Tag Archives: productivity

At last economists see the robot revolution. Here’s why they worry.

Summary:  When I first warned about the “robot revolution” (the 3rd industrial revolution) 3 years ago, I was one of a minority. Experts assured us it would produce quick benefits without much disruption (unlike the previous 2). Time has brought new evidence, and now concern has replaced confidence. Today we review the problem. The next few posts will consider solutions. {1st of 2 posts today.}

“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’s “A Contribution to the Critique of Political Economy” (1857/58).

Robot Evolution

Matthew Yglesias gave a strong rebuttal to people blaming automation for the slow growth in jobs and wages since the recession ended. But it’s happening nonetheless, slowly but accelerating. People tend to underestimate short-term change, and over estimate it over the long term. But now people are noticing the drumbeat of announcements, as automation affects more jobs of all kinds. Even economists are doubting their easy confidence that the future must be like the past.

Previous posts list scores of examples. Every month brings more, such as …”The computer will see you now. A virtual shrink may sometimes be better than the real thing.” “Here come the autonomous robot security guards.”  Robots help deliver meals for patients.  “Eerily lifelike androids join staff at Tokyo tech museum.Journalists reporting the end of journalism as a profession,  “Watch out, coders — a robot may take your job, too.

The problem is structural on three levels, and just beginning. First there is the shift of rewards from labor to capital (those who own the machine), as we see in the workers’ falling share of GDP, and the rise in corporate profits as a percent of GDP.

The second structure factor: technology changes the distribution of income in many fields. We’re shifting to a winner-take-all economy, as explained in “Welcome To Extremistan! Please Check Your Career At The Door.” Excerpt:

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A graph showing the end of America as we know it.

Summary: This is third in a series showing that we’re losing America. This post examines rising inequality of income, one of the major forces reshaping our society and politics. It’s not a class war if we don’t fight back.  {2nd of 2 posts today.}

The one graph that ties together the strands making a New America.
Click to enlarge.

The Great Decoupoling

Andrew McAfee, 12 Dec 2012 — Click to enlarge.

This one powerful but dense graph shows the transformation of what we know of as America — born in the fires of the New Deal, WWII, and the civil rights revolution — into the America of the Gilded Age. The top 2 lines (blue and grey) show America’s increasing economic strength: rising labor productivity and GDP. The bottom two show what we get from that (private sector jobs and median household income).

Here you see the slowly widening break in the early 1980s — the Reagan years, an inflection in so many American political and economic trends — as the 1% siphoned off an increasing fraction of America’s income. That growing gap gives them ever more power, allowing them to restructure America’s institutions to better serve them.

Labor unions were crushed. Workers increasingly became contingent, disposable — either “independent contractors” (often de facto employees without the protections of formal employment), or temps, or just pawns to be fired as needed to boost profits. Open borders brought in more workers to drive down wages (e.g., H-1B visas for skilled workers). Enforcement of labor regulations were gutted, allowing growing exploitation of workers, such as illegally treated cheerleaders in professional sports, plus dubiously legal “managers” (no overtime), unpaid interns, and not-independent independent contractors.

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Three stories of America’s decline for your weekend reading

Summary:  Here are three stories about the decline of America. They’re too complex and too good to abstract. Please read them. The Republic is happening on our watch. It need not be so. That is the vital thing we must realize. Everything flows from that.

Liberty cries


I use Twitter (@FabiusMaximus01) to flag interesting and valuable articles, replacing the weekly posts. But here are three powerful stories about the decline of America, each examining a different facet, that deserve special attention.

(I) Losing Sparta: The Bitter Truth Behind the Gospel of Productivity“, Esther Kaplan, VQR, Summer 2014 — The best reporting I’ve seen in a long time. It’s told in long form, capturing not just the deep dynamics of this event but also its emotional impact on the people involved. It’s about the deindustrialization of America, about the myths we’re told about it, about its madness, about the evil complicity of our political leaders, and the devastation left in its wake.

(II) Oligarchy Blues“, Michael Ventura, The Austin Chronicle, 27 June 2014 — “Without fair elections and a viable legislative process at federal and state levels, the republic no longer exists.” Yes. But couch potatoes are ruled by oligarchs. As we learned as children from Disney films, it’s the great circle of life.

(III) ISIS and Iraq: The T-Shirts, the Cats, the App, the Hasbara“, Lambert Strether, Naked Capitalism, 11 July 2014 — A brilliant forensic analysis of the “news” about ISIS. In addition to useful guide to stories about the latest we must wet our pants in fear threat, it provides powerful evidence about two themes of the FM website.

  1. Yes, we’re among the most gullible people that have ever walked the Earth. We fall for the same propaganda again and again, from the same people.
  2. No, our shiny new tech — instantaneous access to all the world’s knowledge — has not given us the superpowers we need. It has made us neither smarter nor better informed.

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A look at the wonders coming from the Third Industrial Revolution

Summary: We can understand our potential future only by comparison with our pasts. On the cusp of the Third Industrial Revolution, we can look to the Second for insights as to what lies ahead. First we look at the grim facts of our current slow growth, then at how the Second IR reshaped America. The Third IR might do the same.

Industrial revolution

A vision of our future:

The Demise of U.S. Economic Growth: Restatement, Rebuttal, and Reflections

Robert J. Gordon, Professor of the Social Sciences, Northwestern U

National Bureau Economic Research (NBER)
February 2014 — Gate


The United States achieved a 2.0% average annual growth rate of real GDP per capita between 1891 and 2007. This paper predicts that growth in the 25 to 40 years after 2007 will be much slower, particularly for the great majority of the population. Future growth will be 1.3 percent per annum for labor productivity in the total economy, 0.9% for output per capita, 0.4% for real income per capita of the bottom 99% of the income distribution, and 0.2% for the real disposable income of that group.

