Robots Suck, No Robots Rule – What Say Ye?

I was talking to Izabella Kaminska just briefly on Twitter about the impact of robots in the modern economy.  Like many others, she states that robots are hurting the economy through various forces.  See her latest at FT Alphaville for a good summary.

Anyhow, I don’t really have a well informed opinion here.  My gut tells me this might be a bit hyperbolic.  All this worry about robots.  After all, we’ve been worrying about robots in some form for a long time.  From mechanized killing machines to mechanized cleaning machines to mechanized everything machines.  This debate spans the existence of man in some form as various inventions put some people out of work.  On the one hand, technology makes us better off by making us more productive and providing us with the time to demand more goods and services.   As the MR Law states:

“We generate improving living standards through the efficient use of resources resulting in the optimization of time”

On the other hand, there is Izabella’s thinking that a leisure society is developing that threatens full employment.  This idea of the “leisure society” was a favorite theory of JM Keynes who predicted that, by 2030, we would all be sitting around living leisurely.

This idea also conflicts with Volney’s Law of Nature which states that man wants to produce, to improve, to progress.   I generally agree with Volney.  I think the idea of sitting around in a hammock all day sipping Margaritas sounds great – for about 2 weeks.  Then I start feeling useless and unproductive and want to help my fellow man move forward.  Maybe that’s just me, but I don’t think so.  I am surrounded by people who just can’t produce enough and can’t help but think about why mankind isn’t good enough.  I feel like I spend my days reading about the world’s problems.  Humans are inherently dissatisfied with the state of their existence.

We can get very philosophical if we want.   Anyhow, lots of moving parts here which is why I probably haven’t formulated a solid opinion (by the way, where is my robot to think about all of this for me so I can go eat a sandwich?).

So I wanted to reach into the Pragcap knowledge well and see what you all have to say.

Robots – scary or not?

Update - Izabella writes a follow-up here.

 

 

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. I think robots rule. Without them I’d have to sweep my floors, clean my own dishes, wash my own clothes and ride a horse to the store.

    • ss, do you have one of those Irobot Roomba’s? Was thinking of getting one, are they worth it?

      The only that that concerns me about robots is my joining a union and demanding better working conditions “rim shot”..

    • lol..

      I thought by 2012 we would all possess a Jetson’s style Rosie the housemaid robot…

      Anyhow, there is simply too much excess, cheap labor throughout the world to worry about robots taking over..

    • Thanks for sharing that link.

      One of great things about Krugman is that he can bring an issue to national discussion. Wages are the secret sauce. We need to change policies that “Wage War on Wages”.

  2. I vote no answer on this. For example, no one can answer if HFT algos are a net benefit or detriment to the financial market and society as a whole.

    The underlying principle is profit maximization and obviously we will see both winners and losers from new technology such as robotics.

  3. Terrifying if you ask me. Jobs are a thing of the past. Nobody produces anything anymore other than machines. The wealthy collect their rents, the labor class awaits their monthly allotment of food stamps and unemployment benefits.

    • It doesn’t have to be so doom and gloom.

      In my opinion, we’ve already made the transformation from a society that gets a job and stays there for 30 years until retirement. The younger generation is quite comfortable changing careers multiple times and are therefore more resourceful than those in the past. So why not take it another step further?

      Quite often it makes business sense for employers to primarily higher temporary staff, so I can only assume it’s inevitable that full time employment will decline. It is still in the realm of possibilities that society transforms it’s labor force into temp staff, consultants and entrepreneurs. Everyone can be a mixture of all three.

      Changing careers every 5-8 years probably sounded pretty terrifying to people 40 years ago. Now it’s common practice.

      • The thing is I can imagine the standard of living rises with robotic tech which economist will laud as progress. And if GDP and profits are growing then most politicians will be happy as punch.

