"For the Last Time, Robots Do NOT Cause Unemployment"

Here's a pushback at RealClearMarkets against recent worries about technology and the job market.

Parts of the nation's commentariat have been seized, in recent months, with a nasty bout of technophobia. Technophobia is a psychological condition, but infectious. Hardly a week goes by without a new outbreak documented in another blog post or business column. To judge from the symptomatic hand-wringing the epidemic is spreading, we are on the verge of mass unemployment as work becomes increasingly automated.

As I've often said, it is clearly true that there has always been an increase in aggregate demand for labor in the past. But to argue that will continue indefinitely carries an assumption the nature of needs and wants is static. Economics is not that good at understanding changing needs and preferences. Instead, they are treated as exogenous. And that is a foolish assumption.

In fact, it's not at root an economic problem. It's an ethical and instiutuonal problem. There needs to be deeper change and adaptation in economic institutions. That more attention to issues of the "good life " given basic economic survival is no longer the prime problem facing humanity. The labor market achieved huge prominence in the industrial revolution period, dominating life in a way which would have been inscrutable to medieval peasants on the land, or aristocratic Romans. It may be less prominent in the future.

"Sympathy for the Luddites"

Paul Krugman says technological disruption is real, and argues redistribution is the only way to deal with it.

And the modern counterparts of those woolworkers might well ask further, what will happen to us if, like so many students, we go deep into debt to acquire the skills we’re told we need, only to learn that the economy no longer wants those skills?

Education, then, is no longer the answer to rising inequality, if it ever was (which I doubt).

So what is the answer? If the picture I’ve drawn is at all right, the only way we could have anything resembling a middle-class society — a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules — would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income.

It's interesting evidence mainstream economics is starting to get worried about this issue. He's not providing a "but these fears have always been misplaced in the past" usual take.

The trouble is redistribution without some sense of who deserves what isn't going to fly. This is the left's problem: people don't believe equality is the same as justice (or "fairness".) We can't solve this without having some sense of what we value, or what the good life is. And liberal neutrality on that question, and its focus on material resources and income above all, makes that impossible.

Krugman's solution also assumes there will be supernormal profits, but technology may compete and innovate those away, too. In a perfect market profit is zero, after all, and tehnology is removing barriers to entry and market segmentation.

 

 

 

 

Siren Servers

The stories about NSA surveillance of email and phone metadata are one more boost to skepticism about the new digital economy.

Here's a separate article in the NYT about digital concentration of influence and wealth.

DISSECT almost any ascendant center of power, and you’ll find a giant computer at the core. In the past, power and influence were gained by controlling something that people needed, like oil or transportation routes. Now to be powerful can mean having the most effective computer on a network. In most cases, this means the biggest and most connected computer, though very occasionally a well-operated small computer can play the game, as is the case with WikiLeaks. Those cases are so rare, however, that we shouldn’t fall into the illusion of thinking of computers as great equalizers, like guns in the Wild West.

The new class of ultra-influential computers come in many guises. Some run financial schemes, like high-frequency trading, and others run insurance companies. Some run elections, and others run giant online stores. Some run social network or search services, while others run national intelligence services. The differences are only skin deep. I call this kind of operation a “Siren Server.”

The irony is the original image of the personal computer was of liberation, such as Apple's famous Superbowl ad in 1984. The Silicon Valley political vision of the world - a kind of libertarian paradise - is encountering increasing resistance and skepticism.

So the author of the NYT article suggests we should move towards micropayments for our personal information, to reduce the advantage of the "siren servers."

Of course, the counterargument is today's titans - Google, Facebook, Amazon, Apple - are likely to be tomorrow's Dell, Compaq, MySpace, or AOL, let alone earlier titans such as Bethlehem Steel or Pennsylvania Railroad. I doubt there are natural monopolies or network effects sufficiently powerful to entrench the current digital elite for long.

Algorithms can be replicated. That kind of information wants to be free, too. And if people find their personal data is being over-exploited, they will find alternative ways to communicate.

There can often be something of an arms race with technology. Take airline fares, for example. Large centralized computing power originally enabled the airlines to segment their customers in the 1970s and 1980s, and extract the maximum amount people would pay for a certain route. But the consumer caught up. Technology also brought transparency before long, including sites like Expedia or Kayak. Large centralized computers still price airline fares, but the airlines barely stay out of bankruptcy most of the time, and their only way to get pricing power is to cut capacity. Their industry became commoditized.

