3rd Industrial Revolution

2012: the year people began to realize the robots are coming

Summary: The FM website strives to show readers visions of the future. Sometimes we succeed, like with the robot revolution. Two years ago we alerted readers of its arrival, reviewing fifty years of warnings. Now its splash has attracted the attention of economists and journalists. Today we look at some analysis about this, probably one of the major economic and political challenges of the 21st century.

Wired, 24 Dec 2012

“Better than human”. from Wired, 24 December 2012


Experts slowly seeing slivers of this vast restructuring forced on our world: two hor d’oeuvres, a main course, and pointers to more information. Red emphasis added.

  1. The monsters Scylla and Charybdis of the 21st century economy
  2. Going to the heart of the problem
  3. Optimism from faith-based innumeracy
  4. Detailed analysis: Paul Krugman discovers the problem
  5. For More Information

(1) The monsters Scylla and Charybdis of the 21st century economy

(a) Dean Baker, Center for Economic and Policy Research, 10 December 2012 — Excerpt:

If you are concerned that a falling ratio of workers to retirees is going to make us poor then you are not concerned that excessive productivity growth will leave tens of millions without jobs. Let’s try that again. If you are concerned that a falling ratio of workers to retirees is going to make us poor then you are not concerned that excessive productivity growth will leave tens of millions without jobs.

It is possible for too much productivity growth to be a problem, if the gains are not broadly shared. It is also possible for too little productivity growth to be a problem as a growing population of retirees imposes increasing demands on the economy. But, it is not possible for both to simultaneously be problems. (For fans of arithmetic, I just did the numbers on this. It is highly unlikely that lack of productivity growth will be a problem since even very weak rates of growth will swamp the impact of demographics.)


The last office worker

The last office worker

(b) Are robots and aging demographics self-cancelling problems?“, Tyler Cowen, Marginal Revolution, 28 December 2012 — Excerpt:

That is missing the point, as there is too much talk of “productivity growth” per se and not enough of either distribution or political economy. If robots concentrate wealth in the hands of IP {intellectual property} owners, wages for many workers might fall or remain stagnant. That is a problem.

Similarly, if robots concentrate wealth in the hands of IP owners, it may be hard to drum up the tax revenue to support a higher dependency ratio. The wealthy may produce a blocking political coalition or capital simply may be harder to tax for mobility, accountancy, and Laffer curve-like reasons. There is then a problem with the dependency ratio.

We then have both problems, no contradiction.

(2) Going to the heart of the problem: it’s a political problem

Robots are taking your job and mine: deal with it“, Cory Doctorow, Boing Boing, 1 January 2013 — Excerpt:

But here’s the thing that neither of these articles — or even Bruce’s acid observations — touches on: once technology creates abundance, what possibilities exist for distributing the fruits of that abundance such that the benefits are more evenly felt?

… In America, anyone who proposes an increase in overall quality of life through public schools, health programs, libraries, or even Internet access, is immediately branded a socialist and dismissed out of hand.

(3) Optimism from faith-based innumeracy

Better Than Human“, Kevin Kelly, Wired, 24 December 2012 — “Imagine that 7 out of 10 working Americans got fired tomorrow. What would they all do?” Kelly provides this brilliant graphic:

Boing Boing, 3 Jan 2013

Wired, 24 December 2012. But will the boxes be of equal size, or will “A” be larger than “D”. Much larger?

Kelly assumes the future must be like the past, and makes no effort to size the effect of the various factors. This leads him to this Dr. Pangloss-like forecast, assuming that new jobs will appear to replace the old. The above four boxes probably will not be of equal size.

In the coming years our relationships with robots will become ever more complex. But already a recurring pattern is emerging. No matter what your current job or your salary, you will progress through these Seven Stages of Robot Replacement, again and again:

  1. A robot/computer cannot possibly do the tasks I do.
  2. OK, it can do a lot of them, but it can’t do everything I do.
  3. OK, it can do everything I do, except it needs me when it breaks down, which is often.
  4. OK, it operates flawlessly on routine stuff, but I need to train it for new tasks.
  5. OK, it can have my old boring job, because it’s obvious that was not a job that humans were meant to do.
  6. Wow, now that robots are doing my old job, my new job is much more fun and pays more!
  7. I am so glad a robot/computer cannot possibly do what I do now.

