We looked at Krugman's great piece about the question of whether the tremendous technological progress we've seen in the Internet Age has led to a drop in employment or a rise in inequality.
http://diaryofarepublicanhater.blogspot.com/2013/06/krugman-joins-luddites.html
Jared Bernstein points out however that inequality and a rising unemployment are not wholly mutually inclusive-though they are certainly not wholly mutually exclusive either; in truth they are somewhere in the middle though I tend to think closer to to the inclusive than the exclusive side.
"But my question has more to do with jobs, and we've seen periods of growing inequality with pretty robust job growth, i.e., the 1980s (I'm talking job quantity here, not quality), and periods with growing inequality with lousy job growth, i.e., the 2000s."
http://www.huffingtonpost.com/jared-bernstein/technology-full-employment_b_3444406.html?utm_hp_ref=politics
Of course, as liberals you have to be concerned about job quality as well. If we get 3 million new jobs but they are mostly making the minimum wage that is very different from 3 million new jobs that actually pay a livable wage.
Bernstein puts the central question here well:
"One of the more important economic questions of the day is the one I pose, but alas, do not answer here: Is an acceleration in labor-saving technology displacing workers in a historically unique and problematic manner? Will the increasing presence of robotics and AI software make it harder to achieve full employment?"
Again, as I suggested yesterday, I tend to say yes, as I remember the start of the 2000s where over night it became much less easy to nail down a good white collar job.
Part of me hates to make the argument for a couple of reasons.
1). Nobody loves the technology revolution we've seen over the last 20 years more than me.
2). I'm well aware that most economists feel that this argument is the 'Luddite fallacy.'
In this sense, I feel better broaching this question with Krugman and now Bernstein broaching it. In late 2011, Joseph Stiglitz was ripped to shreds for suggesting this.
http://diaryofarepublicanhater.blogspot.com/2011/12/is-stiglitz-guilty-of-lump-sum-of-labor.html
However, while a Scott Sumner would likely rip my own reasoning as merely anecdotal, the interest that Krugman, Stiglitz, Bernstein, et. al. are showing in this question I feel validates my own interest that was largely inspired initially by anecdotal reasoning. Bernstein notes that most economists-most neoclassical economists?-find it hard to believe that technology innovation and progress can displace workers at least for very long:
"Most economists say no, because they're all hung up on evidence and history -- imagine that. Of the evidence, it's mostly anecdotal, as per these guys, who've certainly influenced my thinking on the issue. On history, as I always stress, the past is littered with the prediction that technology is replacing workers in a lasting way."
That is true. We can think of all kinds of dire economic predictions that seemed very plausible at the time and yet came to nothing-like Ricardo's fear of over-population finally bringing human civilization down.
Technology displacement has often been predicted yet in retrospect these fears have looked unfounded. Stiglitz in that fateful Rolling Stones piece-and even more in his book-talked about the idea that a large cause of the Great Depression was technology displacement of a largely agricultural economy to an urban economy-Americans went from being mostly agricultural workers to urban or suburban workers. Of course, that in the long term the transition was very successful doesn't prove Stiglitz is necessarily wrong.
One reason the 'Luddite' theory doesn't seem very persuasive historically considered is that productivity and employment have largely run close together.
"In this regard, the anti-Luddites -- those who argue that history has been unkind to the argument that technology displaces workers (which is subtly different than "it lowers their relative wages") -- point to the long linkage between productivity growth and job growth. If technology were increasingly labor saving, these lines should diverge. They don't, so goes the argument, because of the intervening variable of demand, which increases as we become more productive thus absorbing those who would suffer technological unemployment back into the workplace."
However:
"Except for since around 2000, the lines don't converge. The figure below plots full-time equivalent employment against productivity, and the anti-Luddites to whom I've showed this find it a head-scratcher. On the other hand, it makes sense to Brynjolfsson and McAfee, the authors of Race Against the Machine (see link above), and on alternative Wednesdays, to me."
However, the 'Luddites' can't necessarily explain everything either:
"On the other hand, Dean Baker points out that productivity hasn't much accelerated over the period of the split, which you'd expect if labor saving technology was a key factor. More wonkishly, the growth of capital inputs into total factor productivity has considerablydecelerated over the last decade, the opposite of what a Luddite might expect. That just means that there's been a slower rate of capital spending feeding into growth relative to earlier periods. (But wait--if labor's share is tanking doesn't that mean capital's share must be rising? Yes, but interestingly, not because of accelerated investment but because of a higher return on capital -- and lower return to work -- see "spectator sport" point above.*)"
http://diaryofarepublicanhater.blogspot.com/2013/06/krugman-joins-luddites.html
Jared Bernstein points out however that inequality and a rising unemployment are not wholly mutually inclusive-though they are certainly not wholly mutually exclusive either; in truth they are somewhere in the middle though I tend to think closer to to the inclusive than the exclusive side.
