Monday, February 23, 2015

Automation and Robots in the News

Interesting news on the rise of automation and robots both in the West and in China:
Paul Davidson, “More robots coming to U.S. factories,” USA Today, February 10, 2015.

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.
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.

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.


  1. Every human job is replaceable. (Cool video here; remarkable insights)

    Well, almost. Assuming things go the way they're going, we can expect increases in prostitution and people entering politics. Perhaps the only real jobs in the far future will be in sectors such as high level programming and engineering or advanced pharma/biodevelopment, i.e. the people actually continuing the tech advancement, which will be undertaken by those with extensive knowledge of their respective areas. Everyone else will receive your minimum "basic human right" incomes and eventually lackadaisically continue their lives, unmotivated and disincentivized.

    And thus we prepare ourselves to enter a sort of Heinlein-Orwell novel in the next 200 years. I wonder if the movie rights are there for something like this.

    (On a slightly irrelevant note, have you heard of Posthumanism?)

    1. "Everyone else will receive your minimum "basic human right" incomes and eventually lackadaisically continue their lives, unmotivated and disincentivized."

      Why that would be the case is completely unclear. In fact, I would expect there would be much greater opportunities for education, artistic and athletic achievement, and literary and other pursuits.

      Entertainment -- whether music, film, TV, novels, sport, gaming, etc. -- would most probably still require a significant labour force and exercise people's imaginations and interests.

      I would imagine that there would much more resources available for and human interest in history and archaeology too, and probably natural history.

      Also, if by "posthumanism" you mean "transhumanism" and people obsessed with what they call the "singularity" (as I recall from a lot of writing by Ray Kurzweil), I think it is mostly far-fetched silliness.

      I imagine science will continue to increase human life expectancy, and maybe advanced medical science in the future might even be able eventually to delay or retard aging and create extended human life spans, but that is a far cry from bizarre fantasies of transhumanism.

    2. Robots can certainly replace people's labor. But they can't make dumb people smart, or give them better habits. Work has also traditionally served the function of keeping the kinds of people out of mischief who can't manage their lives well, and we will have to find other ways to do that in a world of guaranteed incomes where the people lacking in self-discipline have too much time on their hands.

  2. "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)."
    -This never happens. Ever. Prove me wrong, LK, if you can. The U.S., which has the most neoclassically run labor market in the world, suffered none of the permanent increases in the trend rate of unemployment experienced in the last third of the twentieth century in developed countries as diverse as New Zealand, Spain, the U.K., Australia, West Germany, Japan, and Sweden.
    The idea manufacturing automation has been accelerating post-Great Recession is, as far as I can tell from the productivity statistics, utter BS:

    1. Capitalist economies -- outside of about the full employment Keynesian 1946-1970s period -- are frequently plagued by high involuntary unemployment.

      E.g., the UK's unemployment rate from 1870 to 1999:

      Take a look at the U6 unemployment data and alternative Shadowstats unemployment data (including long-term discouraged workers) for the US from 1995 to 2015:

      Frankly, there seems good prima facie evidence that at least some of this is caused by structural unemployment from increasing manufacturing automation.

      And as for your productivity statistics, they don't necessarily tell you anything about the tendency to automation.

      And how could it possibly refute the hard empirical evidence that this is exactly what has been happening?:

    2. I do not deny that there is a strong tendency for the labor market in the U.S. to experience below-full employment. But this unemployment, at least in the U.S., which, again, has the most neoclassically-run labor market, was a constant feature, not something that changed significantly in response to automation. The same cannot be said of countries with less free labor markets.

  3. Didn't Marxists already predict what would happen if we reach full automation and this it's the reason for the tendency of the rate of profit to fall?

    1. Except that they are wrong about the long run tendency of the rate of profit to fall. Wrong about the labour theory of value, and wrong about historical materialism.

    2. So you accept the subjective theory of value? It would be helpful to know what core principles of neoclassical microeconomics you accept.

    3. Subject theory of value, yes, as a general empirical truth, but not the diminishing marginal utility theory as some kind of universal "law":

      Here is what is wrong with neoclassical economics:

  4. A good post was ruined by glib and dismissive comments. As dialectical materialism is a core aspect of European sociology, I think Europeans tend to expect a critique of more than 4 words. If you are American you may not realise how central Marxism is to European sociology. American sociology was purged of Marxism during the McCarthy era. For some reason Australia also has a similar Polanyi based academic culture.