Summary: The first signs of the robot revolution have appeared, a trend that will reshape our world — automation moving from manufacturing into the service industries. Economists see the evidence but are blinded by their biases. This post provides excerpts from a new book about the revolution, and some interesting observations. This post is the fifth in a series; links to other chapters appear at the end.
A new book about one of the major trends of the early 21st century:
Race Against The Machine – How the digital revolution is accelerating innovation, driving productivity, and irreversibly transforming employment and the economy
— By Erik Brynjolfsson and Andrew McAfee. Director and principal research scientist, respectively, of the Center for Digital Business at MIT’s Sloan School of Management.
Contents
Excerpt from the introduction
What’s next in the revolution?
Simple economics explains the challenge to our society
We wrote this book because we believe that digital technologies are one of the most important driving forces in the economy today. They’re transforming the world of work and are key drivers of productivity and growth. Yet their impact on employment is not well understood, and definitely not fully appreciated. When people talk about jobs in America today, they talk about cyclicality, outsourcing and off-shoring, taxes and regulation, and the wisdom and efficacy of different kinds of stimulus. We don’t doubt the importance of all these factors. The economy is a complex, multifaceted entity.
But there has been relatively little talk about role of acceleration of technology. It may seem paradoxical that faster progress can hurt wages and jobs for millions of people, but we argue that’s what’s been happening. As we’ll show, computers are now doing many things that used to be the domain of people only. The pace and scale of this encroachment into human skills is relatively recent and has profound economic implications. Perhaps the most important of these is that while digital progress grows the overall economic pie, it can do so while leaving some people, or even a lot of them, worse off.
And computers (hardware, software, and networks) are only going to get more powerful and capable in the future, and have an ever-bigger impact on jobs, skills, and the economy. The root of our problems is not that we’re in a Great Recession, or a Great Stagnation, but rather that we are in the early throes of a Great Restructuring. Our technologies are racing ahead but many of our skills and organizations are lagging behind. So it’s urgent that we understand these phenomena, discuss their implications, and come up with strategies that allow human workers to race ahead with machines instead of racing against them.
Humanity and Technology on the Second Half of the Chessboard
Why are computers racing ahead of workers now? And what, if anything, can be done about it? Chapter 2 discusses digital technology, giving examples of just how astonishing recent developments have been and showing how they have upset well-established ideas about what computers are and aren’t good at. What’s more, the progress we’ve experienced augurs even larger advances in coming years. We explain the sources of this progress, and also its limitations.
Creative Destruction: The Economics of Accelerating Technology and Disappearing Jobs
Chapter 3 explores the economic implications of these rapid technological advances and the growing mismatches that create both economic winners and losers. It concentrates on three theories that explain how such progress can leave some people behind, even as it benefits society as a whole. There are divergences between higher-skilled and lower-skilled workers, between superstars and everyone else, and between capital and labor. We present evidence that all three divergences are taking place.
What Is to Be Done? Prescriptions and Recommendations
Once technical trends and economic principles are clear, Chapter 4 considers what we can and should do to meet the challenges of high unemployment and other negative consequences of our current race against the machine. We can’t win that race, especially as computers continue to become more powerful and capable. But we can learn to better race with machines, using them as allies rather than adversaries. We discuss ways to put this principle into practice, concentrating on ways to accelerate organizational innovation and enhance human capital.
Conclusion: The Digital Frontier
We conclude in Chapter 5 on an upbeat note. This might seem odd in a book about jobs and the economy written during a time of high unemployment, stagnant wages, and anemic GDP growth. But this is fundamentally a book about digital technology, and when we look at the full impact of computers and networks, now and in the future, we are very optimistic indeed. These tools are greatly improving our world and our lives, and will continue to do so. We are strong digital optimists, and we want to convince you to be one, too.
(2) What’s next in the revolution?
(a) Conclusions from “Seeing Robots Everywhere“, Julia Kirby, Harvard Business Review, 4 November 2011 (red emphasis added):
I heard about other applications — the use of robots to inspect sewers for damage, to automate warehouse operations, to harvest crops in fields. The list goes on. In response to one would-be entrepreneur’s question, “How do you come up with a good idea to turn into a business?” a panel of CEOs had no end of answers.
Charles Grinnell, who leads Harvest Automation, said simply: look at places where there is still a lot of manual labor. When his team did that, he says they narrowed things down to 15 very viable product ideas. Deborah Theobald, CEO of Vecna Technologies, put it this way: “In whatever field you work in—ours is healthcare—you see what the issues are. If as you look around, robots are on your mind, you see the applications everywhere.”
She’s hot but not real
(b) Perhaps no job is safe from automation. Even fashion models.
Visiting the H&M website is not the only virtual experience to be had by H&M customers who choose to order the company’s clothes online instead of inside one of their 2,300 global retail stores.
Also “completely virtual” are the models at the center of H&M’s swimsuit and lingerie online campaigns, the Swedish-based retailer confirmed. “It’s not a real body; it is completely virtual and made by the computer,” H&M press officer Hacan Andersson told Swedish newspaper Aftonbladet in an article questioning the company’s picture-perfect online models.
(3) Simple economics explains the challenge to our society
Automation increases the return to capital, and decreases the return to labor. It will become a major driver of increased inequality. Only slowly does this realization spread, as in the conclusion from this review in the Financial Times by James Crabtree (red emphasis added):
Yet the author’s more basic conclusion – that technological progress is sufficiently rapid that “many present-day organisations, institutions, policies, and mindsets are not keeping up” – is surely right. The result is a conundrum that shares much in common with trade policy. Technology is essential for creating value and raising productivity, but it creates losers as well as winners. These losers are recognised in theory, but too rarely compensated in practice.
This brings the argument back to a more basic problem: fair distribution. Machines work for free, but their benefits end up in someone’s pocket. If technology is indeed speeding up, more of that benefit must be returned to those it affects, especially in the form of investment in human capital. If not, the march of the machines will overtake us sooner than we think.
“Tectonic Shifts in Employment“, David Talbot, MIT Technology Review, January/February 2012 — “Information technology is reducing the need for certain jobs faster than new ones are being created.”
(5) For more information about the robot revolution
(a) Economists and others grapple with these issues (this section will be updated):
63 thoughts on “The Robot Revolution arrives, and the world changes”
jonh
Couple thoughts.
1. Better & cheaper technology enable small and midsize companies to compete against giant companies, even offering the same product.
2. Just because robots can make generic products exponentially cheaper and faster doesn’t mean anyone will want them. I think people will come to demand ever more custom product from smaller firms who are now able to manufacture at a top level, but are still small enough to care about 1 order from 1 customer.
(1) Total nonsense. The automation revolution in manufacturing has accompanied the cartelization of the US manufacturing sector.
(2) You are still thinking manufacturing. That was the previous wave (still in progress, of course). The next wave affects the far larger body of service workers. Think of parking lot attendents, bridge toll collectors, cashiers, and librarians.
The new Ipad marks the start of the paperless revolution (with its high contrast, high resolution screen), driven by companies converting to electronic documents to reduce the fantastic cost of printing, moving, storing, and retrieving electronic paper.
It’s a thousand kinds of service jobs going away, with nothing to replace them.
Mileage does vary. My experience has been otherwise. And I shouldn’t have generalized my personal experience.
Another thought: Doesn’t Japan seek automation for this very reason? Their population growth rate is declining and they need work to be done. Isn’t this why Europe courts immigrants as well?
Could this actually help countries with “demographic challenges”?
That’s a powerful insight. For nations having negative GDP, automation might prove beneign. Japan, now (a lower population on that crowded island would be a blessing for its people). Eventually, after the depresson ends, for southern Europe.
But everybody will face the challenges of massive, continuing automation:
How do we employ people at the bottom of the skills ladder?
How do we prevent automation from concentrating wealth and income, from workers to capitalists?
It would be a strange twist of fate if science at long last made Marx relevant.
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jonh
“How do we prevent automation from concentrating wealth and income, from workers to capitalists?”
Like I said before, people’s mileage varies… but the way i see it, is that it is easier now to start a business than ever before. Yes that means you don’t need to employ as many employees like IT professionals, secretaries, or even engineers. But means you can have more (mini) capitalists.
Connecting to markets is easier and more precise. Advanced fabrication can be done at home (I have built a DIY 3D printer and sold toys made from it). Engineering is easier now with huge amounts of free info, communities, and automated in-program procedures.
But overall, I do share your fear. I think many people will not be interested in tinkering or branching out on their own. I did read Lights in the Tunnel, the book recommended on FM a while back and it’s downright scary in a societal context.
My experiences have been different. One of my first “real” jobs was working with 3D printers at a biology institute. I wish that more people had the opportunities I had and have.
I work for a mid-sized services industry company that has been a niche player for many years. In We’ve increasingly been experimenting with automation and have found it to be a huge equalizer in our efforts to compete with the “big boys” who do not see the immediate value of putting money into automation.
One of our first automation efforts was in Human Resources. At first I resented losing the assistance of the very nice people in negotiating the paperwork maze. My resentment grew because the maze became quickly worse and I had nobody I to assist me. But in the last couple of years they’ve hit the sweet spot and things have gotten dramatically better and now I can’t imagine why I would want to go back to the old ways.
I also perspective on the other side, because I help automate our processes. One of my guiding principles is to avoid automating the part of the person’s job that they really enjoy. This is because they tend to do a better job in those areas than the computer and customer satisfaction is key to repeat business. But sometimes this is unavoidable and then things get rather uncomfortable for everybody.
Jonh’s comment “But means you can have more (mini) capitalists” is, in my experience, true but misleading. Only a small percentage of the human race has the mindset, luck, and skill to be a successful entrepreneur. Far too many people think they have what it takes (as I once did) and burn through large stacks of money only to crash and burn (been there, done that, still have the T-shirt). The frightening thing is that the only good way to test whether a person has the right combination of skills and innovative thinking is to give them a large stack of money and stand back. This is not going to make the transition from our current society to the future society any easier.
The silly claims we hear from folks like jonh show that economists and managers and politicians and ordinary citizens still haven’t realized how prodound this current robotic revolution really is. These people are parrotting the old arguments used by economists and managers and politicians to explain how the automation of farm work from the 1880s through the 1950s would destroy many jobs, but create many new jobs. And in that case, they were right. The new jobs were created in manufacturing. Then, in the 1960s through the 1980s, when automation began eliminating factory jobs, once again the politicians and managers and economists dragged out the “lump of labor fallacy” to point out that while many assembly line factory jobs would go away, many more service jobs would be created. And once again, they were right.
But this current revolution in databases + AI + the internet + robotics is now replacing highly skilled humans. Consider the following examples:
The Da Vinci robotic surgery system, billed as “improving patient outcomes.” Translation: does surgery better than a human surgeon. Initially deployed for prostate cancer, now being rolled out for “urology, gynecology, cardiothoracic, colorectal, head and neck, and general surgery.” How many human surgeons will be needed in another generation? Not many.
Google’s driverless car is “ready to hit the roads.” No longer a case of a “developing technology,” these driverless cars are safer than regular human-driven cars, faster, more efficient. Now licensed for driving in Nevada, California is moving fast on licensing driverless cars. How many human drivers will be needed in another generation? Answer: by 2035, a human driving a car will be cause for arrest for “reckless endangerment on the highway.”
In this series, “Robots Ate My Job,” correspondent David Brancaccio wanted to see if he could drive across the United States without interacting with any people. Turns out he could. He could get food, get gas, check into and out of hotels, do everything he needed to do, without interacting with humans.
Two MIT professors — an economist and a business professor — had been talking to me about what happens to jobs when innovation reaches this fever pitch and takes off exponentially. It’s fabulous for many with the skills to create technology or create with technology. But the professors are deeply worried about people in the middle, even people with college educations, where technological innovation can now pose a threat to more and more livelihoods. I’ve been reporting on that all week. But on this road trip, I wanted to know if technology has become so widespread, you can go 3,200 miles — coast-to-coast — and never have to do business with a human being.
Okay, maybe gas station attendants and fast food servers are in danger of being replaced by kiosks and robots. But highly skilled humans, like aircraft engineers, aren’t in danger of being replaced by robots, right? Wrong.
Genetic algorithms are now being increasingly deployed to design antennas, aircraft, cars, and every other kind of machine better than any human could design them. Take a look at this paper on using genetic algorithms to design airplanes.
“This work shows how a preliminary aircraft design can be achieved by means of genetic algorithms (GA). The aircraft major parameters are mapped into a chromosome like string. These include the wing, tail and fuselage geometry, thrust requirements and operating parameters. GA operators are performed on a population of such strings and natural selection is expected to occur. The design performance is obtained by using the aircraft range as the fitness function.”
“Two MIT professors — an economist and a business professor — had been talking to me about what happens to jobs when innovation reaches this fever pitch and takes off exponentially. It’s fabulous for many with the skills to create technology or create with technology. But the professors are deeply worried about people in the middle, even people with college educations, where technological innovation can now pose a threat to more and more livelihoods.”
Martin Brain has been writing about this for years:
“Why are economists so reluctant to seriously consider the implications of advancing technology? I think a lot of it has to do with pure denial. If the problem is a skill mismatch, then there’s an easy conventional solution. If the problem’s a lack of labor mobility, then that will eventually work itself out. But what if the problem is relentlessly advancing technology? What if we are getting close to a “tipping point” where autonomous technology can do the typical jobs that are required by the economy as well as an average worker? Well, that is basically UNTHINKABLE. It’s unthinkable because there are NO conventional solutions.”
“In the years ahead, sizable numbers of skilled, reasonably well-educated middle-income workers in service-sector jobs long considered safe from foreign trade—accounting, law, financial and risk management, health care and information technology, to name a few—could be facing layoffs or serious wage pressure as developing nations perform increasingly sophisticated offshore work.”
Source: 30 May 2010 Newsweek international edition article “Europe: The Big Squeeze.”
