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Will Automation Lead to Economic Collapse?
Most of the agriculture and industrial jobs are already phased out by machines. Over 70% of jobs and labor is currently to find in the service sector, but also this sector is being phased out and replaced by automation which means decreased purchasing power of the general public. Just take a look at this: http://www.thefiscaltimes.com/Articles/2012/08/20/Will-Robots-Cause-Mass-Unemployment-in-China.aspx#page1
Let's make an example as well. What exactly happens when people get automated by machines? They loose their jobs and need welfare to support themselves until they get a new job, if they ever do. But, where does welfare come from? It comes from tax payers. And do people on welfare pay taxes? They don't. So, what happens when everybody is on welfare due to automation and nobody pays taxes? This example is the reality in Michigan and the government there have been on the brink of shutting down due this exact issue. And we are beginning to see this never-ending spiral go out of control in the rest of the world. The trends are definitely there, but where's the solutions?
Is an economic collapse, in fact, an imminent event and a mathematical certainty, looking at the trends in Michigan and China? And is there a way out of this, looking at it in an economical perspective?
Ecaterina Sanalatii 10+
Andres Aullet 10+
Krisztián Pintér 200+
Andres Aullet 10+
John Smith 30+
No, Murray Rothbart and Ayn Rand will rise from the dead and magically create new jobs for all those people.
Krisztián Pintér 200+
Andres Aullet 10+
If anything, automation would tend to shrink the service sector too... I trust that the human ingenuity is tremendous... but I don't buy on the idea that it can keep creating new economy sectors forever
Krisztián Pintér 200+
the fact is still this: every job taken over by machines were replaced by other jobs. we have no reason to believe that it will ever stop.
Andres Aullet 10+
Krisztián Pintér 200+
Andres Aullet 10+
I promise you, I am willing to be proven wrong, i just have never seen proof of the invisible hand in action
John Smith 30+
Leslie Bray
Corey DeAngelis
Corey DeAngelis
First of all, we should look at why producers look towards automation. It is because of the fact that they are trying to reduce costs and produce their product at the lowest possible price. In other words, they are trying to achieve competitive advantage in order to gain market share and increase profitability. This act will eventually lower the prices of the products for consumers. From this, we can see that automation causes a gain for the producers (businesses) and a gain for the consumers (note that people that work at businesses are also consumers). The problem with automation arises from the fact that people lose their jobs as a result. This is the loss associated with automation (note that the people being laid off are also consumers of other products).
So we can see that automation provides the economy with large gains to large groups (producers and consumers) but causes a loss to a small group (laid off workers). This is where the emotional argument against automation comes in. The individual that is laid off may suffer more in absolute value (loss) than a certain individual gains from the process of automation. We should notice that the companies are better off with automation, but would still be better off even if they were to pay these few existing employees their salaries until they died (sure, they would have to pay these people for not doing the work, but the long run benefits would still outweigh these short run costs).
In other words, consumers gain, producers gain, and some workers lose, but the economy experiences a net gain.
John Smith 30+
No, you can't just "notice" that. A society where 1 million people make 20k is much better than one where 999.990 people make 2k and 10 people make 15bn. Now of course things would be different with redistribution...
"So we can see that automation provides the economy with large gains to large groups (producers and consumers) but causes a loss to a small group (laid off workers). This is where the emotional argument against automation comes in."
Most consumers are workers themselves, so if not enough replacement jobs are provided quickly enough the number of unemployed can reach very high levels and the impact on society would not be negligible.
Corey DeAngelis
You give a certain scenario and state that the prior is "better" than the latter. How do you measure better? I use the one dollar, one vote metric; you do not.
The cost to society would be less than the gain; as others have said, job creation would move towards different sectors and prices would be pushed downward (the income effect of price change should be noted here).
It's really simple.
Steve Saylor
Richard Krooman 50+
I do disagree with the later parts but it's a nice conceptual video. I don't want to believe that the monitairy system is evil (like the video somewhat shows).
cst commonsense
Capitalism – Level 2 history notes Nov 25th 2199
http://www.commonsensethinking.co.uk/philos.html
cheers JP
Jacob M
Rapid automation is certain to create vast pools of unemployed whose skills are no longer required. No alternative jobs that produce tangible goods will be awaiting. Some form of goods and services redistribution will need to be devised before people go cold and hungry.
