The Great Debate: Automation, Jobs, Wealth Inequality, Basic Income, Post Scarcity

Billionaire Cartier Boss Warns of Imminent Uprising, ‘Envy, Hatred’ of Poor People

There is also an accompanying video:

The 65-year-old Rupert, who has an estimated net worth of about $7.5 billion, seemed deeply perturbed about the impending disappearance of the middle class due to robotics and artificial intelligence, which he said would “put hundreds of millions of people out of work.”

An example of the Luddite Fallacy. Replace ‘robotics and artificial intelligence’ with ‘internal combustion engines’, etc. New technologies create new jobs for all skill levels, whether it’s automobile engineers to people who wash your car. For example, every major brand has a Facebook page, and these companies hire people to oversee these pages by removing spam and answering questions – a job that didn’t exist as recently as five years ago.

Tell me how the tens of thousands displaced by McDonalds automated ordering and kitchens will be equally replaced by robot related jobs (hint: they won’t, and also not everyone is able to upskill so easily)
What do you say to the 60-200k/year 50-60 age truck driver about to be displaced who’s not intelligent and good at learning? Just pay 50-200k to go to college with no guarantee of a job, or even graduation given the low likelihood you can pass the classes, and still expect less pay than you currently earned pre-automation.

What happened to the buggy driver, the blacksmith, the butter churner? New technologies create new jobs. There are tens of millions of people employed in the IT sector – jobs that didn’t exist 30 years ago. That’s called structural unemployment…something that even liberal economists accept as economic reality, and ultimately desirable in the long-run.

However, one could also argue that eventually the fallacy will become reality if the IQ threshold required to perform the least intellectually demanding work rises high enough that it excludes a sufficiently large percentage of the population; being that the Luddite Paradox is based only on empirical data, there is no immutable ‘law’ that says that can’t happen.

A gloomy scenario, Productivity and Employment — A Structural Change?

Increasing automation could in theory result in a permanent underclass of millions falling between the cracks, either in poverty or teetering on it.

Then question comes up, shouldn’t we offer a basic income to help people who are left behind?

How about a high-IQ basic income and welfare contingent upon some form of birth control (eugenics). An unconditional basic income just going to perpetuate the problem by creating generations of dependents.

The concept if the high-IQ basic income is discussed here, along with other proposals to helps America’s most important resources, cognitive capital:

A possibility is a high-IQ basic income. It would be like a government Mensa that pays its members, and anyone from rich to poor is eligible for payments provided they meet the IQ requirements. Depending on the requirements, only around 5% of the country would be eligible, so it would cost much less than a universal basic income (UBI). The advantage is that the money would have a higher ROI than a normal UBI because high-IQ people tend to be more productive and creative and therefore would put the money to use in ways that could boost the economy and improve society, such as by starting businesses, coding, tinkering, producing art, and writing – activities that otherwise may not be possible if these smart people are too busy trying to make ends meet than thinking and creating.

A basic income without preconditions seems ripe for abuse, the result being more entitlement spending. Some better ideas:

  • The high-IQ basic income
  • Welfare contingent upon birth control
  • A joint-venture between private companies, donors, and the government to fund the basic income, bypassing the taxpayer
  • A UBI-like program that replaces existing entitlement spending programs
  • Another concern by the left is, who will buy ‘stuff’ without a strong middle class; wouldn’t the economy fail?

    Last time I checked, there are 7 billion people in the world, of which only around 100 million constitutes ‘America’s middle class’. Then you have the Pareto Principle in that the richest 20% contributes 80% to consumer spending. B2B is also a major part of the economy. Companies are (and will) do doing just fine, even if middle class participation is lagging. The totality of the data – from record high exports, quarter after quarter of blowout profits & earnings, record consumer spending, surging stock prices, to rapid gains technological innovation – suggests that wealth inequality, as bad as it may seem, isn’t actually hurting the economy as measured by the data. The left wishes it were, but incantations of doom and gloom won’t make it so, sorry.

    “How is society going to cope with structural unemployment and the envy, hatred and the social warfare? We are destroying the middle classes at this stage and it will affect us. It’s unfair. So that’s what keeps me awake at night.”

    To invoke the Fermi Paradox, if it should happen, why hasn’t it? Maybe because people realize that revolting would make things worse, that as much as wealth inequality may suck, modernity and improving living standards borne out of free market capitalism is better than alternatives such as Communism *. Yes, wealth inequality keeps rising, but our dollars buy things that never existed decades ago, new products that have much more utility than old technologies. A $300 iPhone has considerably more utility than a 1960 TV set and rotary phone. Netflix costs $10-20 month, versus 20 cent movie tickets of earlier generations, but Netflix has much more utility in that you can watch pretty much any movie or show ever produced.

    So that is one resolution to the automation/job question, that improving living standards and ‘abundance’ wrought by technology will allow people who are permanently unemployed to live a relatively comfortable standard of living, even if they reside at the poverty line, through what is the ‘post-scarcity’ hypothesis.

    However, while automation is lowering prices for some goods, on the other hand, despite recent trends in automation, prices for other goods & services like healthcare, education, phone bill, day care, cable & internet, have risen when adjusted for inflation, a phenomena called bifurcated inflation. So while a computer is very cheap, the electricity, software, and internet required to make the computer functional will negate the inflation adjusted savings. The same for TV – the hardware is very inexpensive and the picture of good quality, but the cable bill is very high. The quality may be better, and there may be more features, but it won’t be cheaper, as illustrated by the crudely-drawn graph below:

    Microsoft Office is still expensive, 20 years later.

    Firms are not going to let their earnings fall due to automation and will make up the difference elsewhere, and that will come from ancillary services. Look at how much entitlement spending has surged in recent decades, despite the promise of lower prices through automation. Automation and robots will make some stuff cheaper, not not nearly enough to create the ‘post-scarcity’ economy many hope for.

    Ultimately, there are no universally accepted solutions and explanations for how rapid gains in automation will affect the economy and society, which is why this topic is the subject of so many impassioned online debates.

    * Edit: But how about the Nordic economic model, with programs such as universal healthcare? The problem is Nordic countries have a lot of private debt – a fact that is often glossed over by the left, and that universal healthcare is often not what it’s cracked up to be, with long waits. Nordic countries also have very high prices for goods that are otherwise cheap in America. The Nordic model may not be applicable for countries as large and populous as America.

    Related:

    No, it’s not time for a basic income
    The Daily View: Silicon Valley Diversity, Basic Income, Wealth Inequality

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