Relationship of automation to unemployment
Encyclopedia
The relationship of automation
to unemployment
is a multivariate one, and people's ideas about its nature in their time, as well as their predictions about the future, have varied widely (and have often been wrong). Nevertheless, humanity continues to try to develop theory that adequately explains the relationship, because it has significant potential to affect economies and modes of life throughout the world.
Mechanization
and automation
enhance productivity
, allowing more products to be made, or other work to be done, faster and with less human effort, and therefore they typically displace workers in some (but not all) areas of employment
. The central question has always been whether and where those workers will find new employment. For two centuries, new employment has always been found; during that time, entire new industries and job descriptions have arisen.
The central fear has always been that no new jobs, or not enough new jobs, would arise to fill the void. The earliest versions of this fear predicted that this effect would begin immediately. They turned out to be wrong, and their expected immediate massive unemployment never arose. Later versions of the fear have usually posited that automation would cause unemployment to rise gradually and insidiously. This concept has been discussed by many thinkers, some trained as economist
s and others not. Variants of this fear persist through the present day, as do refutations of it.
The central hope has always been that, although automation would reduce numbers of jobs, it would not reduce, and would even improve, standard of living
, and would provide humanity with unprecedented leisure opportunity and material comfort. This has in fact occurred in many ways. Various mechanisms for how resources would be traded or allocated in such an environment have been posited. The foremost is that new types of jobs would always arise to replace old types lost. This has in fact happened for two centuries.
The fact that for two centuries no permanent, structural unemployment has ever been proven to result from automation has supported an economic concept that automation can never cause it. This view is dominant in economics
today, and the idea that automation can cause such unemployment is considered a fallacy in conventional economic theory. However, there are also many people who believe that this theory is incorrect, and that despite the empirical record thus far, the future could be different. These arguments usually make reference to the rapid (and accelerating) pace of advance of information technology
, which may produce qualitatively different results than earlier kinds of automation produced, if the advantages of humans over machines keep dwindling.
. The main explanation for this is that, so far, job losses in any one particular economic niche have always been more than offset by job gains in other niches. As the lowered unit cost
of goods and services (which the automation made possible) gave consumers more purchasing power
to devote to other goods and services, new jobs sprang up in the production of those goods and services. Thus each time that automation has freed up human resources, those resources have been redeployed by market forces (although it did not always happen without turbulence in the lives of individual workers).
One of the earliest promises of automation was to allow more free time, without any threat of income reduction. This effect has been seen in many individual facets of life (for example, the automatic washing machine has made laundry less time-consuming; engine control unit
s have reduced the amount of automotive downtime; the automatic dishwasher has made dishwashing less time-consuming), but the net outcome of modern life in developed economies remains a state of hurry and busyness, mostly because rising living standards have brought rising expectations in direct relation. (Each time-saving improvement has made room for a new aspiration to take its place.)
Automation also does not imply unemployment when it makes possible tasks that were unimaginable without it (such as exploring Mars with the Sojourner rover). Likewise with fields where the economy is already fully adapted to an automated technology, and the jobs were lost long enough ago that the displacement was long since absorbed by the workforce (as with the continually advancing automation of the telephone switchboard
, which eliminated most telephone operator jobs and kept many more from ever existing in the first place).
Today automation is quite advanced (relative to just a few lifetimes ago), and it continues to advance with an accelerating pace throughout the world. Although it has been encroaching on ever more skilled jobs, the general well-being and quality of life of most people in the world (where political factors have not muddied the picture) have improved. Clearly a multivariate effect has been at work (something much more than just the obvious idea that automation has the potential to cause unemployment). In fact, the idea that automation posed an imminent threat to employment, first articulated in 1811 by a group of textile workers known as Luddite
s, has proven to be so fallacious over the ensuing two centuries that economists call the imminent-threat idea the Luddite fallacy
.
There is some concern today that the economy's ability to continue absorbing ever-increasing automation without experiencing significant structural unemployment may be heading toward an upper limit—that is, that we are approaching a point where the Luddite premise will no longer be entirely fallacious, because the relationship of humans to machines that made it fallacious is changing. In this view, the empirical strength of the eternal-fallaciousness idea is only a reflection of the parameter values of the environment thus far. In other words, the idea is undoubtedly an excellent explanation of the past, but whether it can accurately predict the future is an independent problem. Like an investment prospectus
, proponents of this view caution that "past performance is no guarantee of future results."
, when a social movement of English textile
machine operators in the early 19th century known as the Luddite
s protested against Jacquard's automated weaving looms
. The Luddites destroyed a number of these machines, which they felt threatened their jobs.
disgusted many skilled machinists at a time when the very definition of being a machinist included a core element of skilled toolmaking
and fitting on a craft
basis. Innovations of this system included increasing reliance on jigs
and gauges and on machine tool
s that built more of a process into the tool's movements (such as turret lathe
s and screw machines). These innovations continually turned skilled work into semi-skilled or unskilled, contributing to vast migrations of laborers across borders and oceans. However, despite this transformation, there were always other economic niches for skilled workers to go to, given enough searching. Recession
s interfered with employment, but no foundational aspects of structural unemployment were caused by automation itself.
saw no underlying automation-induced structural lack of new economic opportunities for skilled workers to go to, given enough searching, although the Great Depression
caused a tremendous disruption to employment. The foundational potential for full employment
had not been lost, as would later be shown by the post–World War II economic expansion and other economic miracle
s.
In the 1930s, John Maynard Keynes
predicted that in a century there would be a 15-hour work week as the "economic problem
" would be replaced by the problem of leisure. This work was an early exploration of the comparing and contrasting of an economy of scarcity
(the only kind of economy humanity had ever known) with an economy of abundance, that is, a post-scarcity economy
. This theme would be reprised in future decades.
, servomechanism
s, and digital computers
stoked a new wave of fears similar to the old Luddite ones. Among the working class
and labor unions, there was stiff resistance to loss of employment through automation, including contract clauses won in hard-fought contract negotiations that mandated alternate employment for any workers whose positions were eliminated by automation. These clauses seemed a great victory for union workers at large corporations in developed nations, but because they had no effect at smaller, nonunionized companies or in developing nations, those corporations faced withering competition that shrank their market shares until their workers' gains eventually undermined their own success.
However, the 1950s and 1960s were optimistic times in many respects, and during this era many optimists made forecasts similar to Keynes's 1930s discussion of pending abundant leisure. Meanwhile, pessimists questioned the role of labor in such a world and questioned how people would earn a living or occupy their time. While economic growth increased per capita income in the 1960s, and the average number of hours per work week declined, they have remained relatively constant in the United States since then.
Despite the depopulation of manual labour
and assembly line
jobs after World War II via advancing mechanization and automation, the salvation for employment rates damaged in the industrial sector (secondary sector of the economy) came from the service sector (tertiary sector), which absorbed all of the workers that automation displaced elsewhere. For example, many manufacturing jobs left the United States during the 1990s but were offset by a one-time massive increase in IT
jobs at the same time. And in some cases the freeing up of the labor force allowed more people to enter higher skilled managerial jobs and technically specialized jobs, which are typically higher paying. Therefore, fears of unemployment due to automation were generally dismissed as just another instance of the Luddite
premise, which had proven fallacious time and again over many decades. Given this obvious empirical contradiction of the premise, people who nevertheless returned to it were usually viewed by the mainstream as cranks misled by quixotic leftist
political bias. For example, works by scholars including David F. Noble
and Jeremy Rifkin
were often respected but discounted. At worst, they were mocked with the disparaging label "neo-Luddite". Noble even wrote a later book titled Progress Without People: In Defence of Luddism to try to further explain why the Luddite premise should not be laughed out of academia.
Historian of Technology David F. Noble has argued that the move toward Industrial Automation was taken partly (if not primarily) as a means of class conflict between workers and a the burgeoning managerial class of a corporate / university nexus. He looks at post WW2 machine-tool production in the United States and their relationship to government subsidised R & D work done at MIT.
once in passing and the World Wide Web
not at all; its IT focus was mostly on robotics
); and its timeline prediction turned out to be wrong. It also did not provide much detailed explanation of any solution to the problem. The book's subtitle called the solution a "post-market economy", but its concluding chapters did not clearly lay out how such an economy could be engineered, leaving readers to conclude that a non-market solution involving a planned economy
was implied between the lines.
In terms of political economy
implications, there was no clear differentiation at the time between the ideas of authors like Noble or Rifkin (on the one hand) and traditional leftist agitation (on the other hand). To the extent that readers could ask "What point is this person getting to?" and answer the question with "socialism
" or "a welfare state
", they dismissed these authors.