Economist Tim Duy echoed these sentiments when he wrote:
“I continue to worry that policymakers are ignoring the possibility that increasing reliance on external production to satisfy US demand has contributed significantly to the jobless recoveries we have seen this decade. Something is very different this decade. I think it is a mistake to write off this decade’s shift in manufacturing as simply a repeat of the agricultural experience. At least agricultural output continued to rise as its relative employment importance fell. The capacity numbers are telling us the same can not be said of manufacturing any longer. And in the past, the relative decline in manfacturing jobs was matched by a more than corresponding increase in service sector jobs. No longer the case; job growth is flat for a decade. If we intend to ignore this issue, the supposed reality of tradable services had better get a lot more traction very quickly. Otherwise, we are further solidifying a permanent underclass of citizens who require the constant support of fiscal authorities.”
The service jobs into which most Americans are now being forced by a combination of automation + offshoring are subject to Baumol’s Cost Disease, and as a result they are the most inefficient and low-productivity jobs in the economy, and the lowest paid. Consequently
“It’s also becoming clear that many Americans are being forced to take lower-paying jobs and that a low-wage bias is creeping into the economy, as Bloomberg economist Joseph Brusuelas recently put it. In many cases, minimum-wage work is all that’s available, which may explain why such workers are older and better-educated than they were three decades ago. In 2010, nearly 44 percent of minimum-wage workers had either attended or graduated from college, up from 25.2 percent in 1979, according to the Center for Economic and Policy Research, a liberal think tank.”
But at least we don’t need to worry about uniquely human jobs like “entertainer” being taken over by robots, right? Wrong.
Take a look at this video of the computer-generated Japanese singer Hatsune Miku (actually projected on a thin semitransparent screen on a stage by a digital video projector, not quite holography yet, but looks very close). Not only is she entirely computer-generated, but her singing is computer-generated using the computer program “Vocaloid 2” which synthesizes a female voice in real time.
“The biggest problem with the conventional wisdom is the number of jobs we are talking about. In the U.S. we have a workforce of around 140 million workers. The majority of these jobs are basically routine and repetitive in nature. At a minimum, tens of millions of jobs will be subject to automation, self-service technologies or offshoring. The automation process will never stop advancing: computer hardware and, perhaps most importantly, software will continue to relentlessly improve. Therefore, simply upgrading worker skills is not going to be a long-term solution; automation will eventually (and perhaps rapidly) catch up. If you are willing to look far enough into the future, the number of impacted jobs is potentially staggering.
“Can we really expect that such an enormous number of these supposedly safe creative/”proximity service” jobs are going to materialize? And even if they do appear, can we reasonably anticipate that millions of workers who are now employed as cashiers, accounting clerks, materials movers — or even as college-educated “Dilberts” — are going to be able to successfully transition into those jobs?
“Historically, the job market has always looked like a pyramid in terms of worker skills and capabilities. At the top, a relatively small number of highly skilled professionals and entrepreneurs have been responsible for most creativity and innovation. The vast majority of the workforce has always been engaged in work that is fundamentally routine and repetitive. As various sectors have mechanized or automated, workers have transitioned from routine jobs in one sector to routine jobs in another. In many cases, skills have been upgraded, but the work has nonetheless remained routine in nature. So, historically, there has been a reasonable match between the types of work required by the economy and the capabilities of the available workforce.
“Now, as it becomes clear that automation is going to ultimately consume the entire base of the job skills pyramid, the conventional wisdom is that we are going to somehow cram everyone into the very top. And even if we somehow manage to do that, the jobs will be highly susceptible to offshoring, so we also have to require that the jobs be somehow anchored locally. I think this is somewhat analogous to having the agricultural sector mechanize and then expecting that everyone will get a job driving a tractor. The numbers don’t work. The problem with the conventional wisdom is that it underestimates the long-term impact of automation, and it expects too much in the way of occupational acrobatics from the average worker.”x
Hey, I agree with you an others with your points here. Automation can be very disruptive.
But it does have it’s upsides. I look forward to a lot of these innovations. I really like technology. I like robots and 3dprinters and robot welders. It’s awesome. I like the space shuttle. I like the Apollo mission. I want the US and the whole world to keep making science fiction reality.
If we have to change our economics to make the future work, let’s do it. It’s worth it.
BTW, your little theory is not proven so don’t be so confident that high-skilled professionals will lose their jobs.
Are we worried that the Norwegians will have a collapsed economy with half or more their population out of work?
(1) “confident that high-skilled professionals will lose their jobs.”
It’s not a theory. It’s happening today. Much of the articles cited describe these processes, in early stages today — but directionally clear. Computer operators, publishers, drilling machine operators — it’s a long list. It’s starting to affect the larger professions. Such as attorneys — see “Armies of Expensive Lawyers, Replaced by Cheaper Software“, New York Times, 4 March 2011.
(2) “Are we worried that the Norwegians will have a collapsed economy with half or more their population out of work?”
Saudi Arabia, Alaska, and Norway are among the lucky nations with vast income from minerals. You might just as well use the Beverly Hillbillies as your economic model.
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jonh
Okay…. do you think Japan will suffer worse than most during the Robot Revolution? They have limited natural resources but have highly skilled workers. If so, maybe they have the conditions we should study and emulate to cope with this mass automation.
Japan has a far lower degree of inequality than the US, so that the gains from automation can be shared across society.
Furthermore, their demographic crash (aging population, below-replacement birthrate, little immigration) more easily accomodates automation.
Perhaps they are a model society for the 21st century, not the failure most US experts describe them as.
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Ole C G Olesen
Thank You for the reading Tip ! I agree … the IT technology will … IF IT WORKS …. replace most jobs as they are today..and in every field … provided the world will continue on a peacefull road without major wars . BUT … besides the conclusion that without EDUCATION people will be lost WHAT is the FUNDAMENTAL REQUIREMENT ..which makes IT work ?
2 Fundamental requrements there are :
a. ELECTRICITY … and its uninterrupted use without which NO COMPUTER can work or communicate . This should be viewed as an OPPORTUNITY … but also the ACHILLES HEEL of the whole IT ENTERPRISE . Modern Society… as it is … has engaged in a SYMBIOSIS with IT technology without which modern society … is IMPOSSIBLE Electricity from its creation to its final delivery on all levels is COMPLEX and VULNERABLE . Everywhere in the world we on a daily basis wittness the break down of that process … from experiences at endpoints ( our own computers and affiliated hard ware ) to systemic break downs due to broad scale power failures caused by a multitude of external and internal mistakes and events ranging from human negligence to natural catastrophes … not to talk about ENERGY SUFFICIENCY
b . Functioning SOFTWARE. Also here the needed complexity and level of sophistication makes the IT TECHNOLOGY prone to failures … ranging from simple programming mistakes to software ( and hardware ) attacks on programmes … a phenomen we also wittness ..all of us .. on a daily basis . This failure possibility will only INCREASE as systems become ever more complex .
In the event of WAR ..IT Systems are highly vulnerable and can be made NON FUNCTIONAL by TECHNICAL ATTACKs . The latter to such a degree that the whole society can be SHUT DOWN
( no cash machines , no food in supermarkets , communication systems stop functioning … nothing including traffic lights etc …work … in such a scenario society could only function by reverting to manual human steering of all above process… far slower and far more inefficient .. still the only option left ) Therefore ..Safeguarding the integrity of functioning SOFTWARE on all possible levels will therefore still need many different interactions by a multitude of skilled humans ie … not all hope is lost …:) ….
Finally .. it is mentioned that the benefits of the IT Technology in its entirety has and will increase PRODUCTIVITY … which I understand such that ” The CAKE ” will become bigger . It would be foolish of society to reserve the fruits of this increased productivity on ever diminishing hands … as has been the case for at least the last 10 – 20 years . A continuation of this disproportionate allocation of benefits can only lead to 1 of 2 options :
1. A brutal totalitarian system where the few uphold their grip on being the main recievers of a general increased wealth ( for this they will need bureaucrats , police and soldiers…another ” Job – Opportunity widely in effect also today )
2. A balanced distribution of increased wealth where the fruits of common human intellectual accomplishments are distributed also to the common people … who otherwise will start a rebellion … if they can …
Furthermore … to take the Arguments of the Mentioned Book … to its FINAL ENDPOINT : The Question must arise : IS IT RATIONAL to let HUMANS LEAD AND GOUVERN SOCIETY ? IF .. Computers are so much more EFFECTIVE than Humans … as argued Should we trust HUMANS to be able to in an effective and rational way gouvern the complex society as it is … today ? Would it not be RATIONAL to leave this task to a SUPERIOR CAPACITY ? The ALL POWERFULL AND SOPHISTICATED COMPUTER ?
Now I know that this will NEVER occur .. ofc … based on my understanding of HUMAN NATURE and so it will NOT on all other lesser levels of functioning society ! There is HOPE … therefore ….
I would not spend too much time reading this well-researched Book.
This is another summary of an example of Progress hopefully being used to repair the messes that Progress has caused.
This is an update of a trend that is at least 40 years old in the modern iteration.
I love these glib phrases like “best for Society” like as if such an entity actually exists and anyone is seriously engineering a consideration thereof.
Don’t worry: Long and Short Term Interest Rates will be rising quite soon and all this stuff will be used for and by whomever still has the means. Fun for a quick read though.
“Long and Short Term Interest Rates will be rising quite soon ”
I am amazed how people so casually give these weird little economic forecasts. Accurate predictions lies beyond the state of the art, even for A-team economists.
——
Einstein arrives in heaven, but learns that his room is not yet ready. St Peter asks if he will mind sharing a room. Einstein says “of course not”. St Peter describes his roommates.
Peter: “Joe has an IQ of 140.”
AE: “That’s wonderful! We can discuss Relativity.”
Peter: “Bob has an IQ of 110!”
AE: “That’s great! We can discuss the prospects for world peace.”
Peter: “Steve is a fine man, but he has an IQ of only 90.”
AE: “That’s fine. (long pause) We can discuss where interest rates are going.”
Cars that drive themselves aren’t quite ready yet, but maybe this is a decade off or so? There’s a lot of jobs that involve driving. Some are purely driving, like truck drivers — but also, for example, computers can’t deliver UPS packages because they can’t drive the trucks. The article mentions inspecting sewers, and I’ve seen them inspect sewers. Some guy drives by with a truck, puts the machine with the camera and snakes the thing down the drain. The thing is, you can’t automate this unless you can get the machine to the site. If a person has to drive the truck, they might as well do the work.
I think the other technology that’s coming along, but isn’t quite there yet is machine translation of language. Still the machine translations are a mess, especially for Japanese, but with languages like German and Spanish the results seem to be better. I think this is another technology, that may be impossible to perfect, but might get to the ‘good enough’ level.
Same thing as all during the industrial revolution. just faster.
Back then you replaced 25 guys with shovels digging ditches with a back hoe. And its operator. And a truck driver to transport it to the worksite, and an engineer to design it, workers to build it, a marketing person to sell it, a banker to finance it, a CEO to run the company, several accountants to keep track of the mess, several other executives to “provide leadership” and hold the bankers hand when he/she gets nervous, a Mercedes Benz salesperson (it’s a long walk to the corner office), the mechanic at the Mercedes dealership, also a lawyer, a stockbroker, a hooker, a chef, and a masseuse. Now we got a thriving little economy. Still 10 shovel guys left — 4 become cops, 3 become criminals, 2 become bartenders, and 1 becomes a priest.
Other than the shovel guy who had to become a hooker, it aint that bad. Where was I going with this?
Oh right— so instead of working to fulfill our basic needs, or at this point, working on routine maintenance of our society’s infrastructure, the extra unused labor will get used to take care of some of our “luxury needs”. Probably a very unequal way. As such, it’s actually in the interest of the top 1% to give the freshly unemployed people jobs, serving them. Can’t imagine that’s a new phenomenon either. May still end up better than being ditch diggers, mail sorters, sewer inspectors, or processors of corporate paperwork.
This is about 3% of our current problem and the analysis smacks of a “Broken Window” theory, a variant of glaziers bemoaning the innovation of tempered glass.
Hayek and Mises weren’t right about everything, but I think they got this part right. Their mistake was extending their notions of freedom of action for entrepreneurs to include financiers and bankers. That was a big mistake because intrinsic to finance and baking comes monopoly power of the state over currency combined with zero cost of goods sold through the defacto ability to create new money by extending credit. I’m oversimplifying but show me one banker suffering the onslaught of a computer and I’ll reconsider.
(1) “a variant of glaziers bemoaning the innovation of tempered glass”
I love faith-based economics! Because past technological revolutions created new kinds of jobs, we can sit on our butts and wait for the new wave of jobs to appear! Amen.
Perhaps you should read the previous chapters in this series. And the many references to people who have, like, actually thought about this.
(2) “show me one banker suffering the onslaught of a computer and I’ll reconsider.”
Define “banker.” The finance sector has lost aprox 400 thousand jobs since the May 2006 peak. The crash sparked rationalization and automation in this, as in so many industries. Many of those jobs are gone forever, replaced by ATMs and other forms of automation.
I highly recommend Labor and Monopoly Capital. The Degradation of Work in the Twentieth Century, by Harry Braverman, 1974.
In Marxist analysis no profit is derived from capital (machines), only from labour. This applies only to an ideal market, in reality patent monopolies, tariffs and other distortions make it possible to profit from capital (at someone else expanse of course).
The automation trend can go so far before turning around. After strong automation in Japan in the 70’s and 80’s business moved back to less automation; in the last 20 years Chinese factories were less productive but more profitable, because they use less automation and more cheap workers.
As to technological advances most advances in programming are not cumulative. By the time a framework matures it is already obsolete. Most programmers are younger than 40 years old.
NASA and the Military usually have obsolete electronics because development and certification is longer than the shelf-life of base components. This also increases the maintenance and replacement costs.
(1) “In Marxist analysis no profit is derived from capital (machines), only from labour.”
Yes. Despite Marx’s statement of this as a conclusion of science, today it’s considered a belief about morality. A value, not a fact.
(a) Theories of Surplus Value by Karl Marx (1863):
“We see the great advance made by Adam Smith beyond the Physiocrats in the analysis of surplus-value and hence of capital. In their view, it is only one definite kind of concrete labour — agricultural labour — that creates surplus-value. …But to Adam Smith, it is general social labour — no matter in what use — values it manifests itself — the mere quantity of necessary labour, which creates value. Surplus-value, whether it takes the form of profit, rent, or the secondary form of interest, is nothing but a part of this labour, appropriated by the owners of the material conditions of labour in the exchange with living labour.”
