No, robots are not going to take all the jobs

 

One of the underpinning arguments behind those arguing for a Basic Income Guarantee (BIG) , alternatively known as the Universal Basic Income, is that automation is creating a new technological paradigm, where, as Paul Mason describes it:

information technology is preventing the normal adaptation process, whereby capitalism — as a complex system — reacts to crisis, to the exhaustion of old business models, to the low profitability of old businesses and old sectors.

As the argument is very coherently put by Mason, I will concentrate on his presentation of it. He argues that information technology does three things:

First, it dissolves the price mechanism. The economist Paul Romer pointed out in 1990 that information goods — if they can be copied and pasted infinitely, and used simultaneously without wear and tear — must fall in price under market conditions to a value close to zero.
[…] The second impact of information is to automate work faster than new work can be invented.
Around 47% of all jobs are susceptible to automation, say Frey and Osborne (2013). And information does more to transform work: it makes it modular, loosening the link between hours worked and wages; and it makes work possible to do outside the workplace — blurring the division between work and life.
[…] Fortunately there is a third impact of info-tech. It has begun to create organisational and business models where collaboration is more important than price or value. […] But as soon as technology allowed it, we started to create organisations where the postitive effects of networked collaboration were not captured by the market. Wikipedia is the obvious example; or Linux; or increasingly the platform co-operatives where people are using networks and apps to fight back against the rent-seeking business models of firms like Uber and Airbnb.

Let us look at these in turn. Mason argues that the near-zero marginal costs of unit production means that there is “a dramatic downward impact on the cost of production of real things, and the same vortex of cheapening happens everywhere.” He argues that “capitalism responds by inventing mechanisms that put a price on this zero-cost product. Monopolies, patents, WTO actions against countries that allow copyright theft, predatory practices common among big technology vendors.”

This is a fallacious argument, because it confuses the marginal unit production costs with the overall product lifetime costs. As technology matures marginal production costs always fall, and this has typically been associated with a shift of production from developed to developing countries. The shift of production to lower wage developing countries already represents a move, from the point of view of workers in higher wage developed countries, towards dramatic price competition with which they cannot compete.

From the point of view of developing countries, whose economic factor endowments includes cheap labour, but less access to investment capital or high technology, then starting production of technologically mature products allows them to move up the economic food chain at low cost.

From the point of view of developed economies, whose economic factor endowments include higher labour costs but greater access to investment capital and a more developed technological base, then research and development allows the possibility of innovating to create entire new markets. Much research and development may fail to reach the market, but the premium profits gained by intellectual property rights for new technology areas that are successful, means that overall this is a viable economic growth strategy.

Mason’s argument fails to take into account that technologically innovative products will command a price premium, not only because people are prepared to pay those prices for desirable products, but that patents, commercial confidentiality and premium brand value will allow early entrants to recover their R&D and launch costs. The marginal unit costs of production will therefore only be a relatively small component of price for innovative products. As technology matures, whether it is TV sets, mobile phones, computer disk drives or motorcycles, then the early innovators will drop out of the market, as production moves, typically, to lower wage cost countries.

There is nothing inherently different about information technology in that the marginal unit costs of production may approach zero, but the product development costs of innovation are still recovered when the technology can demand an initial price premium. Corporations will continue to invest in science based R&D and technological innovation in the developed countries to leverage on the legacy of knowledge based and physical infrastructure, and because the higher material standard of living attracts the most highly skilled staff necessary for those activities. Particular areas of future growth are likely to be pharmaceuticals and bio-technology, agricultural research and telecommunications in the broader sense of exploiting the advantages of the networked world. The entertainment industry, for example games, TV and film, but also sport and sport science are also growth areas.

To consider his second argument, about the blurring of work and leisure, Mason underestimates the underpinning of the knowledge economy by the material economy. In a Guardian article he uses this example:

You can see the beginnings of the separation on any business flight. Men and women hunched over laptops and tablets, elbows so close that if it were a factory it would be closed on health and safety grounds.
But it is a factory, and they are working – some of the time. They flip from spreadsheet to a movie to email to solitaire: nobody sets a timer – unless in one of the time-hoarding professions like law. At the high skill end of the workforce we increasingly work to targets, not time.

