Refuting the “Robots Eat All the Jobs” Theory

June 3, 2014 / / 3 Comments

One of the most interesting topics in modern times is the “robots eat all the jobs” thesis; best book on topic: The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. The thesis is that computers can more and more substitute for human labor, thus displacing jobs and creating unemployment. At core, this is Luddism  — “lump of labor” fallacy, that there is a fixed amount of work to be done.

The counterargument is Milton Friedman: Human wants and needs are infinite; there is always more to do. 200 years of history confirms. To avoid the Luddite mistake, you must believe “this time is different”, that either (a) there won’t be new wants and needs (vs human nature), Or (b) It won’t matter that there are new wants and needs, most people won’t be able to adapt to contribute and have jobs in new fields.

While it is certainly true that technological change displaces current work and jobs, and that is a serious issue that must be addressed, it is equally true, and important, that the other result of each such change is a step function increase in consumer standards of living.

As consumers, we virtually never resist technology change that provides us with better products/services even when it costs jobs. Nor should we. This is how we build a better world, improve quality of life, better provide for our kids, solve fundamental problems.

Make no mistake, advocating slowing tech change to preserve jobs = advocating punishing consumers, stalling quality of life improvements.

So how then to best help individuals who are buffeted by producer-side technology change and lose jobs they wish they could keep? First, focus on increasing access to education and skill development — which itself will increasingly be delivered via technology.

Second, let markets work (voluntary contracts and trade) so that capital and labor can rapidly reallocate to create new fields and jobs.

Third, a vigorous social safety net so that people are not stranded and unable to provide for their families.

The loop closes as rapid technological productivity improvement and resulting economic growth make it easy to pay for safety net.

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Lump of Labor Fallacy

June 3, 2014 / / No Comments

Economists call it the ”lump of labor fallacy.” It’s the idea that there is a fixed amount of work to be done in the world, so any increase in the amount each worker can produce reduces the number of available jobs. (A famous example: those dire warnings in the 1950’s that automation would lead to mass unemployment.) As the derisive name suggests, it’s an idea economists view with contempt, yet the fallacy makes a comeback whenever the economy is sluggish.

– Paul Krugman in 2003 “Lumps of Labor“

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