Let say miraculously, the new economical equilibrium is achieved. All physical or routine mental jobs are automated so 99% population don't need to work. All goods and services are delivered by robots to each individual.
What will happen to the people? You can start by watching "Wall-E" http://en.wikipedia.org/wiki/WALL-E
Think of typical side effects when people are not busy or challenged:
1) they procreate -- can automation solve issues resulting from geometric population growth?
2) they seek thrills -- resulting in risky behavior, drug use
3) they want more -- more stuff, more control over others, new social orders, revolutions, radicalism ...
So to avert these, everyone would have to be occupied with mental and physical activities to keep them busy or else suffer the consequences.
Good Luck.
[ Pragmatic Understanding of Trade Imbalance http://ideabits.blogspot.com/ ]
Gary Anderson
Within the framework of our present economic culture, there are only two ways this could work; either we create sentient androids that can buy the products & services they create (they'd have to be paid & then they would totally replace us) OR we fundamentally change our socio-economic structure into... what? Robotically enhanced Socialism, where we all equally benefit? Doesn't look bloody likely!
Let's not ignore the parallel development of recombinant DNA. Within 40 years Biotech will provide the means to increase life spans by 100-200% and arrest the ageing process. Not to mention increased intellect, strength, durability, vision, etc, etc. Who will benefit from these mega-enhancements? It will NOT be egalitarian, it will only be available to the rich & powerful among us (the .001%). If it were applied to the masses it could be a disaster, there aren't enough resources available for the present (short lived) world population. These procedures could cost millions of dollars, whomever becomes the 'Bill Gates' of the Biotech Company providing these enhancements could become a multi-trillionaire.
The gap between the 'haves & have nots' is about to increase by ~several orders of magnitude~! These lucky few may be considered to be Homo Sapiens 2.0, and who better to lead/rule society?! (I suspect that these 'super beings' will consider themselves as Homo Sapiens 1.0, the rest of us were just beta models.)
Combine this with a robotically run society including robotic police & armies and a very unsettling & downright scary future can easily be imagined.
shawn disney 10+
Antonio Robateau
YES... when it's hacked after we forget how it all works.
Sean Champ
From the bluesky point of view, I'd like to think it could also result in more leisure time for workers - therefore more opportunities for community involvement, and probably more local economic involvement consequently. I'm afraid that's not been the case, though, in how it's been working out so far, in the US. (I think it seems bleak to me, personally, in how it's been working out so far - namely, as starting with work weeks far exceeding the typical 40 hour "norm" being not uncommon at all, to my understanding, and following from that, also less community involvement in society, and less local economic interaction, consequent with the diminished leisure time.)
Considering automation, specifically, there are tasks that cannot be usefully automated - so simple as landscaping and gardening and so complex as expert medical work. Regardless of how far automation would proceed, in mass production industries, no doubt jobs will still exist for fulfilling those tasks, in society.
As far as possible unemployment resulting from automation, in regards to the situation of being layed off if a plant becomes newly automated, that would not be an end to one's employability, of course. Retraining and horizontal job shift become possible, at least at the transition.