(4) Detailed analysis: Paul Krugman discovers the problem


(5) For More Information

About the Robot Revolution:

  1. The coming big increase in structural unemployment,
    7 August 2010
  2. The coming Robotic Nation, 28 August 2010
  3. The coming of the robots, reshaping our society in ways difficult to foresee, 22 September 2010
  4. Economists grapple with the first stage of the robot revolution, 23 September 2012
  5. The Robot Revolution arrives & the world changes, 20 Apr ’12
  6. The coming big inequality. Was Marx just early?, 27 November 2012
  7. In Friday’s job report you’ll see early signs of the robot revolution!, 5 December 2012
  8. Krugman discovers the Robot Revolution!, 9 December 2012
  9. How do we respond to the Robot Revolution?, 11 December 2012




38 replies »

  1. The basic outline is clear enough from experience we already have: when productivity increases but real wages do not keep pace, or even fall, then eventually—once the latest debt-based inventions of the financial sector have stretched to the limits of credibility—there will be no one to buy what the economy can produce. Next, one of the following (or some combination/sequence of them) has to happen:

    1. Underproduction/recession, like now, only perhaps much, much worse. Ultimately unstable, but anybody’s guess how long before it blows up and what happens when it does.

    2. A really large military endeavor, or some equivalent calamity, upends everything; if we win/survive, in the aftermath perhaps our system reboots, something like it did after World War II.

    3. Most citizens become owners as well as laborers, so that capital becomes a significant source of income for consumption. Probably neither reachable nor sustainable without very strong government action.

    4. Labor is heavily subsidized so that wages don’t fall to the market price implied by their decreasing marginal value relative to capital. Difficult to see any mechanism for this other than very strong government action.

    5. The robots become consumers as well as producers. Most of us have a lower standard of living than the machines we serve.


    • “The robots become consumers as well as producers.”

      What form would this take? At least in the foreseeable future, robots do not receive an income; they do not have personal needs and wants; they cannot choose what to do.


    • guest,

      You’re thinking of non-sentient machines. Imagine AI’s!

      Science Fiction has explored such worlds, imagining AI’s with vash wants and ambitions. One of my favorites: Colossus (1966) by British author Dennis Feltham Jones, about super-computer AIs assuming control of man. Two sequels, The Fall of Colossus (1974) and Colossus and the Crab (1977) imagine what they’d do with the world (more interesting than SkyNet’s genocide). The film is Colossus: The Forbin Project (1970), which ends with the victory of the computers.


    • Coises,

      All these are valid scenarios, plus others from history. Such as long periods of statis, hundreds or thousands of years. Unlike what Captain Kirk tells on Star Trek, history shows that people tolerate neo-feudal systems quite well.


    • “You’re thinking of non-sentient machines. Imagine AI’s!”

      This is precisely why I stated “At least in the foreseeable future…”


    • guest,

      That’s a fascinating response, pointing to an important question! To some people, AI’s are the foreseeable future. I strongly recommend reading AI Magazine, the publication of the Association for the Advancement of Artificial Intelligence.


  2. Our government has passed a health care law providing contraceptives. Every previous government has tried to increase the birth rate. The government is also deporting large numbers of illegal immigrants. All of this will lead to less hungry mouths to feed. Perhaps our government is way ahead of us on this problem. I am only half joking.


    • This isn’t something I follow closely, but I don’t believe much of SDW’s comment is correct. Exaggerated, at best. In fact, I think he’s been getting his information from right-wing sources such as Fox News, which often leads to a disconnect from reality.

      How did previous Administrations attempt to increase the birth rate? European governments have shown that this can be done, but US government’s have done little to copy them. Mandatory substantial paid maternal leaves, free or inexpensive health care for working families, large tax subsidies for children, broad access to free or inexpensive day care, etc.

