Tuesday, March 29, 2011

What Are People Good For? (part 2)

2. Voices in the Wilderness

Economists tend to distinguish between cyclical unemployment, which are temporary periods of job loss, and structural unemployment, which is a mismatch of skills between available employees and job openings. What they tend to ignore is technological unemployment. Anything that does not involve Bayesian utility maximizers operating in a rational market tending towards equilibrium is out of bounds. This has only become more pronounced as economics dealt with more and more abstract mathematical models of the economy. Automation simply does not fit into their world view - it's the stuff of science fiction and best left to engineers and physicists. They would much rather deal only with issues like interest rates, money supply, trade flows, and tax policy. As Martin Ford put it:

So far, I have not seen a great deal of deep thought given to how the future economy will work. Most people—and nearly all economists—make the obvious assumption about that: they assume the economy will essentially work the way it has always worked. The basic principles that govern the economy are seen as being relatively fixed and reliable. Economists look to history and find evidence that the free market economy has always adjusted to impacts from advancing technology and from resource and environmental constraints, and they assume that the same will always occur in the future. Crises and setbacks are temporary in nature: in the long run, the economy will rebalance itself and put us back on the path to prosperity.

One person who is taking it seriously is engineer Marshall Brain, who is often associated with the Singularity Movement and is the founder of the popular Web site How Stuff Works, (and should not to be confused with Brain from Pinky and the Brain). He was one of the earliest to sound the alarm on automation’s effects on the workforce. His Web site, called Robotic Nation, has been around a long time, and it argues that robots will eventually become advanced enough to perform nearly all necessary tasks to make society function. As he says in his FAQ:

 I firmly believe that the rapid evolution of computer technology will bring us smart robots starting in a 2030 time frame. These robots will take over approximately 50% of the jobs in the U.S. economy over the course of just a decade or two. Something on the order of 50 million people will be unemployed.

The economy may adjust and invent new jobs for those 50 million unemployed workers, but it will not do so instantaneously. What we will have is a period of economic turmoil. All of those unemployed workers will be in a very bad spot. The economy as a whole will suffer from this turmoil and the downward economic spiral it causes. No one will benefit when this happens.

Brain has spoken and written extensively on these issues in a wide variety of forums. He has also written a speculative short fiction story called Manna, detailing a possible version of a society where work is taken over by robots. He presents two possible scenarios. In the first scenario, set in the United States, extensive automation produces a dystopia where workers are worked like dogs by automated "bosses" that run every conceivable business and monitor their every move. Employees that fail to produce adequately are digitally blacklisted, and wind up in internment camps constructed of cheap foam materials where robots keep watch to make sure they don't escape. Profits are maximized by a small class of fabulously wealthy business owners who control the entire economy. In the other scenario, set in Australia, robots preside over an egalitarian society providing every conceivable want. Goods are distributed equally via a credit system and based on resources available. Work is voluntary, and people are free to engage in whatever captures their interest. Everything is free. There are some "singularity" elements like space elevators, and a virtual-reality internet plugged right into people's nervous systems. While some of Brain’s speculations may be over the top, his basic concerns are becoming more and more a reality.

Another lonely voice of concern is Silicon Valley engineer and entrepreneur Martin Ford. He has written a book called The Lights In The Tunnel detailing his concerns about the economy of the future. His blog, Econfuture, is essential reading. Ford has also written for The Huffington Post and the Atlantic Monthly dealing with issues surrounding automation. Like Brain and unlike most economists, he does not believe that jobs displaced by technology are going to automatically be replaced in other areas:

"The biggest problem with the conventional wisdom is the number of jobs we are talking about. In the U.S. we have a workforce of around 140 million workers. The majority of these jobs are basically routine and repetitive in nature. At a minimum, tens of millions of jobs will be subject to automation, self-service technologies or offshoring. The automation process will never stop advancing: computer hardware and, perhaps most importantly, software will continue to relentlessly improve. Therefore, simply upgrading worker skills is not going to be a long-term solution; automation will eventually (and perhaps rapidly) catch up. If you are willing to look far enough into the future, the number of impacted jobs is potentially staggering."

One of the few economists to seriously study the issue is economist David Autor of MIT. In a paper published in 2009, Autor came to an ominous conclusion: >technology is rendering middle class jobs obsolete. Autor’s work found that the job growth over the past years has been predominantly on the high-end and low-end of the wage scale, and his findings indicate that automation is a major cause of this phenomenon.

