Home > Uncategorized > Paul Krugman is Wrong about the Rise of the Robots

Paul Krugman is Wrong about the Rise of the Robots

Paul Krugman has recently taken a keen interest in the rise of robots and automation — an issue that I have been focusing on since the publication of my book on this subject back in 2009.

In a recent post, Krugman says the following:

Smart machines may make higher GDP possible, but also reduce the demand for people — including smart people. So we could be looking at a society that grows ever richer, but in which all the gains in wealth accrue to whoever owns the robots.

I think there is a fundamental problem with this way of thinking: as jobs and incomes are relentlessly automated away, the bulk of consumers will lack the income necessary to drive the demand that is critical to economic growth.

Every product and service produced by the economy ultimately gets purchased (consumed) by someone. In economic terms, “demand” means a desire or need for something — backed by the ability and willingness to pay for it. There are only two entities that create final demand for products and services: individual people and governments. (And we know that government can’t be the demand solution in the long run). Individual consumer spending is typically around 70% of  GDP in the United States.

Of course, businesses also purchase things, but that is NOT final demand. Businesses buy inputs that are used to produce something else.  If there is no demand for what the business is producing, it will shut down and stop buying inputs. A business may sell to another business, but somewhere down the line, that chain has to end at a person (or a government) buying something just because they want it or need it.

The point here is that a worker is also a consumer (and may support other consumers). These people drive final demand. When a worker is replaced by a machine, that machine does not go out and consume. The machine may use energy, resources and spare parts, but again, those are business inputs—not final demand. If there is no one to buy what the machine is producing, it will get shut down.  Think of on industrial robot being used by an auto manufacturer. The robot will not continue running if no one is buying cars.*

So if we automate all the jobs, or most of the jobs, or if we drive wages so low that very few people have any discretionary income, then it is difficult to see how a modern mass-market economy can continue to thrive.  (This is the primary focus of my book, The Lights in the Tunnel).

There is plenty of evidence that consumers are already struggling with the structural shift occurring in the economy. The years leading up to the current economic crisis were, of course, characterized by people consuming on the basis of debt rather than income.  A just-released report shows that an ever increasing number of Americans are raiding their retirement accounts to pay current bills.

Does Paul Krugman really believe that it is possible to have a “society that grows ever richer” while a tiny number of robot owners hoover up more and more of total income — and the jobless masses consume the output by running up their credit cards or cashing in their 401(k)s?

The point is that the robot revolution is not just about income inequality. It will ultimately impact the sustainability of economic growth.

Innovation requires the existence of a market. New ideas will not receive the necessary backing if investors do not anticipate healthy market demand.  A future with a dearth of viable consumers will be a far more zero-sum future. It will mean less of the type of innovation we associate with Steve Jobs — and more of the type you would find at Goldman Sachs.

One of the main points I make in my book is that I think we will ultimately have to treat the  market itself as a kind of renewable resource.  Jobs and wages have historically been the primary mechanism that redistributes income (and purchasing power) from producers back to consumers. Widespread reliance on robots and automation may ultimately cause that mechanism to break down — and that will be a threat to continued prosperity.

So what is the solution? In the long run, I think there will be no alternative except to implement direct redistribution of income.  One possibility is a guaranteed minimum income funded by more progressive taxes (on the robot owners), and possibly by other sources (for example, a carbon tax).

It goes without saying that implementing such a solution would be an enormous social and political challenge.  And it will intertwine with the other major problems we face.  Meaningful action on climate change, for example, will become even more difficult in world where much of the population is increasingly focused on individual income continuity.

Make no mistake, responding to the impact that accelerating technology has on the job market could turn out to be one of the defining challenges for our generation.

* Not all robots are used in production, of course. There are also consumer robots. If you own a toy robot, it may “consume” batteries. However, in economic terms, YOU are the consumer — not the robot. You need a job/income or you won’t be able to buy batteries for your robot. Robots do not drive final consumption — people do.

About these ads
Categories: Uncategorized
  1. January 18, 2013 at 3:28 am

    I think it’s entirely possible that you could have a bifurcated economy that is driven by a large number of poorer people and a relatively small (but still large by modern comparison when you consider it’s consisting of the rich from the entire planet) group who consume a great deal. We’re already seeing hints of that with Wal-Mart representing the low-end, various other places representing the high-end, and the “middle” stores getting hollowed out (like K-Mart has been for years).