      Are deportations up substantially? There is a long history of bursts of government deportations — looks good in the news, esp during hard times — followed by reduced activity (as preferred by both political parties).

      Are illegal immigrants “mouths to feed” (ie, are a large fraction on welfare)? That seems unlikely, IMO.


    • Too many hungry mouths to feed is not the problem.

      When production is almost entirely the result of capital, and labor is but a minor (and thus very cheap) component… who will be able to buy what we can produce?

      The very rich can hardly be motivated to buy, by themselves, enough to supply satisfying returns on their own wealth; the poor can’t afford it. This dynamic is underway already, in the current recession; if (or, more realistically, when) labor is further devalued because capital can exploit machines more efficiently than people to do most tasks, it will get much worse.


    • “who will be able to buy what we can produce?”

      It’s purely a question of politics — of wealth and income distribution — and one which in various forms has been confronted often throughout history. Sometimes successfully, as in Solon’s reforms which created the greatness of Athens. Sometimes less so, as in the French Revolution.

      Now it’s our turn.


    • It’s purely a question of politics

      Perhaps, but very contentious politics.

      Paul Krugman’s post Technology and Wages, the Analytics is relevant; if technological advances pan out in certain ways—Krugman’s Technology B example—the market balance between capital and labor will change in such a way that, as the professor wrote in Rise of the Robots:

      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, well, lots of assets inherited from your parents.

      For the past what—250 years?—outside the communist bloc, the politics of economics has been mostly about whether government should merely provide the legal infrastructure to support market capitalism, or if it should supply a gentle corrective now and then, when things get out of hand. Dealing with the “Technology B” scenario would not mean getting market capitalism back on track, but setting up a strong and persistent countervailing force (items 3 and 4 in my first post).

      It would mean admitting that quaint fellow with the same last name as Groucho, Chico and Harpo was not entirely wrong.


  3. I strongly suspect the people who are speculating about the future (or current) sentience (imagined) of a machine are quite over their heads in this metaphysical realm. Right now any such concept is unmeasurable.

    Add that quasi-madness into the “labor markets” in any sort of unregulated manner and this will undoubtably prevail (and forget any idea of a neo feudal existence as “tolerable”,,,,I ask for who–You?):

    “To allow the market mechanism to be sole director of the fate of human beings and their natural environment, indeed, even of the amount and use of purchasing power, would result in the demolition of society.

    For the alleged commodity “labor power” cannot be shoved about, used indiscriminately, or even left unused, without affecting also the human individual who happens to be the bearer of this peculiar commodity. In disposing of a man’s labor power the system would, incidentally, dispose of the physical, psychological, and moral entity “man” attached to that tag.

    Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime, and starvation. ”



    • Breton,

      While your comments are all valid in a sense. when speaking of jobs we’re looking at a narrower sense of “AI”. Certainly one in which machines have made “measurable” progress.

      The ability to sense its environment, process that along with “learned” (ie, stored) information , make decisions in defined narrow domains, and make changes in its environment. What James Blish in his 1962 “Cities in Flight” novels called semi-intelligent machines.

      The progress in these areas has been rapid. AI software engineers believe much of this is masked by our definition of AI as what computers cannot yet do. Once they gain an ability (eg, limited speech recognition), it become “just software” — no longer AI.

      This developments might not replace poets or philosophers, or lead to a “votes for AI’s” movement. But they could displace lots of jobs during the next few generations.

      As for the effect on humanity, I see no reason for pessimism. Increased productivity will open up wonderful new possibilities, assuming we solve the political challenges. But progress has always create political challenges, and we’ve always been able to solve them.


  4. My sources of information for the previous comment are main stream. My hypothesis that our government is intentionally controlling population size to fit the need for a smaller work force was in jest though engineerng birthrate is mentioned in “Brave New World”. The Europeans are quite disturbed by birthrate of 1.5 children per couple but find little correlation to economic situation or access to contraceptives. And no appreciable increase in birthrate by direct monetary support. “Factors impacting on lower fertility include the instability of modern partnerships and value changes.” A thought provoking article: “Europe the continent with the lowest fertility“, Human Reproduction Update, Nov-Dec 2010

    Your topics are also very thought provoking. Thank you.