(b) A Contribution to the Critique of Political Economy by Karl Marx (1859)
If the exchange-value of a product equals the labour-time contained in the product, then the exchange-value of a working day is equal to the product it yields, in other words, wages must be equal to the product of labour. [20] But in fact the opposite is true. Ergo, this objection amounts to the problem, – how does production on the basis of exchange-value solely determined by labour-time lead to the result that the exchange-value of labour is less than the exchange-value of its product? This problem is solved in our analysis of capital. (see the full text here)
(2) “The automation trend can go so far before turning around.”
That’s certainly false as a description of history. Despite short-term ebbs and flows in the process, the overall trend goes in one direction only. The development of semi-intelligent machines is only the next step in a long process, to which we cannot see the end. Our blind faith prevents us from intelligent analysis, planning, and adaptation to these changes.
I think issue is not only that robots are doing our jobs, but that ‘the people’ now are no longer needed at all by the elite. The financial system and elite companies can earn money by gambling and trading among each other in a casino where the fed keep putting in more dollars — they all win — but precious little of that money makes it out to the real economy. For the middle-class, once the last dollar has been extracted why even bother with robots doing jobs for them anymore. It’s like thinking of ways to build condominiums in the middle of the Congo, yes, those people could use the housing, but they don’t have money. What’s the point.
What’s missing here, and maybe this is discussed in other articles, is the development of the drones. This represents a mechanization and a removing of the human element from war and police enforcement. In the past the elites would have needed a loyal police force to keep the order among the rest of us, but I think the killer-drone systems will have the ability to track the people and maybe even enforce the laws by remote control With the fight against terrorism we’re seeing an expansion of the legal framework to kill people based on their intention to commit crimes in the future, and to use the killer drones to do it.
So, there you go, I’m feeling a little dystopian today. There’s a vision — future humans will be broke, and squatting in the abandoned suburbs, while the elites and their minions order killer drone strikes to crush any dissent from the luxury of their walled compounds.
(1) “There’s a vision — future humans will be broke, and squatting in the abandoned suburbs, while the elites and their minions order killer drone strikes to crush any dissent from the luxury of their walled compounds.”
Only if we allow that to happen. In a democracy we have both the power and the responsibility for the future.
(2) “What’s missing here, and maybe this is discussed in other articles, is the development of the drones.”
To deal with any subject in reasonable depth and length, it must focus. There are always important adjacent issues. Don’t assume they are ignored just because they’re mot mentioned directly. Note these posts about drones and UAVs:
Employers dismiss them as either lacking in up-to-date technical skills — such as the latest programming-language fad — or “not suitable for entry level.” In other words, either underqualified or overqualified. That doesn’t leave much, does it? Statistics show that most software developers are out of the field by age 40.
“I am talking about the trend of using automation in assembly lines and not the trend of developing automation, you seem to be talking about the later”
The post is about the latter. The automation of manufacturing is not longer a major factor, since there are so few jobs left. Automation of services is the next wave; that’s where the jobs are there to lose (and the massive savings to employers).
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david jones
Once again… I think it would be a lot clearer to think of robots and other forms of automation as tools, enabling their owners/operators to accomplish do more, faster, but with the cost of being dependent on infrastructure. Robots/automation are not replacement people.
But if you really insist on looking at it that way, there’s historical precedent for “replacement people”, too: Immigration, and Outsourcing (to low-labor rate countries).
(1) “‘Robots/automation are not replacement people”
If we’re to play let’s pretend, why not think of them as flowers? What matters is not “how we think of them”, but their effects.
(3) “there’s historical precedent for ‘replacement people'”
There is historical precedent for everything. But the possible scale and speed of this could be unusual — on the scale of an invasion in preindustrial times. The problem with such analogies is that they confuse as much as they enlighten, because automation is not like an invasion.
(1) yes of course. But I was getting this message where “oh we’re in trouble, the robots will take over all our jobs”, which brings out the fear of technology, or even opposition to it, which is irrational. That’s what I was really trying to say. Of course I haven’t read the book so I’m not sure if this is really where it was going.
Also My reaction to the statement in the introduction that we are in the beginning of a “great restructuring” is to be skeptical, since it seems like it’s been happening, and accelerating too, for hundreds of years already.
(3) Yes… Certainly the scale/speed of the technological advancement is scary- if we react to it badly enough, something bad might happen. I should add that I’m a technology person, so I find this whole post very tantalizing and provocative.
I’m uncertain if you’re just missing the point of these concerns, or actively attempting to avoid seeing the point.
(1) “But I was getting this message where “’oh we’re in trouble, the robots will take over all our jobs’”
Does anybody respect strawman rebuttals? As in making up stuff and then replying with ridicule. Esp fine is putting your made-up-stuff in quotes. In fact nobody seious says “oh, the robots will take all our jobs.”
The debate among experts concerns the rate and magnitude of the coming automation wave. Manufacturing is a small fraction of employment, and the jobs were lost over decades. Services are a far larger fraction, and this next wave might happen far more rapidly.
(2) “brings out the fear of technology, or even opposition to it, which is irrational.”
It’s a carnival of logical fallacies! Now some ex cathedra assertions! False, to boot. In the real world fear of new applications of technology has often been justified. Here are a few examples.
Chemical pollution has been a serious problem, not yet solved everywhere.
Nuclear power has been poorly implemented, with widespread releases of low-level radiation — and (so far) two serious large-scale accidents (the second still in progress).
The debate about xenoestrogens continues.
New telecom technology offers the potential of 1984-like surveilance, now being implemented in the US.
(3) “statement in the introduction that we are in the beginning of a “great restructuring” is to be skeptical, since it seems like it’s been happening, and accelerating too, for hundreds of years already.”
Determining if the rate of tech change has been accellerating over centuries is difficult. IMO the last rapid wave of tech change was roughly 1850-1950, with a far slower rate of change since then (see details here). But it might be accellerating again.
Past performance is no guarantee of future performance. That we managed the last wave does not guarantee that we will manage the next wave. Every spin of the great wheel is independent of the last.
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david jones
Whoa! Hold your fire, boss…
(1) the strawman was to draw attention to the extremeness that I think lies right under the surface of the book’s introduction that was quoted. Got to work on my tone when replying. No disrespect was intended.
Were manufacturing jobs totally lost due to automation? or were they moved to another country and transformed into logistical “service” jobs on our end? What about the fact that automation allows much more manufacturing to take place than without it? Does that increase exceed population growth? How is the current transformation of service jobs similar different from this? I guess I have to get the book now to see the numbers and the details.
(2) fair enough, but those examples are not automation/robots. I should have been more specific and not said technology in general.
(1) “the strawman was to draw attention to the extremeness that I think lies right under the surface of the book’s introduction”
Then show the extremism, don’t assume it. If you must make assumptions, assume that MIT guys are competent in their areas of expertise.
(2) “Were manufacturing jobs totally lost due to automation? or were they moved to another country and transformed into logistical “service” jobs on our end?”
This might be one of the most-studied subjects in modern economics. Manufacturing jobs have been evaporating around the world.
(3) “What about the fact that automation allows much more manufacturing to take place than without it?”
???
(4) “Does that increase exceed population growth?”
Read Wikipedia about the “demographic transition”.
(5) “I guess I have to get the book now to see the numbers and the details.”
Yes, that might be a good idea. Or read the previous posts in the series, or the articles with links in the “for more information” section. But giving rebuttals like this with so little knowledge of the subject is IMO not a good idea.
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david jones
(1) You’re right, I shouldve done that, especially after my first comment on this article which was admittedly un-serious.
(2) replaced by service jobs. worldwide labor force divided up amongst agriculture / industry / services at 36.1% / 21.5% / 42.4% https://www.cia.gov/library/publications/the-world-factbook/geos/xx.html
it also says worldwide unemployment at 9.1%, which is a little hard to believe but it makes it seem that we are surviving the effects of industrial automation.
Nostradamus says: service sector employment will fall and be replaced by a category whose name is yet to be invented.
(3) that’s a mitigating factor for the job-destruction. the ability to build with fewer workers (more cheaply) causes us to build more, which offsets some of the losses.
(4) I didnt know about that, thanks!
(5) Yes… I know… I had a very strong was reacting to the book exerpts, starting with the title itself, and wanted to share it without spending the time to research it.
PS- So I went to the bookstore today, but couldn’t remember the name of the book. The lady there did a google search for McAffee and came up with this
note the title of the blog post, which is the message I was getting from the book intro in the article. If that’s not designed to provoke and get attention, i don’t know what is.
Next … System failure POSSIBILITY ( read ! ) does increase with increasing complexity of a system( that is LOGIC ! ) As an example : do YOU know ..the complexity behind such a common thing as a CASH MACHINE lets say in an Airport … able to spit out various currencies ? Study that .. in its entirety .. n come back with something else than loose shots from the hip … Many humans are needed supervising and maintaining such an everyday technicality … far more than most people have any idea about . Anyway ..as it is … NOW . Look up for ex ” Payment Systems in Portugal 2007 ” on the net … and that is just a microscopic little part of what ..amongst other things makes a cash machine possible . Besides this .. i do agree that the issue of above article .It is very relevant and IT technology has and will change society dramatically. Personally i LOVE my computer.. could not be without it .. as it magnifies my horizon and my potential … and i do NOT feel threatened by it ..at all ! ( Except when used by Gouvernment for surveillance …. of ME ! ) My view is that LIFE has evolved in an ever continuing flow of symbiotic relationships ..each .. if surviving .. due to increased potential and capability
IT technology is humankinds new Symbiotic evolutionary buddy… and without it ..todays society would be impossible. The sad thing is.. we dont need as many humans as there are.. to accomplish what we need .. and we will need less Therefore humans have become dispensable .. which we all KNOW ..in our heart also applies to ourselves .
Still the current political blabber ..pretends this is otherwise Also Nature as we know it is strained by the demands on recources Those facts have to find their solution.. one way or the other… if we are not able to implement availability of limitless sources of ENERGY Personally i would prefer ( and now i go into the realm of science fiction ) colonisation of space … in stead of otherwise inevitable wars and human suffering and death.
But that would take the combined effort of Humankind sustained over long term …
History of the industrial age indicates that complex systems increase overall stability of a society. Individual systems failed in the pre-industrial era (eg, food, water, transportation, commerce, political), just as they do today. But our complex engineering sytems reduce the indidence of large-scale disasters that kill large fractions of the population. These used to be common. Now they are extraordinarily rare in developed nations.
Complaining about reliability of ATMs is missing the point. Especially as that they are part of a complex payment system combining credit/debit cards, checks, electronic transfers — and cash. Extremely stable. Compare that with late 19th century America, often reliant on barter, quasi-banking systems run from the general store, and banks (the last two subject to frequent and locally catastrophic failures).
On the other hand, some things remain omnipresent over time. Wars were bad, and sometimes laid waste to large areas. In 1240 Genghis Khan reduced Kiev to a pile of skulls and bones. The 30 Years War killed almost 1/3 of Germany’s population. Today war are bad, and sometimes lay waste to large areas.
Absurd question: will Jesus return as an evolved-enlightened Robot, and bring about World Peace? Wild speculation based on common ideas in science fiction books: 125 year human lifespans have been predicted by some “futurists” in the last 10 years, partially due to expected new artificial replacement organs.
Humans will become more robotic via medical technologies (organ replacement, cognitive enhancement). A hybrid human-robotic species may eventually “evolve”. NanoTech may play a role (interface biological cells with tech)? There may be human-robot “wars” in the interim, due to the economic issues under discussion here.
Experimentation with drastic modification of human DNA may become a matter of “survival” to allow for better integration of robotic cognition in hybrid HuBots. HuBots may overcome the genetic limitations of “tribal” culture to create a true world culture. Perhaps such a culture will be based on a more pure form of Altruism.
The existing “species” of (non-robotic) humans may only exist on the margins of society in 100 years, similar to less evolved primate species (Apes, Chimpanzees, etc.) that continue their existence only in ecologically marginal areas of little use to most of the human population.
I do not believe it is possible to “refute” science fiction, speculation about the effects of possible future technology.
On the other hand, our track record for predicting such things is quite poor. We have experienced several technological revolutions during the past two centuries, accompanied by sci-fi-like speculation. Little of it proved accurate, except with respect to details of the tech (eg, we have communication satellites, waldos, water beds, and atomic bombs).
The future will probably continue to be a story of the unexpected.
As seen on Facebook, even Hookers may be replaced by Robots: “How would robotic prostitutes change the sex tourism industry?“, published by i09, 15 April 2012
.
. FM Note: Their about page describes i09 as “a daily publication that covers science, science fiction, and the future. Time to get ready for tomorrow.”
The article in i09 describes the gated paper “Robots Men and Sex Tourism”, Ian Yeoman and Michelle Mars (Victoria Management School, Victoria U of Wellington), Futures, May 2012 — Abstract:
In 2050, Amsterdam’s red light district will all be about android prostitutes who are clean of sexual transmitted infections (STIs), not smuggled in from Eastern Europe and forced into slavery, the city council will have direct control over android sex workers controlling prices, hours of operations and sexual services. This paper presents a futuristic scenario about sextourism, discusses the drivers of change and the implications for the future. The paper pushes plausibility to the limit as boundaries of science fiction and fact become blurred in the ever increasing world of technology, consumption and humanity, a paradigm known as liminality.
I dont complain about the reliability of ATMs … on the contrary .. I marvel .. that it in fact functions as smooth and most of the times stable as it does.. I just point out ..that this reliability ..demands HUMAN input on a vast number of areas …in order to functioning as well as it does .
And that was the theme of above article
Regarding Your asumption that complexity INCREASES Stability …. hm … show me the facts logically it is a contradiction in terms … as the more elements a process has logically the more possible steps can go wrong ..potentially . ( And that is why humans are needed .. still … :) ) In my experience … stability depends on QUALITY of process … which needs appropriate Human input… to be the faintest .. true … and sometimes complexity ..can increase overall stability… I agree ..if the quality is high… other times decrease stability .. if quality is deficient …
Quality of process demands motivated individuals . A discussion about what motivates individuals in society is far too ” complex ” for this space .
