[batista]

There's also the problem of what will you do with the millions of people working in retail economy, and with the assorted collapsed buying ability of the middle to lower class.

We don't just keep jobs because we need them. We also keep them because we need the distribution of wealth that they make possible --without a way to ensure that, everything collapses. There can't be a billionaire without millions of wage slaves.

[JumpCrisscross]

There can't be a billionaire without millions of wage slaves

Except for where there can. Economic productivity is nowhere close to decoupling from population mass yet, but when it does, you won't need low or semi-skilled workers.

There is a careful calculus happening at every level comparing the productivity of a human versus machines (and other humans). To deny that competitive spirit, à la Greece or Italia, builds systematic inefficiencies into the economy.

At a certain point there won't be a place in the world for unskilled humans - they will be un-differentiable from a defective tool.

TL;DR This may be a problem, but will be un-avoidable. Social structures, demographics, or both will have to adapt to new realities of productivity.

[rbarooah]

Do you know where there is any good analysis of the kinds of adaptations that might be possible to this new reality of productivity?

[JumpCrisscross]

It's funny, a Treasury paper from a 1994 conference in Canberra [1] looks like the oeuvre on the topic. Everything more recently has focused on rising productivity as a desired effect instead of an a priori cause.

The paper concludes that in the short-run, rising productivity decreases inflation, increases the current account balance, increases GDP, and increases unemployment (and real wages) as aggregate supply increases without a commensurate increase in aggregate demand. The system starts equilibrating as people internalise the higher productivity into their investment assumptions.

We could see falling rates on student loans coupled with rising returns on education (note: not just college education, as the OP pointed out) as increasing the incentive to invest in one's education. Given that our culture creates barriers to education the older one gets it seems like we will have a wasted generation of un-skilled workers who will just need to be worked through the system (being a cold, pragmatic macroeconomist here). Being civil to those people without incurring undue cost to the system will be the challenge.

[1] http://www.treasury.gov.au/documents/239/PDF/paper07.pdf

[batista]

Except for where there can. Economic productivity is nowhere close to decoupling from population mass yet, but when it does, you won't need low or semi-skilled workers.

You don't need workers to have productivity, but you need people not being rich to have riches. And those people need to be fed, clothed, etc. And they also need money, to be able to buy things and services, else you cannot sell them.

So, you either turn into a Star Trek/socialism scheme, where social wealth is shared, and rich men are those that take more share by power alone --like kings of time old--, or you have a problem or keeping people occupied.

[HeyLaughingBoy]

That's only true if you define "rich" as "I have a lot more than you."

If you define rich to mean "I have way more than I will ever need" then there is ultimately no reason that everyone can't be rich. It just takes a while to get there.

Personally I'd prefer the latter. Eliminating poverty makes everyone better off.

[batista]

That's only true if you define "rich" as "I have a lot more than you." If you define rich to mean "I have way more than I will ever need" then there is ultimately no reason that everyone can't be rich. It just takes a while to get there.

The problem I described is multi-faceted, and I might not have made a good job at it, or some people might not have understood me (judging from the knee-jerk downvotes).

One issue is societal wealth. As a society, everybody can be "rich" in the sense you describe, but I already addressed that in the part where I write about the "Star Trek/socialism scheme, where social wealth is shared". I am fine with that kind of a society. I just don't see that this is what we are currently approaching with automation, etc, but rather huge poor masses and an middle class in decline.

So, my other argument was about what is actually happening, i.e. the continuation of the current model + automation. And what I said, is that if you believe --as many do--, that corporations, enterpreneurs, buying and selling stuff, in essence a market economy is crucial, then you need poorer people with jobs, ie. you need consumers. You cannot have a market economy AND everyone being rich in the "I have more than you" sense, and you cannot have a market economy AND the great masses out of work due to automation.

So, my argument is, automation is ultimately non compatible with a market economy. You get either sharing for everybody (i.e no market economy), or a collapse in buying power / sales (i.e a poor market economy).

(A final point, re everyone being rich in the "I have enough" sense: beyond the basics, "needs" are themselves a social construct. To a caveman, or a 17th century peasant, a man working at McDonalds with a house, tv, food, internet, bathroom, modern medicine, etc, seems as "more that he will ever need". To his contemporaries, not so much).

[yummyfajitas]

I just don't see that this is what we are currently approaching with automation, etc, but rather huge poor masses and an middle class in decline.

Can you support claim with some facts?

Note that in our current society, it is easily possible to be both richer than the 1970's middle class (in absolute terms) and live a life of leisure. We apply the label "poor" to people who do this, but that's just an arbitrary label.

...beyond the basics, "needs" are themselves a social construct.

