[hasanove]

This reminds of wonderful book - "Economics in One Lesson". Written half a century ago it describes most economy fallacies, that are dominating even among intelligent people. If you didn't know, you would think it was written today.

There is a chapter on "The curse of machinery" (read online - http://www.fee.org/library/books/economics-in-one-lesson/#0....), that explains why this whole post is thousand years long delusion, that keeps coming back every decade or so.

Highly recommended to anyone who wants to understand true fundamentals of the sound economies.

[A1kmm]

After a long rant, the chapter of that book comes to the core thesis that consumption will increase, and that consumptive increase will increase demand for labour.

The economy finds a way to efficiently use resources until constraints are hit. Historically, despite automation, the constraint (or rate limiting factor) that has been hit has been human labour. What if increasing population, increasing automation, and natural resource depletion mean that natural resources and land become the predominant rate limiting factor holding back the economy, rather than human labour? Then, we won't see full employment, we will see full natural resource utilisation instead.

That said, in the medium term, natural resource depletion is actually likely to inhibit automation - automation is largely dependent on energy derived from fossil fuels, and as we approach and pass peak oil and supplies dwindle, sustainable energy sources will need to take over.

The other problem is that it is not just employment that should be considered, but equality (see http://www.equalitytrust.org.uk/why/evidence for why equality matters). To see why this is a problem, lets take the reductio ad absurdum approach: suppose that we had the technology and natural resources to give everyone on the planet the capital they needed to live independently, sustainably and happily without having to do any work at all - everything is automated. In this perfect society, there is no inequality and no transfer of wealth. Now consider the exact same situation - still no workers, but a small percentage of people own most of the wealth, and everyone else pays rent to them for the equipment (this is essentially the current economy). Wealth transfer will continue to flow from the poor to the wealthy, and there will be very little economic mobility because the wealthy don't need the poor.

Obviously, in reality things are not quite so grim as in the hypothetical scenario because not everything can be automated, and there is still a need for labour. However, when pressed against natural resource limits and a lack of land, I think that something very similar is happening in the global economy.

[nate_meurer]

A bunch of excellent points about basic economics.

I would add, regarding this part:

  "The economy finds a way to efficiently use resources until constraints are hit."

... that "efficiently" is only true to the extent that resources are scarce. For resources that are not scarce, as was the case with oil until relatively recently, and as is the case with nat gas now in the U.S., the market optimizes for volume much more than efficiency. Hence the reason we're sucking the stuff out of the ground as fast as we possibly can.

[cwb]

The author makes the implicit and false assumption that humans will always be able to compete with machines in something that other people are willing to pay for. That has been, and probably still is, the case. I see no reason to think that will continue indefinitely. Humans have three key properties that have kept us competitive with machines:

- "Intelligent" observation-based decision making

- Flexible manipulation of objects

- Teachability

Technology still have some way to go to match our capability here, but they're getting there. The dynamics are roughly that humans improve or change linearly through education, but technology can improve roughly exponentially.

[wtallis]

New technology can cause unemployment, but only short-term unemployment. (New workers don't generally aspire to obsolete jobs, so the unemployment is limited to one generation.) Unfortunately, many people whose jobs disappear from underneath them find that they are no longer qualified for the remaining skilled jobs, they can't easily afford to go back to school for several years, and the unskilled jobs are disappearing even faster!

[jaekwon]

No, the text in that link is also flawed. You're assuming that owners of efficient machines actually spend their money. What if they don't? What if they invest their money in privatized land, IP patents, TBonds, cornering the food futures market instead?

That's not spending... that's exploiting & extracting. Jobs would disappear as money dries up. I believe this is happening, no?

[OstiaAntica]

The idea of "money on the sidelines" is also an economic fallacy. Money invested in land, futures, or TBonds still gets circulated into the economy. There's still another person on the other side of the trade. The landowner who sold will have cash to spend, the government with new borrowed funds will spend them on a new bridge, and so on.

[jaekwon]

I'm talking about cornering markets. The money received for land sold can be can still sucked out of the economy. It is possible for one entity to own all land.