It’s not a difficult to understand. A naked solitary savage has the ultimate in simple “systems”: none. So there is no possibility in failure of his social or technological systems. But he is almost totally vulnerable to environmental hazards.
As we have built up increasingly large and complex social and engineering systems, the potential for systems failure has increased — but the stability of the resulting society has increased.
This process accellerated with industrialization. The resulting systems we live in are too large for any individual too fully see, and are complex beyond any individual’s understanding. But two centuries’ experience indicates that they are robust, and becoming more so. Despite the ever-present fears expressed during their growth that we need to go back to the land — a more simple time, growing wheat in our backyards. Many , like John Robb, have successfully tapped these fears — it can be a lucrative gig.
Meanwhile the chariot of civilization rolls on despite the fearful cries from the passenger section. Nor do many of these fearful people move to the vast and empty rural areas lead a simple life. Many of the areas fought over during the late 19th century range wars are empty, almost unused today — waiting for those low-tech pioneers!
Those areas are empty because the industrial system destroyed the communities and small farm economies necessary for a decent life. The spiritual sterility of what remains is obvious to anyone that has experienced real community. There is a large clue here as to why democracy no longer works in the USA. People do not want to be repeatedly traumatized by failed reforms and exploited by those that manipulate the idea of reform in order to advance special interests.
Research the expansion of Amish people into rural areas in the western USA. They bring community with them, along with alternate tech.
(1) “Those areas are empty because the industrial system destroyed the communities and small farm economies necessary for a decent life”
There speaks somebody who never attempted to live the “decent life” of a cowboy (1860-1890). I suggest you try it and learn, rather than relying on John Wayne movies for information about “the simple life”. For an easy introduction, try Time-Life’s The Cowboys.
(2) “Research the expansion of Amish people into rural areas in the western USA”
Nonsense.
(a) The Amish use quite a bit of modern tech, selectively (see Wikipedia). They live nothing like a late 19th century tech level. Also they live in areas richer in natural resources than the abandoned range areas of the west. Although all rural land might look the same, it is not.
(b) There are very few (if any) Amish living in the abandonded rangelands of the old west. See Wikipedia for numbers by State.
Oh, I am a Texas cowboy
Far away from home,
If ever I get back to Texas
I never more will roam.
Montana is too cold for me
And the winters are too long;
Before the roundups do begin
Our money is all gone.
All along the Yellowstone
‘Tis cold the year around;
You will suurely get consumption
By sleeping on the ground.
Come all you Texas cowboys
And warning take from me,
And do not go to Montana
To spend your money free.
But stay at home in Texas,
Where work lasts the year around,
And you’ll never catch consumption
By sleeping on the ground.
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WTF (unattended gmail)
You did not cite any facts about the destruction of small farm communities, and your opinions to not appear to be accurate or based on experience.
My family is from the midwest, I observed a large number of relatives move off farms for 40 years (1950s through 1990s). I spent summers working wheat harvests, and observed local communities. I worked on farms and ranches for 10 years in the western mountain regions of the western USA in the 80s, as well as working in the forest doing timber falling (while living in a ranch hand shack with one wood stove and cold water in the winter, outdoor toilet), and feed/fertilizer business. My ancestors were mostly farmers, but some were business people, inventors/techs, military and academics.
What is your ranching/farming experience and background? Or even experience living in an isolated rural town in an occupation of any kind related to farm/ranch economy?
PBS (or similar) had a documentary about Amish migration to the west recently.
“You did not cite any facts about the destruction of small farm communities”
Missing the point, as usual.
(a) What part of “automation moving from manufacturing into the service industries” was not clear to you?
(b) The automation of the farm sector was largley completed by WWII. Then the long slow last phase, another drop of roughly half of the remaining jobs from 1947 to 1980. It’s been very roughly stable at about 900 thousand since 1980 (the definition makes a difference, due to the very large number of part-time farm workers). But since WWII the important (ie, large) story was automation in manufacturing.
The dying farm towns was the result of demographics: the aging of the remaining small town population, as their children move away. This was unexpected, as imporved communication and transportation technology was expected to advantage small town over large cities. As usual, the futurists were wrong. The reason are complex and as yet poorly understood.
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Premature technology from the past, but they're coming in our future.
“Perhaps you should read the previous chapters in this series. And the many references to people who have, like, actually thought about this.”
Coincidentally, that robot car posted above, with that spinning doohickey on top? I cofounded the company that designs those. You can believe I have, like, thought about this. And like it or not, I believe you are barking up the wrong tree. If the core construct is a three way struggle between bankers and financiers at one vertex, entrepeneurs at another, and labor at the third, then the main problem we have now is the losing battle between labor and banking (as evermore income is diverted to debt service), and the losing battle between entrepeneurs and bankers (as evermore surplus is diverted toward sustaining a zombie finance sector). Fix these problems and guys like me will quickly show you where the new jobs can be created. Read Simon Johnson and Steve Keen if your looking for homework, otherwise, these diversions are really annoying over here in the real world, where we have, like, real problems.
(1) “You can believe I have, like, thought about this. ”
Perhaps I should have said “read something about this.” The history you describe is the starting point for almost all research into the economics and sociology of automation. The key point of the current work questions if the past pattern applies to us and our future. You speak as one totally unfamiliar with this discussion. Hence my recommendation, which still seems correct IMO.
(2) “labor and banking (as evermore income is diverted to debt service)”
Nope. Debt service levels have been falling in both absolute and relative (vs income) terms since the recession began in 2007. The most commonly used metric is the Fed’s Financial Obligations Ratio of debt payments to disposable personal income. It peaked in Q3 of 2007 at 18.75, now 15.93 (down 15%). History, demographic trends, and theory all suggest continued decline for a decade or more.
(3) “If the core construct is a three way struggle between bankers and financiers at one vertex, entrepreneurs at another, and labor at the third,”
Although a popular formulation (unquestioned dogma for many), I have seen no expert use this. IMO it’s daft, with no analytical power. It combines 3 random interest groups, not the 3 most powerful. Nor are these 3 groups similarly defined (as conceptual categories). One is a business sector, one is a type of person (or perhaps a tiny class of businesses, grouped by stage in their life cycle), one is occupational class of people.
Bankers are a powerful guild or special interest group. Like teachers, prison guards, and attorneys — all of whom have large effects on society by their influence on narrow sectors. Bankers have become too powerful in our society, a recurrent problem in America (see Andrew Jacksonian’s speeches). But our list of problems is long; like syphilis, there are larger systemic factors at work.
Despite the hype, there is a considerable body of research showing that entrepreneurs are a minor factor in the American economy — and probably no more important here than in our peers. For instance, technology advances do not require entrepreneurs.
By themselves neither is as influential as the broad classes of capital holders (eg, the “1%”) or (potentially) labor which perhaps should be called “the 60%”.
(4) “the losing battle between entrepreneurs and bankers (as evermore surplus is diverted toward sustaining a zombie finance sector). ”
That’s unclear IMO. But if so, it implies a rising cost of capital to businesses during the past several decades, especially to start-ups. Do you have any evidence of that?
(5) “Fix these problems and guys like me will quickly show you where the new jobs can be created. ”
Faith-based economics. Hallelujah and amen! How sad that there is little evidence supporting this creed. The rise of the financial sector since 1980 has had minor effects on the overall US economy, compared to the simultaneous changes in fiscal policy (from taxes to borrowing) and deregulation. The result is clear, however: slower growth in employment and income vs the post-WWII era and vs. the more highly taxed and regulated Scandinavian and Germanic-area economies.
(6) “Read Simon Johnson and Steve Keen if your looking for homework”
I am familiar with Johnson’s work, and agree with it (see the 15 major citations of his work on the FM website). But I don’t believe he’d claim it was highly relevant to a discussion of the effects of automation on our society.
Keen is a fringe economist, and I doubt that either of us is competent to evaluate such technical debates of theory among economists. By “fringe” I mean bold assertions with minimal supporting data, obtaining crowd appeal rather than peer approval. For more see here, here, here, and here.
Here is Michael Hudson talking about the reasons why aggregate demand is falling: “Wall Street’s Euthanasia of Industry“, interview on 16 July 2011:
“It’s shrinking – from a combination of families and businesses having to pay off debts rather than spend their income on goods and services, and the government’s shift of taxes off finance, insurance and real estate (FIRE) onto labor and industry.”
Substitute “firms”, or “industry” for entrepreneur above if you like.
My point is that the real, ongoing, and highly deleterious struggle playing out between firms, financiers, and (the 99%, labor, take your pick), Is what’s mostly killing us and this worry over technology disrupting through Schumpeter’s Creative destruction is a minor element.
Moreover, it serves the interests of financial elites who are happy to find explanations for high unemployment and our ongoing debt deflation that takes the spot light off them. When I see banks and stock brokers align their interests with mine (as an industrialist), suggesting that freedom from regulation for them is akin to freedom from regulation for me, I blanch.
And when I compete head to head against hybrid monstrosities like GE, who use their status as shadow banks to provide vendor financing where I cannot, and pay zero taxes by leaving my country to operate elsewhere, while I do not is, let’s just say, galling. And when that vendor financing sours, and GE gets into trouble, watching them receive $billions in low interest bail out funds when I borrow at 8%, I get really disgusted. We are so bereft of functioning, pure innovative, manufacturing firms like mine, we can’t have a fact based discussion to even prioritize our problems. Like Rome, we are so screwed up we can’t debate the core issues because we have lost sight of what the core issues actually are. Thanks for your well considered response, but job loss from creative destruction is not our biggest problem from my perspective.
(1) Hudson is an interesting guy. This interview is about politics more than economics (like your comment).
(a) Economics, like all science, is about numbers. Telling “just so stories” (eg, Kipling explaining how the elephant got his trunk) is not economics. How would somebody disprove Hudson’s theory? What is the magnitude of the effects he describes relative to the swings in the US economy?
(b) Many of his specifics are wrong. Saying the bank bailout cost $13 trillion is a gross exaggeration. The economy was not shrinking when he gave this interview, and has continued to slowly expland since then.
For an application of this to our situation details see these articles about the work of Richard Koo (Chief economist of Nomura). He calls it a balance sheet recession.
(2) “Substitute “firms”, or “industry” for entrepreneur above if you like.”
Economics is a science, in which words have precise meaning. Otherwise the discussion is a waste of time, or playing like in chapter 6 of Alice Though the Looking Glass:
When I use a word,’ Humpty Dumpty said, in rather a scornful tone, `it means just what I choose it to mean — neither more nor less.’
`The question is,’ said Alice, `whether you can make words mean so many different things.’
`The question is,’ said Humpty Dumpty, `which is to be master — that’s all.’
Some of the most thought-provoking comments I’ve seen on FM’s site in response to this article.
Japan is a very special case when talking about automation, since the Japanese have a cultural policy of preferring to let useless workers stay at their jobs rather than firing them. In fact the Japanese even have a term for this kind of worker whose job has been eliminated, but who is allowed to stay: “Japan’s Window Zombies“, Tim Kelly, Forbes, 10 May 2009 — “Unable to easily lay off workers, Japanese companies come up with other ways to dump their duffers.” Because of Japan’s unique cultural solidarity, we should be wary of extrapolating Japanese society’s response to automation onto other cultures, particularly those societies which prize “flexible labor markets” like America.
Speaking of drones:
“In fact, the aerospace industry has essentially stopped all research and development on manned aircraft. Going forward, air force “pilots” will be guys sitting at computers directing drones on targets thousands of miles away. In fact, this is not just the future; it has already been happening for several years now.”
— Source: “When Drone Attacks Work, and When They Don’t“, Todd Brewster, Constitution Daily, 13 February 2012 — Brewster is the Director of the Center for Oral History at West Point.
Of course, fighting wars with robots also has a downside: the enemy can hack the robots, capture them, reverse-engineer them, and send them back at you:
“Iran claimed Sunday that it had recovered data from an American spy drone that went down in Iran last year including that it was used to spy on Osama bin Laden’s house weeks before he was killed by U.S. forces. Iran also said it was building a copy of the surveillance aircraft.”
— Source: “Iran says is building copy of captured U.S. drone,” yahoo news.
Futurist Thomas Frey spoke at TEDx recently and predicted that by 2030, 2 billion jobs will disappear (roughly 50% of the jobs on the planet). Source: “2 Billion Jobs to Disappear by 2030“.
The lifetime employment policy applies only to the largest corporations. There is a large segemnts of small and mid-sized companies, many acting as vendors to or subcontractors of large corporations. Their employees enjoy no such protections, and they comprise the bulk of Japan’s workforce.
I agree with peterblogdanowich and am NOT a pessimist as such regarding modern technology and IT technology .i have personally wittnessed marvelous storys of success ensuring work for all within highly competitive GLOBAL sectors of production utilizing the most advanced automation possible at the same time maintaing work ( jobs ) and economic competitive success .( both needed for such process to be viable ! )
Still I am a Pessimist amongst other on the grounds mentioned by blogdanovich :
Lack of Leadership well even subversive undemocratic and totalitarian high- jacking of Leadership by people/ institutions / entities who enjoy disproportionate financial rewards from actual PRODUCTIVE processes of society in which they have NO real interest ( or real input ) except for financial exploitation .
These entities have ammassed a totally disproportionate control over society in the whole western world ….
They need to be STOPPED … if we want to maintain a free democratic society where there is space and opportunity for everyone
If only we had leaders equal to our awesomeness! But, if I might committ heresy, perhaps the problem lies not in our leaders but in their followers? Are we in fact charged up, ready to trod a long and difficult road behind a leader? Or are we sheep, waiting to be bullied into the pen? Or cattle, tied to wagon and awaiting the lash?
FM responds that lifetime employment in Japan only applies to the largest corporations (true) and implies that this means that the average Japanese worker is as much at the mercy of automation as Euro/American workers.
Sorry, this just doesn’t add up. If you study historical chart number four on this webpage, you’ll see that Japanese unemployment rates have almost never risen above 3% except for a very brief period during the late 1990s.