Let us put to one side the naïve conceit that business travelers on a foreign trip are “working in a factory”, and consider the scenario. They are sitting on an aircraft, which is a high tech product at the top of the foodchain, that aircraft is the product of a vast, organized collaborative production network, that has involved mining, petrochemical extraction, raw material processing, machine tool design and production, design and production of instruments, engines, software, seats, and catering equipment. It has involved the development of aviation standards, communications standards, it has involves testing and accreditation. It is flown and serviced by skilled staff, who have travelled to work – needing to be on time – in cars or on public transport, those aircrew will stay overnight in hotels, staffed by other workers. The airport employs thousands of service technicians, air traffic controllers, restaurant staff, cleaners, security staff and baggage handlers. The computers our travelers are working on have also been designed and manufactured. The telecommunications protocols that network their computers together are also based on a vast industry, also at the top of the technological foodchain, where protocols are designed and improved upon, spectrum auctioned at dizzyingly high prices, forcing more innovation for more efficient use of bandwidth. A huge industry exists in the design, manufacture, system integration and deployment of the communications networks, from switches to base stations. The computers and telecommunications protocols are exposed to malware and other security threats that also requires an industry developing and deploying countermeasures.

Mason has made the mistakes of generalising from his own work experience, and entertaining the conceit that he is more skilled than the engineers and technicians whose work provides the platforms upon which he types and travels.

Mason argues that

The automation revolution is possible, but without a radical change in the social conventions surrounding work it will not happen. The real dystopia is that, fearing the mass unemployment and psychological aimlessness it might bring, we stall the third industrial revolution. Instead we end up creating millions of low skilled jobs that do not need to exist.

Certainly, there is a challenge for a developed country whose factor endowments favour high-skilled innovative jobs, in ensuring that the economic benefits are spread across society and not isolated in high tech bubbles. However, the high wage sectors of the economy also provide a market for other productive work.

The amount of labour required to reproduce the living standards of our society is not a fixed constant, as it varies with cultural expectations. We cannot assume that lower production costs will always be desirable. The growth of markets for tattooists, butchers, cake decorators, bakers, brewers and candle makers is a function of a growing demand for higher quality hand-crafted products. Many diary farms have responded to the collapse of prices for milk by moving up the production chain towards craft cheese and yogurt production, these attract premium prices greater than those for mass produced products.

Automation need not lead to a reduction of the amount of human labour from the production process, it can lead to a reduction in raw material, component, transport and informational costs to allow for the expansion of areas of the economy where human creative labour is valued.

Similarly, the advances in medicine and the ageing population are an opportunity for an expansion on the care and social services sector, where government policies and priorites have deliberately suppressed wages below their market value. A shift in social and political priorities to value and remunerate the care sector as professional and skilled jobs, paid for by taxation, would lead to a massive expansion of employment opportunities. The fact that these jobs are currently low paid does not mean that they always need to be, and the staff are already professional, but greater reward and recognition would increase their status and make these sought after jobs.

Mason’s third point about information technology creating emerging networks of cooperation outside of the market is a bit starry eyed. As a professional engineer I once worked on a system for a country with a socialist government, who had specified that wherever possible Open Source software, such as the Linux operating system, should be used. This was more difficult and created more work, not less. He underestimates the degree to which technological innovation, and then integrating that innovation into successful products, requires structured organizational cooperation on an industrial enterprise scale. Perhaps new apps might be developed by a loose collaborative network, but for example to shift the telecommunications infrastructure to 5G needs professional engineering, and industrial capability.

The argument that robots will be taking our jobs, and that to avoid there being millions of low paid, low skilled non jobs we need a universal basic income, is a retreat from the idea that it is possible to value and remunerate high skilled jobs. The biggest current obstacles to the creation of jobs is a government whose economic policies discourage investment, and where care sector jobs are undervalued and underpaid. Both of these are political choices that can be changed.