    Free contraceptives http://www.cbsnews.com/8301-504763_162-57484277-10391704/free-contraception-for-women-provision-of-obama-health-care-law-starts-today/

    Deporting foreigners http://www.nytimes.com/2012/09/08/us/us-deports-record-number-of-foreigners-in-2011.html


    • SDW,

      Thank you for the additional information. Just to recap, I pointed to three statements that I don’t believe are correct. Your comments about (1b) and (4) suggested to me relying on right-wing news sources. Esp #4.

      (1a) “How did previous Administrations attempt to increase the birth rate?”

      (1b) A sidenote: “European governments have shown that this can be done”

      Several governments in Europe have reported success with such measures. From memory, both the Nordics and France.

      (2) “Are deportations up substantially?”

      Thanks for the articles about this, showing that Obama has increased deportations by aprox 18% over the rate during Bush Jr’s administration.

      (3) This is the big one, IMO the most serious of your allegations: “Are illegal immigrants ‘mouths to feed’ (ie, are a large fraction on welfare)?”

      There are many costs to illegal immigration, most especially the potential for them to depress the wages of unskilled Americans. But I wonder if increased welfare costs is high on the list.


  5. Guest asked what form “robots as consumers” could take. Frederick Pohl wrote a witty story about that called “The Midas Plague.”

    Guest goes ont o remark “when productivity increases but real wages do not keep pace, or even fall, then eventually—once the latest debt-based inventions of the financial sector have stretched to the limits of credibility—there will be no one to buy what the economy can produce.” The actual situation is more complex than that, because wages in the third world rise while wages in the developed world fall. What you see is global wage arbitrage. The wages don’t meet in the middle, but fall substantially from first-world standards, for the obvious reason that doubling the annual income of a Chinese rural peasant represents a lot smaller number of inflation-adjusted dollars than halving the income of an American middle-class worker. At the same time, the entire global GDP contracts sharply. Once again, because doubling a Chinese peasant’s income adds much less to global GDP than halving an American middle-class worker’s income.

    Increasing automation, which leads to a lower employment/population ratio, does not necessarily lead to poverty and social instability. Consider that Germany has an E/P of 55, compared to America’s current E/P of 56. If America’s social problems and eroding middle class were really due to its low employment-to-population ratio, then Germany would be in much worse condition. But it isn’t. FM may reply that Germany is exporting its way out of this problem, but that isn’t really a response because FM dodges the essential issue that Germany E/P ratio is lower than ours but they don’t have an unemployment problem.

    Clearly Germany is using social policy to enhance its safety net and thereby avoid the kinds of erosion of the middle class experienced by America .Where that money comes from (whether from exports, as in Germany, or from dominance in a wide range of intellectual property fields like movies and WIndows software, as in America, or in global dominance in internet seach, as in America, or in global dominance in weapons sales, as in America) makes no difference. The essential point is that Germany is actually taxing the income of its world-class industries to provide a social safety net, whereas America simply isn’t. Instead, America has chosen to avoid large-scale social revolt by unleashing the DHS and police using military weapons (LRAD sound cannons, etc.) against non-violent protesters clamoring against the erosion of the middle class. Talking about German exports represents a side issue tangential and ultimately irrelevant to the central point that America has decided not to have much of a social safety net, whereas Germany has put an excellent one in place. We could also talk about the fact that German higher education is essentially free, while it’s increasingly unaffordable for Americans.

    It’s also short-sighted to restrict the discussion of technology to robots. The internet has had a much larger impact on the global economy than robots. See “The great doubling: the challenge of the new global labor market” by Richard Freeman, August 2006, available as a pdf from the UC Berkeley edu website. Freeman points out that between 1990 and 2005, the global labor force nearly doubled due to the introduction of the internet + the liberalization of China, India and the former USSR .This has had exactly the effects you’d expect from classical economics: doubling the labor force while increasing the amount of global capital by only 61% (since China and India are not rich countries, and the USSR had little hard exchangeable currency after the fall of the Soviet Union) has been a bonanza for employers, but terrible for workers.