My point was and is correct. Some societies like Japan go out of their way to avoid extreme unemployment. While America was nearing 10% unemployment, Japan never went above 3%. Japan did this by shifting to part-time work, by retaining “window workers,” and by closing down unprofitable divisions of companies and transferring the workers to more profitable divisions rather than firing them. Japan seems to be weathering the robot revolution without extreme unemployment and social disruption. Europe and America are not.
Ratio of large to small businesses AND degree of automation = change in unemployment! No, it’s not that simple. There are many other factors. To mention just one: changing population by age. A aging and shrinking population takes much of the pressure off workers — acting to stabilize employment and wages.
“I (Robot) Thee Wed“, Daniel H. Wilson, Slate, 4 May 2012 — “Researchers claim robot-human marriage is in our future. But is our society really headed in that direction?”
[caption id="attachment_38598" align="aligncenter" width="300"] A robot girl for the discerning male[/caption]
Socialism isn’t the answer to the basic problem haunting all rich nations. The answer is to reform capitalism. The world’s productivity revolution is outpacing the political will of rich societies to fairly distribute its benefits. The result is widening inequality coupled with slow growth and stubbornly high unemployment.
In the United States, almost all the gains from productivity growth have been going to the top 1 percent, and the percent of the working-age population with jobs is now lower than it’s been in more than thirty years (before the vast majority of women moved into paid work).
Inequality is also growing in Europe, along with chronic joblessness. Europe is finding it can no longer afford generous safety nets to catch everyone who has fallen out of the working economy.
… At the heart of the productivity revolution are the computers, software, and the Internet that have found their way into the production of almost everything a modern economy creates. Factory workers are being replaced by computerized machine tools and robotics; office workers, by software applications; professionals, by ever more specialized apps; communications and transportation workers, by the Internet.
… Consumers in rich nations are reaping some of the benefits of the productivity revolution in the form of lower prices or more value for the money – consider the cost of color TVs, international phone calls, or cross-country flights compared to what they were before.
But most of the gains are going to the shareholders who own the companies, and to the relatively small number of very talented (or very lucky and well-connected) managers, engineers, designers, and legal or financial specialists on whom the companies depend for strategic decisions about what to produce and how.
… The problem is not that the productivity revolution has caused unemployment or under-employment. The problem is its fruits haven’t been widely shared. Less work isn’t a bad thing. Most people prefer leisure. A productivity revolution such as we are experiencing should enable people to spend less time at work and have more time to do whatever they’d rather do.
The problem comes in the distribution of the benefits of the productivity revolution. A large portion of the population no longer earns the money it needs to live nearly as well as the productivity revolution would otherwise allow. It can’t afford the “leisure” its now experiencing involuntarily.
Not only is this a problem for them; it’s also a problem for the overall economy. It means that a growing portion of the population lacks the purchasing power to keep the economy going. In the United States, consumers account for 70 percent of economic activity. If they as a whole cannot afford to buy all the goods and services the productivity revolution is generating, the economy becomes stymied. Growth is anemic; unemployment remains high.
That’s why “supply-side” tax cuts for corporations and the wealthy are perverse. Corporations and the rich don’t need more tax cuts; they’re swimming in money as it is. The reason they don’t invest in additional productive capacity and hire more people is they don’t see a sufficient market for the added goods and services, which means an inadequate return on such investment.
But more Keynesian stimulus won’t help solve the more fundamental problem. Although added government spending has gone some way toward filling the gap in demand caused by consumers whose jobs and incomes are disappearing, it can’t be a permanent solution. Even if the wealthy paid their fair share of taxes, deficits would soon get out of control. Additional public investments in infrastructure and basic research and development can make the economy more productive – but more productivity doesn’t necessarily help if a growing portion of the population can’t absorb it.
What to do? Learn from our own history.
The last great surge in productivity occurred between 1870 and 1928, when the technologies of the first industrial revolution were combined with steam power and electricity, mass produced in giant companies enjoying vast economies of scale, and supplied and distributed over a widening system of rails. That ended abruptly in the Great Crash of 1929, when income and wealth had become so concentrated at the top (the owners and financiers of these vast combines) that most people couldn’t pay for all these new products and services without going deeply and hopelessly into debt – resulting in a bubble that loudly and inevitably popped.
During the Depression decade of the 1930s, the nation reorganized itself so that the gains from growth were far more broadly distributed. The National Labor Relations Act of 1935 recognized unions’ rights to collectively bargain, and imposed a duty on employers to bargain in good faith. By the 1950s, a third of all workers in the United States were unionized, giving them the power to demand some of the gains from growth.
Meanwhile, Social Security, unemployment insurance, and worker’s compensation spread a broad safety net. The forty-hour workweek with time-and-a-half for overtime also helped share the work and spread the gains, as did a minimum wage. In 1965, Medicare and Medicaid broadened access to health care. And a progressive income tax, reaching well over 70 percent on the highest incomes, also helped ensure that the gains were spread fairly.
This time, though, the nation has taken no similar steps. Quite the contrary: A resurgent right insists on even more tax breaks for corporations and the rich, massive cuts in public spending that will destroy what’s left of our safety nets, including Social Security and Medicare and Medicaid, fewer rights for organized labor, more deregulation of labor markets, and a lower (or no) minimum wage.
Michael Lind, Salon: Robots are coming (for your job)
“Robots are coming (for your job)“, Michael Lind, Salon, 26 September 2012 — “Get ready: Automation could wipe out whole categories of employment, and not even 1 percenters are safe”
Opening:
During this year’s political campaigns, politicians of both parties have neglected one increasingly important constituency of American workers. I refer, of course, to robots.
Just when many people had resigned themselves to an age of innovation limited to social media, technology in its iconic science fiction incarnation, the robot, is on the verge of transforming the economy and society. Few if any robots will take the form of silvery humanoids, and they are unlikely to revolt and try to exterminate their makers. But the effect of their evolution, if less dramatic than “Terminator” movies, could be profound.
Among other things, the rise of the robots may force a restructuring of the class system in the U.S. and similar advanced industrial countries. From an earlier stage in technological society, we have inherited a five-tier class system, based on functions in the economy circa 1950, which itself replaced an earlier agrarian class system. …
Couple thoughts.
1. Better & cheaper technology enable small and midsize companies to compete against giant companies, even offering the same product.
2. Just because robots can make generic products exponentially cheaper and faster doesn’t mean anyone will want them. I think people will come to demand ever more custom product from smaller firms who are now able to manufacture at a top level, but are still small enough to care about 1 order from 1 customer.
(1) Total nonsense. The automation revolution in manufacturing has accompanied the cartelization of the US manufacturing sector.
(2) You are still thinking manufacturing. That was the previous wave (still in progress, of course). The next wave affects the far larger body of service workers. Think of parking lot attendents, bridge toll collectors, cashiers, and librarians.
The new Ipad marks the start of the paperless revolution (with its high contrast, high resolution screen), driven by companies converting to electronic documents to reduce the fantastic cost of printing, moving, storing, and retrieving electronic paper.
It’s a thousand kinds of service jobs going away, with nothing to replace them.
Mileage does vary. My experience has been otherwise. And I shouldn’t have generalized my personal experience.
Another thought: Doesn’t Japan seek automation for this very reason? Their population growth rate is declining and they need work to be done. Isn’t this why Europe courts immigrants as well?
Could this actually help countries with “demographic challenges”?
That’s a powerful insight. For nations having negative GDP, automation might prove beneign. Japan, now (a lower population on that crowded island would be a blessing for its people). Eventually, after the depresson ends, for southern Europe.
But everybody will face the challenges of massive, continuing automation:
It would be a strange twist of fate if science at long last made Marx relevant.
“How do we prevent automation from concentrating wealth and income, from workers to capitalists?”
Like I said before, people’s mileage varies… but the way i see it, is that it is easier now to start a business than ever before. Yes that means you don’t need to employ as many employees like IT professionals, secretaries, or even engineers. But means you can have more (mini) capitalists.
Connecting to markets is easier and more precise. Advanced fabrication can be done at home (I have built a DIY 3D printer and sold toys made from it). Engineering is easier now with huge amounts of free info, communities, and automated in-program procedures.
But overall, I do share your fear. I think many people will not be interested in tinkering or branching out on their own. I did read Lights in the Tunnel, the book recommended on FM a while back and it’s downright scary in a societal context.
My experiences have been different. One of my first “real” jobs was working with 3D printers at a biology institute. I wish that more people had the opportunities I had and have.
I will speak from my own experience as well.
I work for a mid-sized services industry company that has been a niche player for many years. In We’ve increasingly been experimenting with automation and have found it to be a huge equalizer in our efforts to compete with the “big boys” who do not see the immediate value of putting money into automation.
One of our first automation efforts was in Human Resources. At first I resented losing the assistance of the very nice people in negotiating the paperwork maze. My resentment grew because the maze became quickly worse and I had nobody I to assist me. But in the last couple of years they’ve hit the sweet spot and things have gotten dramatically better and now I can’t imagine why I would want to go back to the old ways.
I also perspective on the other side, because I help automate our processes. One of my guiding principles is to avoid automating the part of the person’s job that they really enjoy. This is because they tend to do a better job in those areas than the computer and customer satisfaction is key to repeat business. But sometimes this is unavoidable and then things get rather uncomfortable for everybody.
Jonh’s comment “But means you can have more (mini) capitalists” is, in my experience, true but misleading. Only a small percentage of the human race has the mindset, luck, and skill to be a successful entrepreneur. Far too many people think they have what it takes (as I once did) and burn through large stacks of money only to crash and burn (been there, done that, still have the T-shirt). The frightening thing is that the only good way to test whether a person has the right combination of skills and innovative thinking is to give them a large stack of money and stand back. This is not going to make the transition from our current society to the future society any easier.
The silly claims we hear from folks like jonh show that economists and managers and politicians and ordinary citizens still haven’t realized how prodound this current robotic revolution really is. These people are parrotting the old arguments used by economists and managers and politicians to explain how the automation of farm work from the 1880s through the 1950s would destroy many jobs, but create many new jobs. And in that case, they were right. The new jobs were created in manufacturing. Then, in the 1960s through the 1980s, when automation began eliminating factory jobs, once again the politicians and managers and economists dragged out the “lump of labor fallacy” to point out that while many assembly line factory jobs would go away, many more service jobs would be created. And once again, they were right.
But this current revolution in databases + AI + the internet + robotics is now replacing highly skilled humans. Consider the following examples:
The Da Vinci robotic surgery system, billed as “improving patient outcomes.” Translation: does surgery better than a human surgeon. Initially deployed for prostate cancer, now being rolled out for “urology, gynecology, cardiothoracic, colorectal, head and neck, and general surgery.” How many human surgeons will be needed in another generation? Not many.
Google’s driverless car is “ready to hit the roads.” No longer a case of a “developing technology,” these driverless cars are safer than regular human-driven cars, faster, more efficient. Now licensed for driving in Nevada, California is moving fast on licensing driverless cars. How many human drivers will be needed in another generation? Answer: by 2035, a human driving a car will be cause for arrest for “reckless endangerment on the highway.”
In this series, “Robots Ate My Job,” correspondent David Brancaccio wanted to see if he could drive across the United States without interacting with any people. Turns out he could. He could get food, get gas, check into and out of hotels, do everything he needed to do, without interacting with humans.
Two MIT professors — an economist and a business professor — had been talking to me about what happens to jobs when innovation reaches this fever pitch and takes off exponentially. It’s fabulous for many with the skills to create technology or create with technology. But the professors are deeply worried about people in the middle, even people with college educations, where technological innovation can now pose a threat to more and more livelihoods. I’ve been reporting on that all week. But on this road trip, I wanted to know if technology has become so widespread, you can go 3,200 miles — coast-to-coast — and never have to do business with a human being.
Okay, maybe gas station attendants and fast food servers are in danger of being replaced by kiosks and robots. But highly skilled humans, like aircraft engineers, aren’t in danger of being replaced by robots, right? Wrong.
Genetic algorithms are now being increasingly deployed to design antennas, aircraft, cars, and every other kind of machine better than any human could design them. Take a look at this paper on using genetic algorithms to design airplanes.
These kinds of database + Bayesian heuristics + robotics can be applied to a vast range of human activities previously thought to require intelligence, from forensic accounting to graphic design to architecture (see these websites by new firms now doing generative design of everything from tableware to furniture to buildings) to “pathology robots that can look at X-rays of breast tissue and identify cancer tissue about as well as humans can,” to automated high school essay scoring machines which do as well as human readers on scoring the essays.
Martin Brain has been writing about this for years:
Economist Tim Duy echoed these sentiments when he wrote:
The service jobs into which most Americans are now being forced by a combination of automation + offshoring are subject to Baumol’s Cost Disease, and as a result they are the most inefficient and low-productivity jobs in the economy, and the lowest paid. Consequently
But at least we don’t need to worry about uniquely human jobs like “entertainer” being taken over by robots, right? Wrong.
Take a look at this video of the computer-generated Japanese singer Hatsune Miku (actually projected on a thin semitransparent screen on a stage by a digital video projector, not quite holography yet, but looks very close). Not only is she entirely computer-generated, but her singing is computer-generated using the computer program “Vocaloid 2” which synthesizes a female voice in real time.
This is increasingly leading people like Douglass Rushkoff to ask: “Are Jobs Obsolete?”
Hey, I agree with you an others with your points here. Automation can be very disruptive.
But it does have it’s upsides. I look forward to a lot of these innovations. I really like technology. I like robots and 3dprinters and robot welders. It’s awesome. I like the space shuttle. I like the Apollo mission. I want the US and the whole world to keep making science fiction reality.
If we have to change our economics to make the future work, let’s do it. It’s worth it.
BTW, your little theory is not proven so don’t be so confident that high-skilled professionals will lose their jobs.
Are we worried that the Norwegians will have a collapsed economy with half or more their population out of work?
(1) “confident that high-skilled professionals will lose their jobs.”