, Martin Ford, and others have suggested that exponentially accelerating information technology (IT) may ultimately result in widespread structural unemployment, because an implicit assumption underlying the "eternally fallacious" idea (that lots of regular humans will always find ways to do service work that machines can't do) will itself be fallacious as IT advances. They suggest that, unlike in the 20th century, when the tertiary sector absorbed all of the workers that the automation of the secondary sector expelled, the tertiary sector now also faces depopulation via automation; its employment will shrink, not grow, and this time there is no other sector to backstop the process by absorbing the displaced workers. The high unemployment rates of the late-2000s recession have brought the idea of structural unemployment back into mainstream attention, as observations are made about positions that require extensive specialized skill and experience standing long vacant even while general unemployment rates above 9% (and horror stories of fruitless job searches) would seem to suggest that such vacancies ought to be scarcer. The idea that automation has finally advanced to the point that the Luddite premise is no longer entirely fallacious is one of the components of some theoretical explanations for the string of jobless recoveries
in developed economies in recent decades. Expectations that the (already eroding) fallaciousness will fall off sharply in coming decades underlie the fear of structural shift.
Although automatons that mimic humans so precisely as to be difficult to distinguish from them are probably a long way from being technologically feasible, they provide a thought experiment
regarding the assertion that humans will always find new types of jobs to do that machines can't do. If one imagines an excellent robotic clone of oneself, which only required one year's worth of one's salary to buy or build but could last 10 years with minimal maintenance, that robot could be hired for any job that oneself could be hired for, but at much less pay. The idea that there would be any new type of job for the human to fall back to seems defeated. Of course, there are objections to this thought experiment. One is that it is irrelevant because its stated conditions are too far in the future to be worth speculating upon. Another is that the lack-of-new-jobs idea, even if true, could be moot, because post-scarcity economics could be in play, and jobs would be unnecessary for income anyway. However, it is interesting to ask oneself what intermediate states human socioeconomics might have to pass through to get from today's economy (scarcity-based trade, mediocre technology) to that distant future (post-scarcity abundance, very high technology). What would happen during an intermediate era when robots and other AI were mediocre but still fairly useful, and income still depended on having a job—that is, selling one's labor? Would the market value of that labor be depressed? Clearly total production (gross domestic product
) could grow ever higher in this world; but how would money circulate? Would a large underclass of humans have no way to partake of the output, having no employment? Or would something happen (perhaps something we cannot foresee) that would cause a different scenario? Attempts to answer these questions have been made, as outlined below.
Writers such as Rifkin, Brain, and Ford often suggest that the structure of the economy will have to shift to a basic income because its present structural foundation (trading labor for income) will no longer be an available option on a full employment
basis. It would perhaps be available to only 90% of workers in the next decade, perhaps 75% of workers a decade after that, and so on. Often included in the basic income idea is an element of civic obligation, such that able people must somehow contribute civically in order to receive the basic income (sometimes differentiated as guaranteed minimum income
). The labor-market economy (trading labor for income) already achieves that outcome today (because working for income generally produces civic value in various ways, directly and indirectly), but the argument is that advanced automation will decouple the linkage that makes that possible. Thus the same result (trading civic value for income) would have to be driven by different forces—either non-market ones, or via a new kind of market. The non-market idea seems infeasible given the generally abysmal performance record of planned economies
. But the idea of engineered new markets leaves room for the disciplining and motivating powers that make capitalist markets capable of positively shaping human behavior where government alone is usually unable.
or welfare state
s—generally seeking to keep a market economy with private enterprise, which they believe cannot be preserved unless its foundation is modified from its current structure. Thus, quite contrary to being anti-market agents (as critics might suppose them to be), they believe themselves to be salvaging markets from destruction. They envision creating consumer purchasing power by some other mechanism than the traditional labor market as we have known it so far, in order that free markets may continue to provide the invisible hand
component of production-possibilities decisions. In other words, they believe that market forces are necessary to generate allocative efficiency
, and they believe that without a structural modification that (at least partially) decouples purchasing power (and consumer confidence
) from employment determined by the traditional labor market, there will be a systemic market failure
, which they seek to avoid.
Just as new-market advocates are pro-market and pro-private-property, they are also very much non-Luddite (in fact, exactly opposite of Luddite) in the respect that they like technology—they don't hate it. They want it to continue advancing as robustly as ever. They simply feel that income and purchasing power must be decoupled from human participation in production. (The decoupling does not have to happen all at once; it could start small and gradually increase.) If that happens, then they essentially do not have any problem with technology or automation, per se. In contrast to old-style welfare, they do not feel that income should be unconditional, or equal, or "free" (given out "for nothing"). They believe that people should have to work for it (in a new sense of the word "work"), in the respect that they are given incentives to do positive things, like take classes, read books, conserve (or remediate) environmental resources, and so on. People would be paid to do civically valuable things, and if they chose not to do those things, they would not be paid. In this way, new-market advocates align themselves with human nature, which generally requires selfish motivations and incentives to shape behavior, and with the market's invisible hand, which is needed to make the right production-possibilities decisions (because the idea that individual human managers, or groups of them, are capable of making those decisions correctly with zero invisible-hand assistance has been empirically discredited).
Discussions of new-market ideas usually lead to the topic of post-scarcity
economic paradigms. But new-market engineers argue that without clear-eyed, realist engineering of the intermediate steps, there is an abyss of dysfunction and hardship between today's economy of scarcity and the starry-eyed goal of any fully developed economy of abundance.
Ford's main new-market mechanism would be to create a tax that recaptures most (not all) of the value that firms and their customers gain from eliminating wages, then use the tax revenue to pay people for doing civically valuable actions—that is, pursuing activities, such as higher education or environmental preservation, that have positive externalities
. The main reason for paying these "wages" need not be their altruistic or environmentalist components; the main reason is simply to prevent the market economy from collapsing due to noncirculation of value (that is, the lack of adequate trade which would occur if lack of consumer purchasing power and confidence left no way for an adequate mass market to exist). Ford points out that the tax could not take all of the gains away from the corporations and their customers, because this would destroy the natural incentive to innovate that a market economy needs to be sustainable. The value would be split between the innovators, their customers, and the rest of the population, because leaving out any of that trio would wreck the sustainability of the model. (The leaving out of the third leg is what is causing today's economic pathologies and promising tomorrow's, in the view of new-market engineers.) Ford's idea is an earnest market effort because it preserves the invisible hand as the maker of production-possibilities decisions for goods and services. However, it does rely on human planning (via a technocratic government agency in each country) to make the production-possibilities decisions for civic actions. The latter is viewed as unfortunate but necessary due to the lack of an alternative.
Another idea for a new-market mainspring which solves the aforementioned "lack of an alternative" problem is a "mirror image" idea, which has an even more private-sector approach in which the invisible hand helps make even the civic-actions production-possibilities decisions. In this model, the government does not collect a wage-recapture tax at all. Instead of enforcing tax payment, it only enforces payment of a new-style "wage" directly from corporations to consumers that looks to us today like something we might label "mandatory philanthropy", but which would actually be a true market wage of a new type. In today's old market, money flows from consumers, through (partially automated) companies, past the eyes of the government enforcement sentry (but not through its hands) as wages, into the hands of workers (who are also the consumers, thus completing the cycle of value recirculation). In the new market (mirror-image variant), money would flow from consumers, through (highly automated) companies, past the eyes of the government enforcement sentry (but not through its hands) as [new-style] "wages", and into the hands of [new-style] "wage" earners, who are paid the "wage" for civically valuable actions. (They are also the consumers, thus completing the cycle of value recirculation).
In this model, the decisions about what the civic actions are can be made by the invisible hand, because each "mandated philanthropist" gets a large degree of authority in what actions their "philanthropy" (which is actually [functionally] a new-style "payroll") will or won't pay for. Many such paymasters functioning simultaneously could constitute the "buyers" in a market for civically valuable actions (with mass-market "workers" as the "sellers"). There would still be some regulation involved, because, for example, it would be illegal to base the "payroll" decisions on race, color, religion, creed, gender, sexual orientation, ethnicity, disability, marital or veteran status, and so forth. To decide which "workers" were on a given "payroll", there might be a clearinghouse to randomly match the two, rotating assignments every several years. Or perhaps the businesses that run the "payroll" could even "hire" the "workers" themselves, in which case workers would compete for "jobs" by showing off how "productive" they could be in doing the civic actions (another level of invisible hand yet again). The "mirror image" name comes from the idea that this variant of new market is a very free market where the invisible hand remains just as powerful as it was in the 1945–2008 economy, but with many mirror-image aspects (which are visualized above by the amount of quotation marks that are necessary to signify mirror-image senses for words that were always [up till now] widely known only in their non-mirror-image senses).
