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The Rise of Robonomics

Abenomics, move over.

Kevin Drum isn’t as optimistic about the massive capital-biased technological change that robots promise:

Nor is it enough. Even if we can immerse ourselves in the web all we want for low cost, we still need to eat, clothe ourselves, live somewhere, and so forth. Until our future robot paradise arrives, this is a big deal. If you lose your job to a robot, your net economic position is going to be sharply worse than it used to be.

Drum doesn’t buy my argument that this structural change will almost-definitely be a good thing. At least not in the short-run. I want to clarify my last point, which I’ve clearly obscured, vis-a-vis the emphasized text. If mass labor is no longer needed to produce most goods and services (an assumption I doubt – but that later), there is definitely reason to believe in disemployment effects. But my point wasn’t about unemployment, per se, but standard of living. A rise in total output will allow much sharper redistribution of income.

Long ago, J.S. Mill noted that the humanitarians of the day needn’t criticize the Smithian free market in its “natural” tendencies. Because production was an economic question, and distribution was political. Of course, he ignored the intimate link between the two. If high-earners are taxed at sufficiently high rates, they will definitely be disincentivized at the margin.

But to the extent Drum’s suppositions are true – i.e. that robots replace most wage labor – production has, largely, been solved. (Drum’s whole point is there isn’t much work to be done in “running” the robots, material production will be on auto-pilot). The vast amounts of capital income would lend themselves to more redistribution, and I doubt that standard of living would fall much at all. Remember, the capitalists who own all the robots won’t have any profits without a huge and growing consumer base. Falling cost of production implies increase in supply, and hence more surplus –  consumers included. I cannot emphasize this point enough – without healthy consumption, robots are useless. I’ve read comments that the rich would “use” the robots “for themselves”. This is highly unlikely for a plethora of reasons but, if it comes to pass, will mean everyone else can create their own, relatively labor-intensive economy. Problem (kinda) solved. Capitalists paying huge sums for fixed quantities, like land, make a new Ricardian tax program a perfect choice.

This is tangential to the main point, because I don’t think we’ll face severe disemployment effects at all. For all the talk about “offshoring” to China, the American labor market adjusted remarkably well over the Clinton and early Bush years. The post-industrial apocalypse that is Detroit aside, the current crisis isn’t, at least not directly, one of structural unemployment.

On that note, this whole argument has been framed in an unfortunately Western point of view. Most wage labor across this world is treated in dismal conditions. They don’t want to work, but have no other way to put food on the table (or on the mud floor, as it might be). Just calculate, how many slaves do you have? I have 29. In a robotic world, that will be nil. I know there are many poor women across India who would rather put their ten year-old son in school than on the hot field as a brutally-treated farmhand.

Drum seems to think that in our robotic future, the demand for (most) labor will vanish:

I very much doubt [that millions will enter the ‘thinking classes’]. The vast majority of humans have neither the skills nor the desire for this. Rao may be right about “millions,” but that represents just a tiny fraction of the human race. What about the rest of us?

I was probably a bit idealistic about the future being “a cornucopia of thought, refinement, ideology, and science”. As I noted, if incorrectly applied, such jobs are by definition restricted to the smartest who, by definition are few. But an important part of the argument remains. Many people today who feel financial pressures either drop out of the educational system early, or undertake a purely vocational education, against their will. And this isn’t a bunch of intellectual snootballing either – I’m more than happy if people turn to “lower” pleasures (this was in the spirit of Mill, after all!)

But in the future we’ll see more youngsters confident enough to study english, philosophy, or the lab sciences. Noah Smith’s argument against all non-econ PhDs will become a nonstarter. Kids who want to pursue their time as “starving artists” will have all the means to do so. I think Drum underestimates the huge demand for the more “thinking” pursuits of life we’d see if the whole world – billions not millions – was educated.

As Tyler Cowen linked to, earlier today, a Master’s in Computer Science from one of the best universities is now available for $7,000. TotalThis is a story about how not even the most exclusive admission committees can keep the gate closed on learning itself.

And there’s another narrative here. The huge increase in material wellbeing (unequal as it might be) will itself create demand for all kinds of new things we can’t even imagine. Here’s one prediction. As a % of total employment, the sex industry will grow relatively rapidly. Because no robot can replace, how to put it.. a beautiful woman.