Considering economic shift, the number of economic flows in a society is not limited to those passing through an automated production chain. Without analysis, I wouldn't want to blame machinery for economic difficulty, . (In fact, I'd probably look at management, first. ;)
Intriguing questions
cst commonsense
http://www.commonsensethinking.co.uk/philos.html#capitalism
Resources with continue to become scarcer (until we leave for the stars) and it is the share-out of these finite resources (including nice bits of land on which to live and play) that will be the main issue for the human race - this means new politics - and no-one is thinking about how we move on this yet, even though our children or certainly grandchildren will be faced with this move directly during their lives. Payment is likely to be made (as no one is working) by a 'share' of the resources, these are likely to be swappable and finite as they will reflect precise physical resources (so no inflation et al)
see - Capitalism vs Resourcism and new political structures
http://www.commonsensethinking.co.uk/philos.html#capitalism
JP
Andy Kelly
Roberto Garcia
Krisztián Pintér 200+
=> cheaper product => expanding demand => more sells => expanding business => more hires
and also
=> cheaper product => people have more money to spent on other things => more demand for everything else => all other business expand => hiring everywhere
and also
=> cheaper product => people have more money to save => increased capital formation => even faster growth
Krisztián Pintér 200+
the more you learn the more you know
the more you know the more you forget
the more you forget the less you know
ergo the more you learn the less you know
John Smith 30+
If robots replace 10% of the workforce, and require the resources of 2% of the workforce to run, then assuming perfect competition, prices will fall to 92% of their previous level, so far so good. However, 10% of the workforce is without a job, now there are enough resources to give 8% a new job for the same pay, or give all 10% a new job for 80% of their former pay. In the former case 2% will be permanently unemployed, in the latter case 10% will see their purchasing power fall to 87% of its former value. Average purchasing power has gone up in both cases but that doesn't benefit everyone unless everyone's wages are reset or everyone's working hours are reduced (redistribution), that's unlikely to happen in any capitalist society: a rising tide doesn't always lift all boats, and that's something you should keep in mind when you read these highly theoretical economic models that don't factor in reality (or perhaps the original authors never imagined people would later quote only half their model, conveniently leaving out the redistribution part).
@below
I choose not to work with dollars, but resources because that avoids needlessly pondering of deceptive things like inflation and because you can indeed not eat money. I hope you are aware that there has been a lot of redistribution in the form of (government/union mandated) working hours reductions since the industrial revoultion began. But the biggest reason we still have jobs is that we're using a lot more resources (and using them more efficiently) than we used to, this progress is not guaranteed to always be faster than automatization, in which case my model basically describes reality (you'd get to the same outcome if you went hadcore and did all the math withoutomitting money), at least for some people. The point of the model is to show that the free market can fail under the right/wong circumstances.
Krisztián Pintér 200+
in fact that happened, i say again, for like 200 or 300 years, during the industrial revolution, and after that, up to now. jobs constantly got replaced, but laid off workers were hired in other jobs. not only the average income grew, but median, and lowest trenches too.
your calculation does not work for many reasons. first, price is not determined by used resources, but by supply and demand. technology raises the supply curve, so the equilibrium point moves. by how much, depends on many factors. second, resources don't grant jobs proportionally. third, it is not good to count life standards in dollar amount. we don't eat dollars. in a free market economy with a sound money system deflation is the normal state of affairs. as the amount of stuff increases, and the amount of money is near constant, prices continue to fall. thus, lowered wage in money terms is not a necessarily a problem, only a relative loss. fourth, using robots usually not reduces the used resources at all. it only reduces the used man hours.
John Smith 30+
I'm not the one preaching the gospel of the unfallible free market (or any economic system). All I have to do is poke the tiniest hole in your reasoning and I can use highly theoretical, simplified models for that because I only have to come up with possible scenarios, not scenarios that describe the entire current economic system in great detail.
"in a free market economy with a sound money system deflation is the normal state of affairs. as the amount of stuff increases, and the amount of money is near constant, prices continue to fall. thus, lowered wage in money terms is not a necessarily a problem"
It doesn't have to be a problem, but it can be with the right/wrong parameters (such as automatization not being accompanied by an even stronger increase in resource utilitization efficiency at some point in time), and tht wuld be a failure of the free market to work for everyone, that was my whole point.
Lee Miller 10+
Chris Fox
Juan Marcos Perez Gulin 500+
Regarding other views mentioned on this thread, of course, we cannot compete with machines on repetitive tasks and we should focus on added value, creativity and of course, human services...
Henry Woeltjen 10+
As you stated Mat...about a displacement to the service sector. These are generally low paying jobs with little possibility for advancement. This result is concerning as we would ultimately like an employment climate that gravitates towards more high paying careers.
However, if the service sector is booming the jobs must be filled. The fact that people are finding employment is a positive. We obviously want a more progressive state for our society. However, I think we sometimes get confused with the real issues.
The current problem is really about education, government policy, and peoples general attitude. None of this is the fault of anybody in particular. I don't think it is healthy to blame anybody for our current state.
If progression is our target then moving forward is the only positive state.
I don't like to post things like this without solutions. Doing so would probably just make me look like a preacher.
1) Let's talk about education!