The axis of reflection in the mirroring seems to be, at root, a "polarity shift
" from where human individuals can add value only by doing production (from within production systems) to where they can also add value by avoiding hurting production systems (from outside). The hurt-avoidance comes from such civic actions as providing goods-and-services demand via consumption (which the system requires in order to stay running) instead of failing to consume (because of lack of income); ensuring the sustainable supply of energy and environmental resources to the production systems (by avoiding overconsuming those); and ensuring the supply of people educated enough to provide the few humans that the production systems will need in the future, by pursuing education and cognitively enriching pastimes. The humans that the systems need will be few, but those few will need to be highly intelligent, talented, and educated, constituting a human resource that might be endangered if the general population does not act as a "farm team
system" for it by valuing education and self-education as a civic action. An analogy is provided by sports' relationship to general life. Few humans are talented and practiced enough to play professional sports, but the professional teams rely on a system that filters such scarce people out of the general population via little league/pee wee programs, high school play, college play, farm-team play, etc. People in the general population are not considered inferior human beings (versus the pro players) because of their lack of pro talent. They are valued as the fans and ticket-buyers that make the pro system economically viable. And a small fraction of them grow up to become pros themselves.
In today's old market, governments enforce the payment of wages by having outlawed their nonpayment (i.e., slavery
); by levying tariffs on cheap competition from countries that kept their nonpayment (slavery) (that outlawing has now been global for many decades); and by attempting to minimize their underpayment (i.e., wage slavery
, a sharply cheapened value of work [with elites and their customers keeping the money]). In the new market (mirror-image variant), governments enforce the payment of "wages" by outlawing their nonpayment (i.e., evading the "payroll"); by levying tariffs on cheap competition from countries that kept their nonpayment (non-participating countries); and by attempting to minimize their underpayment (i.e., "wage" slavery, a sharply cheapened value of civic actions [with elites and their customers keeping the money]).
One of the inherent challenges of the mirror-image variant is that various forms of dressing up corporations' financial self-interest in a specious cloak of civic virtue would inevitably arise. This would be a "washing" form of marketing and operations that included greenwashing and analogous washing in other domains of life (e.g., education, infrastructure). It seems unlikely that this can be entirely negated; instead, it would have to be perennially pruned by social censure and regulatory oversight. However, no other system is without its chronic weaknesses, either. For example, the classical variants of capitalism (implemented thus far) have scored poorly on various tests, such as environmental sustainability and (potentially) the employability
of the average human (as that was traditionally defined) as automation grows pervasive. Twentieth-century variants of communism fared even worse in environmental sustainability, and also failed economically in average standard of living and politically in individual freedom. The wage-recapture new-market variant, with its technocratic decisions on how to spend the revenue, holds promise to minimize the corporate "washing" problem, yet it also holds risks of failing on allocative efficiency and market-driven innovation, which the mirror-image variant mitigates. As elsewhere in reality, each choice has pros and cons, rather than any choice being perfect. The "washing" problem may be the mirror-image analog of classical capitalism's tendency to exaggerate needs (for example, a maker of antibacterial soaps encouraging the populace to fear microbes to an irrational degree). Both are forms of conflict of interest
that cause "chronic irritation" to a socioeconomic system but need not be "fatal" to it if given adequate "medical management". The washing problem may be less systemically injurious than the allocative inefficiency problem, just as the "exaggerated needs" problem of classical capitalism was less systemically injurious than the allocative inefficiency problem of central economic planning.
In choosing the decider of production-possibilities decisions (whether of goods, services, or civic actions), the invisible hand is generally preferred to committees of humans because it has proven to be superior at the decision making (except for regulatory issues such as race-color-religion-etc. and the "washing" discussed above). In the future it will also be necessary to ask what role artificial intelligence might possibly have in making those decisions, and whether humans would allow it. Perhaps artificial intelligence, like human intelligence, will share the role with the invisible hand but be barred from usurping the entirety of it.
Regarding the chances of any new-market ideas being implemented, there are both significant barriers and significant drivers, with a net potential of perhaps "even chances". Ford discusses many of these barriers and drivers. The barrier side includes (a) natural cultural conservatism that powerfully resists systemic changes; (b) the powerful influence of laissez-faire
ideals, which would resist any engineered systemic change to markets (especially anything involving a tax); (c) the fact that early implementation by individual countries faces an immediate threat from the export and offshoring
competition of countries that haven't yet implemented; and (relatedly) (d) the all-or-nothing problem, which may occur if a new system would work well but only if the switch from old to new was an off-on switching rather than a gradual evolution. However, on the driver side there are powerful forces that may answer all of the barriers. Foremost would be a dawning realization by economic elites that they have a choice between a new market with prosperity, or the old market spiraling into near-total failure. Globalization so far has not threatened the wallets of economic elites (only those of average workers), and has in fact enriched the elites thus far; but the changing parameter values of the economic system as automation advances would alter that runtime environment and transform it into a new one, where even the elites' wealth would be threatened by a market failure that killed their businesses and reduced asset values throughout the economy. Realizing these options, elites might actually switch from opposing new markets to actively supporting their implementation (including addressing the competition between countries whose policies differed). The all-or-nothing problem does not have to occur if an implementation is engineered such that extremely profitable, extremely automated industries began piloting new markets while other industries continued with an old-market status quo for quite some time. In this model, the early adopters voluntarily become leaders, and the pilot projects would act simply as economic stimulus on the broader economy (although a type of stimulus much more effective than old-style stimulus, whose efficacy seems to be eroding because it relies on the Luddite premise being a total fallacy as opposed to shifting by degrees out of total fallaciousness). The overall transition in this model could actually be quite painless, as a generally prosperous economy changed gradually over decades from mostly-old-with-some-new to mostly-new-with-some-old. The selfish motivation of the early-adopter leaders would be the aforementioned choice faced by economic elites. They would choose to stimulate the broader economy because that result would ensure their own continuing strong sales and growth by preserving a runtime environment of general prosperity for them to operate within, without which depression or malaise would occur.
Given the aforementioned choice faced by economic elites, those in the private sector
might even choose to pursue the new market without government involvement. But the private sector faces two hurdles that would make it difficult: the natural competition between firms (which is necessary and thus must be protected by competition law
), and legal obligation to maximize shareholder value. The traditional definitions of shareholder value evolved in an earlier era whose commercial
environment had different parameter values due to lack of advanced automation. Those traditional definitions would bar new-style payrolls. But in the face of market failure without them, perhaps a case would emerge for an updated definition. Competition is the other hurdle. Companies are barred by competition law from agreeing to limit competition, and even if they weren't, individual companies generally cannot make the first move of increasing expense without being killed by competition from rivals who don't. This is why "a level playing field" would have to be created by policy, or to use a different analogy, "a high tide
that lifted all boats equally". This is directly analogous to existing minimum wage
laws. Individual companies generally could not survive in the market if they volunteered to self-enforce minimum limits on wages (in the absence of any laws requiring them). There is breathing room for above-market wages (e.g., to attract superior talent) at some companies in some industries who enjoy a relatively high level of imperfect competition; but most companies in most industries face competition too close to pure
to survive the attempt. In this sense, the mandated value recirculation (whatever anyone calls it, from "wage recapture" to "new-style wages") is as unremarkable and non-novel an idea as any legislative or regulatory mechanism in commerce
. For goals that make long-term systemic balance possible but cannot be pursued by the self-interest of individual market players, these mechanisms provide a path by forcing all competitors to play the game by the same rules. Existing examples include employment standards (e.g., child labor laws, minimum wage laws), environmental protection
, and financial regulation
(to prevent bubbles and thus crashes). These exist in perennial tension with the forces of pure capitalism; thus the extremes perform checks and balances on each other. Businesses usually fight for inadequate regulation; government usually fights for excessive regulation; and a sustainable balance results. Over decades, systemic pathologies gradually push the balance point out of the sustainable range; periodic breakdowns then yield correction by counteractive forces
(e.g., trust-busting
[leftward correction], the Reagan revolution
[rightward correction]).
Laissez-faire ideals reigned supreme worldwide for about three decades (roughly centered on the fall of the Soviet Bloc, which vindicated capitalism over central planning in many ways). In this environment, where the lesson commonly extrapolated was that pure capitalism will always be better than any mixed-economy alternatives, the prevailing theory has been that higher corporate taxes can only harm economic prosperity. The reasoning is partly that countries can simply compete to undercut each other's corporate tax rates (which is true), but also, more importantly, that only the invisible hand is capable of recirculating capital back toward the base of the economy in a successful manner (which is not to be dismissed lightly, and may in fact be true). The disparaging label for such ideas is "trickle-down economics
", but many intelligent people have earnestly believed in these ideals; and the fact that their discounting has often been facile and done by imperfect opponents has only encouraged believers to stay faithful. Widespread fervor for trickle-down beliefs (in both the public and private sectors) poses a formidable barrier to the wage-recapture-tax new-market variant. But these conventional beliefs rely on the assumption that the Luddite premise is entirely and eternally fallacious. Unfortunately, there has already been a decade of empirical evidence that low taxes, new business investment, and economic growth no longer have a sure-fire correlation to strong, "good-jobs" employment in developed economies, and that alarming instances of structural unemployment resulting from software-driven automation are arising, with little to no "silver lining" or mitigating factors being discernible so far. If the Luddite premise has been starting to shift into partial accuracy, then no amount of continued low taxes and deregulation will ever be able to produce enough trickling down to create broad-based prosperity. In that case, mandating the payment of new-style wages could recirculate value back to the base of the mass market. The promise of the mirror-image variant would be that humans need not turn to taxes for the value recovery (at the top) nor to central planning for the distribution details (at the bottom). As long as the "minimum wage" (referring to the new-style wages) and other employment standards are being enforced, then government's role ends there.
premise could change states in continuous-graph
fashion, from completely false to partially true, depending on parameter values in the commercial environment, most specifically, the available modes of value recirculation. In this view, for two centuries they were completely false or very nearly so, because the traditional labor market provided sufficient means of value recirculation. As that fails because of advanced automation, they could enter partial influence. But if new forms of broad-based personal income came into being (for example, basic income, guaranteed minimum income, or new-style wages), they could revert back to a state of complete or near-complete falsehood again. The difference would be that enough value was circulating broadly enough through a mass market of consumers and corporations that services which today could not possibly garner middle-class wages and benefits
(for example, full-time jobs reading stories to hospitalized children, providing free nursing care to low-income elderly, or attending university) would become viable at that wage level.