    Moreover, we’ve had markets in goods even when most of the population was too poor to afford more than a few things. 17th and 18th century England had a booming market for consumer goods, even though the majority of the population still lived on the land and couldn’t afford any of them.

    • zdlax
      January 18, 2013 at 1:29 pm

      I think you are right. If you haven’t come across it yet, search for “Plutonomy”. Dated from 2005, it’s a supposedly leaked piece of research from Citigroup meant for the ultra high networth slice of its clientele. It talks about how global demand can shift from mass-market industries to those catering to an elite, but that in dollar terms, can continue to expand.

      • Edward
        August 9, 2013 at 12:45 pm

        In a vacuum, what you are talking about could happen. In reality, you are looking at another French Revolution, where the masses will rise up out of jealousy and poverty and will tear down the systems we currently have in place; including the systems that are designed to placate the masses, such as medicaid and food stamps. The point you are failing to realize is that this is already happening in parts of the world now. The uprisings in the middle east are a perfect example. So is the problems of Greece and the EU. It will only accelerate with time, and will become a planetary phenomenon soon.

  2. January 18, 2013 at 4:16 am

    It’s a commonplace that jobs do three things: provide income, prevent boredom, and provide a sense of self-worth and a place in society. Redistribution will help with the first, but not with the second and third problems. I think those will prove to be the bigger challenges.

    On economic growth – the root of the word ‘economic’ is the Greek ‘oikos’, household. Growth that does not benefit households isn’t economic.

    • January 18, 2013 at 9:05 am

      Lack of self worth and boredom are inconsequential when compared to starving in some Femavella.

    • zdlax
      January 18, 2013 at 1:45 pm

      I think that that kind of commonplace thinking is as much an artifact of American work-good, welfare-bad indoctrination, coupled with the Protestant work-ethic as anything else. Such memes were indispensable for a subsistence level agricultural society to survive. As we approach the boundary of scarcity-defined societies, such memes go from being advantageous to being cancerous.

      I don’t know what age range you hail from, but I can say that for Millenials like myself, and more so as you go younger, the ability to waste time and not feel guilty about it is effortless. Give me 20k/year guaranteed, and I can spend decades modding video games and feel like I’m doing something worthwhile, because in fact, I actually am. It is the pride of artisanal “work”.

      The digital age presents oodles of opportunities for such pride and self-worth from personal craft.

      Will some people abuse their life of leisure? Sure, but for every hooligan who gets their jollies from breaking stuff, many more will produce stuff with their free time. In the end stuff will not get broken since law and order can always be maintained by robotic police forces.

      • chrisf
        January 19, 2013 at 11:09 am

        Great post – comments like this give me hope that things are going to be Ok ! I like the idea of a worldwide network of artisans, each channelling their creative energies into whatever they enjoy the most. Imagine what we could create, if free of the need to earn a living…

    • Rint
      January 19, 2013 at 8:29 pm

      What an absurd assumption. Income is the only thing that really matters because it can be used to replace the other functions. I would literally give my right arm to have a free income, to finally be left alone forever.

    • gamba
      February 7, 2013 at 7:28 pm

      First problem can be solved, second and third problems may not be hard for anyone with an artistic inclination but for many regular Joes and Janes it will get harder to find meaning in life. Ironically, abundance and safety can be more difficult to handle than scarcity.

      Today in western middle class world we’re reading the news all up in arms about say a delay in the release of the latest gadget or a reality star doing something odd or a band having a below expectations second album. Pause and think about how silly and meaningless that really is to complain about in the grand scheme of things. And still how important it is for us to find something to be all up in arms for. There’s more than one reason for news papers blowing threats out of proportions, not only do we want to know about and be prepared for threats but I believe threats are a requirement to have a meaningful existence. There’s a reason we crave scary movies, theme parks and extreme sports.

      Can humans really be happy without having something meaningful to complain about? Can true happiness exist without the contrast of struggle? In my mind that will be the main issue 50 years from now.

  3. jbk
    January 18, 2013 at 4:56 am

    I think the mistake you are making is thinking that there needs to be poor people at all. Neal Stephenson and Issac Asimov decades described perfectly possible societies where the rich have completely distanced themselves from the non-rich, and live in two basic completely separate environments.