It’s not a theory. It’s happening today. Much of the articles cited describe these processes, in early stages today — but directionally clear. Computer operators, publishers, drilling machine operators — it’s a long list. It’s starting to affect the larger professions. Such as attorneys — see “Armies of Expensive Lawyers, Replaced by Cheaper Software“, New York Times, 4 March 2011.
(2) “Are we worried that the Norwegians will have a collapsed economy with half or more their population out of work?”
Saudi Arabia, Alaska, and Norway are among the lucky nations with vast income from minerals. You might just as well use the Beverly Hillbillies as your economic model.
Okay…. do you think Japan will suffer worse than most during the Robot Revolution? They have limited natural resources but have highly skilled workers. If so, maybe they have the conditions we should study and emulate to cope with this mass automation.
Japan has a far lower degree of inequality than the US, so that the gains from automation can be shared across society.
Furthermore, their demographic crash (aging population, below-replacement birthrate, little immigration) more easily accomodates automation.
Perhaps they are a model society for the 21st century, not the failure most US experts describe them as.
Thank You for the reading Tip ! I agree … the IT technology will … IF IT WORKS …. replace most jobs as they are today..and in every field … provided the world will continue on a peacefull road without major wars . BUT … besides the conclusion that without EDUCATION people will be lost WHAT is the FUNDAMENTAL REQUIREMENT ..which makes IT work ?
2 Fundamental requrements there are :
a. ELECTRICITY … and its uninterrupted use without which NO COMPUTER can work or communicate . This should be viewed as an OPPORTUNITY … but also the ACHILLES HEEL of the whole IT ENTERPRISE . Modern Society… as it is … has engaged in a SYMBIOSIS with IT technology without which modern society … is IMPOSSIBLE Electricity from its creation to its final delivery on all levels is COMPLEX and VULNERABLE . Everywhere in the world we on a daily basis wittness the break down of that process … from experiences at endpoints ( our own computers and affiliated hard ware ) to systemic break downs due to broad scale power failures caused by a multitude of external and internal mistakes and events ranging from human negligence to natural catastrophes … not to talk about ENERGY SUFFICIENCY
b . Functioning SOFTWARE. Also here the needed complexity and level of sophistication makes the IT TECHNOLOGY prone to failures … ranging from simple programming mistakes to software ( and hardware ) attacks on programmes … a phenomen we also wittness ..all of us .. on a daily basis . This failure possibility will only INCREASE as systems become ever more complex .
In the event of WAR ..IT Systems are highly vulnerable and can be made NON FUNCTIONAL by TECHNICAL ATTACKs . The latter to such a degree that the whole society can be SHUT DOWN
( no cash machines , no food in supermarkets , communication systems stop functioning … nothing including traffic lights etc …work … in such a scenario society could only function by reverting to manual human steering of all above process… far slower and far more inefficient .. still the only option left ) Therefore ..Safeguarding the integrity of functioning SOFTWARE on all possible levels will therefore still need many different interactions by a multitude of skilled humans ie … not all hope is lost …:) ….
Finally .. it is mentioned that the benefits of the IT Technology in its entirety has and will increase PRODUCTIVITY … which I understand such that ” The CAKE ” will become bigger . It would be foolish of society to reserve the fruits of this increased productivity on ever diminishing hands … as has been the case for at least the last 10 – 20 years . A continuation of this disproportionate allocation of benefits can only lead to 1 of 2 options :
1. A brutal totalitarian system where the few uphold their grip on being the main recievers of a general increased wealth ( for this they will need bureaucrats , police and soldiers…another ” Job – Opportunity widely in effect also today )
2. A balanced distribution of increased wealth where the fruits of common human intellectual accomplishments are distributed also to the common people … who otherwise will start a rebellion … if they can …
“This failure possibility will only INCREASE as systems become ever more complex ”
Probably not. That’s an urban legend, with little basis in fact.
History to date suggests that increased science and technology makes societies more stable, not less.
Furthermore … to take the Arguments of the Mentioned Book … to its FINAL ENDPOINT : The Question must arise : IS IT RATIONAL to let HUMANS LEAD AND GOUVERN SOCIETY ? IF .. Computers are so much more EFFECTIVE than Humans … as argued Should we trust HUMANS to be able to in an effective and rational way gouvern the complex society as it is … today ? Would it not be RATIONAL to leave this task to a SUPERIOR CAPACITY ? The ALL POWERFULL AND SOPHISTICATED COMPUTER ?
Now I know that this will NEVER occur .. ofc … based on my understanding of HUMAN NATURE and so it will NOT on all other lesser levels of functioning society ! There is HOPE … therefore ….
You are confusing automation with science fiction. Automating bridge toll collection is not like automating Congress.
I would not spend too much time reading this well-researched Book.
This is another summary of an example of Progress hopefully being used to repair the messes that Progress has caused.
This is an update of a trend that is at least 40 years old in the modern iteration.
I love these glib phrases like “best for Society” like as if such an entity actually exists and anyone is seriously engineering a consideration thereof.
Don’t worry: Long and Short Term Interest Rates will be rising quite soon and all this stuff will be used for and by whomever still has the means. Fun for a quick read though.
Breton
“Long and Short Term Interest Rates will be rising quite soon ”
I am amazed how people so casually give these weird little economic forecasts. Accurate predictions lies beyond the state of the art, even for A-team economists.
——
Einstein arrives in heaven, but learns that his room is not yet ready. St Peter asks if he will mind sharing a room. Einstein says “of course not”. St Peter describes his roommates.
Have you guys seen Google’s self-driving car video.
http://www.youtube.com/watch?v=cdgQpa1pUUE
Cars that drive themselves aren’t quite ready yet, but maybe this is a decade off or so? There’s a lot of jobs that involve driving. Some are purely driving, like truck drivers — but also, for example, computers can’t deliver UPS packages because they can’t drive the trucks. The article mentions inspecting sewers, and I’ve seen them inspect sewers. Some guy drives by with a truck, puts the machine with the camera and snakes the thing down the drain. The thing is, you can’t automate this unless you can get the machine to the site. If a person has to drive the truck, they might as well do the work.
I think the other technology that’s coming along, but isn’t quite there yet is machine translation of language. Still the machine translations are a mess, especially for Japanese, but with languages like German and Spanish the results seem to be better. I think this is another technology, that may be impossible to perfect, but might get to the ‘good enough’ level.
Same thing as all during the industrial revolution. just faster.
Back then you replaced 25 guys with shovels digging ditches with a back hoe. And its operator. And a truck driver to transport it to the worksite, and an engineer to design it, workers to build it, a marketing person to sell it, a banker to finance it, a CEO to run the company, several accountants to keep track of the mess, several other executives to “provide leadership” and hold the bankers hand when he/she gets nervous, a Mercedes Benz salesperson (it’s a long walk to the corner office), the mechanic at the Mercedes dealership, also a lawyer, a stockbroker, a hooker, a chef, and a masseuse. Now we got a thriving little economy. Still 10 shovel guys left — 4 become cops, 3 become criminals, 2 become bartenders, and 1 becomes a priest.
Other than the shovel guy who had to become a hooker, it aint that bad. Where was I going with this?
Oh right— so instead of working to fulfill our basic needs, or at this point, working on routine maintenance of our society’s infrastructure, the extra unused labor will get used to take care of some of our “luxury needs”. Probably a very unequal way. As such, it’s actually in the interest of the top 1% to give the freshly unemployed people jobs, serving them. Can’t imagine that’s a new phenomenon either. May still end up better than being ditch diggers, mail sorters, sewer inspectors, or processors of corporate paperwork.
This is about 3% of our current problem and the analysis smacks of a “Broken Window” theory, a variant of glaziers bemoaning the innovation of tempered glass.
Hayek and Mises weren’t right about everything, but I think they got this part right. Their mistake was extending their notions of freedom of action for entrepreneurs to include financiers and bankers. That was a big mistake because intrinsic to finance and baking comes monopoly power of the state over currency combined with zero cost of goods sold through the defacto ability to create new money by extending credit. I’m oversimplifying but show me one banker suffering the onslaught of a computer and I’ll reconsider.
(1) “a variant of glaziers bemoaning the innovation of tempered glass”
I love faith-based economics! Because past technological revolutions created new kinds of jobs, we can sit on our butts and wait for the new wave of jobs to appear! Amen.
Perhaps you should read the previous chapters in this series. And the many references to people who have, like, actually thought about this.
(2) “show me one banker suffering the onslaught of a computer and I’ll reconsider.”
Define “banker.” The finance sector has lost aprox 400 thousand jobs since the May 2006 peak. The crash sparked rationalization and automation in this, as in so many industries. Many of those jobs are gone forever, replaced by ATMs and other forms of automation.
I highly recommend Labor and Monopoly Capital. The Degradation of Work in the Twentieth Century, by Harry Braverman, 1974.
In Marxist analysis no profit is derived from capital (machines), only from labour. This applies only to an ideal market, in reality patent monopolies, tariffs and other distortions make it possible to profit from capital (at someone else expanse of course).
The automation trend can go so far before turning around. After strong automation in Japan in the 70’s and 80’s business moved back to less automation; in the last 20 years Chinese factories were less productive but more profitable, because they use less automation and more cheap workers.
As to technological advances most advances in programming are not cumulative. By the time a framework matures it is already obsolete. Most programmers are younger than 40 years old.
NASA and the Military usually have obsolete electronics because development and certification is longer than the shelf-life of base components. This also increases the maintenance and replacement costs.
I guess I am a strong digital pessimist.
(1) “In Marxist analysis no profit is derived from capital (machines), only from labour.”
Yes. Despite Marx’s statement of this as a conclusion of science, today it’s considered a belief about morality. A value, not a fact.
(a) Theories of Surplus Value by Karl Marx (1863):
“We see the great advance made by Adam Smith beyond the Physiocrats in the analysis of surplus-value and hence of capital. In their view, it is only one definite kind of concrete labour — agricultural labour — that creates surplus-value. …But to Adam Smith, it is general social labour — no matter in what use — values it manifests itself — the mere quantity of necessary labour, which creates value. Surplus-value, whether it takes the form of profit, rent, or the secondary form of interest, is nothing but a part of this labour, appropriated by the owners of the material conditions of labour in the exchange with living labour.”
(b) A Contribution to the Critique of Political Economy by Karl Marx (1859)
(2) “The automation trend can go so far before turning around.”
That’s certainly false as a description of history. Despite short-term ebbs and flows in the process, the overall trend goes in one direction only. The development of semi-intelligent machines is only the next step in a long process, to which we cannot see the end. Our blind faith prevents us from intelligent analysis, planning, and adaptation to these changes.
I think issue is not only that robots are doing our jobs, but that ‘the people’ now are no longer needed at all by the elite. The financial system and elite companies can earn money by gambling and trading among each other in a casino where the fed keep putting in more dollars — they all win — but precious little of that money makes it out to the real economy. For the middle-class, once the last dollar has been extracted why even bother with robots doing jobs for them anymore. It’s like thinking of ways to build condominiums in the middle of the Congo, yes, those people could use the housing, but they don’t have money. What’s the point.
What’s missing here, and maybe this is discussed in other articles, is the development of the drones. This represents a mechanization and a removing of the human element from war and police enforcement. In the past the elites would have needed a loyal police force to keep the order among the rest of us, but I think the killer-drone systems will have the ability to track the people and maybe even enforce the laws by remote control With the fight against terrorism we’re seeing an expansion of the legal framework to kill people based on their intention to commit crimes in the future, and to use the killer drones to do it.
So, there you go, I’m feeling a little dystopian today. There’s a vision — future humans will be broke, and squatting in the abandoned suburbs, while the elites and their minions order killer drone strikes to crush any dissent from the luxury of their walled compounds.
(1) “There’s a vision — future humans will be broke, and squatting in the abandoned suburbs, while the elites and their minions order killer drone strikes to crush any dissent from the luxury of their walled compounds.”
Only if we allow that to happen. In a democracy we have both the power and the responsibility for the future.
(2) “What’s missing here, and maybe this is discussed in other articles, is the development of the drones.”
To deal with any subject in reasonable depth and length, it must focus. There are always important adjacent issues. Don’t assume they are ignored just because they’re mot mentioned directly. Note these posts about drones and UAVs:
A good opinion piece to read.
Fabius wrote: “The development of semi-intelligent machines is only the next step in a long process, to which we cannot see the end.”
I am talking about the trend of using automation in assembly lines and not the trend of developing automation, you seem to be talking about the later.
“I am talking about the trend of using automation in assembly lines and not the trend of developing automation, you seem to be talking about the later”
The post is about the latter. The automation of manufacturing is not longer a major factor, since there are so few jobs left. Automation of services is the next wave; that’s where the jobs are there to lose (and the massive savings to employers).
Once again… I think it would be a lot clearer to think of robots and other forms of automation as tools, enabling their owners/operators to accomplish do more, faster, but with the cost of being dependent on infrastructure. Robots/automation are not replacement people.
But if you really insist on looking at it that way, there’s historical precedent for “replacement people”, too: Immigration, and Outsourcing (to low-labor rate countries).
(1) “‘Robots/automation are not replacement people”
If we’re to play let’s pretend, why not think of them as flowers? What matters is not “how we think of them”, but their effects.
(3) “there’s historical precedent for ‘replacement people'”
There is historical precedent for everything. But the possible scale and speed of this could be unusual — on the scale of an invasion in preindustrial times. The problem with such analogies is that they confuse as much as they enlighten, because automation is not like an invasion.
(1) yes of course. But I was getting this message where “oh we’re in trouble, the robots will take over all our jobs”, which brings out the fear of technology, or even opposition to it, which is irrational. That’s what I was really trying to say. Of course I haven’t read the book so I’m not sure if this is really where it was going.
Also My reaction to the statement in the introduction that we are in the beginning of a “great restructuring” is to be skeptical, since it seems like it’s been happening, and accelerating too, for hundreds of years already.
(3) Yes… Certainly the scale/speed of the technological advancement is scary- if we react to it badly enough, something bad might happen. I should add that I’m a technology person, so I find this whole post very tantalizing and provocative.
I’m uncertain if you’re just missing the point of these concerns, or actively attempting to avoid seeing the point.