It is also possible that new-market engineering does not actually stand in contradistinction to the mainstream economic view that new types of jobs will always arise (which is how it seems to appear today). Instead, it may conceivably be the new category, whose exact nature the conventional theory did not foresee but whose inevitable arising the theory was confident of. For the end result in either case (conventional view or new-market view) is that humans could get jobs as, for example, long-term care nurses to poor people who under older economic paradigms could not afford to pay for such nursing. In both cases, the productivity created by automation shifts human workers further into the service sector than they've ever yet been (that is, into a brand new territory of that sector). The only twist, in this view, is that it took a new kind of minimum wage law to jump-start the newly arising job types into commercial viability.
Automation
Automation is the use of control systems and information technologies to reduce the need for human work in the production of goods and services. In the scope of industrialization, automation is a step beyond mechanization...
to unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
is a multivariate one, and people's ideas about its nature in their time, as well as their predictions about the future, have varied widely (and have often been wrong). Nevertheless, humanity continues to try to develop theory that adequately explains the relationship, because it has significant potential to affect economies and modes of life throughout the world.
Mechanization
Mechanization
Mechanization or mechanisation is providing human operators with machinery that assists them with the muscular requirements of work or displaces muscular work. In some fields, mechanization includes the use of hand tools...
and automation
Automation
Automation is the use of control systems and information technologies to reduce the need for human work in the production of goods and services. In the scope of industrialization, automation is a step beyond mechanization...
enhance productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...
, allowing more products to be made, or other work to be done, faster and with less human effort, and therefore they typically displace workers in some (but not all) areas of employment
Employment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...
. The central question has always been whether and where those workers will find new employment. For two centuries, new employment has always been found; during that time, entire new industries and job descriptions have arisen.
The central fear has always been that no new jobs, or not enough new jobs, would arise to fill the void. The earliest versions of this fear predicted that this effect would begin immediately. They turned out to be wrong, and their expected immediate massive unemployment never arose. Later versions of the fear have usually posited that automation would cause unemployment to rise gradually and insidiously. This concept has been discussed by many thinkers, some trained as economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
s and others not. Variants of this fear persist through the present day, as do refutations of it.
The central hope has always been that, although automation would reduce numbers of jobs, it would not reduce, and would even improve, standard of living
Standard of living
Standard of living is generally measured by standards such as real income per person and poverty rate. Other measures such as access and quality of health care, income growth inequality and educational standards are also used. Examples are access to certain goods , or measures of health such as...
, and would provide humanity with unprecedented leisure opportunity and material comfort. This has in fact occurred in many ways. Various mechanisms for how resources would be traded or allocated in such an environment have been posited. The foremost is that new types of jobs would always arise to replace old types lost. This has in fact happened for two centuries.
The fact that for two centuries no permanent, structural unemployment has ever been proven to result from automation has supported an economic concept that automation can never cause it. This view is dominant in economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
today, and the idea that automation can cause such unemployment is considered a fallacy in conventional economic theory. However, there are also many people who believe that this theory is incorrect, and that despite the empirical record thus far, the future could be different. These arguments usually make reference to the rapid (and accelerating) pace of advance of information technology
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...
, which may produce qualitatively different results than earlier kinds of automation produced, if the advantages of humans over machines keep dwindling.
Multivariate effect
Many people consider it common sense that automation has the potential to foster unemployment, because it obviates human work by transferring tasks to machines. However, the translation of that potential into observed effect has largely not happened in the two centuries during which it has been continually predicted. After many decades of automation development and dissemination, the net macroeconomic effect has been generally positive—automation has been part of a general trend of economic growth worldwide; standards of living have risen in many places; and automation has never yet been shown to have induced any widespread structural unemploymentStructural unemployment
Structural unemployment is a form of unemployment resulting from a mismatch between demand in the labour market and the skills and locations of the workers seeking employment...
. The main explanation for this is that, so far, job losses in any one particular economic niche have always been more than offset by job gains in other niches. As the lowered unit cost
Unit cost
The unit cost of a product is the cost per standard unit supplied, which may be a single sample or a container of a given number. When purchasing more than a single unit, the total cost will increase with the number of units, but it is common for the unit cost to decrease as quantity is increased...
of goods and services (which the automation made possible) gave consumers more purchasing power
Purchasing power
Purchasing power is the number of goods/services that can be purchased with a unit of currency. For example, if you had taken one dollar to a store in the 1950s, you would have been able to buy a greater number of items than you would today, indicating that you would have had a greater purchasing...
to devote to other goods and services, new jobs sprang up in the production of those goods and services. Thus each time that automation has freed up human resources, those resources have been redeployed by market forces (although it did not always happen without turbulence in the lives of individual workers).
One of the earliest promises of automation was to allow more free time, without any threat of income reduction. This effect has been seen in many individual facets of life (for example, the automatic washing machine has made laundry less time-consuming; engine control unit
Engine control unit
An engine control unit is a type of electronic control unit that determines the amount of fuel, ignition timing and other parameters an internal combustion engine needs to keep running...
s have reduced the amount of automotive downtime; the automatic dishwasher has made dishwashing less time-consuming), but the net outcome of modern life in developed economies remains a state of hurry and busyness, mostly because rising living standards have brought rising expectations in direct relation. (Each time-saving improvement has made room for a new aspiration to take its place.)
Automation also does not imply unemployment when it makes possible tasks that were unimaginable without it (such as exploring Mars with the Sojourner rover). Likewise with fields where the economy is already fully adapted to an automated technology, and the jobs were lost long enough ago that the displacement was long since absorbed by the workforce (as with the continually advancing automation of the telephone switchboard
Telephone switchboard
A switchboard was a device used to connect a group of telephones manually to one another or to an outside connection, within and between telephone exchanges or private branch exchanges . The user was typically known as an operator...
, which eliminated most telephone operator jobs and kept many more from ever existing in the first place).
Today automation is quite advanced (relative to just a few lifetimes ago), and it continues to advance with an accelerating pace throughout the world. Although it has been encroaching on ever more skilled jobs, the general well-being and quality of life of most people in the world (where political factors have not muddied the picture) have improved. Clearly a multivariate effect has been at work (something much more than just the obvious idea that automation has the potential to cause unemployment). In fact, the idea that automation posed an imminent threat to employment, first articulated in 1811 by a group of textile workers known as Luddite
Luddite
The Luddites were a social movement of 19th-century English textile artisans who protested – often by destroying mechanised looms – against the changes produced by the Industrial Revolution, which they felt were leaving them without work and changing their way of life...
s, has proven to be so fallacious over the ensuing two centuries that economists call the imminent-threat idea the Luddite fallacy
Luddite fallacy
The Luddite fallacy is an opinion in development economics related to the belief that labour-saving technologies increase unemployment by reducing demand for labour. The concept is named after the Luddites of early nineteenth century England.The original Luddites were hosiery and lace workers in...
.
There is some concern today that the economy's ability to continue absorbing ever-increasing automation without experiencing significant structural unemployment may be heading toward an upper limit—that is, that we are approaching a point where the Luddite premise will no longer be entirely fallacious, because the relationship of humans to machines that made it fallacious is changing. In this view, the empirical strength of the eternal-fallaciousness idea is only a reflection of the parameter values of the environment thus far. In other words, the idea is undoubtedly an excellent explanation of the past, but whether it can accurately predict the future is an independent problem. Like an investment prospectus
Prospectus (finance)
In finance, a prospectus is a document that describes a financial security for potential buyers. A prospectus commonly provides investors with material information about mutual funds, stocks, bonds and other investments, such as a description of the company's business, financial statements,...
, proponents of this view caution that "past performance is no guarantee of future results."
Early in the Industrial Revolution
Historical concerns about the effects of automation date back to the very beginning of the Industrial RevolutionIndustrial Revolution
The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the social, economic and cultural conditions of the times...
