Why Workers Are Losing the War Against Machines
theatlantic.com
theatlantic.com
A future where machines displace most of what we currently think of as blue collar workers is a future where most of the things blue collar workers currently produce are much, much, cheaper than they are now. This author worries whether blue collar jobs will pay "subsistence" wages. They will, because the cost of subsistence [and indeed, the cost of a fairly satisfied life] will be lower.
As machines become better at manufacturing and hard labor, unskilled "work" will shift from physical to service industries. That's good! It's been happening for the past century. Unskilled physical labor is hard, especially as you get older and banged up.
A mechanized future is one where physical resources are plentiful. People will figure out a reason to trade them. Humanity will be fine.
Sure, the average worker may be able to buy more things at Walmart than they can today, but that has less of an effect on quality of life.
Health care will absolutely be much cheaper in 30 years than it is now. We can provide 1960s-style health care to most people for literally hundreds of dollars / year. The fact that we choose not to because technology has improved quality faster than it has reduced costs is irrelevant. At some point that trend will reverse, and when it does costs will drop dramatically.
Construction costs are mostly driven by labor costs these days, and as construction is mechanized those will trend towards the cost of raw materials. Obviously there's a sort of theoretical floor there, but even the cost of extracting metal ores from the earth has dropped substantially as technology has improved.
All of these things trends are pointing in the same direction; they are just moving at different speeds.
This was the entire thesis of the neoliberal project. Over 30 years of implementation, it has never once come true for basic subsistence goods.
Rent is not cheaper. Health-care is not cheaper. Energy is not cheaper. Food is only slightly cheaper.
The primary good that has become massively cheaper is electronics.
Robots might help bring down health care costs the same way that LASIK is now relatively cheap compared to what it once was.
Food should be cheaper. It's not because the government props up the prices.
That leaves only rent. Arguably rent is only high in desirable places. So I'm not sure it's universally true that rent only goes up.
That's not a fair comparison. Modern healthcare is not cheaper, but healthcare equivalent to what was available a generation or 2 ago is.
>Food is only slightly cheaper.
Food has pretty steadily been declining as a fraction of disposable income. It would be declining even more dramatically if it weren't being offset by an increase in eating outside the home.
By all measures we are much better off than the average peasant in the Middle Ages, and their lifestyle is now incomprehensibly cheap. But that's not where the bar is at.
Ditto energy - the amount of energy a poor person can consume is astronomical compared to that of a poor person even 100 years ago - but that bar hasn't stayed still either. You don't take a horse-drawn buggy to work, and most people have an expectation of keeping warm in the winters without huddling around the stove.
I will agree on the food part - we have shown consistently that food cost, as a proportion of income, is at some of the lowest it's ever been, and a massive improvement over a century ago. This has been a clear win - but if you think about it, this is hardly a surprise. The bar for "eats well, not hungry" doesn't move very much over the decades.
If we redefine "middle class" upwards to mean flying cars, robot servants and solid gold toilets, then we are all poor.
That doesn't mean life hasn't become dramatically better over time, it just means reality has failed to keep up with our moving goalposts.
Health-care cannot really be compared because it is not subject to free competition. If it had been, basic care would have been massively cheaper.
Energy is cheaper, you are just not seeing it because China is using so much of it.
Food is cheaper -- but you are eating larger portions of it, more meat and better cuts.
Of course electronics have gotten massively cheap, as it is not limited by government, or geography and the primary expense is the production facilities, rather than the actual product.
As a result, what were supposed to be gains in production efficiency resulting in lower prices with higher supplies all-around have instead resulted in somewhat lower prices, but much higher economic rents.
We're partially seeing a capitalist crisis of overproduction, but we're also very much seeing a reversion to a feudal economy based on rent-extraction and financialized ownership of entire labor outputs.
For example, a company called Momentum Machines is making a burger-producing machine (http://momentummachines.com/) that produces fresher, customizable burgers at a rapid pace. Obviously there are cost issues to be worked out over time, but it's just the tip of the iceberg.