        But the robots will first replace the less skilled jobs first (hence why HFT was one early adopters – I jest here). And those who are unskilled will continue to have the hardest time training for and finding work. That is as great as the US economy is, we still hasn’t recovered unemployment and output gap from the financial crisis.

        To me I see a future moving to an increasing divide in the have and have nots. The outcome will be either as extreme as rebellion of the underclass or the more of this increase in welfare/foodstamp stamp dependency. And for those that have made the right choices in work and education life will be great.

  4. Read some Asimov and get back to us. Plenty of great thinkers have pondered this for centuries. One of the earliest was Lord Byron during the Luddite rebellions. If all the benefits of automation accrue to a single group of “owners”, then there are truly very few benefits inherent in automation. Increased productivity means little if everyone is put out of work in the process; an increasingly automation-driven world almost demands some form of redistribution.

  5. One thing regarding HFT’s specifically, I question how much market correlations can change.

    A perfect example would be at the height of the Euro problems last year, every rumor of a bailout would send equity markets higher. Seeing as the Euro is correlated with equities, the Euro would rally as well. Now we wouldn’t always know the specifics of the bailout, but it could quite possibly involve increasing the amount of Euro’s ie: printing money. If the Euro can rally based on printing Euro’s, the clear solution is to print 10 trillion Euro’s and have the Euro go to all time highs…

    HFT have never existed in a time where you didn’t buy equities and sell dollars. Buying dollars and selling equities makes intuitive sense, but it’s really a recent phenomena. For most of history it hasn’t worked that way. HFT’s didn’t exist in the 90′s when the dollar and equities rallied together and I question whether it is possible to go back to such a scenario.

  6. Just a refresher on Asimov’s “Three Laws of Robotics”:

    a. A robot may not injure a human being or, through inaction, allow a human being to come to harm.

    b. A robot must obey orders given it by human beings except where such orders would conflict with the First Law.

    c. A robot must protect its own existence as long as such protection does not conflict with the First or Second Law.

    What bothers me right now is not domestic robots or armed UAVs, which still require humans to make the ultimate decisions (placement in a space for the former, pressing the trigger to launch a missile for the latter). No, what really truly worries me is financial firms have created and launched robots (algos) into our financial system and ceded all human control, short of termination. The coding in these algo does not contain the language of the First Law and the result is we now have fully-functioning robots without a) human control or b) programmed ethics or morals. They initiate and terminate trades, period, with no regard to the harm they inflict on the entire financial system. From my point of view, these robots endanger all humans on the other side of these trades. We are very close to having a catastrophic event in which trillions disappear from the coffers of everyday investors, pension fund holders, retirees, etc. The “flash crash” and the rogue Knight algo are only the beginning.

    • Is there an inverse of the first law – since these algos are specifically designed to exploit weaknesses of humans on the other side of the trade.

    • There is nothing to stop the US from flying drones that are programmed to hover for days over a “free fire zone” and shoot everything that moves with a sniper rifle. An army of millions of such drones could kill an enemy population more completely than a massive thermonuclear attack.

      In terms of economics, I think the real breakthrough will be robots that can care for children, replacing human caregivers. This will allow the demographic equation to change, and would have a major fundamental economic impact.

  7. I am not sure I believe all this. Washing machines don’t steal work. They make work for other people as Cullen has explained in the past. We’ve been scared of robots and competition forever. This just sounds like more Keynesian claptrap.

  8. When we automated agriculture the workers moved to manufacturing. When we automated manufacturing the workers moved to the service sector. When we automate the service sector, where will they go?

    I understand the Luddite fallacy, but I’m not sure it applies in a world where there is a substitute good for human labor. We’re not there quite yet but it’s becoming more possible all the time.

    In a free market, wages will drop so that humans remain competitive with robots, but unlike robots humans have a lower bound on what wages they can accept due to fixed requirements like food and shelter. What happens to capitalism when half the population isn’t worth hiring due to the cost?