People have also feared the use of technology for surveillance for decades, but it usually enables transparency and less power for gatekeepers too.

The whole economy is changing in deeper ways, and that is irreversible. But I doubt that technology will enable any enduring center of power.

 

 

 

 

 

The Prevalence of Loneliness

This, from an article in the New Republic, is an indicator that things are not going well in society. How truly amazing and sad.

... even among the not-so-old, loneliness is pervasive. In a survey published by the AARP in 2010, slightly more than one out of three adults 45 and over reported being chronically lonely (meaning they’ve been lonely for a long time). A decade earlier, only one out of five said that. With baby-boomers reaching retirement age at a rate of 10,000 a day, the number of lonely Americans will surely spike.

I've talked before how we overlook the importance of connection and the experience of the texture of daily lived life, as if we need a "gross national loneliness" to set against GDP.

 

Work is a human right

A great essay by Walter Russell Mead, here. I disagree with his confidence about personal services sometimes, but this is good stuff, worth reading in full.

There is a horrible snobbery lurking beneath the idea that most people will not be able to find meaningful work when the age of scarcity ends. Once the working classes aren’t needed to dig coal anymore, in this view, there is nothing to be done for the mass of mankind than to sit them in front of the TV on a comfy couch with a big bag of chips. They are good for nothing else.

This is a premise which any serious theist or humanist must reject. If we believe that every human being has a unique real worth, we must also believe that every human being has a contribution to make. Keynes rather snidely remarks that few people have the talent to live creative lives; writing about the difficulty many will have adjusting to lives without toil he warns of the intense boredom that most will suffer. “Yet it will only be for those who have to do with the singing that life will be tolerable and how few of us can sing!”

Actually, a good many more of us can sing than Keynes thought; it’s just that life in the coal mines and the factories means that many people haven’t had the same chances to develop their talents that a son of privilege like Keynes did.

 

Morality unhinged from Wisdom

Walter Russell Mead writes about the situation in Syria, as Samantha Power, who urged humanitarian interventions, leaves the Obama Administration:

As a general rule, sad to say, the good guys and the smart guys often play on different teams. For too many foreign policy humanitarians, it is more important to have good intentions than to understand the crooked and wicked ways of the world you want to change. This instinct for the ideal over the real was a hallmark of humanitarian policy failures all during the 20th century and on the evidence to date the deadly mixture of political amateurism with ambitious humanitarian international agendas has persisted into the 21st. America’s university campuses are packed with people who believe that the flaws in our foreign policy are failures of morality rather than failures of forethought and execution, but morality unhinged from wisdom is one of the most destructive forces known to man.

 

The end of entitlement

Robert Samuelson writes that the public is going through a downshift in expectations that is having deeper political consequences.

Weighed down by these contradictions, entitlement has been slowly crumbling for decades. The Great Recession merely applied the decisive blow. We're not entitled to many things: not to a dynamic economy; not to secure jobs; not to homeownership; not to ever-more protective government; not to fixed tax burdens; not to a college education. Sooner or later, the programs called "entitlements," including Social Security, will be trimmed because they're expensive and some recipients are less deserving than others.

The collision between present realities and past expectations helps explain the public's extraordinary moodiness. The pandering to the middle class by both parties (and much of the media) represents one crude attempt to muffle the disappointment, a false reassurance that the pleasing past can be reclaimed. It can't.

I don't think this is true. We still have the paradox that we have more productive capacity and underlying abundance than ever before. The problem is we have less and less clarity on how to distribute it, or what we value, or what incentives are or ought to be.

What it does mean is we need a deeper rethink of economic institutions to cope with a world in which many of the things we value most are not easily traded. Government cannot deliver what people want if we have no shared vision of what people ought to want, in their own different ways. Instead, our general discourse on rights and universal rules tends to evade the question.

"..some recipients are less deserving than others" says Samuelson. That is the heart of the problem. It is a matter of ethics, not economics. The left wants universal (unearned) rights. The right wants a changing mix of pure market allocation and tradition.