I would be interested to know if any economist has an economic argument against the following ideas:
Future breakthroughs in technology (e.g. robotics, nanotech) could eliminate millions of jobs very quickly, creating a serious problem of unemployment.
I am not suggesting that this is likely in the near term…. I am suggesting, however, that there is nothing that rules out the possibility of vastly more powerful technologies creating a net loss of available jobs and concentrating wealth to an unprecedented degree.
and here is Mark J. Perry’s response
Yes, there IS a fundamental principle of economics that rules out a serious persistent problem of unemployment:
The first principle of economics is that we live in a world of scarcity, and the second principle of economics is that individuals have unlimited wants and desires.
Therefore, the second principle of economics: unlimited wants and desires, rules out any long-term problems of unemployment.
Am I the only one that can’t fill in the gap between those laws of economics and the long-term problems of unemployment ?
To be sure, history of technology supports the optimist. As Perry mentions in his blog, the industrial revolution and our own information revolution have openned new jobs as they were killing old ones. Still, History’s laboratory only provides examples in which machines are not sophisticated enough to compete with us monkeys on everything. Even in low-skilled jobs like driving, cleaning, cooking, we are still doing better. Perhaps this will always be the case, but the laws of economics are not in contrast with the possibility that machines become so sophisticated that they outperform us, or at least a large chunk of us, in everything. In such a situation, with unskilled human labor having a cheap substitute, natural resources might become the binding constraint for production.
Here is an historical analogue of the situation I have in mind: The Roman empire suffered from a type of substitution for human labor that our Silicon Valley have not yet been able to come up with: slavery. And the story of the empire matches Sam Harris horror forecast, with wealth (that is to say, land) concentrated in the hands of very few, and a persistent unemployment in cities crowded with unskilled citizen who are unable to compete with slaves in the jobmarket.
Now, I suppose one can construct a model, and maybe this is what Perry refers to, that shows that in an ideal world without a welfare state people should still find jobs as long as there is some epsilon value in human labor, with a salary that reflects this value. Indeed, even the unemployed plebs of Rome have managed to scratch some sesterces by provididng whatever utility the few rich aristocrats got from having flatterers and clients welcoming them in the morning, and one can always work as a thief or a beggar. But overall, I think it is fair to say that the benefits that slavery brought to the Roman jobmarket is closer to Harris’ prediction — net loss of available jobs and concentration of wealth — than to what the industrial revolution brought to western civ.
7 comments
August 28, 2011 at 11:22 pm
Evan
Is the standard comparative advantage framework of trade applicable here? The robots may have an absolute advantage in everything, but labour can still focus on its comparative advantage.
I suppose this argument would break down if there was an unlimited supply of robots. But assuming that the production of robots requires at least one finite input then labour should be able to find a niche.
I think this is probably the mechanism that Mark Perry had in mind when arguing that his two principles imply no long term unemployment problem.
August 29, 2011 at 11:57 am
Eran
I don’t think so. Sure, labor can find a niche, but the salary would still be negligible.
Suppose that an economy produces two products, tomatoes and Industrial Organization papers. A robot can produce 1000 tomatoes or 1000 IO papers in a year, and a human can produce 1 tomato or 10 IO papers. Then the human has a substantial comparative advantage in IO papers, so that’s probably where he will be employed if at all, but his salary will still be at most 1/100 times the cost of maintaining a robot.
The thing is, what determines the salary is not the comparative advantage but the absolute value of human labor.
August 29, 2011 at 2:15 pm
Evan
Yes, the possibility of extreme inequality still exists, but we don’t have an unemployment problem!
August 29, 2011 at 2:31 pm
Eran
To quote myself “Now, I suppose one can construct a model, and maybe this is what Perry refers to, that shows that in an ideal world without a welfare state people should still find jobs as long as there is some epsilon value in human labor, with a salary that reflects this value. ”
This is unrelated to comparative advantage though. It is true even if there were only tomotoes. However, assuming some constant cost in traininig and supervising human employeees or some minimum wage for which they are willing to work, you will get unemployment.
August 31, 2011 at 8:11 pm
Evan
point taken!
August 31, 2011 at 10:24 pm
Jonathan Weinstein
Nice column. Scary, though. I grew up with the Asimov robot novels which had different resolutions to this on different worlds, each of which worked at least tolerably well. On Earth, robots were mistrusted and severely restricted in their activities by law. “Aurora” was a sort of socialist paradise with extreme population control, many robots, and uniformly high human standard of living. Our current politics don’t seem likely to produce either of these solutions.
September 4, 2011 at 6:36 pm
Anonymous
Here’s how the problem seems to me. Advances in robotics dramatically increase the return to capital as compared to the return to labor, leading to a world in which a few capitalists control the vast majority of wealth. In order to prevent the rebellion of the masses, the elites create a welfare state that provides a comfortable standard of living and diversionary entertainment for everyone else. Jobs paying a pittance are still available to human laborers, but given the existence of the welfare state most people refuse to take these jobs because the salary is below their reservation wage. This is not “unemployment” in the standard economic sense.
However, it is still a scary vision for society, because consumption is not the only or even the most important condition for happiness. Having productive work is valuable in itself, and a society where the vast majority of people produce nothing would not be a happy society. I think that the robot dystopia looks more like Brave New World than Blade Runner, but it is still a dystopia.