, when a social movement of English textile
Textile
A textile or cloth is a flexible woven material consisting of a network of natural or artificial fibres often referred to as thread or yarn. Yarn is produced by spinning raw fibres of wool, flax, cotton, or other material to produce long strands...
machine operators in the early 19th century known as the Luddite
Luddite
The Luddites were a social movement of 19th-century English textile artisans who protested – often by destroying mechanised looms – against the changes produced by the Industrial Revolution, which they felt were leaving them without work and changing their way of life...
s protested against Jacquard's automated weaving looms
Jacquard loom
The Jacquard loom is a mechanical loom, invented by Joseph Marie Jacquard in 1801, that simplifies the process of manufacturing textiles with complex patterns such as brocade, damask and matelasse. The loom is controlled by punched cards with punched holes, each row of which corresponds to one row...
. The Luddites destroyed a number of these machines, which they felt threatened their jobs.
Later in the Industrial Revolution
The development of the American system of manufacturingAmerican system of manufacturing
The American system of manufacturing was a set of manufacturing methods that evolved in the 19th century. It involved semi-skilled labor using machine tools and jigs to make standardized, identical, interchangeable parts, manufactured to a tolerance, which could be assembled with a minimum of time...
disgusted many skilled machinists at a time when the very definition of being a machinist included a core element of skilled toolmaking
Tool and die maker
Tool and die makers are workers in the manufacturing industry who make jigs, fixtures, dies, molds, machine tools, cutting tools , gauges, and other tools used in manufacturing processes...
and fitting on a craft
Craft production
Craft production is the process of manufacturing by hand with or without the aid of tools. The term Craft production refers to a manufacturing technique applied in the hobbies of Handicraft but was also the common method of manufacture in the pre-industrialized world...
basis. Innovations of this system included increasing reliance on jigs
Jig (tool)
In metalworking and woodworking, a jig is a type of tool used to control the location and/or motion of another tool. A jig's primary purpose is to provide repeatability, accuracy, and interchangeability in the manufacturing of products. A jig is often confused with a fixture; a fixture holds the...
and gauges and on machine tool
Machine tool
A machine tool is a machine, typically powered other than by human muscle , used to make manufactured parts in various ways that include cutting or certain other kinds of deformation...
s that built more of a process into the tool's movements (such as turret lathe
Turret lathe
The turret lathe is a form of metalworking lathe that is used for repetitive production of duplicate parts, which by the nature of their cutting process are usually interchangeable...
s and screw machines). These innovations continually turned skilled work into semi-skilled or unskilled, contributing to vast migrations of laborers across borders and oceans. However, despite this transformation, there were always other economic niches for skilled workers to go to, given enough searching. Recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
s interfered with employment, but no foundational aspects of structural unemployment were caused by automation itself.
During the Machine Age
As in the preceding century, the period of 1880 to 1940Machine Age
The Machine Age is a term associated mostly with the early 20th century, sometimes also including the late 19th century. An approximate dating would be about 1880 to 1945. Considered to be at a peak in the time between the first and second world wars, it forms a late part of the Industrial Age...
saw no underlying automation-induced structural lack of new economic opportunities for skilled workers to go to, given enough searching, although the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
caused a tremendous disruption to employment. The foundational potential for full employment
Full employment
In macroeconomics, full employment is a condition of the national economy, where all or nearly all persons willing and able to work at the prevailing wages and working conditions are able to do so....
had not been lost, as would later be shown by the post–World War II economic expansion and other economic miracle
Economic miracle
The terms "economic miracle", "economic boom", "tiger economy" or simply "miracle" have come to refer to great periods of change, particularly periods of dramatic economic growth, in the recent histories of a number of countries:-Post-World War II:...
s.
In the 1930s, John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...
predicted that in a century there would be a 15-hour work week as the "economic problem
Economic problem
The economic problem, sometimes called the basic, central or fundamental economic problem, is one of the fundamental economic theories in the operation of any economy. It asserts that there is scarcity, or that the finite resources available are insufficient to satisfy all human wants and needs...
" would be replaced by the problem of leisure. This work was an early exploration of the comparing and contrasting of an economy of scarcity
Scarcity
Scarcity is the fundamental economic problem of having humans who have unlimited wants and needs in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs. Alternatively, scarcity implies that not all of society's goals can be...
(the only kind of economy humanity had ever known) with an economy of abundance, that is, a post-scarcity economy
Post scarcity
Post scarcity is a hypothetical form of economy or society, in which things such as goods, services and information are free, or practically free...
. This theme would be reprised in future decades.
During the 1950s through 1990s
The postwar development of new automation technologies using electronicsElectronics
Electronics is the branch of science, engineering and technology that deals with electrical circuits involving active electrical components such as vacuum tubes, transistors, diodes and integrated circuits, and associated passive interconnection technologies...
, servomechanism
Servomechanism
thumb|right|200px|Industrial servomotorThe grey/green cylinder is the [[Brush |brush-type]] [[DC motor]]. The black section at the bottom contains the [[Epicyclic gearing|planetary]] [[Reduction drive|reduction gear]], and the black object on top of the motor is the optical [[rotary encoder]] for...
s, and digital computers
Computer
A computer is a programmable machine designed to sequentially and automatically carry out a sequence of arithmetic or logical operations. The particular sequence of operations can be changed readily, allowing the computer to solve more than one kind of problem...
stoked a new wave of fears similar to the old Luddite ones. Among the working class
Working class
Working class is a term used in the social sciences and in ordinary conversation to describe those employed in lower tier jobs , often extending to those in unemployment or otherwise possessing below-average incomes...
and labor unions, there was stiff resistance to loss of employment through automation, including contract clauses won in hard-fought contract negotiations that mandated alternate employment for any workers whose positions were eliminated by automation. These clauses seemed a great victory for union workers at large corporations in developed nations, but because they had no effect at smaller, nonunionized companies or in developing nations, those corporations faced withering competition that shrank their market shares until their workers' gains eventually undermined their own success.
However, the 1950s and 1960s were optimistic times in many respects, and during this era many optimists made forecasts similar to Keynes's 1930s discussion of pending abundant leisure. Meanwhile, pessimists questioned the role of labor in such a world and questioned how people would earn a living or occupy their time. While economic growth increased per capita income in the 1960s, and the average number of hours per work week declined, they have remained relatively constant in the United States since then.
Despite the depopulation of manual labour
Manual labour
Manual labour , manual or manual work is physical work done by people, most especially in contrast to that done by machines, and also to that done by working animals...
and assembly line
Assembly line
An assembly line is a manufacturing process in which parts are added to a product in a sequential manner using optimally planned logistics to create a finished product much faster than with handcrafting-type methods...
jobs after World War II via advancing mechanization and automation, the salvation for employment rates damaged in the industrial sector (secondary sector of the economy) came from the service sector (tertiary sector), which absorbed all of the workers that automation displaced elsewhere. For example, many manufacturing jobs left the United States during the 1990s but were offset by a one-time massive increase in IT
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...
jobs at the same time. And in some cases the freeing up of the labor force allowed more people to enter higher skilled managerial jobs and technically specialized jobs, which are typically higher paying. Therefore, fears of unemployment due to automation were generally dismissed as just another instance of the Luddite
Luddite
The Luddites were a social movement of 19th-century English textile artisans who protested – often by destroying mechanised looms – against the changes produced by the Industrial Revolution, which they felt were leaving them without work and changing their way of life...
premise, which had proven fallacious time and again over many decades. Given this obvious empirical contradiction of the premise, people who nevertheless returned to it were usually viewed by the mainstream as cranks misled by quixotic leftist
Left-wing politics
In politics, Left, left-wing and leftist generally refer to support for social change to create a more egalitarian society...
political bias. For example, works by scholars including David F. Noble
David F. Noble
David Franklin Noble was a critical historian of technology, science and education, best known for his seminal work on the social history of automation. In his final years he taught in the Division of Social Science, and the department of Social and Political Thought. at York University in...
and Jeremy Rifkin
Jeremy Rifkin
Jeremy Rifkin is an American economist, writer, public speaker, political advisor and activist. He is the founder and president of the Foundation On Economic Trends...
were often respected but discounted. At worst, they were mocked with the disparaging label "neo-Luddite". Noble even wrote a later book titled Progress Without People: In Defence of Luddism to try to further explain why the Luddite premise should not be laughed out of academia.
Historian of Technology David F. Noble has argued that the move toward Industrial Automation was taken partly (if not primarily) as a means of class conflict between workers and a the burgeoning managerial class of a corporate / university nexus. He looks at post WW2 machine-tool production in the United States and their relationship to government subsidised R & D work done at MIT.