"But my question has more to do with jobs, and we've seen periods of growing inequality with pretty robust job growth, i.e., the 1980s (I'm talking job quantity here, not quality), and periods with growing inequality with lousy job growth, i.e., the 2000s."
http://www.huffingtonpost.com/jared-bernstein/technology-full-employment_b_3444406.html?utm_hp_ref=politics
Of course, as liberals you have to be concerned about job quality as well. If we get 3 million new jobs but they are mostly making the minimum wage that is very different from 3 million new jobs that actually pay a livable wage.
Bernstein puts the central question here well:
"One of the more important economic questions of the day is the one I pose, but alas, do not answer here: Is an acceleration in labor-saving technology displacing workers in a historically unique and problematic manner? Will the increasing presence of robotics and AI software make it harder to achieve full employment?"
Again, as I suggested yesterday, I tend to say yes, as I remember the start of the 2000s where over night it became much less easy to nail down a good white collar job.
Part of me hates to make the argument for a couple of reasons.
1). Nobody loves the technology revolution we've seen over the last 20 years more than me.
2). I'm well aware that most economists feel that this argument is the 'Luddite fallacy.'
In this sense, I feel better broaching this question with Krugman and now Bernstein broaching it. In late 2011, Joseph Stiglitz was ripped to shreds for suggesting this.
http://diaryofarepublicanhater.blogspot.com/2011/12/is-stiglitz-guilty-of-lump-sum-of-labor.html
However, while a Scott Sumner would likely rip my own reasoning as merely anecdotal, the interest that Krugman, Stiglitz, Bernstein, et. al. are showing in this question I feel validates my own interest that was largely inspired initially by anecdotal reasoning. Bernstein notes that most economists-most neoclassical economists?-find it hard to believe that technology innovation and progress can displace workers at least for very long:
"Most economists say no, because they're all hung up on evidence and history -- imagine that. Of the evidence, it's mostly anecdotal, as per these guys, who've certainly influenced my thinking on the issue. On history, as I always stress, the past is littered with the prediction that technology is replacing workers in a lasting way."
That is true. We can think of all kinds of dire economic predictions that seemed very plausible at the time and yet came to nothing-like Ricardo's fear of over-population finally bringing human civilization down.
Technology displacement has often been predicted yet in retrospect these fears have looked unfounded. Stiglitz in that fateful Rolling Stones piece-and even more in his book-talked about the idea that a large cause of the Great Depression was technology displacement of a largely agricultural economy to an urban economy-Americans went from being mostly agricultural workers to urban or suburban workers. Of course, that in the long term the transition was very successful doesn't prove Stiglitz is necessarily wrong.
One reason the 'Luddite' theory doesn't seem very persuasive historically considered is that productivity and employment have largely run close together.
"In this regard, the anti-Luddites -- those who argue that history has been unkind to the argument that technology displaces workers (which is subtly different than "it lowers their relative wages") -- point to the long linkage between productivity growth and job growth. If technology were increasingly labor saving, these lines should diverge. They don't, so goes the argument, because of the intervening variable of demand, which increases as we become more productive thus absorbing those who would suffer technological unemployment back into the workplace."
However:
"Except for since around 2000, the lines don't converge. The figure below plots full-time equivalent employment against productivity, and the anti-Luddites to whom I've showed this find it a head-scratcher. On the other hand, it makes sense to Brynjolfsson and McAfee, the authors of Race Against the Machine (see link above), and on alternative Wednesdays, to me."
However, the 'Luddites' can't necessarily explain everything either:
"On the other hand, Dean Baker points out that productivity hasn't much accelerated over the period of the split, which you'd expect if labor saving technology was a key factor. More wonkishly, the growth of capital inputs into total factor productivity has considerablydecelerated over the last decade, the opposite of what a Luddite might expect. That just means that there's been a slower rate of capital spending feeding into growth relative to earlier periods. (But wait--if labor's share is tanking doesn't that mean capital's share must be rising? Yes, but interestingly, not because of accelerated investment but because of a higher return on capital -- and lower return to work -- see "spectator sport" point above.*)"
"All of which is to say is that we just don't yet know the extent to which tech is displacing workers. One way to think about it is to ask yourself "in terms of job growth, are we at the cusp of a period that will resemble the 1990s expansion or the 2000s expansion?" The latter sucked for job growth; the former was strong in that regard."
"Me, I fear that the path back to full employment is looking very steep, and I suspect accelerated labor-saving technology is one reason for that. So I'm keeping my powder dry and my spreadsheets open."
I admit, I continue to find this argument very compelling whether it's 'Luddite' or not. I also think that it's important to have some measure of job creation quality as well as quantity. My guess is that since the 2001 recession, the quality of job creation has been abysmal.
You really should check out Bernstein's 'these guys'-the writers of Race Against the Machine. Here is a little blurb review of it that says it all:
”We’re entering unknown territory in the quest to reduce labor costs. The AI revolution is doing to white collar jobs what robotics did to blue collar jobs. Race Against the Machine is a bold effort to make sense of the future of work. No one else is doing serious thinking about a force that will lead to a restructuring of the economy that is more profound and far-reaching than the transition from the agricultural to the industrial age. Brynjolfsson and McAfee have hit the ball out of the park on this one. It’s a book anyone concerned with either business, or more broadly, the future of our society, simply must read.” – Tim O’Reilly
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