(1) “But I was getting this message where “’oh we’re in trouble, the robots will take over all our jobs’”
Does anybody respect strawman rebuttals? As in making up stuff and then replying with ridicule. Esp fine is putting your made-up-stuff in quotes. In fact nobody seious says “oh, the robots will take all our jobs.”
The debate among experts concerns the rate and magnitude of the coming automation wave. Manufacturing is a small fraction of employment, and the jobs were lost over decades. Services are a far larger fraction, and this next wave might happen far more rapidly.
(2) “brings out the fear of technology, or even opposition to it, which is irrational.”
It’s a carnival of logical fallacies! Now some ex cathedra assertions! False, to boot. In the real world fear of new applications of technology has often been justified. Here are a few examples.
New telecom technology offers the potential of 1984-like surveilance, now being implemented in the US.
(3) “statement in the introduction that we are in the beginning of a “great restructuring” is to be skeptical, since it seems like it’s been happening, and accelerating too, for hundreds of years already.”
Determining if the rate of tech change has been accellerating over centuries is difficult. IMO the last rapid wave of tech change was roughly 1850-1950, with a far slower rate of change since then (see details here). But it might be accellerating again.
Past performance is no guarantee of future performance. That we managed the last wave does not guarantee that we will manage the next wave. Every spin of the great wheel is independent of the last.
Whoa! Hold your fire, boss…
(1) the strawman was to draw attention to the extremeness that I think lies right under the surface of the book’s introduction that was quoted. Got to work on my tone when replying. No disrespect was intended.
Were manufacturing jobs totally lost due to automation? or were they moved to another country and transformed into logistical “service” jobs on our end? What about the fact that automation allows much more manufacturing to take place than without it? Does that increase exceed population growth? How is the current transformation of service jobs similar different from this? I guess I have to get the book now to see the numbers and the details.
(2) fair enough, but those examples are not automation/robots. I should have been more specific and not said technology in general.
(3) yes… i don’t know, so i’m skeptical :-)
(1) “the strawman was to draw attention to the extremeness that I think lies right under the surface of the book’s introduction”
Then show the extremism, don’t assume it. If you must make assumptions, assume that MIT guys are competent in their areas of expertise.
(2) “Were manufacturing jobs totally lost due to automation? or were they moved to another country and transformed into logistical “service” jobs on our end?”
This might be one of the most-studied subjects in modern economics. Manufacturing jobs have been evaporating around the world.
(3) “What about the fact that automation allows much more manufacturing to take place than without it?”
???
(4) “Does that increase exceed population growth?”
Read Wikipedia about the “demographic transition”.
(5) “I guess I have to get the book now to see the numbers and the details.”
Yes, that might be a good idea. Or read the previous posts in the series, or the articles with links in the “for more information” section. But giving rebuttals like this with so little knowledge of the subject is IMO not a good idea.
(1) You’re right, I shouldve done that, especially after my first comment on this article which was admittedly un-serious.
(2) replaced by service jobs. worldwide labor force divided up amongst agriculture / industry / services at 36.1% / 21.5% / 42.4%
https://www.cia.gov/library/publications/the-world-factbook/geos/xx.html
it also says worldwide unemployment at 9.1%, which is a little hard to believe but it makes it seem that we are surviving the effects of industrial automation.
Nostradamus says: service sector employment will fall and be replaced by a category whose name is yet to be invented.
(3) that’s a mitigating factor for the job-destruction. the ability to build with fewer workers (more cheaply) causes us to build more, which offsets some of the losses.
(4) I didnt know about that, thanks!
(5) Yes… I know… I had a very strong was reacting to the book exerpts, starting with the title itself, and wanted to share it without spending the time to research it.
PS- So I went to the bookstore today, but couldn’t remember the name of the book. The lady there did a google search for McAffee and came up with this
http://blogs.hbr.org/hbr/mcafee/2012/03/every-time-i-take-a.html
note the title of the blog post, which is the message I was getting from the book intro in the article. If that’s not designed to provoke and get attention, i don’t know what is.
First : I am Not confusing anything
Next … System failure POSSIBILITY ( read ! ) does increase with increasing complexity of a system( that is LOGIC ! ) As an example : do YOU know ..the complexity behind such a common thing as a CASH MACHINE lets say in an Airport … able to spit out various currencies ? Study that .. in its entirety .. n come back with something else than loose shots from the hip … Many humans are needed supervising and maintaining such an everyday technicality … far more than most people have any idea about . Anyway ..as it is … NOW . Look up for ex ” Payment Systems in Portugal 2007 ” on the net … and that is just a microscopic little part of what ..amongst other things makes a cash machine possible . Besides this .. i do agree that the issue of above article .It is very relevant and IT technology has and will change society dramatically. Personally i LOVE my computer.. could not be without it .. as it magnifies my horizon and my potential … and i do NOT feel threatened by it ..at all ! ( Except when used by Gouvernment for surveillance …. of ME ! ) My view is that LIFE has evolved in an ever continuing flow of symbiotic relationships ..each .. if surviving .. due to increased potential and capability
IT technology is humankinds new Symbiotic evolutionary buddy… and without it ..todays society would be impossible. The sad thing is.. we dont need as many humans as there are.. to accomplish what we need .. and we will need less Therefore humans have become dispensable .. which we all KNOW ..in our heart also applies to ourselves .
Still the current political blabber ..pretends this is otherwise Also Nature as we know it is strained by the demands on recources Those facts have to find their solution.. one way or the other… if we are not able to implement availability of limitless sources of ENERGY Personally i would prefer ( and now i go into the realm of science fiction ) colonisation of space … in stead of otherwise inevitable wars and human suffering and death.
But that would take the combined effort of Humankind sustained over long term …
ALL CAPS makes you sound crazy. Avoid it to be taken seriously.
History of the industrial age indicates that complex systems increase overall stability of a society. Individual systems failed in the pre-industrial era (eg, food, water, transportation, commerce, political), just as they do today. But our complex engineering sytems reduce the indidence of large-scale disasters that kill large fractions of the population. These used to be common. Now they are extraordinarily rare in developed nations.
Complaining about reliability of ATMs is missing the point. Especially as that they are part of a complex payment system combining credit/debit cards, checks, electronic transfers — and cash. Extremely stable. Compare that with late 19th century America, often reliant on barter, quasi-banking systems run from the general store, and banks (the last two subject to frequent and locally catastrophic failures).
On the other hand, some things remain omnipresent over time. Wars were bad, and sometimes laid waste to large areas. In 1240 Genghis Khan reduced Kiev to a pile of skulls and bones. The 30 Years War killed almost 1/3 of Germany’s population. Today war are bad, and sometimes lay waste to large areas.
re: HuBots? RoMans?
Absurd question: will Jesus return as an evolved-enlightened Robot, and bring about World Peace? Wild speculation based on common ideas in science fiction books: 125 year human lifespans have been predicted by some “futurists” in the last 10 years, partially due to expected new artificial replacement organs.
Humans will become more robotic via medical technologies (organ replacement, cognitive enhancement). A hybrid human-robotic species may eventually “evolve”. NanoTech may play a role (interface biological cells with tech)? There may be human-robot “wars” in the interim, due to the economic issues under discussion here.
Experimentation with drastic modification of human DNA may become a matter of “survival” to allow for better integration of robotic cognition in hybrid HuBots. HuBots may overcome the genetic limitations of “tribal” culture to create a true world culture. Perhaps such a culture will be based on a more pure form of Altruism.
The existing “species” of (non-robotic) humans may only exist on the margins of society in 100 years, similar to less evolved primate species (Apes, Chimpanzees, etc.) that continue their existence only in ecologically marginal areas of little use to most of the human population.
Please correct/refute any of the above.
“Please correct/refute any of the above.”
I do not believe it is possible to “refute” science fiction, speculation about the effects of possible future technology.
On the other hand, our track record for predicting such things is quite poor. We have experienced several technological revolutions during the past two centuries, accompanied by sci-fi-like speculation. Little of it proved accurate, except with respect to details of the tech (eg, we have communication satellites, waldos, water beds, and atomic bombs).
The future will probably continue to be a story of the unexpected.
As seen on Facebook, even Hookers may be replaced by Robots: “How would robotic prostitutes change the sex tourism industry?“, published by i09, 15 April 2012
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FM Note: Their about page describes i09 as “a daily publication that covers science, science fiction, and the future. Time to get ready for tomorrow.”
The article in i09 describes the gated paper “Robots Men and Sex Tourism”, Ian Yeoman and Michelle Mars (Victoria Management School, Victoria U of Wellington), Futures, May 2012 — Abstract:
I dont complain about the reliability of ATMs … on the contrary .. I marvel .. that it in fact functions as smooth and most of the times stable as it does.. I just point out ..that this reliability ..demands HUMAN input on a vast number of areas …in order to functioning as well as it does .
And that was the theme of above article
Regarding Your asumption that complexity INCREASES Stability …. hm … show me the facts logically it is a contradiction in terms … as the more elements a process has logically the more possible steps can go wrong ..potentially . ( And that is why humans are needed .. still … :) ) In my experience … stability depends on QUALITY of process … which needs appropriate Human input… to be the faintest .. true … and sometimes complexity ..can increase overall stability… I agree ..if the quality is high… other times decrease stability .. if quality is deficient …
Quality of process demands motivated individuals . A discussion about what motivates individuals in society is far too ” complex ” for this space .
It’s not a difficult to understand. A naked solitary savage has the ultimate in simple “systems”: none. So there is no possibility in failure of his social or technological systems. But he is almost totally vulnerable to environmental hazards.
As we have built up increasingly large and complex social and engineering systems, the potential for systems failure has increased — but the stability of the resulting society has increased.
This process accellerated with industrialization. The resulting systems we live in are too large for any individual too fully see, and are complex beyond any individual’s understanding. But two centuries’ experience indicates that they are robust, and becoming more so. Despite the ever-present fears expressed during their growth that we need to go back to the land — a more simple time, growing wheat in our backyards. Many , like John Robb, have successfully tapped these fears — it can be a lucrative gig.
Meanwhile the chariot of civilization rolls on despite the fearful cries from the passenger section. Nor do many of these fearful people move to the vast and empty rural areas lead a simple life. Many of the areas fought over during the late 19th century range wars are empty, almost unused today — waiting for those low-tech pioneers!
Those areas are empty because the industrial system destroyed the communities and small farm economies necessary for a decent life. The spiritual sterility of what remains is obvious to anyone that has experienced real community. There is a large clue here as to why democracy no longer works in the USA. People do not want to be repeatedly traumatized by failed reforms and exploited by those that manipulate the idea of reform in order to advance special interests.
Research the expansion of Amish people into rural areas in the western USA. They bring community with them, along with alternate tech.
(1) “Those areas are empty because the industrial system destroyed the communities and small farm economies necessary for a decent life”
There speaks somebody who never attempted to live the “decent life” of a cowboy (1860-1890). I suggest you try it and learn, rather than relying on John Wayne movies for information about “the simple life”. For an easy introduction, try Time-Life’s The Cowboys.
(2) “Research the expansion of Amish people into rural areas in the western USA”
Nonsense.
(a) The Amish use quite a bit of modern tech, selectively (see Wikipedia). They live nothing like a late 19th century tech level. Also they live in areas richer in natural resources than the abandoned range areas of the west. Although all rural land might look the same, it is not.
(b) There are very few (if any) Amish living in the abandonded rangelands of the old west. See Wikipedia for numbers by State.
You did not cite any facts about the destruction of small farm communities, and your opinions to not appear to be accurate or based on experience.
My family is from the midwest, I observed a large number of relatives move off farms for 40 years (1950s through 1990s). I spent summers working wheat harvests, and observed local communities. I worked on farms and ranches for 10 years in the western mountain regions of the western USA in the 80s, as well as working in the forest doing timber falling (while living in a ranch hand shack with one wood stove and cold water in the winter, outdoor toilet), and feed/fertilizer business. My ancestors were mostly farmers, but some were business people, inventors/techs, military and academics.
What is your ranching/farming experience and background? Or even experience living in an isolated rural town in an occupation of any kind related to farm/ranch economy?
PBS (or similar) had a documentary about Amish migration to the west recently.
“You did not cite any facts about the destruction of small farm communities”
Missing the point, as usual.
(a) What part of “automation moving from manufacturing into the service industries” was not clear to you?
(b) The automation of the farm sector was largley completed by WWII. Then the long slow last phase, another drop of roughly half of the remaining jobs from 1947 to 1980. It’s been very roughly stable at about 900 thousand since 1980 (the definition makes a difference, due to the very large number of part-time farm workers). But since WWII the important (ie, large) story was automation in manufacturing.
The dying farm towns was the result of demographics: the aging of the remaining small town population, as their children move away. This was unexpected, as imporved communication and transportation technology was expected to advantage small town over large cities. As usual, the futurists were wrong. The reason are complex and as yet poorly understood.
“Paleofuture: The Disco-Blasting Robot Waiters of 1980s Pasadena“, Smithsonian, 19 April 2012
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[caption id="attachment_37799" align="alignleft" width="286" caption="Robot Waiter from 1985"]
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“Perhaps you should read the previous chapters in this series. And the many references to people who have, like, actually thought about this.”
Coincidentally, that robot car posted above, with that spinning doohickey on top? I cofounded the company that designs those. You can believe I have, like, thought about this. And like it or not, I believe you are barking up the wrong tree. If the core construct is a three way struggle between bankers and financiers at one vertex, entrepeneurs at another, and labor at the third, then the main problem we have now is the losing battle between labor and banking (as evermore income is diverted to debt service), and the losing battle between entrepeneurs and bankers (as evermore surplus is diverted toward sustaining a zombie finance sector). Fix these problems and guys like me will quickly show you where the new jobs can be created. Read Simon Johnson and Steve Keen if your looking for homework, otherwise, these diversions are really annoying over here in the real world, where we have, like, real problems.
(1) “You can believe I have, like, thought about this. ”
Perhaps I should have said “read something about this.” The history you describe is the starting point for almost all research into the economics and sociology of automation. The key point of the current work questions if the past pattern applies to us and our future. You speak as one totally unfamiliar with this discussion. Hence my recommendation, which still seems correct IMO.