Yes, this is the game played by most people who complain about the "middle class in decline" or "increasing poverty". They increase the definition of "middle class" more rapidly than the living standards of the middle class actually increased, and then whine when reality hasn't met their artificial benchmark.

[batista]

>> I just don't see that this is what we are currently approaching with automation, etc, but rather huge poor masses and an middle class in decline.

> Can you support claim with some facts?*

Well, but how about just looking around you? Because arguing for obvious facts gets tiresome after a while.

http://www.dailyfinance.com/2010/10/17/disturbing-statistics...

http://finance.yahoo.com/tech-ticker/the-u.s.-middle-class-i...

http://www.businessinsider.com/22-statistics-that-prove-the-...

http://theeconomiccollapseblog.com/archives/30-statistics-th...

Yes, this is the game played by most people who complain about the "middle class in decline" or "increasing poverty". They increase the definition of "middle class" more rapidly than the living standards of the middle class actually increased, and then whine when reality hasn't met their artificial benchmark.

It's not a game --it's how society works. Definitions change according to the social reality. Would you consider YOURSELF middle class if you only had access to what a '50's middle class family had? A 1920's one?

[JumpCrisscross]

The material and energy intensity of consumption, per capita, has increased exponentially over the past centuries. There is no reason to not expect it to continue to do so for the foreseeable future. Thus, you don't need an army of low-wage consumers to buy things from the wealthy.

You need people not being rich to have riches

Echoing another point made in this thread, but wealth differentials doesn't mean you need to have poor people. The least well off person in a society may not have everything they want - most people don't and probably should not, if we want aspiration and ambition to have a place in the future - but they'll have their basic human rights fulfilled (a roster that gains mass with economic development).

[batista]

The material and energy intensity of consumption, per capita, has increased exponentially over the past centuries. There is no reason to not expect it to continue to do so for the foreseeable future. Thus, you don't need an army of low-wage consumers to buy things from the wealthy.

The "material and energy intensity of consumption, per capita, has increased exponentially over the past centuries" EXACTLY because of the creation first and constant availability of "an army of low-wage consumers".

People were taught to hold jobs in the way we do now, and they were taught to consume, in the way we do now. The vast masses of the people not only consumed much less, but made their own everything, from clothes and shoes, to vegetables and housing. Like an Amish community.

A decline in the middle class, e.g by migration of their jobs abroad, translate to a decline in economy, unless you can create new jobs at the same rate, which currently we can't, and the economy took a hit.

Echoing another point made in this thread, but wealth differentials doesn't mean you need to have poor people.

No, but a market economy needs people poor enough to have to work and at the same time rich enough to be able to spend money on things.

Automation can eliminate the need to have people working, but it cannot eliminate the need to have people spending --except if you move beyond a market economy.

[MBlume]

Guaranteed income. If the economy doesn't require everyone's labor, a bunch of people just shouldn't work, so make sure they can eat and you're done. I don't understand all this American obsession with jobs for everyone.

[ctdonath]

Promise free food, and suddenly way more people are demanding it than the economy can support. Even if the economy can afford to give away food, society stagnates because there is no incentive to produce nor advance anything of value - be it making widgets, sweeping floors, or writing sonnets. Those who do produce the wealth unproductive others live on will decide to not bother (look up "go Galt"). We Americans are obsessed with jobs because we realize to not work leads to death, be it individual or cultural.

[karamazov]

"free food" doesn't necessarily mean a communist society where everything is free - it means providing an income level that allows for the necessities of life. It probably makes more sense to give those away than it does to force people to work meaningless jobs just so we feel they aren't getting something for "free" - if the jobs don't produce value, then the workers are getting something for free, they're just also wasting their time in the process.

People would still have every incentive to work to improve their lot in life; most people on HN probably have the capability to quit their jobs and live off of welfare checks, but it's not exactly a great lifestyle, even if it doesn't require any work. In fact, people might have more incentive than they do now to try out new, interesting work; knowing that if everything blows up they won't screw up their lives and the lives of their families is a great asset.

Overall, I imagine society would progress tremendously if everyone were able to get an education and do creative work while being guaranteed the basics of life, even if that results in some freeloaders surviving on the dole.

[ctdonath]

It's amazing how many people will settle for a free "necessities of life" income. TV makes it very easy to waste time with satisfaction. Few will use the opportunity for creative productivity. Most will be freeloaders. Whatever the arguable percentages, it creates a drag on the productive by depriving them of the value of their work.

[pyoung]

A television is not a 'necessity', and if the policy is designed correctly the income should be designed to support just the bare minimum of existence, i.e. food, shelter, and some sort of health care. This can be done providing debit cards or other payment systems that only allow the recipient to spend the funds on approved items.