EDIT: Reading the website would make clear that this replaces the people who make burgers in fast food restaurants. That's not manufacturing, that's service (in this case, food preparation / cooking).
Add in the zillions of vans distributing stuff to smaller shops and taxi drivers,and one could see a huge impact on employment. Of course, not all of this will go (making deliveries probably will require the presence of a human), but firms will find ways to decrease driver's hours. For example, a truck driver could drive his car to the neighborhood where his truck makes deliveries instead of to the warehouse. More likely, companies would seek part time 'delivery assistants' that live in the neighborhood. As a second example, large multi-truck deliveries would need only one driver for handling the paperwork.
http://krugman.blogs.nytimes.com/2012/12/11/human-versus-phy...
http://krugman.blogs.nytimes.com/2012/12/10/technology-and-w...
Basically it's simple: as more wealth creation is driven by technology, the wealth shifts to whoever owns the technology or can operate it. Why is the payoff for founding a successful technology company so potentially lucrative? It's because you're basically both. If you think acqui-hires that pay something like $1 million per engineer is a lot, that's basically why.
In the US, we should have two political parties mitigating this by figuring out the balance between helping low-skilled workers become high-skilled (e.g. education funding and reform) versus making sure those unemployed low-skilled workers don't get sick and starve to death on the street in the meantime (e.g. unemployment and health insurance). Instead we have two political parties arguing to the death about whether or not to raise taxes by 4.9%.
Periodically people put forward the notion that there is some community 'good' to be achieved by not taking advantage of this progress. Ned Ludd is probably the most well known example but lots of folks have made similar suggestions over the years. In every example, without exception, that path has lead to stagnation and death of the community that supported it. This truth however does not stop people being displaced by automation to suggest it however, that death will come later to community they are no longer a part of so they don't really care, they only care about the here and now.
Talk to former factory workers of car companies that no longer exist but they successfully kept automation out of those factories. They protected their own jobs, at the expense of killing the company and all future jobs it might create, and ultimately their own pensions took a hit when those companies died.
As a journalist though it is a great way to generate rage views with the dispossessed and the fearful.
Because pointing out the existence of class war is politically incorrect. Most people would sooner admit to a race war than a struggle between the capitalist class and working class.
Let me guess: You're not in the US. Because turning the issue into a battle of rich-versus-poor is exactly what the Occupy Wall Street protests, the President's reelection rhetoric in the last election and the Democratic framing of the present "fiscal cliff" crisis are about.
On a tangential note, "fiscal cliff" is a brilliant term from a certain faction's marketing perspective -- once you describe the situation in that way, you've already committed to embracing a particular conclusion.
Also, as a small manufacturer I am forced to train the people I have to adapt to the new world order. The article implies that the uneducated worker is to be replaced with the educated worker. I can't just replace my staff with all new people. I would lose the tribal knowledge. I can't avoid automation that my competitors have; it would put me at a big disadvantage. In fact the biggest advantage I can get is to automate a process that we do manually. This is why mcmaster.com will send you a huge catalog (printed) for free. It is because the people that order from the catalog are price insensitive. I certainly am when I have a broken machine. My automatic sand blaster needed $1000 worth of bearings overnighted last month.
To make a big advantage in automation I need the help of the guy who has been doing it manually. So we work on bottlenecks in production one after the other. Every month we figure out what is slowing us down, or causing quality variations, or supplier problems and we try to come up with a way to improve things. The obvious first place to look for solutions is with the person suffering with the problem. The next obvious thing to do is to use some technology to make repetitive tasks easier. So my welder is now learning to use Arduino, and we are working on updating some old machinery with new automation. He might not do the coding, but he will certainly be the guy bolting the hardware together.
So I would say the workers are not at war with the machines. The workers are working with the machines.
At time t -> infinity, the ideal state would not be humans not having jobs (machines taking over), but humans not "needing" jobs (machines doing everything we need to do today). This may however never be since natural resources are limited, and so the cost of goods (while reducing due to economically cheaper machines taking over) would never come to zero.
