Paul Davidson, “More robots coming to U.S. factories,” USA Today, February 10, 2015.While only about 10% of manufacturing tasks in American factories are automated today, some think that this will rise to about 25% in about 2025, a decade from now. But, more importantly, what will the percentage be in 2035 and 2050? Presumably much higher.
Georgina Prodhan, “China to have most robots in world by 2017,” Reuters, February 6, 2015.
Paul Wiseman, “Robots Replacing Human Factory Workers at Fast Pace,” Cio Today, February 22, 2015.
The upside of this will be increased productivity and what has been dubbed “reshoring,” or the return of manufacturing to the Western world. If this happens on a large enough scale in the long run, that in turn means lower trade deficits and a larger manufacturing sector and output for nations with mass consumer markets in North America and Europe.
But we can’t see the full effects of this today and the downsides, partly because robotics has been – for a long time – an overrated field with many robots being just expensive frivolous toys. All that is changing, as anyone reading the news can see.
A lot of neoclassical economists and those under their influence see no problem with mass automation, but that is only because neoclassical economists is deeply flawed and mistaken in its core principles.
Economies run on orthodox neoclassical theory are likely to have chronic problems of insufficient aggregate demand and mass structural unemployment as automation in production soars and even service and white collar work can be done by artificial intelligence (AI).
Market economies have no effective and reliable tendency to full employment equilibrium, and there is no necessary reason to think that the issue of structural unemployment will be solved by markets.
Worse still, with the fall in prices and factor input costs, possible general price deflation could put downward pressure on wages in the future, which means debt deflationary problems as goods prices, wages, nominal debt and asset prices are grossly distorted in relation to one another.
In the late 19th century from 1873 to 1896, for example, there was a period of chronic deflation, probably caused to a great extent by positive supply shocks and technological advancement, but the effects on investment, confidence and the economy at large were deleterious (the evidence can be seen here, here, and here).
Economic policies will need to change in the future to reflect the realities of production by mass automation.
Government welfare will have be reconsidered, not as some safety net, but as a basic human right in an age of automation: in essence, everyone will need a basic guaranteed income from the state.
If you wish to work in addition to this, as no doubt many – and probably most – people will, and you cannot find work in the private sector, the traditional policy of Keynesian fiscal stimulus will become weaker and weaker in its effects as more and more work is done by machines and artificial intelligence.
Eventually, governments will need direct mass employment programs to create economically and socially useful work, e.g., in social services where real people can never really be displaced, and in education, sciences, research and development, or other services.
Perhaps I just haven’t read the literature well enough, but I am surprised that Post Keynesian economists haven’t taken these issues more seriously in their academic writing.