    The social and political factors may prevent what Krugman describes from happening, but I think we are currently trending that way. Look at how much wages have dropped relative to output in the last 30 years. That trend is exactly the trend Krugman describes.

    And I’m not sure why people count as “final demand” more than robots. In purely economic terms, from the perspective of the capitalist, laborers show up to work, produce some output, and cost some amount.I really don’t see how that is different than what robots do. Sure, there might be more power plants than farmers, because the robots need more electricity and less food, but to the capitalist, why is that important?

  4. January 18, 2013 at 12:39 pm

    I find his claim about a reduced need for smart people to be puzzling. And you’re right – if people can’t work, they won’t have the money required to buy stuff that the robots produce.

    Not sure if you ever read, or consider reading Science Fiction, but Neal Stephenson’s book “The Diamond Age” specifically imagines some of the economic fallout of a highly automated society.

  5. January 18, 2013 at 2:13 pm

    isn’t the issue here that automation and robots should theoretically make goods and services cheaper. With cheaper goods, people can maintain the same standard of living even with a reduced income. As an example, consider the amenities available to someone living in poverty today compared to the amenities available to someone living in poverty 100 years ago.

    Izabella Kaminska at the Financial Times has written a number of interesting articles in the last year about the changes brought by technology and automation. Her 3-part series Beyond Scarcity (http://ftalphaville.ft.com/2012/06/07/1031561/beyond-scarcity-the-parable-of-water/) is particularly interesting. She concludes that the economy is still operating with the belief in scarcity, despite the waning influence of scarcity. Producers are fighting against the growing influence of abundance by trying to create artificial scarcity.

    • January 19, 2013 at 6:49 am

      It depends on what automation makes cheaper. More than half of the average American household’s income goes to a mix of housing, health care, cars, and food expenses (mostly housing), so if automation can make those drastically cheaper, then real wages will go much farther even if they’re declining.

      That said, the politics of this tends to be difficult. For most people in the US, wages tend to be far more visible than costs of living unless it’s their mortgage payment, food, or gasoline.

      • PJinSoCal
        January 23, 2013 at 9:30 pm

        Interestingly, for your list, you left out taxes (income, sales, fees, licenses), which constitute a sizeable portion of household expenditures, and included medicine (health care is what politicians provide through Medicaid and Medicare), which does not constitute a sizeable portion of household expenditures for the randomly selected household.

  6. January 18, 2013 at 2:33 pm

    I think I get what Krugman is saying, I think he means to say that the entry of robots that can entirely replace the demand for labor, would leed to low employment from the industrial sector. At that point the service sector, which needs more human-ness to perform, would employ the bulk of the labor. However, it would require a high level of specialization, in order to be of worth to the economy. Hence the poor uneducated, would be in trouble as they would not be able to carve out a niche for themselves.

    Robots, would require less maintenance and would give lesser trouble than thier human counterparts. However, human happiness is the goal for economics, so the usage of Robots may not be the ideal way forward.

    But what about cyborgs? Part human and part robot. The benefits of efficiency without losing the income allocation.

    • Jonathan
      January 18, 2013 at 9:50 pm

      “However, human happiness is the goal for economics”

      Manifestly untrue. The goal of economics has always been efficient allocation of scarce resources, with the measure of efficiency a long-running controversy. If the goal of economics were happiness, by now there is ample evidence of abject failure and plenty of cause to scrap the lot and return to barter.

      • January 20, 2013 at 11:14 pm

        well, that makes economics sound a bit cold

    • January 19, 2013 at 6:51 am

      I’m not sure the “poor uneducated” will be at a permanent disadvantage, either, particularly as artificial intelligence gets better and better. It’s quite possible for the returns of education to wither away because most jobs can be done with a lower level of training plus machine/robot/computer assistance.

      That would not be the first time that’s happened, either. Textile industrialization in late 18th century Britain replaced a lot of skilled artisans with lower-skilled migrant workers working with machines.

      • January 20, 2013 at 11:18 pm

        temporarily yes, but what when automatons are more cost efficient than the lower skilled workers?
        the rate of technological progress must at sometime outshine them too.