So then, as time progresses, the jobs for humans would end up being at the end of the production-possibility frontier [1] where their sole motive is to figure new things (entrepreneurship), while the machines take care of existing methods of producing.
[1] http://en.wikipedia.org/wiki/Production-possibility_frontier
I was sort of nodding in agreement at another comment you left elsewhere but this one is just not on. This belief is definitely at odds with mine (specially going in with Club of Rome studies on this topic, for e.g.).
The fact is that matter is virtually unlimited, and it is not against the laws of physics that we can transform matter into more useful kinds, that we can deploy various means of collecting energy from the sun (even extraterrestrial), that we can learn how to fuse hydrogen, etc.
Edit: I guess you sort of did indicate why you disagreed, but referring to "Club of Rome" is just argument from authority, and anyway their study flies in the face of common sense. We know the Earth is brimming over with energy and resources, that the main difficulty is collecting and transforming them. This is a technological problem not a fundamentally unresolvable problem.
The assumption of 'unlimited natural resources' is now at odds with modern economic theory.
By seeing natural resources as limitless and by extension free at source undervalues their net economic contribution.
Take the example of massive ocean trawlers that cast kilometer wide nets then bring back all the catch to sell at market. The trawler is not creating the value of the fish just facilitating an arbitrage for the cost of delivery.
Companies are now looking at ways they can put a financial value on the value of their natural resource inputs.
A failure in quantifying and pricing resources creates a mindset problem when resources turn out not to be limitless or indescuctuble.
The World Bank, in it's 2011 report 'The Changing Wealth of Nations', set the estimates for all the planets natural resources - its forests, rivers, wetlands, wild lands, farm and grazing lands, minerals, oil and coal, oceans, biodiversity of speciecs - at about $44 trillion dollars, with $29 trillion belonging to developing nations.
Ref: HBR Oct 2011, the sustainable economy
http://www.nature.com/news/transgenic-fish-wins-us-regulator...
Secondly, economics is concerned with the efficient allocation of scarce resources among unlimited wants.
Human want is insatiable, and that's a pretty fair assumption. Even in some hyper-futuristic world, someone out there is going to want their own planet or some other kind of luxury status good. Even if everyone gets their own planet, you still have the dilemma of the fact that having a planet won't be a luxury good anymore (and something else might). This is one of the fundamental assumptions of economics.
Whether or not natural resources are scarce depends on whether you want to factor in resources in the Solar System / universe. Even in that scenario, it's a question of time scale:
The problem is that I believe we are likely to achieve levels of automation where 99.99% of human jobs are eliminated before we can utilize natural resources beyond our Solar System, and before we can achieve a point where humans are so satisfied they desire nothing more (excepting the occasional planet or two).
Why would this segment of the population not have realistic options for producing marginal value? Everyone is capable of learning new things.
Perhaps not quickly or efficiently enough, but even worse, it's not a given that there will always be enough valuable activities for everyone to perform and earn a wage.
This is particularly true when wealth is not evenly distributed. The needs that a small group of wealthy people have for human-created value is, well, small, and therefore wealth barely gets redistributed. Other factors compound this, like the fact that most of the proceeds from a market do not go to the (potentially many) people involved in producing the goods or services, but to those comparatively few with the capital to finance that activity; the chasm between the (so to speak) haves and the have nots grows bigger and bigger.
At that point, a significant segment of society simply can't earn a living, and society must adapt to become sustainable again.
It's not the kind of thing that happens overnight, but you can see how most forces are pushing in that direction, so without a fundamental change in the dynamics of production, market and compensation, it's not a question of if, but when.
I always liked this fictional story about it. http://marshallbrain.com/manna1.htm
That day may not be next week, but it might be in the next couple of centuries. It might even be in your lifetime.
What then?
Since corporate earnings exist for the benefit of the shareholder, it makes far more sense to raise taxes on shareholders than on corporations. Shareholders don't get to benefit with trying to justify their personal spending as a tax deductible business cost.