30 comments on “No, robots are not going to take all the jobs

  1. Karl Stewart on said:

    I wholeheartedly agree with this article.

    The poverty of thought and the sheer intellectual shallowness of people like Mason and others high up and well connected to the current Labour leadership really is not a little disturbing.

    It’s a real worry that people in positions of authority and influence at the top of our movement can seriously advance such trite and ill-thought out theories of nothing.

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  2. Karl Stewart,

    Thanks

    The point here is worth emphasising:

    Certainly, there is a challenge for a developed country whose factor endowments favour high-skilled innovative jobs, in ensuring that the economic benefits are spread across society and not isolated in high tech bubbles.

    The process of “incorporation” of California towns such as Palo Alto and Carmel is a dystopian answer, where well paid silicon valley technical experts have walked away from heir social responsiblities towards the lower paid workers who service their life-styles.

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  3. This from Mason is particularly weak:

    First, it dissolves the price mechanism. The economist Paul Romer pointed out in 1990 that information goods — if they can be copied and pasted infinitely, and used simultaneously without wear and tear — must fall in price under market conditions to a value close to zero.

    Prices are simply not determined by production costs. Prices are whatever the market can bear based upon what people are prepared to pay.

    If Mason is arguing that no value is being added, whether in the Marxian sense of labour value, or whether considering added value based upon marginal utility, then he is ignoring the overall value of the product’s development, but also the value of provenance, in terms of quality confidence, and contractual and service support.

    If he really thinks there is no difference, then I have a £25 Rolex from Bangkok that he might want to pay £4000 for.

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  4. Evan P on said:

    What worries me isn’t them doing all the work but taking control.

    That Terminator is well scary.

    I need to think about this some more and then I’ll be back.

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  5. Jellytot on said:

    Andy Newman: I have a £25 Rolex from Bangkok

    You paid that much !! I got mine for 500 baht….about £11….you were done mate.

    Also Mason could probably afford the £4000 for your £25 watch.

    Seriously, have you kept up with the advances in 3D printing?

    Some libertarians in America managed to print a functioning receiver of an AR-15 assault rifle a few years back and fired off a few rounds. I can also imagine a scenario where the planes and cars you mention in the article are printed in 50 or so year’s time.

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  6. Jellytot: I can also imagine a scenario where the planes and cars you mention in the article are printed in 50 or so year’s time.

    Not really. But even were that the case, that would mean that there would be a vast new industry involved in the design, production, commissioning, servicing and resupplying the consumables of the 3D printing machines

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  7. Jellytot on said:

    Andy Newman,

    There will be support needed but would it necessarily be vast?

    Couldn’t support industries be subject to automation with an ever decreasing circle of hands on human involvement?

    Capitalism, in the final analysis, will always chase the $. The people at the top of the pyramid really are venal, greedy f*ckers who honestly can never have enough.

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  8. Andy Newman on said:

    Jellytot: Couldn’t support industries be subject to automation with an ever decreasing circle of hands on human involvement?

    The factory of the future, staffed by a man and a dog. The man is there to feed the dog, and the dog is there to stop the man touching the machinery.

    However, I introduced the discussion of factor endowments to address this issue. For the developed economies the reduction of Labour costs is more easily achieved by offshoring where the technology is mature, of immigration where Labour intensive and incapable of being moved ( eg care homes)

    But fully automating to exclude nearly all workers would be a strategy that defied the competitive factor advantages of an advanced economy, which include the capability to expand economic activity through innovation and research at the high tech end. Value is added by the creative human activity.

    Similarly, why would anyone want a beer that has been digitally printed, instead of made by skilled brewers?

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  9. Evan P on said:

    I got a rolex off this bloke in Chania, Crete for 20e.

    The thing is he was robbed. It’s this rare one where instead of the second hand moving smoothly round the face, it ticks.

    What a muppet.

    I’m open to serious offers.

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  10. Andy Newman:
    This from Mason is particularly weak:

    Prices are simply not determined by production costs. Prices are whatever the market can bear based upon what people are prepared to pay.