I think there's much debate about degree over certification or trade. This disparity is an illusion and we need not pay attention to it.
That being said...what you should pay attention to is what you are good at. What are you really good at?
I think it's important to focus on such things because if you don't realize what your good at....come on...how do you realize your potential?
Once you have a subject that makes you feel good inside...go to it. If you utilize passion your every move will be full of energy and desire. This is a necessity...don't look past it as a "hippie concept" :)
As far as degree over certification...just do what's necessary. If you want to be a doctor...guess what?
Just my opinions.
Great post Mats.
mike mclean
Vincenzo Sergi
mulder wang
Scott Koenraadt
If you do partial automation, the question is where do you draw the line? Which jobs do you automate and which ones do you not?
Richard Krooman 50+
Scott Koenraadt
Mats Kaarbö 10+
It could though, if we wanted to. It's all a matter of choice. If we choose to declare all of Earths resources as the common heritage of all mankind and fully automate the production and distribution of goods and services we could provide everybody with food, clothes, shelter and a high standard of living within ten years, including the planning and building the infrastructure (source: http://www.amazon.com/The-Best-That-Money-Cant/dp/0964880679/).
A World Hunger Education Service report (http://www.worldhunger.org/articles/Learn/world%20hunger%20facts%202002.htm) "reveals" that "the world produces enough food to feed everyone. World agriculture produces 17 percent more calories per person today than it did 30 years ago, despite a 70 percent population increase. This is enough to provide everyone in the world with at least 2,720 kilocalories (kcal) per person per day according to the most recent estimate that we could find. The principal problem is that many people in the world do not have sufficient land to grow, or income to purchase, enough food."
What about energy? The amount of geothermal energy we are able to tap from Earth, just today, is enough to provide us with 4000 years of clean, renewable energy (source: http://geothermal.inel.gov/publications/future_of_geothermal_energy.pdf). And on top of that we have solar, wind, wave and tidal to mention a few.
It's all a matter of choice.
Richard Krooman 50+
Then why would you need money?
John Smith 30+
@Richard Krooman
Food is just an example, people need other stuff as well, the point is that there would always be a limit to how much can be consumed (resources are finite) and that necessitates some kind of rationing system which would be equivalent to an income.
Richard Krooman 50+
Richard Krooman 50+
But you are right though... But I just replied to the food. I do hope that in the future (say 50 years from now) all 'regular' meals would be free of charge for everyone.
It's true that if everything is free then a lot of things need to change... Your example of a rationing system could work. But, to stay on topic, everything for free would definitely mean that it is the end of our current economy.
How to best solve the problems that go with that problem is something I do no thave an answer for.
Scott Koenraadt
I don't think that geothermal is a good idea, the idea of drilling into a high pressure high temperature system like the earths core is very scary to me.
As for solar, wind those two have two important restrictions, and are very costly.
Water flow based enery has its own issues too (inland is huge amounts of flooding) and sea side is ecological disruption (especially if done in areas where there is fish migration)
As for food, that also has a distribution problem, because you will need fuels to transport, people to distribute, thus it will still have a cost
Mats Kaarbö 10+
Then I will happily calm you down with the fact that most of Islands, the country, energy comes from geothermal. It's all safe and sound.
"As for solar, wind those two have two important restrictions, and are very costly."
What I was trying to convey in my previous post was the amount of efficiency we could have in a moneyless society that is based on collaboration and sharing of resources rather than competition and narrow self-interests.
"Water flow based enery has its own issues too (inland is huge amounts of flooding) and sea side is ecological disruption (especially if done in areas where there is fish migration)"
First of all, sourcing energy inland doesn't make any sense since there is little to no water activity. Second of all, sourcing energy sea side would have no effect on fish migration.
"As for food, that also has a distribution problem, because you will need fuels to transport, people to distribute, thus it will still have a cost"
Distribution is fairly simple and can be totally automated. Have you heard about pneumatic tubes? This is actually already in use in some hospitals. For longer distances we could use maglev's and other hi-speed transport that run on renewable energy. And again, this would be completely free and automated in a moneyless society.
neil cheney
cst commonsense
www.commonsensethinking.co.uk/history1.html
So, here's an extract:-
But “what was the point” my students would shout out! How could you possibly use more than a few people's "Lifetime Shares" anyway? This of course was where it got really interesting.
