December 9, 2017


Robot Takeover Matters Less If We're All Shareholders (Noah Smith, 12/09/17, Bloomberg View)

As technologies such as machine learning become more advanced, there's a real possibility that automation could start making human labor superfluous on a large scale. So far, nothing like that appears to be happening; as machines improve, humans keep finding new valuable things to do. But there's no guarantee that it won't happen in the future. So it's important to have some way to protect a broad swath of the populace against this scenario.

A social wealth fund provides just such a way. If automation replaces human labor, it means the labor share of income will continue to fall:

That would mean the share of income going to capital owners -- corporate profit, land rent and interest income -- would go up. A social wealth fund would automatically redirect that increased capital income back to the same people whose labor income fell, canceling out much or all the harmful impact. In other words, a social wealth fund is a way to redistribute benefits of the robots.

The beauty of this policy is that it doesn't require the government to take a stand on whether automation will hurt workers. If automation proves to be a boon to workers instead of a threat, as in the past, then wages will stay high and the social wealth fund's payouts will be more modest. Either way, workers and the middle class are protected against change that's almost impossible to predict.

Actually, a social wealth fund would protect against other big economic changes. Labor's share of income is already going down -- probably due to globalization, industrial concentration, falling worker bargaining power, land price appreciation and other forces. Every one of those trends sends more money into the hands of shareholders, landlords and bondholders. So a social wealth fund would provide insurance against the future intensification of any or all of these developments.

So the social wealth fund seems like a great idea. But there are also difficulties and dangers involving its implementation. The main challenge is the issue of corporate control.

Social Security would, likewise, be much better off had we followed Bill Clinton's plan to invest the trust funds in stocks, but government ownership of a large voting interest in corporate America seems obviously problematic.  This is why we should pursue the Third Way and transfer stock ownership to al;l Americans via devices like personal SS accounts, O'Neill accounts, HSAs and the like.  

The ideal is that the labor share of wealth creation trend towards zero.  But that does require a different means for redistributing wealth than the one we currently prefer--jobs.  Universal stock ownership accomplishes that end nicely.

[N.B. : One of the more insidious conservative goals it achieves is to give every citizen a vested interest in maximizing capitalism.]

Posted by at December 9, 2017 10:44 AM