[tatsuke95]

And then what? Continue the thought experiment. One person owns all the land. What does he do with it? Does he rent it to people? Then those renters are willing to pay a price to use the land in order to generate some kind of return. The economy expands. If the land owner refuses to allow people to use the land, what was the point in accumulating it all in the first place?

[Tichy]

I used to think kind of like you, until I realized that the rich people would also buy military robots. Then they could defend their land against revolutions for free. Sure, it would maybe be kind of pointless (although, maybe by then there would be "super golf clubs" that allow you to play really big golf ranges), but that doesn't seem to have stopped people sitting on lots of land in the past.

[tatsuke95]

That's interesting. Never really thought about the military robots. I guess it wouldn't take much for a "rich person" to pay an individual enough to be willing to fly a drone over a crowd of "poor people"

[jaekwon]

Someone crazy enough to try to own all land, is crazy enough to do nothing with it.

[Tichy]

That doesn't seem to automatically solve all problems. For example, imagine I sell my land in exchange for 1000 apples. I eat apples for a couple of months, then they run out and I starve to death. Whoever bought my land still has the land, but nothing is left of whatever he paid it with.

Yes, I might have worked those months, powered by apples. But what if I was sick, or played farmville instead?

[chrisgppall]

Unless that money is tied up in assets that are thought to be safe like land or commodities.

[dan85]

If you don't spend any money, the State can print without creating inflation.

Imagine that there are $1000 in the world, and you earn $450 of them. Then you burn all your money instead of spending them. The State can now print another $450 without worries because... you have just been taxed at 100%. Also, investing isn't the same as not spending money.

[jaekwon]

All true, but then the problem is how the distribute the money being printed. Giving everyone X dollars seems more fair than what the Fed is currently doing, but you may disagree.

Also, investing is not the same as spending. Investing, then getting bailed out by the Fed is especially not the same as spending. That was my point.

[wisty]

It could be worse. Imagine you were trapped in a giant reality TV show the size of a planet, set up for the entertainment of a ruling elite, who through generations of decadent luxury have degenerated to the point where recreating the 21st century actually seems like an amusing thing to do with their essentially unlimited resources.

Kind of a "The Matrix" meets "Doctor Who: Bad Wolf" sort of thing. Maybe our unseen overlords are just too lazy to make good TV, and want a planet of genuinely suffering artists to do it for them?

But really, who knows? Strong AI, automation, and resource recycling might head off a lemming-like bust in the next 100 years.

[rcthompson]

I always assumed that there was something horribly wrong with the idea that technology kills jobs, but that link explains the fallacy quite clearly. It's actually the same logic as that which disproves the fallacy that destroying things stimulates the economy (yes, some people actually believe this).

[bambax]

> the fallacy that destroying things stimulates the economy (yes, some people actually believe this)

"Cash for clunkers": did it work?

[jpadkins]

for what definition of "work"?

increase economic activity: yes make society wealthier: no make used cars more expensive for poor people: yes increase jobs in the auto industry: no pull auto industry profits from the future forward: yes create new long auto industry term profits: no

[wetbrain]

The only thing I'd add to this is how things move so much quicker.

It takes time to find a new job. Like the Joe Smith example, a skilled worker is now unskilled because his job has been made obselete. Anecdotally, I've seen friends parents try to find a job in the industry they used to do, unsuccessfully. There are some people who don't like change. There's a refusal to accept that all that time you spent was wasted and you need to change industries, or at least focus. There's also the stigma associated with having worked in that now dead market. Though many skills are transferable, it seems some companies have a bias that it's easier to train a new worker than retrain one with 'useless skills'. Again, that's all anecdotal.

So while Joe Smith will eventually find a new job, it does take a while. And that can stack such that a significant workforce is unemployed. Everything in the article holds until the hypothetical day that a new disruptive technology is released continuously, and your skills are worthless every other year. Which will probably never happen, but an interesting thought experiment nonetheless.

[davidw]

Which is probably an argument for giving a helping hand to the Joe's of the world in their moment of need, rather than throwing shoes into the machinery.

[bambax]

The post doesn't discuss efficiency as productivity (ie, quantity of output per hour of labor), which could be called "curse of machinery", but rather, increases in the efficiency of distribution which results in a "winner takes all" economy.