Arnold Kling  

The Great Factor Substitution

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The New York Times reports,


Even as Foxconn, Apple's iPhone manufacturer, continues to build new plants and hire thousands of additional workers to make smartphones, it plans to install more than a million robots within a few years to supplement its work force in China.

Pointer from Tyler Cowen.

Think about this. Robots are close to being competitive in China. Suppose that robots improve their productivity/cost performance at a Moore's Law pace over the next decade. What happens to labor's share of income?

To put it another way, suppose that for most people, the future is one of ZMP--zero marginal product? That is one scenario, which I doubted when I first heard Robin Hanson articulate it. Now it strikes me as plausible. Under that scenario, I am not sure that I would be as wildly pro-natalist as Bryan. From a material standpoint, supporting lots of ZMP individuals will be cheap. But the social tensions of that scenario might be a little troubling.


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COMMENTS (12 to date)
e writes:

You are way off base here. Robots are nearly competitive in low value added assembly. Labor sparing is an unambiguously good thing.

roystgnr writes:
From a material standpoint, supporting lots of ZMP individuals will be cheap.

Are you sure? One marginal product that people will always be good at producing: exponentially more people.

Mike Rulle writes:

I agree with e on this. How is this different than the classic "buggy whip" example? My favorite SyFy example of this is an imaginary (maybe not so imaginary given our 3D "printers") machine that can build a house in an hour, a car in a minute or a robot surgeon in a day.

Competition will bring prices down, of course. What will people do? Work less, I presume, as has occurred thru history. I like the Julian Simon paradigm. People create, react, adjust and create again.

But we are still human. That does not change for better or worse. No heaven on earth, but better living conditions for all.

Mathew writes:

I have actually been thinking about this scenario a great deal lately, and am pessimistic about what it portends.

1. People have a nature that doesn't change as fast as our circumstances.
2. The old adage "the devil finds work for idle hands to do" is quite apt.
3. People with low conscientiousness/IQ have very little to create.
4. A world with too little work is a world of horrid people acting self destructively.
5. The solution is mandatory genetic engineering, less people, smarter and more self motivated. (I give this a 33% chance of happening in the US, it will happen elsewhere, we might follow their lead eventually.)


6. Sometimes I think greater productivity and too many zero marginal product workers will lead to something kind of weird, where everyone is better off historically, but in order to motivate people at the bottom to work, we have to create great economic insecurity. This is done mostly by the only remaining profitable sector of the economy, economic rents on natural resources. So we have very great economic inequality, and poor people willing to act as servants. Despite the fact there is no chance of them going hungry. They will need to pay for medical care to replace their organs.

I also sometimes think, the future is full of restaurants, and health care facilities to deal with all that eating at restaurants.

Thomas DeMeo writes:

Mike Rulle : How is this different than the classic "buggy whip" example?

When a new technology disseminates, it destroys some jobs while enabling people to do more of something else. "This more of something else" takes time to evolve.

It is possible that we will reach a point where this time to evolve can't catch up anymore. With sufficient technology, a small cadre of very talented people might simply continue to produce more and more of what the markets need, chewing up market share far faster than displaced labor can.

joeftansey writes:

We usually think of "unemployed" people as sitting on the couch all day watching TV.

What if, upon discovering you had ZMP to the global economy, you reasoned you still had positive MP in other areas?

How many unemployed people become cooks? Artists? Gardeners? These things are all work that is valuable in and of itself.

English Professor writes:

I believe Robin Hanson did a podcast on this topic with Russ Roberts (it was really on "the singularity"). If I remember correctly, Hanson was optimistic that people would receive great benefits from immense increases in productivity. But I seem to recall thinking that almost all the wealth would accrue to the holders of capital. Labor of course was being replaced by robots, so they had no means of accumulating wealth. Hanson seemed to suggest (once again, if I remember correctly) that the ownership of capital would probably be widely dispersed, but I can't see why this would take place. Think of the contemporary situation: anyone with a moderate income can save and invest, but how many people sacrifice consumption for the sake of retirement savings?

Nevertheless, I'm still optimistic that people will always find services that they can provide, which will keep many people employed even if robots take over much of manufacturing. This is liable to pose a greater problem for developing nations than for mature economies.

Bryan Willman writes:

The real issue is that there is not "one answer." More people does not *always* mean more poverty. More people does not *always* mean more wealth.

The example here supports my thesis that in the relatively near future (100 to 200 years) every country on Earth will be in one of two states - one in which people with low skills have nothing much to do (coming in the US), or one in which there is violent anarchy and crushing misery (Somalia.)

Obviously, it's better to be in the first camp and find a resolution that keeps people happy.

ChrisA writes:

The two equilibriums in a future with a very low labor content manufacturing sector are;

1. Most people not working (or not working in a real job but made up ones) getting lots of free stuff that equates to well above subsistance living. The few remaining workers will get extra stuff to compensate for having to work. This is probably the democratic solution.

2. A parallel economy such as you often see in the developing world, with the low productivity people trading among themselves separately from the high productivity sector. In many of the countries I have lived you can still see people plowing fields using oxen, harvesting by hand, using hand looms etc, although these activities have been mechanised for hundreds of years now. The reason is that these people have nothing to trade with the developed world and their governments don't provide any kind of social security. To take this example to the extreme imagine advanced aliens coming to the earth - they know how to do pretty much everything we know how to. They refuse to give us free stuff though, they want to be paid. But we have nothing to pay them with (or everything we could provide to them they can make cheaper themselves). Would we starve to death at this point, just because we know that there is a more productive economy in existence? Of course not, we would just continue to trade amongst ourselves, using our existing technology.

Thomas Esmond Knox writes:

"In many of the countries I have lived you can still see people plowing fields using oxen, harvesting by hand, using hand looms etc, although these activities have been mechanised for hundreds of years now."

Farm tractors are less than 100 years old.

t3 writes:

Everyone has been worried about machines replacing men as labor for at least 200 years. Hundreds of novels have been written in the past centuries. There are probably literatures courses dedicated to the subject.

So far, they've all been wrong. But when they stop being wrong, yikes.

I'd love to know Arnold's predictions of how governments throughout the world react to it. Maybe Robin Hanson has already done it.

(Also, no matter what Bryan says about wanting everyone to breed, he only writes for and is read by a tiny slice of likely non-zero MP workers.)

Steve Roth writes:

As always wildly curious about this subject. Just did a post on it, asking essentially: do the limits of human cognitive capacity and declining marginal utility of innovation and consumption make the Luddite Fallacy a fallacy? Is the stopped clock finally right?

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