  7. January 18, 2013 at 7:19 pm

    I doubt that at the time your concerns arise, most of the population will have any sort of meaningful relationship to “legal tender”, or what we consider the medium of exchange currently.

    I don’t know why people simply take our current monetary arrangements for granted.

  8. Donald A Coffin
    January 18, 2013 at 7:43 pm

    “Individual consumer spending is typically around 70% of GDP in the United States.” Consumption spending is around 70% of GDP NOW, but this is a post-WWII high. In 1950, consumption spending was about 60% of GDP; it has been rising as a % of GDP fairly steadily ever since. (The only major component of spending that has been falling over time is government purchases of goods and services–that’s all levels of government, local, state, and federal–down from about 30% in 1950 to about 20% today.) I don’t know if this makes any significant difference in your argument, but I always like to see the facts presented correctly…

  9. Chirag
    January 18, 2013 at 8:18 pm

    I think that the crux of the unstated issue (inequality & unemployment) is that the level or growth rate of GDP doesn’t matter to people in general. Machines can produce higher and higher GDP as shown without societal benefits. Jobs are needed by all and inequality needs to be reduced or the worker cannot afford to buy the products his/her company produces since an increasing amount of profits are going to the bosses (well without increasing credit -look where that has got is, or fudges such as QE and bond buying). Technology can help to reduce inequality by helping people voice opinions or mobilise groups but it can also inexorably make jobs redundant leading to wealth being hoarded by those that can afford the machines. At the end of the day machines can’t (currently) spend the money they generate although that may change one day when they make their own music, write their own novels, paint their own pictures and develop their own meds….ok back to FIFA13!

    • Jonathan
      January 18, 2013 at 10:05 pm

      I disagree only with:

      “Jobs are needed by all”

      Nobody, anywhere, needs a job. Everybody, everywhere, needs food, shelter, clothing, perhaps something to do. It just happens at the moment that wage employment is the normal, socially sanctioned way for most people to receive the bulk of their share of the tokens with which they in turn acquire their share of those things. (There are other means by which one can receive income, such as royalties, interest, profit draw and other economic rents, which are often privileged compared to wage income.)

      The “job”, as we know it today, is intrinsically hierarchical and arbitrary and has taken on a supernatural specter, as if that social arrangement were a form of revealed wisdom.

      • Chirag
        January 18, 2013 at 10:28 pm

        Agree with what you state. Generally however the vast vast majority of people need to stay in employment in order to pay for food, shelter and clothing. Some people also have “jobs” that don’t directly equate to income, for example being a carer, or a poker player or financial trader on one’s own account for example. It seems to me that there will become at some point a real “race relations” style moral debate about the power and rights that machines/cyborgs/AI will be bestowed. As mentioned by others the governments need to be aligned in rewarding creativity of those who produce machines whilst taxing them an appropriate amount so that they do not have a self fulfilling resource hegemony. The problem is that countries will not be aligned in policy. At the moment tax rates, the balance of capitalism and socialism amongst other things cannot even be agreed upon. Countries will generally bestow the wealthy with subsides in order to attract them to operate within their borders. I used to be an FX trader for a bank. Manual execution style roles are becoming phased out and replaced by algorithms.

  10. Brandon
    January 18, 2013 at 8:26 pm

    What if the government taxes the owners of capital (owners of the robots) at, let’s say, 90% of their income (or 10% of their wealth or whatever other scheme works the best) and redistributes that with direct payments to the poor. Then indeed there will still be a marketplace and many people wanting to consume the fruits of the robots labor. It will be a society of mostly people who are unemployed or in a menial job and has a massive amount of gov. assistance versus the 1% or less who own the means of the production, but that’s something we’ll have to learn to live with.

    In addition (I think this is mostly an idea from one of the comments), the idea that all manufacturing will be replaced by robots but somehow humans will still have to perform all our service jobs is thinking only in terms of what we see today. When robots and computing are powerful enough to easily understand language, run there own advanced neural nets etc. a robot will be able to just as easily serve you food at a restaurant or cut your hair or give you a massage or provide customer service or even write code for another robot etc.

    • January 19, 2013 at 6:53 am

      That depends on how expensive those services are, and whether people end up specifying a preference for human service. There’s a lot of stuff where we could increase automation, but it’s cheaper and more flexible just to use “humans plus machines”.

