January 15, 2013
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The End of Labor: How to Protect Workers From the Rise of Robots (Noah Smith, 8 JAN 14 2013, Atlantic)
For most of modern history, inequality has been a manageable problem. The reason is that no matter how unequal things get, most people are born with something valuable: the ability to work, to learn, and to earn money. In economist-ese, people are born with an "endowment of human capital." It's just not possible for one person to have everything, as in the nightmare example in Econ 101.For most of modern history, two-thirds of the income of most rich nations has gone to pay salaries and wages for people who work, while one-third has gone to pay dividends, capital gains, interest, rent, etc. to the people who own capital. This two-thirds/one-third division was so stable that people began to believe it would last forever. But in the past ten years, something has changed. Labor's share of income has steadily declined, falling by several percentage points since 2000. It now sits at around 60% or lower. The fall of labor income, and the rise of capital income, has contributed to America's growing inequality.What can explain this shift? One hypothesis is: China. The recent entry of China into the global trading system basically doubled the labor force available to multinational companies. When labor becomes more plentiful, the return to labor goes down. In a world flooded with cheap Chinese labor, capital becomes relatively scarce, and its share of income goes up. As China develops, this effect should go away, as China builds up its own capital stock. This is probably already happening.But there is another, more sinister explanation for the change. In past times, technological change always augmented the abilities of human beings. A worker with a machine saw was much more productive than a worker with a hand saw. The fears of "Luddites," who tried to prevent the spread of technology out of fear of losing their jobs, proved unfounded. But that was then, and this is now. Recent technological advances in the area of computers and automation have begun to do some higher cognitive tasks - think of robots building cars, stocking groceries, doing your taxes.Once human cognition is replaced, what else have we got? For the ultimate extreme example, imagine a robot that costs $5 to manufacture and can do everything you do, only better. You would be as obsolete as a horse.
The replacement of human cognition by machines is, by definition, just another improvement in efficiency. This presents us with an interesting question--how to distribute the ever greater wealth we create ever more efficiently--but to pretend that maximizing efficiency is a problem is just Luddism.Posted by Orrin Judd at January 15, 2013 9:32 AM