(2) “labor and banking (as evermore income is diverted to debt service)”
Nope. Debt service levels have been falling in both absolute and relative (vs income) terms since the recession began in 2007. The most commonly used metric is the Fed’s Financial Obligations Ratio of debt payments to disposable personal income. It peaked in Q3 of 2007 at 18.75, now 15.93 (down 15%). History, demographic trends, and theory all suggest continued decline for a decade or more.
(3) “If the core construct is a three way struggle between bankers and financiers at one vertex, entrepreneurs at another, and labor at the third,”
Although a popular formulation (unquestioned dogma for many), I have seen no expert use this. IMO it’s daft, with no analytical power. It combines 3 random interest groups, not the 3 most powerful. Nor are these 3 groups similarly defined (as conceptual categories). One is a business sector, one is a type of person (or perhaps a tiny class of businesses, grouped by stage in their life cycle), one is occupational class of people.
(4) “the losing battle between entrepreneurs and bankers (as evermore surplus is diverted toward sustaining a zombie finance sector). ”
That’s unclear IMO. But if so, it implies a rising cost of capital to businesses during the past several decades, especially to start-ups. Do you have any evidence of that?
(5) “Fix these problems and guys like me will quickly show you where the new jobs can be created. ”
Faith-based economics. Hallelujah and amen! How sad that there is little evidence supporting this creed. The rise of the financial sector since 1980 has had minor effects on the overall US economy, compared to the simultaneous changes in fiscal policy (from taxes to borrowing) and deregulation. The result is clear, however: slower growth in employment and income vs the post-WWII era and vs. the more highly taxed and regulated Scandinavian and Germanic-area economies.
(6) “Read Simon Johnson and Steve Keen if your looking for homework”
I am familiar with Johnson’s work, and agree with it (see the 15 major citations of his work on the FM website). But I don’t believe he’d claim it was highly relevant to a discussion of the effects of automation on our society.
Keen is a fringe economist, and I doubt that either of us is competent to evaluate such technical debates of theory among economists. By “fringe” I mean bold assertions with minimal supporting data, obtaining crowd appeal rather than peer approval. For more see here, here, here, and here.
Here is Michael Hudson talking about the reasons why aggregate demand is falling: “Wall Street’s Euthanasia of Industry“, interview on 16 July 2011:
Substitute “firms”, or “industry” for entrepreneur above if you like.
My point is that the real, ongoing, and highly deleterious struggle playing out between firms, financiers, and (the 99%, labor, take your pick), Is what’s mostly killing us and this worry over technology disrupting through Schumpeter’s Creative destruction is a minor element.
Moreover, it serves the interests of financial elites who are happy to find explanations for high unemployment and our ongoing debt deflation that takes the spot light off them. When I see banks and stock brokers align their interests with mine (as an industrialist), suggesting that freedom from regulation for them is akin to freedom from regulation for me, I blanch.
And when I compete head to head against hybrid monstrosities like GE, who use their status as shadow banks to provide vendor financing where I cannot, and pay zero taxes by leaving my country to operate elsewhere, while I do not is, let’s just say, galling. And when that vendor financing sours, and GE gets into trouble, watching them receive $billions in low interest bail out funds when I borrow at 8%, I get really disgusted. We are so bereft of functioning, pure innovative, manufacturing firms like mine, we can’t have a fact based discussion to even prioritize our problems. Like Rome, we are so screwed up we can’t debate the core issues because we have lost sight of what the core issues actually are. Thanks for your well considered response, but job loss from creative destruction is not our biggest problem from my perspective.
(1) Hudson is an interesting guy. This interview is about politics more than economics (like your comment).
(a) Economics, like all science, is about numbers. Telling “just so stories” (eg, Kipling explaining how the elephant got his trunk) is not economics. How would somebody disprove Hudson’s theory? What is the magnitude of the effects he describes relative to the swings in the US economy?
(b) Many of his specifics are wrong. Saying the bank bailout cost $13 trillion is a gross exaggeration. The economy was not shrinking when he gave this interview, and has continued to slowly expland since then.
(c) There is a conventional explanation for the current deleveraging cycles in Japan, Europe, and America: the Fisher-Minsky-Bernanke line of theory about debt deflation. For a brief description (and links to more information) see Debt – the core problem of this financial crisis, which also explains how we got in this mess (22 October 2008).
For an application of this to our situation details see these articles about the work of Richard Koo (Chief economist of Nomura). He calls it a balance sheet recession.
(2) “Substitute “firms”, or “industry” for entrepreneur above if you like.”
Economics is a science, in which words have precise meaning. Otherwise the discussion is a waste of time, or playing like in chapter 6 of Alice Though the Looking Glass:
Some of the most thought-provoking comments I’ve seen on FM’s site in response to this article.
Japan is a very special case when talking about automation, since the Japanese have a cultural policy of preferring to let useless workers stay at their jobs rather than firing them. In fact the Japanese even have a term for this kind of worker whose job has been eliminated, but who is allowed to stay: “Japan’s Window Zombies“, Tim Kelly, Forbes, 10 May 2009 — “Unable to easily lay off workers, Japanese companies come up with other ways to dump their duffers.” Because of Japan’s unique cultural solidarity, we should be wary of extrapolating Japanese society’s response to automation onto other cultures, particularly those societies which prize “flexible labor markets” like America.
Speaking of drones:
Of course, fighting wars with robots also has a downside: the enemy can hack the robots, capture them, reverse-engineer them, and send them back at you:
Futurist Thomas Frey spoke at TEDx recently and predicted that by 2030, 2 billion jobs will disappear (roughly 50% of the jobs on the planet). Source: “2 Billion Jobs to Disappear by 2030“.
Re: Japan
The lifetime employment policy applies only to the largest corporations. There is a large segemnts of small and mid-sized companies, many acting as vendors to or subcontractors of large corporations. Their employees enjoy no such protections, and they comprise the bulk of Japan’s workforce.
I agree with peterblogdanowich and am NOT a pessimist as such regarding modern technology and IT technology .i have personally wittnessed marvelous storys of success ensuring work for all within highly competitive GLOBAL sectors of production utilizing the most advanced automation possible at the same time maintaing work ( jobs ) and economic competitive success .( both needed for such process to be viable ! )
Still I am a Pessimist amongst other on the grounds mentioned by blogdanovich :
Lack of Leadership well even subversive undemocratic and totalitarian high- jacking of Leadership by people/ institutions / entities who enjoy disproportionate financial rewards from actual PRODUCTIVE processes of society in which they have NO real interest ( or real input ) except for financial exploitation .
These entities have ammassed a totally disproportionate control over society in the whole western world ….
They need to be STOPPED … if we want to maintain a free democratic society where there is space and opportunity for everyone
I strongly agree. Partially.
“Lack of Leadership”
If only we had leaders equal to our awesomeness! But, if I might committ heresy, perhaps the problem lies not in our leaders but in their followers? Are we in fact charged up, ready to trod a long and difficult road behind a leader? Or are we sheep, waiting to be bullied into the pen? Or cattle, tied to wagon and awaiting the lash?
FM responds that lifetime employment in Japan only applies to the largest corporations (true) and implies that this means that the average Japanese worker is as much at the mercy of automation as Euro/American workers.
Sorry, this just doesn’t add up. If you study historical chart number four on this webpage, you’ll see that Japanese unemployment rates have almost never risen above 3% except for a very brief period during the late 1990s.
My point was and is correct. Some societies like Japan go out of their way to avoid extreme unemployment. While America was nearing 10% unemployment, Japan never went above 3%. Japan did this by shifting to part-time work, by retaining “window workers,” and by closing down unprofitable divisions of companies and transferring the workers to more profitable divisions rather than firing them. Japan seems to be weathering the robot revolution without extreme unemployment and social disruption. Europe and America are not.
The Japanese love each other.
Moore,
Ratio of large to small businesses AND degree of automation = change in unemployment! No, it’s not that simple. There are many other factors. To mention just one: changing population by age. A aging and shrinking population takes much of the pressure off workers — acting to stabilize employment and wages.
For more information see “Japan’s changing demography“, The Economist, 26 July 2007.
“I (Robot) Thee Wed“, Daniel H. Wilson, Slate, 4 May 2012 — “Researchers claim robot-human marriage is in our future. But is our society really headed in that direction?”
[caption id="attachment_38598" align="aligncenter" width="300"]
A robot girl for the discerning male[/caption]
“The Answer Isn’t Socialism; It’s Capitalism that Better Spreads the Benefits of the Productivity Revolution“, Robert Reich, 6 May 2012
Excerpt
Socialism isn’t the answer to the basic problem haunting all rich nations. The answer is to reform capitalism. The world’s productivity revolution is outpacing the political will of rich societies to fairly distribute its benefits. The result is widening inequality coupled with slow growth and stubbornly high unemployment.
In the United States, almost all the gains from productivity growth have been going to the top 1 percent, and the percent of the working-age population with jobs is now lower than it’s been in more than thirty years (before the vast majority of women moved into paid work).
Inequality is also growing in Europe, along with chronic joblessness. Europe is finding it can no longer afford generous safety nets to catch everyone who has fallen out of the working economy.
… At the heart of the productivity revolution are the computers, software, and the Internet that have found their way into the production of almost everything a modern economy creates. Factory workers are being replaced by computerized machine tools and robotics; office workers, by software applications; professionals, by ever more specialized apps; communications and transportation workers, by the Internet.
… Consumers in rich nations are reaping some of the benefits of the productivity revolution in the form of lower prices or more value for the money – consider the cost of color TVs, international phone calls, or cross-country flights compared to what they were before.
But most of the gains are going to the shareholders who own the companies, and to the relatively small number of very talented (or very lucky and well-connected) managers, engineers, designers, and legal or financial specialists on whom the companies depend for strategic decisions about what to produce and how.
… The problem is not that the productivity revolution has caused unemployment or under-employment. The problem is its fruits haven’t been widely shared. Less work isn’t a bad thing. Most people prefer leisure. A productivity revolution such as we are experiencing should enable people to spend less time at work and have more time to do whatever they’d rather do.
The problem comes in the distribution of the benefits of the productivity revolution. A large portion of the population no longer earns the money it needs to live nearly as well as the productivity revolution would otherwise allow. It can’t afford the “leisure” its now experiencing involuntarily.
Not only is this a problem for them; it’s also a problem for the overall economy. It means that a growing portion of the population lacks the purchasing power to keep the economy going. In the United States, consumers account for 70 percent of economic activity. If they as a whole cannot afford to buy all the goods and services the productivity revolution is generating, the economy becomes stymied. Growth is anemic; unemployment remains high.
That’s why “supply-side” tax cuts for corporations and the wealthy are perverse. Corporations and the rich don’t need more tax cuts; they’re swimming in money as it is. The reason they don’t invest in additional productive capacity and hire more people is they don’t see a sufficient market for the added goods and services, which means an inadequate return on such investment.
But more Keynesian stimulus won’t help solve the more fundamental problem. Although added government spending has gone some way toward filling the gap in demand caused by consumers whose jobs and incomes are disappearing, it can’t be a permanent solution. Even if the wealthy paid their fair share of taxes, deficits would soon get out of control. Additional public investments in infrastructure and basic research and development can make the economy more productive – but more productivity doesn’t necessarily help if a growing portion of the population can’t absorb it.
What to do? Learn from our own history.
The last great surge in productivity occurred between 1870 and 1928, when the technologies of the first industrial revolution were combined with steam power and electricity, mass produced in giant companies enjoying vast economies of scale, and supplied and distributed over a widening system of rails. That ended abruptly in the Great Crash of 1929, when income and wealth had become so concentrated at the top (the owners and financiers of these vast combines) that most people couldn’t pay for all these new products and services without going deeply and hopelessly into debt – resulting in a bubble that loudly and inevitably popped.
During the Depression decade of the 1930s, the nation reorganized itself so that the gains from growth were far more broadly distributed. The National Labor Relations Act of 1935 recognized unions’ rights to collectively bargain, and imposed a duty on employers to bargain in good faith. By the 1950s, a third of all workers in the United States were unionized, giving them the power to demand some of the gains from growth.
Meanwhile, Social Security, unemployment insurance, and worker’s compensation spread a broad safety net. The forty-hour workweek with time-and-a-half for overtime also helped share the work and spread the gains, as did a minimum wage. In 1965, Medicare and Medicaid broadened access to health care. And a progressive income tax, reaching well over 70 percent on the highest incomes, also helped ensure that the gains were spread fairly.
This time, though, the nation has taken no similar steps. Quite the contrary: A resurgent right insists on even more tax breaks for corporations and the rich, massive cuts in public spending that will destroy what’s left of our safety nets, including Social Security and Medicare and Medicaid, fewer rights for organized labor, more deregulation of labor markets, and a lower (or no) minimum wage.
This is, quite simply, nuts. …
“Robots are coming (for your job)“, Michael Lind, Salon, 26 September 2012 — “Get ready: Automation could wipe out whole categories of employment, and not even 1 percenters are safe”
Opening:
During this year’s political campaigns, politicians of both parties have neglected one increasingly important constituency of American workers. I refer, of course, to robots.
The complaint “It’s the twenty-first century, so where are the robots?” is receiving an answer. Robots are being used in advanced manufacturing. Support is building for allowing drones, developed in warfare, to be used for commercial purposes inside the U.S. Google’s robocars have logged more than 300,000 miles on American roads and Las Vegas has legalized self-driving vehicles. Robot vacuum cleaners chase dust bunnies across the floors of many homes.
Oh, and phones can now talk back.
Just when many people had resigned themselves to an age of innovation limited to social media, technology in its iconic science fiction incarnation, the robot, is on the verge of transforming the economy and society. Few if any robots will take the form of silvery humanoids, and they are unlikely to revolt and try to exterminate their makers. But the effect of their evolution, if less dramatic than “Terminator” movies, could be profound.
Among other things, the rise of the robots may force a restructuring of the class system in the U.S. and similar advanced industrial countries. From an earlier stage in technological society, we have inherited a five-tier class system, based on functions in the economy circa 1950, which itself replaced an earlier agrarian class system. …
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