Post-market musings
Rifkin's End of Work, published in 1995, predicted that automation-induced unemployment would begin to be widespread within the next decade. However, the book's concept of how IT would evolve over the next decade was incomplete (the book mentioned the InternetInternet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
once in passing and the World Wide Web
World Wide Web
The World Wide Web is a system of interlinked hypertext documents accessed via the Internet...
not at all; its IT focus was mostly on robotics
Robotics
Robotics is the branch of technology that deals with the design, construction, operation, structural disposition, manufacture and application of robots...
); and its timeline prediction turned out to be wrong. It also did not provide much detailed explanation of any solution to the problem. The book's subtitle called the solution a "post-market economy", but its concluding chapters did not clearly lay out how such an economy could be engineered, leaving readers to conclude that a non-market solution involving a planned economy
Planned economy
A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...
was implied between the lines.
In terms of political economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
implications, there was no clear differentiation at the time between the ideas of authors like Noble or Rifkin (on the one hand) and traditional leftist agitation (on the other hand). To the extent that readers could ask "What point is this person getting to?" and answer the question with "socialism
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...
" or "a welfare state
Welfare state
A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...
", they dismissed these authors.
During the 2000s and 2010s
Since the 1990s, the possibility has been raised again in even an apolitical, technocratic way that the Luddite premise (that automation creates unemployment) was only fallacious in the absence of highly advanced and ubiquitous automation, which until recently was mostly out of reach technologically. This would explain why it has always been fallacious until now, but also why it might not always remain so. For example, Marshall BrainMarshall Brain
Marshall David Brain is an American author, public speaker, and entrepreneur. A former college instructor and computer programmer, Brain is the founder of HowStuffWorks.-Background:Marshall Brain was born in Santa Monica, California...
, Martin Ford, and others have suggested that exponentially accelerating information technology (IT) may ultimately result in widespread structural unemployment, because an implicit assumption underlying the "eternally fallacious" idea (that lots of regular humans will always find ways to do service work that machines can't do) will itself be fallacious as IT advances. They suggest that, unlike in the 20th century, when the tertiary sector absorbed all of the workers that the automation of the secondary sector expelled, the tertiary sector now also faces depopulation via automation; its employment will shrink, not grow, and this time there is no other sector to backstop the process by absorbing the displaced workers. The high unemployment rates of the late-2000s recession have brought the idea of structural unemployment back into mainstream attention, as observations are made about positions that require extensive specialized skill and experience standing long vacant even while general unemployment rates above 9% (and horror stories of fruitless job searches) would seem to suggest that such vacancies ought to be scarcer. The idea that automation has finally advanced to the point that the Luddite premise is no longer entirely fallacious is one of the components of some theoretical explanations for the string of jobless recoveries
Jobless recovery
A jobless recovery or jobless growth is an economic phenomon in which a macroeconomy experiences growth while maintaining or decreasing its level of employment...
in developed economies in recent decades. Expectations that the (already eroding) fallaciousness will fall off sharply in coming decades underlie the fear of structural shift.
Although automatons that mimic humans so precisely as to be difficult to distinguish from them are probably a long way from being technologically feasible, they provide a thought experiment
Thought experiment
A thought experiment or Gedankenexperiment considers some hypothesis, theory, or principle for the purpose of thinking through its consequences...
regarding the assertion that humans will always find new types of jobs to do that machines can't do. If one imagines an excellent robotic clone of oneself, which only required one year's worth of one's salary to buy or build but could last 10 years with minimal maintenance, that robot could be hired for any job that oneself could be hired for, but at much less pay. The idea that there would be any new type of job for the human to fall back to seems defeated. Of course, there are objections to this thought experiment. One is that it is irrelevant because its stated conditions are too far in the future to be worth speculating upon. Another is that the lack-of-new-jobs idea, even if true, could be moot, because post-scarcity economics could be in play, and jobs would be unnecessary for income anyway. However, it is interesting to ask oneself what intermediate states human socioeconomics might have to pass through to get from today's economy (scarcity-based trade, mediocre technology) to that distant future (post-scarcity abundance, very high technology). What would happen during an intermediate era when robots and other AI were mediocre but still fairly useful, and income still depended on having a job—that is, selling one's labor? Would the market value of that labor be depressed? Clearly total production (gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
) could grow ever higher in this world; but how would money circulate? Would a large underclass of humans have no way to partake of the output, having no employment? Or would something happen (perhaps something we cannot foresee) that would cause a different scenario? Attempts to answer these questions have been made, as outlined below.
Writers such as Rifkin, Brain, and Ford often suggest that the structure of the economy will have to shift to a basic income because its present structural foundation (trading labor for income) will no longer be an available option on a full employment
Full employment
In macroeconomics, full employment is a condition of the national economy, where all or nearly all persons willing and able to work at the prevailing wages and working conditions are able to do so....
basis. It would perhaps be available to only 90% of workers in the next decade, perhaps 75% of workers a decade after that, and so on. Often included in the basic income idea is an element of civic obligation, such that able people must somehow contribute civically in order to receive the basic income (sometimes differentiated as guaranteed minimum income
Guaranteed minimum income
Guaranteed minimum income is a system of social welfare provision that guarantees that all citizens or families have an income sufficient to live on, provided they meet certain conditions. Eligibility is typically determined by citizenship, a means test and either availability for the labour...
). The labor-market economy (trading labor for income) already achieves that outcome today (because working for income generally produces civic value in various ways, directly and indirectly), but the argument is that advanced automation will decouple the linkage that makes that possible. Thus the same result (trading civic value for income) would have to be driven by different forces—either non-market ones, or via a new kind of market. The non-market idea seems infeasible given the generally abysmal performance record of planned economies
Planned economy
A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...
. But the idea of engineered new markets leaves room for the disciplining and motivating powers that make capitalist markets capable of positively shaping human behavior where government alone is usually unable.
New-market engineering
Brain and Ford's books, in stark contrast to Rifkin's, came later and were written by engineers with extensive under-the-hood knowledge of modern production methods, computer hardware and software, and the Internet. They explicitly reject non-market solutions as unworkable and instead suggest new kinds of markets. Rather than being "post-market" proponents, such authors could be called "new-market" proponents. They vigorously distance themselves from socialismSocialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...
or welfare state
Welfare state
A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...
s—generally seeking to keep a market economy with private enterprise, which they believe cannot be preserved unless its foundation is modified from its current structure. Thus, quite contrary to being anti-market agents (as critics might suppose them to be), they believe themselves to be salvaging markets from destruction. They envision creating consumer purchasing power by some other mechanism than the traditional labor market as we have known it so far, in order that free markets may continue to provide the invisible hand
Invisible hand
In economics, invisible hand or invisible hand of the market is the term economists use to describe the self-regulating nature of the marketplace. This is a metaphor first coined by the economist Adam Smith...
component of production-possibilities decisions. In other words, they believe that market forces are necessary to generate allocative efficiency
Allocative efficiency
Allocative efficiency is a theoretical measure of the benefit or utility derived from a proposed or actual selection in the allocation or allotment of resources....
, and they believe that without a structural modification that (at least partially) decouples purchasing power (and consumer confidence
Consumer confidence
Consumer confidence is an economic indicator which measures the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation. How confident people feel about stability of their incomes determines their spending activity and therefore serves as...
) from employment determined by the traditional labor market, there will be a systemic market failure
Market failure
Market failure is a concept within economic theory wherein the allocation of goods and services by a free market is not efficient. That is, there exists another conceivable outcome where a market participant may be made better-off without making someone else worse-off...
, which they seek to avoid.
Just as new-market advocates are pro-market and pro-private-property, they are also very much non-Luddite (in fact, exactly opposite of Luddite) in the respect that they like technology—they don't hate it. They want it to continue advancing as robustly as ever. They simply feel that income and purchasing power must be decoupled from human participation in production. (The decoupling does not have to happen all at once; it could start small and gradually increase.) If that happens, then they essentially do not have any problem with technology or automation, per se. In contrast to old-style welfare, they do not feel that income should be unconditional, or equal, or "free" (given out "for nothing"). They believe that people should have to work for it (in a new sense of the word "work"), in the respect that they are given incentives to do positive things, like take classes, read books, conserve (or remediate) environmental resources, and so on. People would be paid to do civically valuable things, and if they chose not to do those things, they would not be paid. In this way, new-market advocates align themselves with human nature, which generally requires selfish motivations and incentives to shape behavior, and with the market's invisible hand, which is needed to make the right production-possibilities decisions (because the idea that individual human managers, or groups of them, are capable of making those decisions correctly with zero invisible-hand assistance has been empirically discredited).
Discussions of new-market ideas usually lead to the topic of post-scarcity
Post scarcity
Post scarcity is a hypothetical form of economy or society, in which things such as goods, services and information are free, or practically free...
economic paradigms. But new-market engineers argue that without clear-eyed, realist engineering of the intermediate steps, there is an abyss of dysfunction and hardship between today's economy of scarcity and the starry-eyed goal of any fully developed economy of abundance.
