June 3, 2014


Robot workers could tear America's social fabric (Michael R. Strain, May 28, 2014, Washington Post)

Even if the standard economist's answer is correct when comparing the 21st century to the 19th, it omits the fact that living through this period of transformation was wrenching. Many economic historians believe that the British working class had to endure decades of hard labor with little improvement in their quality of life before they were able to enjoy the benefits of the new economy. Real wages fell dramatically for some occupations. Many who held those occupations couldn't be retrained to compete in the new economy. Lives were shattered. Some families suffered across generations. People flocked from the countryside to dirty, disease-infested cities.  For decades there was deep social unrest. British society was shaken to its core.

Marx and Engels, responding to these developments, thought it was self-evident that "constantly revolutionizing the instruments of production" caused changes in "the whole relations of society." As they famously put it, "All that is solid melts into air." This could be taken to be descriptive rather than speculative.

The economist Joseph Schumpeter thought "creative destruction" was "the essential fact about capitalism." Today, it is tempting to think of creative destruction as a relatively benign thing -- Starbucks replacing mom-and-pop coffee shops, or companies going out of business from time to time. In reality, creative destruction can be a massive, painful force. It certainly was during the Industrial Revolution. So will another technological revolution change the face of the West? Should we fear the rise of the machines?

There is no question that technology is already having a major impact on the labor market. Over the last several decades, employment in Western economies grew in both low- and high-skill occupations, but fell in middle-skill occupations. That's because middle-skill, middle-class occupations are those that can be most easily replaced by technology. (Think of a 1970s-era bank that employed a president, a bank teller, and a custodian. Today, it's the bank teller who's gone, replaced by an ATM.)

When technology replaces you, it's a gain in productivity.  When it replaces me, it's a social crisis.

Posted by at June 3, 2014 8:03 PM

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