    If Mason is arguing that no value is being added, whether in the Marxian sense of labour value, or whether considering added value based upon marginal utility, then he is ignoring the overall value of the product’s development, but also the value of provenance, in terms of quality confidence, and contractual and service support.

    If he really thinks there is no difference, then I have a £25 Rolex from Bangkok that he might want to pay £4000 for.

    From what I can see , generally, what the market will bear is often based on consumer’s knowledge of production costs.
    Nowadays most people would baulk at paying more than £200 for a blu-ray player with all the bells and whistles, because they know there are Chinese and Korean factories churning out these machines in high volume whereas seven years ago those who really wanted one would have been prepared to pay the £800+ for the Japanese machines that were available then. Supply is a factor, of course, but people nowadays are used to cheap goods and are aware of low production costs.

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  11. Omar: seven years ago those who really wanted one would have been prepared to pay the £800+ for the Japanese machines that were available

    This is the premium price for innovative products, companies court the “early adopters” but not all new products are successful so initial volumes are more tentative, so those products which are successful will be in limited supply. Once a product is established the risk of volume production is removed, and the production start up costs relatively low. This is distinct phase in the life cycle of a technology, allowing products to tumble dramatically in price

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  12. Ken McKenzie: Surely automation will mean that there will be a minority of skilled workers versus a majority of unemployed.

    Why should that be so? If we look back just a hundred years ago, a huge slice of the working class in Britain were engaged in domestic service, agriculture and mining. These jobs have gone, and the service and farming sectors wiped out by automation. But we have achieved full employment and large numbers of skilled jobs subsequent to that.

    Automation can lead to a dramatic drop in many costs of some businesses, which could be an economic stimulus,

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  13. Evan P on said:

    #14 This is how it starts.

    We pay for something that can do little jobs for us. Perhaps someone works out that you can have something that can take someone out for cheaper than a human hitman. Next thing they’re in control, and we’re hiding in cellars while they hunt and kill us all.

    Why can nobody else see what’s happening??

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  14. Evan P on said:

    #17 What’s even scarier is that Davros guy. The way he gets all those daleks to exterminate everyone who gets in his way.

    Then you get the Cybermen and the f###ing Ice Warriors.

    Can you people not see where this is going?

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  15. Andy Newman: This is the premium price for innovative products, companies court the “early adopters” but not all new products are successful so initial volumes are more tentative, so those products which are successful will be in limited supply. Once a product is established the risk of volume production is removed, and the production start up costs relatively low. This isdistinct phase in the life cycle of a technology, allowing products to tumble dramatically in price

    OK, take another , less “techy” product like basic clothing. People expect it for virtually nothing nowadays because they know it’s made with cheap,sweatshop labour. Pretty soon you’ll be able to take you’re own design ( of just about any product, including clothing), made with free software, to the local 3-D print shop and have it done there and then for nothing but the cost of materials. We are approaching “zero value” in this scenario.

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  16. Karl Stewart on said:

    Omar: OK, take another , less “techy” product like basic clothing. People expect it for virtually nothing nowadays because they know it’s made with cheap,sweatshop labour. Pretty soon you’ll be able to take you’re owndesign ( of just about any product, including clothing),made with free software,to the local 3-D print shop and have it done there and then for nothing but the cost of materials. We are approaching“zero value” in this scenario.

    Back when I was a kid, my nan used to do exactly that Omar.

    She used to knit jumpers for all of us

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  17. Jellytot on said:

    Karl Stewart,

    The “Impact” and “Social Change” parts of this article are worth reading:

    https://en.m.wikipedia.org/wiki/3D_printing

    From the article:

    “Larry Summers wrote about the “devastating consequences” of 3D printing and other technologies (robots, artificial intelligence, etc.) for those who perform routine tasks. In his view, “already there are more American men on disability insurance than doing production work in manufacturing. And the trends are all in the wrong direction, particularly for the less skilled, as the capacity of capital embodying artificial intelligence to replace white-collar as well as blue-collar work will increase rapidly in the years ahead.”

    Those who dismiss 3D printing are similar to those who dismissed the internet as a passing fad in the mid-90’s……and there were some !

