, 2017 at 8:05 pm

        Capitalism leads to many things being treated as “disposable garbage,” including people, water, forests, etc. Which brings up the question of whether a sustainable capitalism is possible.

  5. January 2, 2017 at 12:30 am

    I think the pros and cons of capitalism can be summed up thus: It has tremendous vitality that comes with inbuilt instability. Something akin to nitroglycerin. Perhaps we need another Alfred Nobel to stabilize it?

    • January 2, 2017 at 2:44 am

      Stabilizing capitalism is likely impossible. Its instability is part of its basic structure. It’s the center of the entrepreneurialism and dynamism that economists brag makes capitalism the best economic system ever.

  6. January 2, 2017 at 6:05 am

    In today’s world, capitalism appears in many forms, depending upon the culture in which it operates: China, Russia, Japan, Germany, etc. Central planning and entrepreneurship should be able to coexist relatively harmoniously within a given culture, given good will and sensible planning.

    • January 2, 2017 at 8:33 am

      I look at capitalism like the genetic code of homo sapiens. It’s 99.9% the same, just like homo sapiens’ genetic code. That 0,01% gives humans different skin pigmentation, different sizes, muscular, hair texture and coverage, etc. Capitalism is like that. Everywhere it’s 99.9% the same. The 0.01% is the variation. For me, more important is the intentions of the humans who carry out capitalism. As well as how and how much humans combine capitalism with other approaches to economics and society construction. Your suggestion about combining entrepreneurship and central planning is one example. These should be able to not just coexist, but to help one another build not just stronger economies but stronger societies. This is happening today in the countries you list and many others. But US capitalism is going the other direction. And with a huckster failed businessman in charge for the next four years, it seems likely that wrong direction will get worse before it gets better. Left unchecked capitalism is the most destructive economic system ever invented.

  7. January 2, 2017 at 4:20 pm

    So the question is: How can effective checks and balances be implemented if the integrity of those charged with the responsibility of overseeing the process can be easily purchased?
    And BTW, that problem exists in every system, not just capitalism.

    • January 3, 2017 at 6:43 am

      In other words, how do we restore honor and accountability to the process of judging economic arrangements? This requires cultural changes. In other words, economic life is wedded to cultural life. To achieve our goal here American culture must change. Some would say there was a time in the US when money did not trump (pun intended) “doing the right thing.” To achieve something similar today the rewards that motivate must change, along with the factors that define success and the “good life.” Remaking our society will change the economics. After the Great Depression, government, religious organizations, and labor groups remade American culture. But businesses (companies large and small) never accepted the changes, since they pushed them out of controlling role in society. Over the 50 years following the Depression the businesses hired the biggest propagandists and spent a lot of money to change the culture back to its pre-1929 forms. And now in 2017 business has it seems succeeded completely. Based on that history those who don’t like what American culture looks like in 2017 know how to change it. But will they? Can they?

  8. January 3, 2017 at 6:23 pm

    Sitting here in cold Canada, the the picture looks pretty grim for the regular person: Those that created the crash in 2007/8 have not been held accountable and are still in the driver’s seat. And now, the incoming US President uses Twitter as his main policy making tool, God forbid, and spouts off, making the corporate bosses (Ford is today’s case) jump in their seats.

    I don’t think he has consensus or control within his own party and I think the Democrats are in a similar situation with factions developing.

    And we here in Canada are the poor cousins that rely heavily on exports to the US in order to buy what we need from abroad.

    I don’t like to be a doomsday prophet, but it seems to me that we are about to enter into a global trade war, which is historically followed by a shooting war, so that the prevailing system can survive at the cost of millions of lives.

    • January 6, 2017 at 5:35 am

      Helge, you may be correct about the war. But trade tariffs and wars are counter to current Republican ideology. Now they change. Look how the Republicans are falling over one another to “not investigate” Russian hacking into the 2016 election. It helped Trump (a sort of Republican) win so even if it happened it can’t be a bad thing. I think what we miss sometimes is the strength of American Fascism. American Fascists attempted to overthrow/assassinate FDR and make the US a Fascist state. American Fascists dominated US government in the 1950s and 1960s. While Senator McCarthy was searching for communists, Fascists were already in control. I don’t believe Trump is a Fascist. But neither was von Hindenburg. But he paved the way and actually legitimized Hitler as Chancellor of Germany. A full blown Fascist state and war followed, killing 60,000,000 people. Trump already has two admitted Fascists in his cabinet or leading in the White House. These frighten me a great deal more than Trump. After all, from small acorns large Oaks grow. Of current Republicans in office most are not Fascists, but many would not object to a Fascist nation. Including Paul Ryan and Mitch McConnell. As for Canada and Mexico, keep in mind what happened with the Rhineland and Austria, and Nazi Germany.

  9. January 4, 2017 at 11:12 am

    Ken says “I look at capitalism like the genetic code of homo sapiens. … Everywhere it’s 99.9% the same. The 0.01% [sic] is the variation. For me, more important is the intentions of the humans who carry out capitalism.”

    So what is the 0.1% that makes the difference? I think one needs to go deeper than intentions to the understanding that determines the aim one intends.

    It seems evident that capitalism was designed as a control system, and evident that it is operating as one directed to filling the pockets of the rich with the currency of the poor. The
    paradigm of control is steering: in a ship by correcting aim to eliminate compass and positional deviations or to avoid danger; in economics by correcting prices and production to eliminate unsold stock or product to avoid financial loss.

    The problem, though, is that the primary error indicators are ambiguous: the compass points N-S, not simply N, so the S can be mistaken for the N, in which case positional adjustments (including readjustments after avoiding error) will be made back to front, increasing rather than reducing the error. In monetary economies, likewise, stock may remain unsold not because it is unwanted but because those who want it cannot afford it, resulting in reduction of producer wages which makes matters worse.

    The solution is to distinguish the North from the South in the compass by magnetising the needle. In economics the solution is to buy as needed on credit so that money cannot be mistaken for value.

    n the parallel thread on India abolishing high-value money, allowing the poor a government- rather than bank-determined citizen’s income in the form of credit (pre-spendable in the form of money withdrawn from a cash machine) could actually work out rather well. This coin has two sides, though: the reciprocity of rights and duties, not monetary give and take.

    • January 6, 2017 at 5:43 am

      The kind of things as are happening in India are what I mean when I mention the 0.01% that is variation in capitalism. They don’t change the basic formula, but they can make quite a difference in terms of emphasis and operations. And in terms of how homo sapiens construct their lives. But friends tell me there is quite a bit of push back in India on the experiment. Is that what you hear?

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