  6. FM offers: “This developments might not replace poets or philosophers, or lead to a “votes for AI’s” movement. But they could displace lots of jobs during the next few generations.

    “As for the effect on humanity, I see no reason for pessimism. Increased productivity will open up wonderful new possibilities, assuming we solve the political challenges. But progress has always create political challenges, and we’ve always been able to solve them.”

    Displacing lots of jobs results in lots of people with no jobs. Right? And then what do these people “do”……the 47% or whatever diminshing class we can assign them to? And who decides to do that?

    Corporations make that decision…has been going quite sometime in the recent generational past, just for example. And mainly here in the USA. You all think this just happens, as in like, organically in a chemical reaction—like scientifically unavoidable? Please, spare us the apologetics.

    “…wonderful new possibilities.”?
    Such polyanna hope and change stuff. This place deserves better counterpoints to what I posted from Karl Polanyi earlier.

    What has happened is the financialization of everything in the USA. Commodify almost every thing imaginable and the people — well, what about ’em?

    If you are a Rentier, which I am, you know this deep in your bones.(we are middlemen and produce damn near nothing!) If you are a producer or have been one or on a team of producers/manufacturers, which I have also been, you know it because you were replaced and cast aside. All for a “price”.

    Americans have this great learned helplessness in which they sit by and watch life happen and then try to conjure up reasons and hopes of eternal progress in almost “every area” of life….in a few more generations. Whew.

    Try this on for size:

    “When the modern corporation acquires power over markets, power in the community, power over the state and power over belief, it is a political instrument, different in degree but not in kind from the state itself. To hold otherwise — to deny the political character of the modern corporation — is not merely to avoid the reality. It is to disguise the reality. The conventional view serves to protect us from the painful job of thinking.”
    — Jamie Galbraith’s Dad

    So what were you saying about the need for a “political solution”? Pessimistic? You best be, not for yourself but for the next ones who are not clever enough to step aside and create anew.



    • It’s always fun to read people like Breton, who take Zeno’s Paradox too seriously. While despair usually seems wise — Change Is Impossible! — history shows that it’s false. In fact change is possible. The existence of western civilization proves that.


  7. FM has offered the “lump of labor fallacy” rebuttal to which Breton counters with the point that increasingly adept AI-like programs are now cutting into what used to be considered exclusively human jobs requiring genuine creativity, like news reporting (new programs take raw facts from the net and write passable local news stories about ’em) or electronic design (genetic algorithms can produce new circuits or building or car or airplane designs that work better than human-generated designs).

    It’s not clear whether Breton or FM is correct. Time will tell. Perhaps Ai-like algorithms will peter out and reach a hard ceiling beyond which human workers are always required. Or perhaps we’ll see continued incremental advances to the point where such a small and highly educated elite of human workers are the only peole left employable that, for all practical purposes, machines will replace most humans in the workforce. Time will tell. What is clear is that, as FM points out, even in the worst-case scenario where machines have nearly completely replaced humans, we could certainly rearrange our social-economic system to eliminate unemployment. After all, if machines have so entirely replaced human workers that everyone is unemployed, why does anyone need to work? We can simply give everyone a basic allotment of housing food, spendable credit, and so on, and let the average citizen get on with more interesting and productive activities than standing in front of a McDonald’s counter yelling “Order number 47, your order is ready!” Or, at a slightly higher level, filing yet another tiresome motion for summary judgment against a 14-year-old kid who downloaded some movies because a giant media monopoly wants to preserve its artificially and unnaturally-generated profits made possible only by an absurd extension of copyright to ludicrous (life of the creator + 70 years) lengths.


    • “We can simply give everyone a basic allotment of housing food, spendable credit, and so on”

      This means redistributing income and wealth from those entities that reap the benefit from the fully-robotized economy to the people, which ultimately implies confronting the class that owns the capital (production capital will be the robots) and diverting its profits to social uses. We are clearly going in the opposite direction now, and this class will then have accumulated so much wealth and captured the political infrastructure to such an extent that it will be in a position to repulse every attempt at implementing what you suggest — including through genocidal means, for instance with specialized killing robots, such as evolved drones…

      If you like prospective, then look at all plausible scenarios. Which ones are the most probable? I presume you answer will depend on your personal degree of optimism.