Wage-recapture market variant
Ford's main new-market mechanism would be to create a tax that recaptures most (not all) of the value that firms and their customers gain from eliminating wages, then use the tax revenue to pay people for doing civically valuable actions—that is, pursuing activities, such as higher education or environmental preservation, that have positive externalities
Externality
In economics, an externality is a cost or benefit, not transmitted through prices, incurred by a party who did not agree to the action causing the cost or benefit...
. The main reason for paying these "wages" need not be their altruistic or environmentalist components; the main reason is simply to prevent the market economy from collapsing due to noncirculation of value (that is, the lack of adequate trade which would occur if lack of consumer purchasing power and confidence left no way for an adequate mass market to exist). Ford points out that the tax could not take all of the gains away from the corporations and their customers, because this would destroy the natural incentive to innovate that a market economy needs to be sustainable. The value would be split between the innovators, their customers, and the rest of the population, because leaving out any of that trio would wreck the sustainability of the model. (The leaving out of the third leg is what is causing today's economic pathologies and promising tomorrow's, in the view of new-market engineers.) Ford's idea is an earnest market effort because it preserves the invisible hand as the maker of production-possibilities decisions for goods and services. However, it does rely on human planning (via a technocratic government agency in each country) to make the production-possibilities decisions for civic actions. The latter is viewed as unfortunate but necessary due to the lack of an alternative.
Mirror-image market variant
Another idea for a new-market mainspring which solves the aforementioned "lack of an alternative" problem is a "mirror image" idea, which has an even more private-sector approach in which the invisible hand helps make even the civic-actions production-possibilities decisions. In this model, the government does not collect a wage-recapture tax at all. Instead of enforcing tax payment, it only enforces payment of a new-style "wage" directly from corporations to consumers that looks to us today like something we might label "mandatory philanthropy", but which would actually be a true market wage of a new type. In today's old market, money flows from consumers, through (partially automated) companies, past the eyes of the government enforcement sentry (but not through its hands) as wages, into the hands of workers (who are also the consumers, thus completing the cycle of value recirculation). In the new market (mirror-image variant), money would flow from consumers, through (highly automated) companies, past the eyes of the government enforcement sentry (but not through its hands) as [new-style] "wages", and into the hands of [new-style] "wage" earners, who are paid the "wage" for civically valuable actions. (They are also the consumers, thus completing the cycle of value recirculation).
In this model, the decisions about what the civic actions are can be made by the invisible hand, because each "mandated philanthropist" gets a large degree of authority in what actions their "philanthropy" (which is actually [functionally] a new-style "payroll") will or won't pay for. Many such paymasters functioning simultaneously could constitute the "buyers" in a market for civically valuable actions (with mass-market "workers" as the "sellers"). There would still be some regulation involved, because, for example, it would be illegal to base the "payroll" decisions on race, color, religion, creed, gender, sexual orientation, ethnicity, disability, marital or veteran status, and so forth. To decide which "workers" were on a given "payroll", there might be a clearinghouse to randomly match the two, rotating assignments every several years. Or perhaps the businesses that run the "payroll" could even "hire" the "workers" themselves, in which case workers would compete for "jobs" by showing off how "productive" they could be in doing the civic actions (another level of invisible hand yet again). The "mirror image" name comes from the idea that this variant of new market is a very free market where the invisible hand remains just as powerful as it was in the 1945–2008 economy, but with many mirror-image aspects (which are visualized above by the amount of quotation marks that are necessary to signify mirror-image senses for words that were always [up till now] widely known only in their non-mirror-image senses).
The axis of reflection in the mirroring seems to be, at root, a "polarity shift
Electrical polarity
Electrical polarity is present in every electrical circuit. Electrons flow from the negative pole to the positive pole. In a direct current circuit, one pole is always negative, the other pole is always positive and the electrons flow in one direction only...
" from where human individuals can add value only by doing production (from within production systems) to where they can also add value by avoiding hurting production systems (from outside). The hurt-avoidance comes from such civic actions as providing goods-and-services demand via consumption (which the system requires in order to stay running) instead of failing to consume (because of lack of income); ensuring the sustainable supply of energy and environmental resources to the production systems (by avoiding overconsuming those); and ensuring the supply of people educated enough to provide the few humans that the production systems will need in the future, by pursuing education and cognitively enriching pastimes. The humans that the systems need will be few, but those few will need to be highly intelligent, talented, and educated, constituting a human resource that might be endangered if the general population does not act as a "farm team
Farm team
In sports, a farm team, farm system, feeder team or nursery club, is generally a team or club whose role is to provide experience and training for young players, with an agreement that any successful players can move on to a higher level at a given point...
system" for it by valuing education and self-education as a civic action. An analogy is provided by sports' relationship to general life. Few humans are talented and practiced enough to play professional sports, but the professional teams rely on a system that filters such scarce people out of the general population via little league/pee wee programs, high school play, college play, farm-team play, etc. People in the general population are not considered inferior human beings (versus the pro players) because of their lack of pro talent. They are valued as the fans and ticket-buyers that make the pro system economically viable. And a small fraction of them grow up to become pros themselves.
In today's old market, governments enforce the payment of wages by having outlawed their nonpayment (i.e., slavery
Slavery
Slavery is a system under which people are treated as property to be bought and sold, and are forced to work. Slaves can be held against their will from the time of their capture, purchase or birth, and deprived of the right to leave, to refuse to work, or to demand compensation...
); by levying tariffs on cheap competition from countries that kept their nonpayment (slavery) (that outlawing has now been global for many decades); and by attempting to minimize their underpayment (i.e., wage slavery
Wage slavery
Wage slavery refers to a situation where a person's livelihood depends on wages, especially when the dependence is total and immediate. It is a negatively connoted term used to draw an analogy between slavery and wage labor, and to highlight similarities between owning and employing a person...
, a sharply cheapened value of work [with elites and their customers keeping the money]). In the new market (mirror-image variant), governments enforce the payment of "wages" by outlawing their nonpayment (i.e., evading the "payroll"); by levying tariffs on cheap competition from countries that kept their nonpayment (non-participating countries); and by attempting to minimize their underpayment (i.e., "wage" slavery, a sharply cheapened value of civic actions [with elites and their customers keeping the money]).
One of the inherent challenges of the mirror-image variant is that various forms of dressing up corporations' financial self-interest in a specious cloak of civic virtue would inevitably arise. This would be a "washing" form of marketing and operations that included greenwashing and analogous washing in other domains of life (e.g., education, infrastructure). It seems unlikely that this can be entirely negated; instead, it would have to be perennially pruned by social censure and regulatory oversight. However, no other system is without its chronic weaknesses, either. For example, the classical variants of capitalism (implemented thus far) have scored poorly on various tests, such as environmental sustainability and (potentially) the employability
Employability
Employability refers to a person's capability of gaining initial employment, maintaining employment, and obtaining new employment if required . In simple terms, employability is about being capable of getting and keeping fulfilling work...
of the average human (as that was traditionally defined) as automation grows pervasive. Twentieth-century variants of communism fared even worse in environmental sustainability, and also failed economically in average standard of living and politically in individual freedom. The wage-recapture new-market variant, with its technocratic decisions on how to spend the revenue, holds promise to minimize the corporate "washing" problem, yet it also holds risks of failing on allocative efficiency and market-driven innovation, which the mirror-image variant mitigates. As elsewhere in reality, each choice has pros and cons, rather than any choice being perfect. The "washing" problem may be the mirror-image analog of classical capitalism's tendency to exaggerate needs (for example, a maker of antibacterial soaps encouraging the populace to fear microbes to an irrational degree). Both are forms of conflict of interest
Conflict of interest
A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other....
that cause "chronic irritation" to a socioeconomic system but need not be "fatal" to it if given adequate "medical management". The washing problem may be less systemically injurious than the allocative inefficiency problem, just as the "exaggerated needs" problem of classical capitalism was less systemically injurious than the allocative inefficiency problem of central economic planning.
In choosing the decider of production-possibilities decisions (whether of goods, services, or civic actions), the invisible hand is generally preferred to committees of humans because it has proven to be superior at the decision making (except for regulatory issues such as race-color-religion-etc. and the "washing" discussed above). In the future it will also be necessary to ask what role artificial intelligence might possibly have in making those decisions, and whether humans would allow it. Perhaps artificial intelligence, like human intelligence, will share the role with the invisible hand but be barred from usurping the entirety of it.