We make them in our image, and they will do just as we did.
Fail.
Right, you probably don't have any..
Fundamentally, the economy is driven by demand, and demand is driven by culture. If it is perceived that it is distasteful to buy machine-made goods, then people will buy handmade.
Similarly, i assume that anything 'tailored' will become popular. If it is as cheap to produce a run of one as a run of 1 million (and this day is coming), then everyone will be looking for something tailored just for them. There's a huge opportunity for low-skilled labor there.
I have an opposing opinion. Let me explain my thoughts.
In a fair system everyone would have access to the same amount of land once he is born.
He could then farm the land build a house and provide for himself.
But this system would not be very efficient. We as a society do better once we start specializing. As a necessary result some people / companies have to own more land than others.
Now if someone is not able to make a living because his skills are not in demand, I think we as a society have the obligation to help this person, simply because he suffers consequences from a system, we as a society profit from.
> People with little economics training intuitively grasp this point. They understand that some human workers may lose out in the race against the machine. Ironically, the best-educated economists are often the most resistant to this idea, as the standard models of economic growth implicitly assume that economic growth benefits all residents of a country.
No important model of economic growth assumes that growth or technological progress benefits everyone. What is broadly assumed (and there's a lot of empirical evidence behind it) is that innovation is the prime driver of economic growth, particularly in advanced capitalist economies.
Economic growth means that society is gaining wealth in aggregate. And so long as the pie is growing, it is always possible, in principle, to allocate the gains in a Pareto-efficient manner (that is, in a manner in which everybody gains) through the political process. Therefore many economists consider the "distributional" question, concern about who gets what, to be of secondary importance to their field. They see their job as figuring out how to maximize the size of the pie and leave it to others to figure out how to divvy it up. (Economists do of course have a lot to say about how various ways of distributing the gains from growth affect the prospects for future growth.)
> Shortly after the Luddites began smashing the machinery that they thought threatened their jobs, the economist David Ricardo, who initially thought that advances in technology would benefit all, developed an abstract model that showed the possibility of technological unemployment.
What the author is eliding here is Ricardo's development of the idea of comparative advantage [0], one of the truly remarkable ideas in economics. Comparative advantage is basically the idea that even if one country (or firm, or group of people, or single person, or whatever economic unit you want to think about) is better at producing every conceivable good or service, that country (firm/group/person/etc) will still gain from specializing in producing the good or service it (they/he/she/etc) is relatively best at producing, then trading with others—who will also gain by the interaction.
This insight does not mean that everyone will always gain from freer trade, or from innovation (which can be thought of as essentially similar in this regard to a relaxation of trade barriers with a country that's particularly adept at producing one good or another). But it does suggest that there is a net gain to be had from these developments. And, again, economists are primarily concerned with growing the pie.
> At least since the followers of Ned Ludd smashed mechanized looms in 1811, workers have worried about automation destroying jobs. Economists have reassured them that new jobs would be created even as old ones were eliminated. For over 200 years, the economists were right.
And that, really, is where I would leave things. There is very little to suggest that technological progress is about to take on a fundamentally different character, or entail much different results, than it has had, and has done, throughout the course of human history. When the singularity arrives, let's have this conversation again.
The people of 1800 had poor reading skills, the people of 2000 are much better at reading; meanwhile the horses have not improved their literacy. Horses are not people. To suggest that low-skill workers are hopeless and cannot improve themselves is paternalistic and insulting.
When education is out of reach for many of us, yes, hopelessness does very well come into play.
The issue here is not whether a second or third tier school can give a decent education, it is whether poor families see school as an option at all. When you combine skyrocketing costs with growing numbers of horror stories of people who are financially destroyed, and cannot even (as when I was young) declare bankruptcy, more and more are going to make the economic decision that they cannot afford higher education.
I am not sure that they are wrong.