  11. abprosper
    January 19, 2013 at 7:12 am

    Very good article. There are a other less savory options you might have overlooked.

    Plutocrats might simply use the robots they own to control or even exterminate mass numbers of people f. You can read John Robb’s Global Guerillas for the horrid details of what such conflicts might be like.

    Alternately we might simply tolerate a world of slums, You can reasonbly assume so long as their personal safety is maintained by said machines that the plutocrats won’t really care.

    Another options and an almost morbidly amusing one would be a population crash. The unmployed take the approach so much of the world seems to be doing and have fewer and fewer kids.

    This seems to be happening almost everywhere already and though no one wants to admit it, its certainly caused by housing and other costs that people no longer have resources or social pressure to front.

    It could be in a few hundred years, they’ll be a small elite class tended by machines, Eloi if you like and no one else save maybe a few comley slaves or something. As bizarre as that sounds, its technologically plausible.

    Given that creativity is nothing but patterns, good algorythms can already play chess, and so I am told write coies of famous novels . Composing music based of memetic analysis is quite doable. They won’t even need artists …

    • January 25, 2013 at 8:20 pm

      Writing copies of famous novels does not require a brain. A Xerox Workcentre 1157 can handle that.

  12. January 19, 2013 at 3:07 pm

    “In the long run, I think there will be no alternative except to implement direct redistribution of income. One possibility is a guaranteed minimum income funded by more progressive taxes (on the robot owners), and possibly by other sources (for example, a carbon tax).”

    I mostly agree with this but I also believe we may need new forms of business organization beyond the corporation. I am thinking of syndicates and cooperatives where workers and members are the owners.

  13. KevinH
    January 19, 2013 at 6:35 pm

    I think you focus on human consumption as a driving force of an economy is a bit tangential to the problems/potential of increased automation through robotics. The idea of an economy is a subset of complex interactive systems that almost by definition happens to involve human demands and consumption. So in this sense you are right, the economy will need human consumers. The real scary/powerful thing about robotics however is that you can build a complex interactive, self-perpetuating system that ISN’T an economy by this definition. You can have robotic miners, robotic goods manufactures, and robots that build robots with small/zero need for human input into the system.

    The potential of such a system is that it can lower the time-cost of human desires dramatically. The danger is that in choosing to allocate scare resources between human desires, and maintenance of the robotic network, that a small group of humans choose to feed more resources into the system to meet more of their own needs rather than distribute the resources fairly. Now I’m not sure that this will happen, but that type of problem space has less to do with traditional beliefs about economies, and more to do with in-group/out-group distinctions in people, and which resources a robotic based system would require.

    • KevinH
      January 19, 2013 at 7:03 pm

      Just to add something about human and robots competing for scare resources: I think there are 3 main resources we would want to center a discussion around. Rare earth minerals, land, and energy. The first is pretty obvious. Do we want to build another 200 iPhone 8’s for the masses or 1 robotic butler for the elite? For land, robots still take up physical space and possibly a lot of land to grow bio-fuels or put up solar panels, which brings us to energy. I think this is the biggest unknown. If we are able to develop cheap energy sources that don’t use a lot of land, then the other problems start to disappear and we get a population of happy dilettantes and artisans. It becomes feasible to mine asteroids and other planets for rare earth minerals, to have enough excess energy and land to produce large amounts of food for feed billions of people.

      Even then, we could have many outcomes that look very little a macroeconomic conditions we know now. If robots can manufacture good locally and recycle the raw components we are currently mining and distributing throughout the world (with concentrations matching population density fairly closely), then we don’t need or want most macroeconomic institutions except for communication networks. For example, when my neighbor (or Facebook friend in Mongolia) has a robot that can take my old car and make a robot that makes robots that can farm or make an computer, I don’t really need a bank loan.

  14. Paul P
    January 19, 2013 at 6:44 pm

    We are all living off the free lunch provided by past generations,
    whose labors gave us knowledge and built our world. The wealth of the
    world is a commons and the rich should be disposed from it. Then, we
    can take advantage of our productivity and fashion a society free of
    toil and want

    Under capitalism’s growth imperative, the economic surplus is
    reinvested and increased each year. This compounded growth has reached
    its environmental limits. Capitalism has outlived it historical
    usefulness. Growth must stop.