    In my industry there used to be a room full of UK.based draughtsmen and women producing engineering drawings….now, well….there’s me!….and a few guys and gals in Beijing “cutting” the 2D CAD drawings from my 3D model.

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  18. Andy newmanl on said:

    Jellytot: In his view, “already there are more American men on disability insurance than doing production work in manufacturing.

    For which NAFTA is more responsible than automation.

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  19. Andy newmanl on said:

    Omar: OK, take another , less “techy” product like basic clothing. People expect it for virtually nothing nowadays because they know it’s made with cheap,sweatshop labour. Pretty soon you’ll be able to take you’re own design ( of just about any product, including clothing), made with free software, to the local 3-D print shop and have it done there and then for nothing but the cost of materials.

    This is where i find some of the claims by 3d printing evangelists a bit hyperbolic. For example the claims about 3d printed food.

    You may be able to print a garment, but it wont be made of cotton.

    And assuming tastes changed to accept printed clothes, would that not be a stimulus not for self design, but for lower entry costs for fashion design start up companies?

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  20. Andy newmanl: This is where i find some of the claims by 3d printing evangelists a bit hyperbolic. For example the claims about 3d printed food.

    You may be able to print a garment, but it wont be made of cotton.

    And assuming tastes changed to accept printed clothes, would that not be a stimulus not for self design, but for lower entry costs for fashion design start up companies?

    Actually I think it’s a way of doing away with the notion of “companies” altogether. This method of production makes a planned economy possibly more viable and easily quantifiable.

    But my point is that the price a market will bear is always going to be on a downslide as the law of value get’s turned on it’s head.

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  21. Andy newmanl: This is where i find some of the claims by 3d printing evangelists a bit hyperbolic. For example the claims about 3d printed food.

    You may be able to print a garment, but it wont be made of cotton.

    And assuming tastes changed to accept printed clothes, would that not be a stimulus not for self design, but for lower entry costs for fashion design start up companies?

    And it seems that the whole discussion (or as much of it as I have heard) ignores the question of how much energy would be consumed in printing everything we need. For the most part, of course, we happily ignore questions of energy because it’s currently relatively cheap and available. But this situation is an historical anomaly, and won’t be sustained. Then what?

    As to whether the internet is a passing phase, I can’t help thinking of Mao’s supposed take on the French Revolution – it’s too early to tell.

    Matt

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  22. Evan P on said:

    #25 Sorry to be pedantic but it was Chou En Lai. And although it’s not as good as if he was talking about THE French Revolution, I understand it was in fact about the May 68 events which were a bit more recent 🙁

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  23. Evan P:
    #25 Sorry to be pedantic but it was Chou En Lai. And although it’s not as good as if he was talking about THE French Revolution, I understand it was in fact about the May 68 events which were a bit more recent

    Yes, I’d heard that too but I was never one to let an awkward fact (or two, it seems) ruin a good story.

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  24. Omar: the price a market will bear is always going to be on a downslide as the law of value get’s turned on it’s head.

    It is of course arguable that failure to have a pricing policy which reflected prevailing economic conditions is the greatest factor behind the difficulties of former actually existing socialist economies. There is no reason why market pricing is incompatible with socialist planning, it just means that your data inputs for planning will be better

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  25. Matt: For the most part, of course, we happily ignore questions of energy because it’s currently relatively cheap and available

    This is a good point, I look forward to Paul Mason explaining how you can print a new nuclear power station at near zero cost

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  26. George Hallam on said:

    Andy Newman: It is of course arguable that failure to have a pricing policy which reflected prevailing economic conditions is the greatest factor behind the difficulties of former actually existing socialist economies.

    Arguable, but wrong.

    Andy Newman: There is no reason why market pricing is incompatible with socialist planning,

    That would depend on ones definition of
    a) market pricing
    b) socialist planning

    Andy Newman: it just means that your data inputs for planning will be better

    Or worse, as the case may be. Even mainstream economics acknowledges that market prices give misleading information.
    http://www.imf.org/external/pubs/ft/fandd/2010/12/basics.htm

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