Implementations
Regarding the chances of any new-market ideas being implemented, there are both significant barriers and significant drivers, with a net potential of perhaps "even chances". Ford discusses many of these barriers and drivers. The barrier side includes (a) natural cultural conservatism that powerfully resists systemic changes; (b) the powerful influence of laissez-faire
Laissez-faire
In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....
ideals, which would resist any engineered systemic change to markets (especially anything involving a tax); (c) the fact that early implementation by individual countries faces an immediate threat from the export and offshoring
Offshoring
Offshoring describes the relocation by a company of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Even state governments employ offshoring...
competition of countries that haven't yet implemented; and (relatedly) (d) the all-or-nothing problem, which may occur if a new system would work well but only if the switch from old to new was an off-on switching rather than a gradual evolution. However, on the driver side there are powerful forces that may answer all of the barriers. Foremost would be a dawning realization by economic elites that they have a choice between a new market with prosperity, or the old market spiraling into near-total failure. Globalization so far has not threatened the wallets of economic elites (only those of average workers), and has in fact enriched the elites thus far; but the changing parameter values of the economic system as automation advances would alter that runtime environment and transform it into a new one, where even the elites' wealth would be threatened by a market failure that killed their businesses and reduced asset values throughout the economy. Realizing these options, elites might actually switch from opposing new markets to actively supporting their implementation (including addressing the competition between countries whose policies differed). The all-or-nothing problem does not have to occur if an implementation is engineered such that extremely profitable, extremely automated industries began piloting new markets while other industries continued with an old-market status quo for quite some time. In this model, the early adopters voluntarily become leaders, and the pilot projects would act simply as economic stimulus on the broader economy (although a type of stimulus much more effective than old-style stimulus, whose efficacy seems to be eroding because it relies on the Luddite premise being a total fallacy as opposed to shifting by degrees out of total fallaciousness). The overall transition in this model could actually be quite painless, as a generally prosperous economy changed gradually over decades from mostly-old-with-some-new to mostly-new-with-some-old. The selfish motivation of the early-adopter leaders would be the aforementioned choice faced by economic elites. They would choose to stimulate the broader economy because that result would ensure their own continuing strong sales and growth by preserving a runtime environment of general prosperity for them to operate within, without which depression or malaise would occur.
Given the aforementioned choice faced by economic elites, those in the private sector
Private sector
In economics, the private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state...
might even choose to pursue the new market without government involvement. But the private sector faces two hurdles that would make it difficult: the natural competition between firms (which is necessary and thus must be protected by competition law
Competition law
Competition law, known in the United States as antitrust law, is law that promotes or maintains market competition by regulating anti-competitive conduct by companies....
), and legal obligation to maximize shareholder value. The traditional definitions of shareholder value evolved in an earlier era whose commercial
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...
environment had different parameter values due to lack of advanced automation. Those traditional definitions would bar new-style payrolls. But in the face of market failure without them, perhaps a case would emerge for an updated definition. Competition is the other hurdle. Companies are barred by competition law from agreeing to limit competition, and even if they weren't, individual companies generally cannot make the first move of increasing expense without being killed by competition from rivals who don't. This is why "a level playing field" would have to be created by policy, or to use a different analogy, "a high tide
Tide
Tides are the rise and fall of sea levels caused by the combined effects of the gravitational forces exerted by the moon and the sun and the rotation of the Earth....
that lifted all boats equally". This is directly analogous to existing minimum wage
Minimum wage
A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labour. Although minimum wage laws are in effect in a great many jurisdictions, there are differences of opinion about...
laws. Individual companies generally could not survive in the market if they volunteered to self-enforce minimum limits on wages (in the absence of any laws requiring them). There is breathing room for above-market wages (e.g., to attract superior talent) at some companies in some industries who enjoy a relatively high level of imperfect competition; but most companies in most industries face competition too close to pure
Perfect competition
In economic theory, perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets...
to survive the attempt. In this sense, the mandated value recirculation (whatever anyone calls it, from "wage recapture" to "new-style wages") is as unremarkable and non-novel an idea as any legislative or regulatory mechanism in commerce
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...
. For goals that make long-term systemic balance possible but cannot be pursued by the self-interest of individual market players, these mechanisms provide a path by forcing all competitors to play the game by the same rules. Existing examples include employment standards (e.g., child labor laws, minimum wage laws), environmental protection
Environmental protection
Environmental protection is a practice of protecting the environment, on individual, organizational or governmental level, for the benefit of the natural environment and humans. Due to the pressures of population and our technology the biophysical environment is being degraded, sometimes permanently...
, and financial regulation
Financial regulation
Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system...
(to prevent bubbles and thus crashes). These exist in perennial tension with the forces of pure capitalism; thus the extremes perform checks and balances on each other. Businesses usually fight for inadequate regulation; government usually fights for excessive regulation; and a sustainable balance results. Over decades, systemic pathologies gradually push the balance point out of the sustainable range; periodic breakdowns then yield correction by counteractive forces
Regression toward the mean
In statistics, regression toward the mean is the phenomenon that if a variable is extreme on its first measurement, it will tend to be closer to the average on a second measurement, and—a fact that may superficially seem paradoxical—if it is extreme on a second measurement, will tend...
(e.g., trust-busting
Competition law
Competition law, known in the United States as antitrust law, is law that promotes or maintains market competition by regulating anti-competitive conduct by companies....
[leftward correction], the Reagan revolution
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....
[rightward correction]).
Laissez-faire ideals reigned supreme worldwide for about three decades (roughly centered on the fall of the Soviet Bloc, which vindicated capitalism over central planning in many ways). In this environment, where the lesson commonly extrapolated was that pure capitalism will always be better than any mixed-economy alternatives, the prevailing theory has been that higher corporate taxes can only harm economic prosperity. The reasoning is partly that countries can simply compete to undercut each other's corporate tax rates (which is true), but also, more importantly, that only the invisible hand is capable of recirculating capital back toward the base of the economy in a successful manner (which is not to be dismissed lightly, and may in fact be true). The disparaging label for such ideas is "trickle-down economics
Trickle-down economics
"Trickle-down economics" and "the trickle-down theory" are terms used in United States politics to refer to the idea that tax breaks or other economic benefits provided by government to businesses and the wealthy will benefit poorer members of society by improving the economy as a whole...
", but many intelligent people have earnestly believed in these ideals; and the fact that their discounting has often been facile and done by imperfect opponents has only encouraged believers to stay faithful. Widespread fervor for trickle-down beliefs (in both the public and private sectors) poses a formidable barrier to the wage-recapture-tax new-market variant. But these conventional beliefs rely on the assumption that the Luddite premise is entirely and eternally fallacious. Unfortunately, there has already been a decade of empirical evidence that low taxes, new business investment, and economic growth no longer have a sure-fire correlation to strong, "good-jobs" employment in developed economies, and that alarming instances of structural unemployment resulting from software-driven automation are arising, with little to no "silver lining" or mitigating factors being discernible so far. If the Luddite premise has been starting to shift into partial accuracy, then no amount of continued low taxes and deregulation will ever be able to produce enough trickling down to create broad-based prosperity. In that case, mandating the payment of new-style wages could recirculate value back to the base of the mass market. The promise of the mirror-image variant would be that humans need not turn to taxes for the value recovery (at the top) nor to central planning for the distribution details (at the bottom). As long as the "minimum wage" (referring to the new-style wages) and other employment standards are being enforced, then government's role ends there.
Other conceptual implications
Conceivably, both the Luddite premise and the lump of laborLump of labour fallacy
In economics, the lump of labour fallacy is the contention that the amount of work available to labourers is fixed. It is considered a fallacy by most economists, who hold that the amount of work is not static. Another way to describe the fallacy is that it treats the demand for labour as an...
premise could change states in continuous-graph
Continuous function
In mathematics, a continuous function is a function for which, intuitively, "small" changes in the input result in "small" changes in the output. Otherwise, a function is said to be "discontinuous". A continuous function with a continuous inverse function is called "bicontinuous".Continuity of...
fashion, from completely false to partially true, depending on parameter values in the commercial environment, most specifically, the available modes of value recirculation. In this view, for two centuries they were completely false or very nearly so, because the traditional labor market provided sufficient means of value recirculation. As that fails because of advanced automation, they could enter partial influence. But if new forms of broad-based personal income came into being (for example, basic income, guaranteed minimum income, or new-style wages), they could revert back to a state of complete or near-complete falsehood again. The difference would be that enough value was circulating broadly enough through a mass market of consumers and corporations that services which today could not possibly garner middle-class wages and benefits
Employee benefit
Employee benefits and benefits in kind are various non-wage compensations provided to employees in addition to their normal wages or salaries...
(for example, full-time jobs reading stories to hospitalized children, providing free nursing care to low-income elderly, or attending university) would become viable at that wage level.
It is also possible that new-market engineering does not actually stand in contradistinction to the mainstream economic view that new types of jobs will always arise (which is how it seems to appear today). Instead, it may conceivably be the new category, whose exact nature the conventional theory did not foresee but whose inevitable arising the theory was confident of. For the end result in either case (conventional view or new-market view) is that humans could get jobs as, for example, long-term care nurses to poor people who under older economic paradigms could not afford to pay for such nursing. In both cases, the productivity created by automation shifts human workers further into the service sector than they've ever yet been (that is, into a brand new territory of that sector). The only twist, in this view, is that it took a new kind of minimum wage law to jump-start the newly arising job types into commercial viability.