    Global warming is upon us now. Be it 2030, 2040, or 2060, we are going
    to reach tipping points, where climate change will set off feedback
    effects that will increase the speed of change and put it beyond our
    ability to do anything about it.

    Unfortunately, capitalism has an institutional deficit and there
    appears to be no pulling back from its imperatives.

    ——-
    This hagiography of Steve Jobs is beyond me. He did not invent the internet, the mouse, the iconic interface, or the society that buys his gadgets. Hell, he couldn’t even write code. Is the collective labor behind Apple that invisible we personify it in one person?

    • January 19, 2013 at 7:08 pm

      The wealth of the world is a commons and the rich should be disposed from it. Then, we can take advantage of our productivity and fashion a society free of
      toil and want

      It doesn’t work that way. The technology and its productivity are just expressions of the overall political and economic systems that utilize them. Destroy the foundation of the system, and the machines rust away, go under-utilized, or stagnate.

      This type of argument is a common Marxist fantasy: the idea that once the technological infrastructure has been produced, you can just swap the institutions for new ones that don’t have the incentives that created the old structure, and everything will be fine (or better).

      Under capitalism’s growth imperative, the economic surplus is
      reinvested and increased each year. This compounded growth has reached
      its environmental limits. Capitalism has outlived it historical
      usefulness. Growth must stop.

      We’re not even close to our environmental and/or economic limits for growth, particularly since vast parts of the population are still “low-productivity” areas that could create a phenomenal amount of intensive GDP growth if they get better technology, institutions, and capital.

      This hagiography of Steve Jobs is beyond me. He did not invent the internet, the mouse, the iconic interface, or the society that buys his gadgets. Hell, he couldn’t even write code. Is the collective labor behind Apple that invisible we personify it in one person?

      He was the prime mover on that front. Without it, Apple would have dwindled away, and likely been bought out by another company.

      That’s another Marxist failing: neglecting to recognize the value of organizational talent and leadership.

  15. January 19, 2013 at 7:13 pm

    We’re already heading towards a far greater proportion of the population in rich countries living off of state-supported pensions, as part of the aging of our population. Assuming that the Demographic Transition hitting Mexico and the rest of Latin American continues, then in 30-40 years time we could have a far smaller segment of the population actually working, since far more people will be old and retired (and I don’t think the political support will be there to drastically cut Social Security, for example).

    That would be an odd economy. You’d have some highly productive, possibly low-employment sectors that heavily utilize automation and other machinery. They would generate some knock-on employment from people selling services to the remaining workers for those companies, but more importantly they’d serve as an important source of tax revenue to fuel Social Security. That large body of old people would then be a source of demand and employment for health care-related services, and those people would in term generate additional employment from the services and goods they use, and so forth.

  16. January 20, 2013 at 4:02 am

    I would argue that most innovation is not done for pay, but people need subsistence plus other things that are needed for a fulfilled life. Governments and corporations appropriate the rewards of innovation through requiring employees to sign over patents associated with their employment. Quite a few innovations are voluntarily contributed through open source activities.

    I could envision a situation where robots do most of what manual labor used to do, with the exception of innovation and those activities requiring human interaction. Whoever owned the robots could be required to redistribute part of the income to a common welfare system that provided nearly all the essentials of life. A universal stipend from this system could be made adequate to create the demand for the new innovations that arose. In this way the only competition would be between the entities that owned the robots. People wouldn’t stop innovating, even if all their needs were met. People would be a lot better off without the rat race of conspicuous and stimulated consumption. In the system described, advertising and patents could be eliminated by simply issuing a directory of available or anticipated products from innovation. The system we have now is like a treadmill where utilization of resources must increase to meet stimulated demand so the great bulk of people can earn enough to survive. It will ultimately collapse from lack of resources.

  17. January 20, 2013 at 7:38 am

    Having scanned the above my impulse is to say only in small parts are some right.

    Most of the large bank reviews on economic development were done with old economic models and many within those institutions challenged the findings. That we have reached a topographical limit on the planet that brings Walras’s ideas to the fore does not mean we have reached a plateau of Man’s existence from which we must shrink – this is old model thinking again. We are limited only by our imaginations and there are many, who do have the money, exercising theirs to take us into space.

    IMHO Krugman has deeply flawed economics anyway but the right to challenge must always be maintained, that’s why we fought for democracy at least three times.

