Krugman discovers the Robot Revolution!
Summary: One of the great challenges of the 21st century will be managing the next wave of automation. This rise in productivity can make us richer, create feudal-like inequality, or spark massive social conflict. The result depends on our decisions. The first step, as always is problem recognition. Today we took another small step forward.
An increase in the productivity of labour means nothing more than that the same capital creates the same value with less labour, or that less labour creates the same product with more capital.
— Karl Marx, Notebook IV of A Contribution to the Critique of Political Economy (1857/58)
Slowly more people become aware of the coming Robot Revolution, the next wave of automation. Now it’s Paul Krugman’s turn: “Rise of the Robots“, New York Times, 8 December 2012:
On the other hand, it’s not good news for workers! This is an old concern in economics; it’s “capital-biased technological change”, which tends to shift the distribution of income away from workers to the owners of capital.
Twenty years ago, when I was writing about globalization and inequality, capital bias didn’t look like a big issue; the major changes in income distribution had been among workers (when you include hedge fund managers and CEOs among the workers), rather than between labor and capital. So the academic literature focused almost exclusively on “skill bias”, supposedly explaining the rising college premium.
But the college premium hasn’t risen for a while. What has happened, on the other hand, is a notable shift in income away from labor:
If this is the wave of the future, it makes nonsense of just about all the conventional wisdom on reducing inequality. Better education won’t do much to reduce inequality if the big rewards simply go to those with the most assets. Creating an “opportunity society”, or whatever it is the likes of Paul Ryan etc. are selling this week, won’t do much if the most important asset you can have in life is … assets inherited from your parents. And so on.
I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism — which shouldn’t be a reason to ignore facts, but too often is. And it has really uncomfortable implications.
But I think we’d better start paying attention to those implications.
Update: Follow-up Krugman article
More analysis of the Robot Revolution: “Technology or Monopoly Power?“, Paul Krugman, New York Times, 9 December 2012
About the Robot Revolution
Marx described it. His vision was muddled. He was wrong about the results of industrialization, as most societies found ways to distribute their fruits without civil war. But now the same challenge returns as the flow of national income shifts from workers to those who own the means of production. Krugman’s graph above shows one side of the coin; here is the other: Corporate Profits as a fraction of GDP:
What can we do?
“Choice. The problem is choice.”
— Neo, The Matrix Reloaded
This is a large challenge, only one of those facing us in the 21st century. Changes in the family structure and society’s demographics. Climate. Depletion of resources. Loss of hegemony as the world evolves to a multi-polar system. Today complacency is our enemy, encouraging us to waste our most valuable resources: time.
Marx describes the challenge of the robot revolution, and points to the solution. We can organize our society to meet this challenge, as we have re-imagined society so many times before to meet past challenges.
“Therefore, mankind always sets itself only such tasks as it can solve; since, looking at the matter more closely, we will always find that the task itself arises only when the material conditions necessary for its solution already exist or are at least in the process of formation.”
–- Preface to A Contribution to the Critique of Political Economy by Karl Marx (1859)
(4) Other posts about the coming Robot Revolution
- The coming big increase in structural unemployment,
7 August 2010
- The coming Robotic Nation, 28 August 2010
- The coming of the robots, reshaping our society in ways difficult to foresee, 22 September 2010
- Economists grapple with the first stage of the robot revolution, 23 September 2012
- The Robot Revolution arrives & the world changes, 20 Apr ’12
- The coming big inequality. Was Marx just early?, 27 November 2012
- In Friday’s job report you’ll see early signs of the robot revolution!, 5 December 2012
- Krugman discovers the Robot Revolution!, 9 December 2012