Matthew Yglesias tells us not to worry about the new industrial revolution

Larry Kummer, Editor

10 years ago

Summary: The new industrial revolution has begun, yet we have not yet begun to prepare. An article by Matthew Yglesias, neo-lib story-teller extraordinaire, shows why. He explains that faith-based economics assures us all will work out for the best.

Last week I posted Well-meant minimum wage increases will accelerate automation. On the same day Matthew Yglesias posted “Will minimum wage hikes lead to a huge boost in automation? Only if we’re lucky.” at VOX. He provides an unusually clear example of liberals’ love of just-so stories to explain the world in a pleasing fashion — much like the follies of conservatives that liberals (correctly) condemn (e.g., Megan McArdle).

Yglesias explains the new industrial revolution in simple and non-threatening terms. No need to worry, let alone act, since the experts are in control (it’s the neoliberals’ mantra). The opening states his thesis.

“…one major line of criticism from outlets like the Wall Street Journal editorial page and Forbes’s Tim Worstall is that big increases in pay floors only lead to job loss via automation. Both critics point to initiatives at McDonald’s and Wendy’s to automate more of the service process, and warn that robots, rather than workers, will be the real winners if liberals succeed in boosting minimum pay.

“This is doubly wrong. On the one hand, there’s little guarantee that increased minimum wages really will increase the pace at which labor-saving technology is developed. On the other hand, there’s no reason to think this would be a bad scenario.”

To draw these confident conclusions he closes his eyes and makes stuff up. This is a common response to the new industrial revolution, one large reason we are so poorly prepared for its obvious effects. Yglesias supports his first assertion by saying…

“Whether a legislative push for high pay can actually spur the development and deployment of new productivity-enhancing technology is really the big unknown about the minimum wage. The economics literature has an enormous amount to say about how to efficiently distribute a fixed stock of resources, but has not really succeeded in shedding much light on where innovation comes from or what policies support it.”

The technology in question already exists in relatively mature form, and is advancing rapidly. For instance, in food service companies are already testing another wave of automation (adding to the remarkable innovations of past decades) — with radically more sophisticated systems coming out of R&D shops. Microeconomics 101 explains that raising the cost of labor accelerates this shift. No hand-waving about “where innovation comes from” needed.

His explanation of why the next wave of automation will not be “a bad scenario” is myopic, even obtuse. It’s faith-based economics.

“What about the workers thrown out of jobs by the new robo-waiters? Many would get new jobs, though the way this would work is often ignored.

Most restaurants would keep longer hours (they’re paying for the rent and the robots anyway), meaning many workers would get a raise and change shifts.

The advanced robo-restaurant technology would itself be a valuable American export good, and people would be employed in designing and selling it.

Some low-wage work would be reallocated out of the relatively low-social-value restaurant sector and into things like child care and home health assistance, for which there is ample demand.

Since poor people are now making more money, there will be opportunities to sell them things — things like restaurant meals! — that they couldn’t previously afford, which in turn creates demand for new jobs.

Even better, to the extent that we are able to produce everything we need with less labor, we can afford to let people work less.”

This is the economic equivalent of asking the audience to save Tinkerbell by clapping their hands if they believe in fairies.

There is no basis to believe that restaurants’ longer hours come close to offsetting job losses from automation. Also, why would anybody get a raise?
There is no basis to believe that the new robo-restaurant machinery would be manufactured in the US. The number of people designing and selling it would be infinitesimal compared to the jobs lost in restaurants.
“Some low-wage work would be reallocated {into things} for which there is ample demand.” What are these areas with unmet demand for labor for fired restaurant workers to take?
This is just daft: fired restaurant workers from automation means “poor people are now making more money”.

Yglesias last point is the key: “Even better, to the extent that we are able to produce everything we need with less labor, we can afford to let people work less.” Who is this “we” that Yglesias refers to? Automation increases the profits of successful restaurant owners and reduces the aggregate income of their workers. Will the owners share their new profits? Now corporations — through their lobbyists such as the Business Roundtable and Chamber of Commerce — work to dismantle social safety nets and government redistributive programs.

America’s success in the 21st century might depend on how well we devise mechanisms to share the fruit from the new industrial revolution. Despite Yglesias’ hand-waving, an invisible hand will not make it happen. Previous generations did so only after severe social turmoil, such as 70 years of corporate violence suppressing strikes. Only time will tell if we do better.

We should be preparing now. The clock is running. Comforting pabulum like Yglesias’ does not help.