Trying to explain the concept of wealth, materialism and capitalism endemic in this old society was tricky. My students live in the solar group that has no concept of capital and material things in general, nearly everything physical is available, mostly you don’t even need to offer a Share to obtain what you need as they are developed autonomously by the drones and many are not dependant on finite resources..... read on if you want to find out how it all happens!
www.commonsensethinking.co.uk/history1.html
also see Resources vs Capitalism
www.commonsensethinking.co.uk/philos.html
JP
John Anthony Quiroz
Christopher Melvin
Noa Johan Thorstensson
I think we all dream of that day ;)
shawn disney 10+
Noa Johan Thorstensson
cst commonsense
Energy is the answer to nearly all the worlds problems - so we need to get on with developing both Thorium and solar massive energy installations (both are sustainable and 'green')
see
http://www.commonsensethinking.co.uk/energy.html
jp
Gordon Barker 10+
Money is of course, nothing special, just a medium of exchange that allow for dissimilar commodities to be valued according to a agreed upon formula.
It can be anything but the source must be controlled. If money were leaves, we would all be millionaires, but each individual leaf would be valuless because it grew on a tree.
So, if you are going to pay someone, they must do something of value to gain that pay.
If you are just going to put people on the dole, then you are creating a debt that must be paid back in the future by people who do work, or you can print more money and make each exisitng curency unit that much less valuable.
Every extinct civilization in th past has gone this route and crashed hard.
We are actually running the automation experiment in real time in our economy. We went from agrarian to industrial, to automation to globalization.
Global trade is just ofshore automation using cheap people rather than cheap machines but it has the same effect.
Automation taken to its ultimate conclusion leaves us with a population that has nothing to be paid for. You end up looking like Greece, where everyone is a cab driver or a barista.
John Moonstroller 20+
Gas is energy.
Really cheap energy and automated machines could create an environment where we just don't have to work anymore. Once your belly is full and the cloth is on your body, what do you care? Suddenly it's time for fun, games, education, parenting, hanging around with Socrates.
If money becomes worthless, we will just have to exchange our company with one another.
That could be much more fun than slaving away at the grind each and every day.
The only reason Greece needed money was to pay the soldiers to protect them. The slaves did all the work. If automated machines became like slaves, we could live like them. If there was nothing to be protected from, why would we need money?
John Smith 30+
No, you need energy to make/provide useful goods and services, you might as well pay people in units of energy. Money without energy is useless, energy without money works fine.
cst commonsense
http://www.commonsensethinking.co.uk/philos.html#capitalism
Resources with continue to become scarcer (until we leave for the stars) and it is the share-out of these finite resources (including nice bits of land on which to live and play) that will be the main issue for the human race - this means new politics - and no-one is thinking about how we move on this yet, even though our children or certainly grandchildren will be faced with this move directly during their lives. Payment is likely to be made (as no one is working) by a 'share' of the resources, these are likely to be swappable and finite as they will reflect precise physical resources (so no inflation et al)
see - Capitalism vs Resourcism and new political structures
http://www.commonsensethinking.co.uk/philos.html#capitalism
JP
shawn disney 10+
Robert Sprawls
Eventually, the whole dept was outsourced and all but four of us lost our jobs at the height of the recession. I'm still trying to find a job that will allow me to keep my house, but I fear that is not going to happen. The bank is going to get the house and I'll have to file for chapter 7 to avoid paying the difference of what they end up selling it for and what I mortgaged for.
Mitt Jobz
John Smith 30+
John Moonstroller 20+
The machines to make a no money, no worry world is already here. What we need is less people.
walter crockett
Ovidiu Ficlenescu
John Smith 30+
It will most likely bring us to the brink of collapse, but doesn't necessarily have to push us over it. Automation is a blessing and we screw that through our current economic system which is the actual problem. A smart society would take advantage of automation by making people work less hours for the same wage to make everyone happier. A stupid society let's half the people work just as many hours as they used to, fires the other half to let them die in the gutter and translates the gain in efficiency into mulit million executive bonuses. It's clear which category our current society falls in, but it doesn't have to stay like that forever.