Automation and Post-Scarcity

From Kevin Drum: You Will Lose Your Job to a Robot—and Sooner Than You Think

As discussed earlier (and a bunch of other times on this blog), fears of a job-apocalypse are overblown. Despite the trend towards increasing automation, the size of the labor force has grown in lock-step with population growth. The labor force participation rate is at multi-decade lows, yes, but more people than ever are working. And the diagnosis improves when you include all the jobs that are not part of the official labor market.

Everyone talks about ‘jobs destroyed’ due to automation but ignore that jobs are created too. The entire Apple app and Facebook advertising ecosystem didn’t exist a decade ago, but both have directly and indirectly produced many jobs. There are jobs pertaining to drones, 3-d printing, crypto currencies, and other innovations that a decade ago didn’t exist or were in their infancy. Quantifying the number of jobs created is hard, but it’s probably a lot. A ‘robot/AI that can do everything’ would still have to be coded and built. The personal computer is a perfect analogy to this, of a massively disruptive technological innovation that destroyed some jobs (typists, mainframe repairmen) but created a multitude of new jobs and industries, but also created new jobs simply by expanding the economy as a whole (or in economic-speak, pushed the possibilities frontier curve out) via increased productivity and economic growth. More free time due to automation means people will get bored and will need entertainment, hence jobs.

…and Arnold Kling responds to Kevin’s article, The Abundance Apocalypse:

The number one reason is that, assuming this plays out, there is a flip side: goods and services will be cheap, and in fact for all intents and purposes they will be essentially free. Take heart surgery as an example.

Today, heart surgery is one of the more expensive things you can get. But if you take all of the labor out of health care, then heart surgery does not need to cost more than a happy meal.

As it turns out, robotic surgery is actually more expensive than regular surgery:

A single robot costs about $2 million. Some of the attachments that go on the arms are disposable. And robotic surgery generally costs anywhere from $3,000 to $6,000 more than traditional laparoscopic surgery

Also, he’s invoking the obsolete ‘labor theory of value’ [the reason why Tyler's blog is called 'Marginal Revolution' is because marginal utility, which is based on market prices, replaced the labor theory of value. Prices are determined by subjective value, not labor, which at the time was revolutionary although we now take this notion for granted].

Again, similar to above, despite the trend towards more automation, many things have gotten more expensive on an inflation-adjusted basis, most notably healthcare and education. But also: cable, phone bill, internet, daycare, and so on. This is because many of these goods have a high perceived or actual value, even if there is less labor involved. Working mothers need daycare; everyone needs healthcare; people need degrees to get good-paying jobs; everyone needs insurance (health, auto, and home); phones need a phone plan. Computer are cheaper than ever, but software is still very expensive, and internet can also be expensive, yet a computer without internet access is nearly useless nowadays (especially considering most software is downloaded online). This is part of a trend of ancillary services becoming more expensive to compensate for hardware/tangibles becoming cheaper. Microsoft Office is still expensive, 20 years later, and is still slow and buggy.

This crudely-drawn chart illustrates the inverse relationship between hardware and services:

But even the hardware can become more expensive. Latest versions of the iPhone cost $1,000 or more. So instead of the $,1000 PC, its now the $1,000 phone.

Furthermore, in this futuristic scenario, the robots will themselves be designed and made by robots, so that the robot heart surgeon will be a cheap commodity, at least if there is competition in production.

But then who makes the robots who make the robots who make the robots? It’s robots all the way down.