  1. The primary cause of this growth slowdown is a set of 4 headwinds, all of them widely recognized and uncontroversial.
  2. Demographic shifts will reduce hours worked per capita, due not just to the retirement of the baby boom generation but also as a result of an exit from the labor force both of youth and prime-age adults.
  3. Educational attainment, a central driver of growth over the past century, stagnates at a plateau as the U.S. sinks lower in the world league tables of high school and college completion rates.
  4. Inequality continues to increase, resulting in real income growth for the bottom 99% of the income distribution that is fully half a point per year below the average growth of all incomes.

A projected long-term increase in the ratio of debt to GDP at all levels of government will inevitably lead to more rapid growth in tax revenues and/or slower growth in transfer payments at some point within the next several decades.

There is no need to forecast any slowdown in the pace of future innovation for this gloomy forecast to come true, because that slowdown already occurred 4 decades ago. In the 8 decades before 1972 labor productivity grew at an average rate 0.8% per year faster than in the 4 decades since 1972. While no forecast of a future slowdown of innovation is needed, skepticism is offered here, particularly about the techno-optimists who currently believe that we are at a point of inflection leading to faster technological change.

The paper offers several historical examples showing that the future of technology can be forecast 50 or even 100 years in advance and assesses widely discussed innovations anticipated to occur over the next few decades, including medical research, small robots, 3-D printing, big data, driverless vehicles, and oil-gas fracking.

Here is the story Gordon tells in two graphs, comparing growth during our golden years vs today’s slow trod.


Robert J. Gordon (2014)

Gordon gives a breakdown to the factors accounting for this large slowing in growth, looking at a different metric:

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Good news about the US economy!

Summary: Many people look at the US economy since the crash and deny there has been a recovery. Or a “real” recovery. That’s false. This is the 5th in a series about our recovery; today we examine those parts of the US economy that have recovered — some even making new highs. That’s too bad for the laggards, such as most Americans, but does not make the recovery less real. It does mean that the recovered sectors are unlikely accelerators of future growth.

Works well for money & power

Works well for money & power


  1. Wages – the big “tell”
  2. Vehicles
  3. Business capital expenditures
  4. Consumer Credit outstanding
  5. Housing – our savior?
  6. Other posts in this series
  7. For More Information

(1) Wages

Before we look at the strong sectors, note the big “tell”. The government’s stimulus programs have boosted profits and increased wealth of the 1%. But they have not brought much benefit to most Americans. Inequality has risen, real wage growth stagnate. Here’s the latest in a long stream of evidence, from the Bureau of Labor Statistics. This suggests that a fundamental shift has occurred in the structure of the US economy, as we passed a tipping point beyond which prosperity only trickles down.

BLS: Wages


(2). Motor Vehicles

Already recovered, and has risen slightly above the Q3 2005 peak to a new high.

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Is America on the road to zero growth?

Summary: Experts have a wide range of forecasts for America’s economy. Rapid growth, leading to the singularity. Slow growth, the muddle-through economy. An no growth. Each of these poses different challenges for America. All of these look plausible. Here we look at the darkest of three these scenarios, sketched out by Jeremy Grantham.  At the end are links to more information.

Excerpt from “On the Road to Zero Growth

By Jeremy Grantham
GMO Quarterly Letter, November 2012


Summary of the forecast

The U.S. GDP growth rate that we have become accustomed to for over a hundred years – in excess of 3% a year – is not just hiding behind temporary setbacks. It is gone forever. Yet most business people (and the Fed) assume that economic growth will recover to its old rates.

Going forward, GDP growth (conventionally measured) for the U.S. is likely to be about only 1.4% a year, and adjusted growth about 0.9%.

Population growth that peaked in the U.S. at over 1.5% a year in the 1970s will bob along at less than half a percent. This is pretty much baked into the demographic pie. After adjusting for fewer hours worked per person, man-hours worked annually are likely to be growing at only 0.2% a year.

Productivity in manufacturing has been high and is expected to stay high, but manufacturing is now only 9% of the U.S. economy, down from 24% in 1900 and 15% in 1990. It is on its way to only 5% by 2040 or so. There is a limit as to how much this small segment can add to total productivity.

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The coming big inequality. Was Marx just early?

Summary: Slowly more people see, slowly emerging, one of the great challenge for developed nations’ societies: increased productivity creates wealth unimaginable to earlier generations, but its benefits go to those who own the machines. Inequality of wealth creates inequality of income.   Marx might have just been right, but early. Today we have a note from Jeremy Grantham describing this future.  At the end see links to other posts about this engine of inequality.

Excerpt from “On the Road to Zero Growth

By Jeremy Grantham
GMO Quarterly Letter, November 2012
Red emphasis added.


… as economies mature and jobs move toward services, productivity per man-hour becomes harder to achieve. This headwind will continue into the indefinite future until one day, perhaps, we will reach what has been called a singularity. The last handful of humans engaged in manufacturing – all engineers and designers – are supervising intelligent robots making and designing yet another generation of even more productive and intelligent robots.

… This deepening of capital and technology almost guarantees that productivity will continue to be high in manufacturing even as the percentage of the total workforce employed there dwindles away toward zero. As the rest of us do each other’s art appraisals and investment management we can fantasize about productivity, but it will mainly represent hard to measure qualitative improvements.

On a hypothetical island where services are outlawed and only manufacturing exists, the final position is that automation, and thereby capital, produces everything while all of the mere mortals sit on the beach. And starve? The worthless unemployed who are obviously not carrying their weight?

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