The parts of the interview that stuck with me is where he said (I'm going to paraphrase, this isn't an exact quote): "I'm one of the best professors in the world in my field. I can teach a couple thousand students a year, at most, at Stanford. Online I can teach hundreds of thousands [and in theory there is no upper bound on the number of people you can reach online]."
There's a huge amount of inertia in our culture and institutions -- the university system of adult education has been built up worldwide for hundreds of years, so it has a lot of inertia in its sheer mass.
But eventually, anyone anywhere will be able to instantly get the best education in the world on any subject, at essentially zero cost. We're nearly there right now, really; it's just that we're still working on accreditation -- getting "I taught myself on the Internet" to carry the same weight as "I have a university degree in the subject."
the question is, though, whether there will be jobs for them even if they do improve themselves. there are lots of over-educated people who end up working menial jobs because there is limited demand for most types of skills. they chose the wrong types of skills and selecting the right types of skills may be increasingly difficult if change continues to accelerate.
A lot of people manage to leave the education system without this basic human trait. The scary part is that they had it when they went in.
The broadest definition of economics is "the study of the allocation of scarce resources" (from Samuelson's classic text), or "studying the production, distribution, and consumption of goods and services" (Wikipedia). Not to be confused with finance: "how investors allocate their (money and other) assets over time under conditions of certainty and uncertainty" (Wikipedia).
Prior to the 19th Century, equity ("positive") of distribution -- how wealth should be distributed -- was a much larger component of economic thought (from Greek/Roman times and before). Even Adam Smith addresses this at great length. Since the 19th century, and particularly through much of the 20th and 21st, "normative" economics (describing how things are rather than how they should be) has been more in vogue, though there's some backlash against this particularly since wage stagnation and reversal in the lower quintiles of the population in the US since the 1970s.
Somehow I think economists will weigh in on this question if we phrase it as it really is: capitalism versus feudalism versus socialism.
They would, now, wouldn't they? Since they are advisors and lackeys for the rich elites, and they get their bones from the short end of the Pareto principle...
The implication is that this is inefficient because the same resources and intelligent people could have been doing productive things that created wealth, like creating startups, rather than e.g. creating financial products that return big bonuses today but blow up a few years down the line, where the state or other people are left holding the can, with no net gain in the system.
What that quotation means is that all the finance MBAs and Wall Street quants of the last decade aren't making the economic pie bigger, they're just ensuring that they get a bigger slice of it.
http://seekingalpha.com/article/1069231-from-positive-to-zer...
It's time our educational system reflected that.
The Text could easly reprinted today, maybe switch out the word 'machine' with 'robot' once in a while.
This idea has been around since more then 100 years and it has shown again an again to not be true. I have nothing against bringing up the same stuff again but if you do that you have to improve your argument not just reprint popular essays from 100 years ago with modern language.
Tell me exactly what fundamental thing has changed with todays innovations that was not true for innovations in 1920 for example.
It wasn't always so. Early man could claim and transform resources as he needed. Now we are required, on pain of death really (if we try to disobey we will be arrested, if we don't comply with the arrest we will be shot), to either plug into the existing economic structures -- or to starve to death.
And this is in my opinion the number one argument for socialism. We have taken people the possibility to go into self providing mode (by claiming land and producing food and shelter) because WE as a society PROFIT from it.
If some people are not able to find a job in our current system, then we have the obligation to make sure that those people still have access to our basic services (food, shelter, healthcare).
Because economics is not a science, its a religion devoted to making sure that those who have money and power keep it and get more.
The idea that there is a set of high-skill jobs which are immune to technological unemployment is false. It will just take a little while longer for those jobs to be replaced by artificial intelligence.
The concept of superstars v. the rest is mainly just a weak argument attempting to cover for the tendency of monopolies to form in any economy. Technology just amplifies this fundamental characteristic of our 'economic' system.
Technology directly opposes our 'economic' system because technology is the application of science to solving problems (i.e. information and resource _sharing_) whereas economics is about using proprietary information and resources to your advantage.