    • Guest,

      Nicely said.

      It is important to look not just at the US, but at all developed nations. Look at the Nordics and Northern Europe. In many ways these nations may be on a batter track for success in the 21st century.

      An indicator of their relative success is how they are shown in the US news media — the relentlessly negative spin shows how our ruling elites see that we must be kept ignorant about these nations. Much as the Soviet Union kept from its citizens the consumer success of the US.

      I have talked with many intelligent, well-educated Americans who believe the health care systems of Europe are hell holes. No amount of evidence will convince them that most of those work better than ours by most metrics — delivering care to their full population, with equivalent outcomes, at 1/2 to 2/3 the cost.

      The real amazing story of post-WW2 America is how well indoctrinated we have become, the first stage to domestication.


  8. It’s hard for me to imagine why robots would ever have wants. I thought their lack of wants was the main reason they were replacing humans to begin with!

    What are the hypothetical scenarios in which someone would intentionally build a robot with that degree of autonomy? I mean, I guess geek scientists would naturally do it just to prove it was possible, but if they built one, who would employ it? Humans have thousands of years of practice in keeping down masses of innately-sentient, innately-social, innately-aggressive human underlings… it’s hard to imagine how an intentionally-designed “being” could ever end up as a peer-level threat to the top of the social pyramid.

    The zombie apocalypse seems realistic in comparison.


    • Mikyo get the best Science Fiction reference award — for the allusion to Do Androids Dream of Electric Sheep? by Philip K. Dick (1968), made into the film “Blade Runner” (1982).


    • Matt,

      I can give the science fiction answer (perhaps a reader who understands these things can comment on the reality): today software evolves slowly and under our control because its designed and mostly written by humans. Imagine when software develops so that it evolves, software writing software. Still under control of humans, but less so. With each cycle the software evolves slightly more under its own imperatives. Not by will — any more than human physical or social evolution is willful — but nonetheless ever less under human control.

      Why would that happen? Business and military pressures for greater effectiveness, much like that that drove the nuclear arms race during the cold war. We might not like the gradual loss of control, but someone will take the next step — putting our company or nation in a position of inferiority in the vital field of software engineering (ie, their software will evolve faster).

      This might even be a path to AI self-awareness, if this evolution follows the mysterious path that lead to human self-awareness.

      Will this happen? I have no idea. But I am confident that with each new century humanity takes another step into the unknown, with challenges ahead we cannot today imagine.


  9. About the role of patents in the robot revolution

    More on Capital-Biased Technological Change“, Dean Baker, Center for Economic and Policy Research (CEPR), 28 December 2012 — Excerpt:

    Since several people in comments and e-mails raised questions on my earlier post on capital-biased technological change I will try to clarify my point. The original impetus was a Paul Krugman post in which he raised the possibility that changes in technology were causing a redistribution from labor to capital. (He has since written further on the topic.)

    My point was to note that this sort of redistribution cannot just be a matter of technology, it also involves a very big role for the laws and norms that make such a redistribution possible. I referred in the earlier post to the Cambridge controversies in the theory of capital.

    … in the modern return to capital story … a very large chunk of profits is earned by software companies, drug companies or other corporations that profit primarily based on their ownership of intellectual property.

    Intellectual property serves a social purpose. It is a way to provide an incentive for innovation and creative work. However it is certainly not the only way. An enormous amount of research is funded publicly, as with the NIH, and also through universities and non-profits, and from private companies not seeking to profit from patent or copyright protection. It is far from clear that patents and copyrights are the most efficient mechanisms for supporting innovation and creative work. If our current intellectual property regime also has distributional consequences that we consider bad, then that would be a serious strike against it.

    But the basic point is that if we are concerned that the economy is leading to a situation where an ever large share of the gains from growth are going to capital, we should not imagine that this is just the result of technological change. It was the result of conscious policy choices. As we say here at CEPR, money does not fall up.


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