    • Automation of agriculture should drive down the price of food as well. And by definition, there are some functions that robots cannot perform, like prostitution. A lot more people will have to sell sex for a living, and the uber wealthy overlords will be serviced all day and night by live sex workers.

  9. The Luddites were essentially right, just their timing was off by two centuries.

    Machines destroyed jobs – but humans were still very valuable: they were intelligent, flexible control computers that made them a valuable asset even as technology stepped up to the next level.

    That is changing though. In two short years an army of 1 million industrial robots will do end-to-end manufacturing of the hottest smart phones of the planet: serving a market of billions of people, but only employing a few ten thousand highly paid specialists.

    The “industrial control computer” property of humans is rapidly losing value.

    Think about it: an increasing percentage of products that billions of people want to buy will be produced by just a few tens of thousands of people. How will those billions pay?

    This happened before: there was a race whose utility dropped below subsistence levels and within two generations 90% of their population went extinct: horses.

  10. I have a personal prediction on this.

    The more we progress and automate the more difficult it becomes to work on the true cutting edge of technology. Once unskilled manufacturing and farming labor becomes obsolete people will shift into the service economy as Clearly Irrational stated. But there is an issue there.

    You will then have

    Innovators – The top percent of motivated and driven people reaching for incremental improvement.
    Skilled workers – Educated graduates and trade smiths for more and more custom work.

    Unskilled workers – I would like to break this down further.

    Unskilled but “socially skilled” – These people have few hard analysis or work skills but are very pleasant to interact with and do well in service based jobs with clients and customores.

    Unskilled but socially limited – These people will eventually be left without meaningful jobs, or there will be very few to go around. It will eventually make sense for society to keep a certain percentage of people on a welfare program intentionally, and it will be affordable.

  11. Now that North Americans and most businesses all have multiple computers, it is time for society to employ those machines (robots) to create more efficient institutions; first on my list would be Taxation.

    1) Taxation: http://www.brianripley.com/1/post/2011/11/apt-tax.html

    The benefits to letting robots manage taxation would allow society to make faster progress in:

    2) Mass Transit & Infrastructure
    3) Education & Training
    4) Energy Efficiency & Resource Allocation
    5) Research & Development (on and off-planet)

    Imagine a social organization that actually produced the greatest good for most of its members.

    I can dream can’t I? It’s Sci-Fi.

  12. It’s not a question of robots or not, but how economic policy changes because of it and if we are happy with that. The Industrial Revolution brought education and flattening of income distributions (the rise of the middle class). Krugman’s and Rowe’s point is that the latter two are reversing (education seems to have rapidly declining marginal usefulness and income’s are more skewed). The question is, are robots responsible for that? And if so, what should our policy response be? I think the robot AND rent story both make sense, since there is still good demand for skilled labor (underwater welders, precision machinists) and they seem to be driving a lot of Rolls-Royces in New York, Beijing and Dubai (the rent collectors).

    • But you can’t collect rent from robots-only from humans which have means of an income…

  13. This Law of Nature is not a law, it is one view of the nature of man. Cullen, as an American Republican Economist(ARE), finds it fits his worldview, with industriousness, individualism and progress at the centre. Fair enough, but let’s not pretend it is a scientific fact.

    I must have a bit of the ARE in me as I always thought it was the nature of man to watch football on Sunday. But then I went to Europe and discovered they watch football on Saturday. And it isn’t even the right kind of football! Vive la difference!

    But really is it natural, let alone necessary, that everyone be industrious? Are not a lot of people just lazy by nature? Or would the Law of Progress have weeded them out through its’ process of natural selection?

    The old functionalist school in Anthropology would probably claim cultures adapt organically to absorb surplus labour. Makes as much sense to me as most of what I read on the matter from economists.

  14. Aight… C’mon.. This was a Softball toss from Cullen, Fellow MR’st.

    Have you not remembered ” I, Pencil”? http://en.wikipedia.org/wiki/I,_Pencil

    Think about it, If a simple pencil can create thousands of jobs, How much more so can creating complex robots that do the crap work for us?