And this pattern carries across. We’ll have more people watching plays at the local theatre, and spending time with their grandparents. Or tending to a garden. Michael Pollen will no longer be chastised as a sexist pig.

Just because myself and Kevin Drum can’t predict the future demand for employment doesn’t mean it won’t exist. I don’t think most of the jobs today would have been predicted ten years ago, let alone fifty. I place incredibly stock in human ingenuity.

This just isn’t about the “long-run”. There are two ways about thinking about the immediate effects. Disemployment might be relatively prominent during “structural adjustment”, as an economist would say. But this doesn’t always have to be so painful. America became a service-based economy rather quickly. Also remember, at the hark of the industrial revolution Luddites were saying the same thing (and burning down buildings in the process). Drum can look retrospectively to analyze why they’re wrong and it’s different this time. But who is the say the future Kevin Drum won’t be saying the same thing!

And, in the meantime, unemployment can always take two forms: of bodies, or of hours. We have good reason to believe a good part of America is “overworked” – the same people that Drum thinks will be most hurt by this change. Moving to fewer working hours will allow working-class parents to spend more time with their kids and mothers to enjoy better maternity leave and benefits.

The smaller working-day will create more social interaction, perhaps at a local cafe. In fact, along with the sex business, I’d be bullish on fancy restaurants – in the future.

I hope I’ve made more clear the obscurities in my previous post. But I also want to get more specific. What does Drum think unemployment rates will look like over the next ten years? Fifteen? Fifty? What about labor force participation?

As for the former, I don’t think natural unemployment will ever hit more than 8%. (I don’t think it will get near, but I can see a few possibilities to the contrary). I think labor force will fall among the elderly – and I think this would be a damn good change. Working-age adults participation has been on secular decline, but I don’t think robot technology will do anything to put this fall on steroids. 

More specifically, over the next twenty years, I don’t expect participation to fall below 70%, adjusting for all hysteresis effects of low AD.

I do think Drum gets one thing absolutely right, robonomics has been given “surprisingly little attention among economists”. This will change. Because, if there’s one thing we liberals hate to admit, this is a supply-side revolution. We have to fundamentally reconsider what income is, and how it’s allocated. I think consumer surplus has already done a lot of that (I mean yeah, the Internet isn’t “free”, but it’s about as close as it gets. That’s pure surplus).

There is the more daunting question of work and dignity. As John Steinbeck beautifully put it during far worse times:

“The last clear definite function of men — muscles aching to work, minds aching to create beyond the single need — this is man. For man, unlike anything in the universe, grows beyond his work, walks up the stairs of his concepts, emerges ahead of his accomplishments. This you say is man — when theories change and crash man reaches, stumbles forward, painfully, mistakenly sometimes. This you may know when the bombs plummet out of the black planes on the marketplace, when prisoners are stuck like pigs, and the crushed bodies drain filthily in the dust. If the step were not being taken, if the stumbling forward ache were not alive, the bombs would not fall, the throats would not be cut. Fear the time when the bombs stop falling while the bombers live — for every bomb is proof that the spirit has not died. And fear the time when the strikes stop while the great owners live — for every little beaten strike is proof that the step is being taken. In this you can know — fear the time when manself will not suffer and die for a concept, for this one quality is the foundation of manself, in this one quality is man, distinctive in the universe.

Cutting words. But I wouldn’t doubt the creative capacity of Man. We’ll create movies, delve into the craziest depths of quantum mechanics, solve the question of P and NP, and “create beyond the single need”. We, after all, are human.

That doesn’t mean there won’t be inequality, or discontent. It won’t be the end of ideology, passion, or thinking. There will be an underclass: of who, what, and where I don’t know. History, after all, won’t be over.

But those in it will be a lot better off than they once were. And that’s why the future is a good place.

Update: Brad DeLong has aggregated many responses to this question. Most notably, Keynes himself:

I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not – if we look into the future – the permanent problem of the human race…. Thus for the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well. The strenuous purposeful money-makers may carry all of us along with them into the lap of economic abundance. But it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes… 

…Meanwhile there will be no harm in making mild preparations for our destiny, in encouraging, and experimenting in, the arts of life as well as the activities of purpose. But, chiefly, do not let us overestimate the importance of the economic problem, or sacrifice to its supposed necessities other matters of greater and more permanent significance.

My post – in other words – is almost a century too late.

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