    Resources and controlled expansion are what the Economy needs, the first of which is found outside our spherical boundary. What we should have learned is that ungoverned expansion leads to greed and hidden catastrophes which is where the second comes in.

    So – get the balance right between governance and democracy and make sure the data on the economy is flowing, the models can change in real time but without the cash flow from taxes all governments are stuffed.

    Stop carping get thinking ;-)

  18. January 23, 2013 at 4:55 pm

    You say, “And we know that government can’t be the demand solution in the long run.” I fail to see that you–or anyone else–has demonstrated this is a true assertion. If society generates a surplus of value such that the needs of people for food, shelter, and medical care can be met, the only question is how this surplus is distributed. If we choose as a society to distribute this so as to create a floor below which people are not allowed to fall, I see no reason that growth, consumption, et cetera cannot continue. See Livingston’s “Against Thrift.”

  19. mark Swanson
    January 24, 2013 at 5:52 am

    I would like you to write a follow-up blog update that applies the model you describe here retroactively to the agricultural or clothing industries. Malthus and Hobbs voiced an essentially opposite argument during their time and instead of their forecasted shortages of food we find ourselves overwhelmed by pleanty as a result of a 100 fold increase in agricultural productivity. With this cautionary tale as your guide, would your argument, your economic model of productivity, applied to say 1700’s agriculture, have foretold the incredible wealth and happiness the agriculture productivity revolution brought? Or would you have advised the 18th century farm labores that the coming productivity revolution would put them out of a job?

  20. February 1, 2013 at 5:11 pm

    This growing disparity between the haves and have-nots because of automation is a question I’ve been wondering about for quite some time. With the coming of singularity (where machines are as smart as humas), NO ONE IS SAFE from being replaced by automation. I too have come to the same conclusion that there must eventually be some kind of income redistribution. But how to do it without killing the drive of people who make the economy go?

    I’m leaning towards the negative income tax (originally proposed by Richard Nixon) so that if you want to earn money, you are not penalized dollar for dollar. That is if you earn a buck, you only give up say $.50 in benefits. Then there needs to be some floor, say $30k which you are guaranteed. If you give up benefits at the rate of 50%, then you would no longer receive any benefits after earning $60k. The danger with all this is that there will be tremendous pressure to continually raise the floor (to say $100k) when all you have to do is vote for it. This will ultimately kill the desire of the vast majority of people to contribute to the enconomy, thereby tipping us dangerously close to not having enough people to drive the economy and/or creating a permanent group of plutocrats and have-nots.

    And the other danger I see is that people who have elected to live on just the subsistence income or some lower level, will disengage themselves from business in general, leaving the control of the economy in an ever growing smaller group of people. This will result in a very small group of people determining how investments will be made and therefore the kinds of goods produced, which may then be directed towards to desire of the plutocrats instead of the have-nots.

    Maybe one way to deal with the latter problem is an idea a friend of mine proposed. That we replace the House of Representatives with a national lottery. If you are an eligible voter, you may enter the lottery. If you name is drawn, you will then serve say 6 years. If you keep your noise clean (no bribery or other misconduct), you will get a large annuity at the end of your term. In this way we would have a truly representative government mostly resistant to bribery and lobbying.

    All in all, I think we are in for some gut wrenching changes in this century.

  21. April 22, 2013 at 5:02 am

    Way cool! Some extremely valid points! I appreciate you writing this
    write-up and the rest of the website is also very good.

  22. June 29, 2013 at 7:51 pm

    Its like you read my mind! You appear to know so much about this,
    like you wrote the book in it or something. I think that you could do
    with some pics to drive the message home a bit, but instead of that, this is great blog.
    An excellent read. I’ll certainly be back.

  23. cynthia.curran8@email.com
    November 26, 2013 at 8:47 pm

    Will, I predict about half the jobs done by illegal immigrants will be done eventually by robots.

  24. Chirag Shah
  1. January 18, 2013 at 9:04 am
  2. January 18, 2013 at 5:08 pm
  3. January 18, 2013 at 5:58 pm
  4. January 20, 2013 at 12:41 am
  5. January 20, 2013 at 7:49 pm
  6. February 6, 2013 at 9:27 pm
  7. June 27, 2013 at 10:20 pm

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 176 other followers