    Also, ask yourselves the same about PAPER. Those here who are over the age of 40 can appreciate the concept of a paperless society. (ESPECIALLY if they have kids). Ask yourself, how much has the computer, cell phone, tech ONLINE age reduced PAPER in our society? Go read your junk mail and get back to me..lol.. :)

  15. If technology is bad then I guess we need to start digging all our holes in the ground with spoons. That will put many to work.

    Technology is always good IF all classes can share in the gains equally. We just can’t take peoples jobs and say “tough luck” and let them starve to death. I would like to see some sort of basic guaranteed income that everyone would get. It would be enough to cover your basics and if you wanted more stuff you would need to go out and get a job. This would change the whole power structure, which now heavily benefits the employer. And it would be equal and fair because everyone would get the same from Warren Buffet to the homeless guy on the street.

    • What you are describing is communism. I am pretty sure I wouldn’t work if I could get basics for me and my family covered.
      I have 5+ hobbies I never have time for. I’d spend time on them if I didn’t have to worry about putting food on the table.

      • Your wife would start looking for another partner pretty quickly. Your kids would look down on you. Your mother would call you a lazy bum who does not care about his loved ones.

        In practice, even in socialism most people worked hard, despite all workers having a fixed pay.

        Inner and social pressures to not be a bottom feeder are very strong.

        • Anon, I grew up in USSR. No, most workers didn’t work hard. The only ones who worked hard were in the areas were was some sort of competition either recognition wise or compensation wise .
          I am actually pretty driven but if I had basics covered I’d just spent time on the things I like the most not on those where the monetary compensation is the highest.

      • No he is describing current Europe. And the social transfers in the US are not that bad either. So you already have a lot of social transfers, the question is whether you need more or less and how to target the right recepients (avoid fraud).

  16. What is going to happen when robots do everything? Robots create robots and when a robot breaks another robot will fix it? I guess we will all starve to death because nobody will have a job ;)

    • Naaa, It’s all just silly talk.. How many Blow up sex dolls populate the planet? Blow Up sex Dolls have been around for years and they still are in the minority.. :)

      Don’t Worry, Just Be Happy.

  17. Or we could go the other route were the rich guys buy up all the robots and let the robots fight it out as to who gets what….wait a minute that sounds vaguely familiar.

  18. The way I see it is either we find something else that is incredibly labour intensive or we need to start at radically changing capitalism. Eventually with all this robots and automation, we will reach a point in which a few people make huge profits because they own the robots and make the products, and a lot of people can’t find work or have to work for a very low wage to compete with robots.

    Even accountants, doctors and traders will be replaced by robots eventually(Banks firing traders because it’s cheaper for them to just use algos anyone?).

    Funny thing, this does *NOT* have to be this way. If you think about it, we’re living in a world radically different from our ancestors: People go hungry NOT because there’s no food, but because they have no money. A lot of food goes to waste. Farmers in China can’t be more productive because there’s NOT incentive to be more productive; the money they earn from food is too low. The same can be said about clothing.

    I think moving forward, we will have to seriously rethink the role of money and capitalism. I think the way it ends is with a society where we’re provided with the free necessities ie, we won’t need to work because our basic needs will be taken care of. But people who want to get more stuff(yatch, mac mansion) will have to work to get those things.

  19. I’m already on the record here as being a fan of what Izzy’s been doing over the last year with this line of thought.

    Anyway, Cullen makes the “Why is it different this time” argument, which is a question I too was stuck on when Izzy started on this. I’ve come to think it isn’t different this time. Maybe the sci-fi talk of robots and singularity are useful in thinking about what’s driving change, but distracts us from today’s problems, and more importantly that there is nothing “different” about technological development. As you and other commenters point out: buggy makers, etc have been feeling technologies bite for millenia.