Economists group all such arguments under the term "Luddite Fallacy." The Luddites were groups textile artisans who were opposed to the use of mechanized looms in factories fearing they would cause the loss of their occupations and consequently mass unemployment. Beginning in 1811 they smashed the labor-saving knitting machines in protest, clashing with the British army in the process. Obviously, the Luddites lost, and industrialization proceeded apace. The vast economy produced by subsequent mechanization eventually produced employment for the displaced labor force. If we had listened to the Luddites, the argument goes, we would not have the marvelous technological achievements of today, nor the affluence we all enjoy.

The conventional economic view states that as you can produce more output per worker, the costs of those outputs go down. As the costs go down, so do the prices, increasing the demand for those goods and allowing them to be supplied to more markets. The increased demand causes more workers to be hired, thus causing automation to maintain or even increase employment. Furthermore, even if workers are lost from one sector, lower prices increase demand in other sectors, and those sectors will absorb unemployed workers. You simply need to match labor with what the economy needs. While workers could be reduced or eliminated in certain operations such as steel milling or automobile manufacture, it would never be the case that need for workers in the entire economy were diminished. Economists simply do not believe that automation causes unemployment, period. Economist Alex Tabarrok summarizes the thinking this way: "If the Luddite fallacy were true we would all be out of work because productivity has been increasing for two centuries." A commenter on Paul Krugman's blog put it more succinctly: "Humanity is a beehive, there will always be work." Note, however that this is based on a series of assumptions, of which these are but a few:

1. Our demands are insatiable.
2. The future will be similar to the past.
3. There are jobs that cannot be automated.
4. Our resources are infinite.
5. All displaced workers will find employment somewhere else.
6. There will always be new industries to absorb population growth.

It appears that economic "science" is little more than taking what had happened in the past, and assuming without any evidence that it will necessarily happen in the future. After all, all those wool weavers found other jobs, didn't they? But are conditions really the same? Can these questions even be realistically addressed in these abstract economic models that are used to dismiss the arguments? What if the underlying assumptions of economics have fundamentally been altered? Martin Ford again:

Among economists and people who work in finance it seems to be almost reflexive to dismiss anyone who says "this time is different." I think that makes sense where we’re dealing with things like human behavior or market psychology. If you’re talking about asset bubbles, for example, then it’s most likely true: things will NEVER be different. But I question whether you can apply that to a technological issue. With technology things are ALWAYS different. Impossible things suddenly become possible all the time; that’s the way technology works. And it seems to me that the question of whether machines will someday out-compete the average worker is primarily a technological, not an economic, question.

Economists did not always ignore technological unemployment. John Maynard Keynes was perhaps the most influential economist of the twentieth century. His General Theory was the guidepost for combating the Great Depression. In one passage, he wrote:

 For the moment the very rapidity of these changes is hurting us and bringing difficult problems to solve. Those countries are suffering relatively which are not in the vanguard of progress. We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come–namely, technological unemployment. This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.

This was in the 1930's, when a computer like Watson was beyond the imagination of all but speculative science fiction writers. Even though he acknowledged the impact increasing mechanization and the resultant productivity had on workers, Keynes still believed that aggregate demand was the main problem affecting the economy, and his theories were centered around stimulating demand. Despite this, Keynes clearly believed the future would be different from the past. Towards the end of his career, Keynes wrote an essay entitled Economic Possibilities for our Grandchildren, where he put forward the claim that we would someday have the material abundance to abolish scarcity. He believed that productivity gains would eventually  lead to more leisure time and greater affluence for all. He saw this leading to a profound social change, where commercial values of wealth acquisition and material goods would give way to a more general appreciation of art, scientific discovery, and social relationships, and that this would be a necessary outgrowth of increasing automaton and efficiency.

Today, economists scoff at his naïveté. Keynes clearly did not foresee the automobile-driven globalized consumer economy. We didn't slow down, we just bought more and found lots of new people to sell to. Consequently, his arguments concerning automation and productivity were dismissed inteir entiretly, as well as Keynes’ ideas about a future where increased productivity was traded for leisure. If we have not brought about Keynes' vision, it is not because it is impossible, but rather it is because of the choices we have made. Those choices have been specifically designed to increase scarcity and preserve the intersts of the powerful. In fact, we work much harder for much less than we did thirty just years ago, despite the increasing aggregate wealth of our society.

It cannot be overstated that the mainstream economics profession entirely missed the economic crash and downturn of 2008 that we are continuing to experience, as well as the crash of 1929 and the Great Depression. In fact, every downturn has been missed by mainstream economists, otherwise they could theoretically have been prevented. Economists were assuring us that the economy was stable and the underlying fundamentals were sound up until the very eve of the crash! How much can we trust mainstream economists?

Please read Part 1 of this article

Please read part 3 of this article

Please read part 4 of this article

Please read part 5 of this article

Please read part 6 of this article

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