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Mats Kaarbø

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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?

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    Oct 1 2012: Automation will lead to economic efficiency...
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      Oct 1 2012: for some time that is a true statement... but i guess the question has to do with the extreme scenario... when all manufacturing jobs are replaced by machines... who is the consumer for the products? even if their manufacturing is done at 99% efficiency?
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        Oct 1 2012: still holds
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          Oct 1 2012: Indeed Krisztian, economic efficiency still holds, but doesn't the consumer base shrink with automation?
        • Oct 1 2012: "Indeed Krisztian, economic efficiency still holds, but doesn't the consumer base shrink with automation?"

          No, Murray Rothbart and Ayn Rand will rise from the dead and magically create new jobs for all those people.
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        Oct 1 2012: nope. consumers don't go anywhere. don't buy keynesian crap. not the cart pushes the horse.
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          Oct 1 2012: I was not thinking about Keynesian crap. I was in Mexico when computer manufacturing moved from the USA there, and I was also there when the same manufacturing moved from Mexico to China. In both cases, for a period of time, there was a shift from manufacturing to services, but the number of people employed was always less after the manufacturing sector was replaced with the service sector.

          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
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        Oct 1 2012: if you focus on short term changes, you might come up with the idea that the sun is lower and lower every day, since it goes down every day.

        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.
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        Oct 1 2012: exactly. supply and demand always clears on an undisturbed free market.
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          Oct 1 2012: like in the case of (insert country name here)...

          I promise you, I am willing to be proven wrong, i just have never seen proof of the invisible hand in action
    • Oct 1 2012: As Andres said: the question at hand here is not productivity, it's what happens to the people who used to be workers.
    • Oct 1 2012: People who used to be workers find employment in providing new products and services. Human needs are infinite. All parties gain. Consumers gain by increased spending power, Businesses gain by staying in business, Price competition drives price to lowest possible that still makes the process of providing the good or service worth while. Profits above the minimum can only be achieved through Innovation (Joseph Schumpeter) Innovation leads to the creation of new products and services that leads to new employment opportunities.

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