    But increases in productivity have always been deflationary. The Industrial Revolution is up there with the Agricultural Revolution in terms of greatest gains of productivity in the history of Man. It came to a peak (especially in the US) roughly 1850-1930. And this era produced many recessions, including the greatest deflationary event in US history.

    Izzy’s point is maybe Greenspan was right- maybe in the last 20 years we’ve entered a third revolution which will unleash deflationary productivity gains. IT greatly increased efficiency but has destroyed interest rates and many a job, creating a credit bubble and deflationary aftermath. It remains to be seen if technology has further magic productivity bullets ready to be deployed soon or not, but any productivity leap like we’ve seen since the 90′s will always be disruptive.

    I mentioned before I wanted to see MR and Izzy join teams- they already have the same solution to today’s troubles- bigger deficits. The robots have given us more time to consume, but too many goods and too little money has created deflation leading to an output gap and hoarding. Our ability to create goods outpaced our ability (or rather, desire) to create money for people to buy those goods. It’s a problem that’s real easy to fix. And it doesn’t have to be a World War- although (economically) that worked like a charm last time. War really is the best weapon against deflation- guilt-free deficits and it destroys massive amounts of excess global capacity.

    But seriously, that’s the best thing Man can come up with? Let’s kill off our “excess”? And we’re worried about robots. Phh.

  20. Well here are my 2c:

    1. Robots = technology. More & better technology is always better.

    2. There are three drivers of GDP with the first two structural, the third long-term cyclical:
    – population growth: inflationary
    – productivity growth: deflationary
    – debt/GDP growth: cyclical – initially inflationary, after the top deflationary

    3. The current redistribution of income and low jobs growth has many reasons:
    - Financialization
    - Monopolies displacing small business, which are the biggest net job creators
    - Govt corruption allowing the above two
    - the burst of the credit bubble should have made upward mobility / downward income redistribution easier, instead of that corrupt governments strengthened the upward income redistribution (that’s why you see low IR and record profits)
    - displaced workers or victims of offshoring need time (& new industries) to be engaged in work again; many prefer to live off state help

    4. As productivity growth is deflationary, the entrepreneur profits from higher sales, while the consumers benefit from lower prices. This means that deflation is good. But not according to the Fed, which ensures that the benefits of productivity growth do not reach the worker in the last 30 years.

    -> Robots are not the problem. Upward income redistribution, enabled and abetted by corrupt govt institutions is. Lobbying is a legalized bribe. FRL is counterfeiting. The Fed serves private, not public interests. Etc.

    • I don’t think all technology is good per se. Just think of the H-Bomb, nuclear missiles or all the surveillance technology our governments now use to spy on us.

      I also don’t think people actually prefer living off state help, it’s just not rational to work over 40 hours a week if the net impact on your standard of living is negative.

  21. 1. The word “robots” is too specific. I would use the word “automation” because the story applies to computers and machines, as well.
    2. More robots, more computers lead to less jobs and therefore more poverty.

  22. There has to be some sort of correspondence between consumption and production. So far, we’ve mostly concluded that everything will be wonderful with production costs (short of materials) mimized to near zero through automation. But, with vast swaths of the population impoverished through unemployment, how will they pay for the iPhone72 of the iPad 60…? (Up until now…easy credit has been the solution….how can that continue ?)

  23. “Humans are inherently dissatisfied with the state of their existence.”

    Very true.

    We are designed to focus on those events when our judgement was flawed; and skip those events when our judgement was correct. The things we enjoy doing, perhaps fishing, perhaps playing computer games, perhaps dancing, relate to activities where we recognize moments when our judgement was flawed and we could have made an improved judgement. Our most vivid memories are memories of flawed moments of judgement.

  24. Eventually, artificial intelligence will surpass our puny human brains. By the end of this century they will be so superior we will not be able to understand what they are doing. Human displacement seems inevitable. Robots appear to be the next step in the evolution of thought.