Most first rate economies already have fairly extensive welfare systems in place, and you do not see people begging to get fired from their jobs so that they can get unemployment. Most people have at least some ambition to increase their social and economic status and that won't change.

[khafra]

> Those who do produce the wealth unproductive others live on will decide to not bother (look up "go Galt").

Has this ever happened? Has anyone at any wealth level ever simply stopped making money because he was upset about taxes? I hear a lot of small-time sole proprieters talk about it, but I've never heard reliable reports of it actually happening.

[karamazov]

pg has a great essay on this: http://www.paulgraham.com/inequality.html.

A quick summary is that yes, people probably do choose not to do certain kinds of work when taxes are too high, but not in the way that Bill O'Reilly tends to advertise it - it's unlikely that someone is going to quit a high-paying job because their marginal tax rate went up a point. However, if you're undertaking an endeavor with a 5% chance of success, and a 30x tax-free payout in case of success (relative to a safe option), your expected payout is 1.5x with no taxes; 1.35x with a 10% tax rate; and 0.9x with a 40% tax rate. Whether or not you'd take the risk in the first two cases varies from person to person, but in the latter scenario, most people wouldn't bother; you'd have better expectancy at a roulette table.

[khafra]

I appreciate the EV calculation. That would probably raise the marginal value at which someone like Warren Buffett would buy a company, fix its problems, and make it productive again. I doubt he'd shut down Berkshire Hathaway, or that it would even slow down people intent on creating a startup; but it would have a marginal effect.

Still a bit different from the classic "going galt," though.

[yummyfajitas]

Has anyone at any wealth level ever simply stopped making money because he was upset about taxes?

Yes, it happened to Ronald Reagan. When the top tax rate was 90% (he was an actor at the time), he chose to make only two movies/year. He saw little point in making more movies since he wouldn't get paid for it.

http://toomuchonline.org/the-tax-that-turned-ronald-reagan-r...

[batista]

Well, fewer Reagan movies. How is this a BAD thing? He was a bad actor, and a worse president.

Meanwhile, a true artist, would make movies no matter what the top tax rate was, because he had the urge to. Artists have worked for nothing for ages, in order to create.

[kiba]

There are two type of people:

Those who are self-motiviated, and those who aren't. Or rather, there's a continuum. Most people aren't that self-motivated so they mostly do nothing.

Those who are, will continue to contribute to society regardless if they got paid or not.

[JumpCrisscross]

They will choose where they contribute and will modulate the risks they take as a function of pay-off, though. These aren't things you see hitting instantly, but it affects decisions at the margin and eventually nickels add up.

[batista]

Pay-off is not only monetary, though.

A society can have totally different ways of compensating someone.

[simonsarris]

At least one prominent American, Thomas Paine (of the American revolution) advocated a guaranteed minimum income for everyone in his pamphlet Agrarian Justice, which was a real fascinating read:

http://en.wikipedia.org/wiki/Agrarian_Justice

The US Social Security administration keeps a full text of the pamphlet online:

http://www.ssa.gov/history/paine4.html

[msrpotus]

Was a common idea back in the 1970's; might have even happened if not for Watergate, stagflation and then Reagan.

[philwelch]

Jobs provide more than income, they also help with self-esteem and prevent idleness, which in turn keeps things like crime down. I think useless make-work jobs are ultimately more feasible than guaranteed income for those reasons.

[MBlume]

> prevent idleness, which in turn keeps things like crime down

This, this right here is exactly the kind of puritan thinking I find infuriating.

Seriously, leisure as a terminal negative term in your utility function?! Never mind the people who are going to use the time to learn, to create art and share it, to spend time with their families -- if we don't shackle people to their counters and desks, they'll be rioting in the streets!

How much theft/violence do you think is driven by need, by looking for a way to get by? If anything, I would expect violence and theft to go down.

[philwelch]

Having been quite the slacker, I assure you there are massively diminishing returns to leisure time, unless you turn it into work. If you don't get anything done, you feel worthless. Maybe 20 hours a week is enough, but no work at all isn't good for you. Rioting in the streets is exactly what the welfare class of Britain did mere months ago.

Art and study could certainly be more heavily subsidized, though. But I would count those as types of work.

[rms]

Agreed with parent that this is basically a Puritan attitude. This idea that one creates self-worth via work is not anything like a cultural absolute. One of my favorite things about Balinese culture is that they don't have the idea that poverty is vice.

[philwelch]

Maybe it's a Puritan attitude, but is it wrong? Who cares about cultural universals; if the Balinese are happier as impoverished slackers, live and let live.