Tuesday, July 10, 2012

Eric W. Dolan — MIT professor warns of ‘enormous disruption’ from rapid technological growth

MIT Sloan School of Management Professor Erik Brynjolfsson on Monday warned that technological advancements were displacing workers at an ever growing rate.
“Technology’s always been creating jobs, it’s always been destroying jobs,” he told Current TV host Eliot Spitzer. “Ninety percent of Americans used to work on farms in 1800. Today it’s less than 2 percent. Now, all those people didn’t become unemployed, they went into new industries, like the auto industry that Henry Ford helped create and the work that Edison did and Steve Jobs and many others — whole new industries were created.”
“What’s different this time is [that] the scale, scope and speed of the technological change is so great that the jobs that are being eliminated are a much bigger share of the economy than the new jobs that are being created,” Brynjolfsson added.
Read it at Raw Story
MIT professor warns of ‘enormous disruption’ from rapid technological growth
by Eric W. Dolan

32 comments:

Lord Keynes said...

I have often thought that in the course of this century there will be large-scale unemployment from technological advances:

http://socialdemocracy21stcentury.blogspot.com/2010/09/automation-and-robotics-future-of.html

This means MMT/Keynesian demand management and jobs programs will be necessary to maintain employment and aggregate demand in general.

Payam said...

It's always funny to me how so many mainstream people (not just economists) make this sort of argument (that technology is a bad thing for jobs) and fail to realize it was exactly what marx was arguing (organic composition of capital). The only difference is that Marx's argument was much more powerful, but at the same time much less appealing to those that didn't want to admit that somehow the system they are living is (ultimately) doomed to failure.

Pete said...

Lord Keynes:

I have often thought that in the course of this century there will be large-scale unemployment from technological advances

This means MMT/Keynesian demand management and jobs programs will be necessary to maintain employment and aggregate demand in general.

Unbelievably stupid. Employment can be maintained with a fall in wage rates to the extent that the demand for labor falls, and aggregate demand is not decreased because of technology, because technological advancement carries with it investment spending, and the output that are new goods like iPhones carries with it investment (to the extent they are purchased by business) and consumption (to the extent they are purchased by final consumers) spending as well.

That the speed of unemployment is grater than the speed of new employment does not mean technological change is causing the speed of new employment to slow down. This is the mother of all conflating correlation for causation.

If the economy continues to sputter because of continued government intervention in the form of money printing and spending, and costly regulations, then the slow speed of new job growth has its own cause apart from the technological advancements elsewhere.

There is no reason why workers laid off cannot find new jobs elsewhere at lower wage rates. Oops I forgot, yes there are reasons why not. The government pays people for 99 week holidays and also makes it illegal to hire workers below a price floor even if that is the new labor market rate.

To commit the Luddite fallacy, and then commit the Keynesian fallacy that aggregate demand is the driver for employment, well, one could not be more wrong in one post. That has to be a record for idiocy.

Pete said...

Payam:

Marx's claims have been falsified enough times to make even the most dogmatic positivist obligated to reject it.

Capitalism is not inherently doomed to failure. It can only be abandoned. If any social system were not inherently doomed to failure, it would be a social system completely outside the scope of human purposeful behavior, desire and choice, which of course would make it a social system of slavery.

Payam said...

Pete:

Nobody has "falsified" Marx's commentary. In fact, even those intellectually honest enough (even if they disagree with bits and pieces of it) admit that nobody has ever reached the depth and breadth of his analysis, and he didn't even get to finish what he was writing. There are a few problems with some of Marx's statements, like extending his value theory onto prices of production, but these are queries far beyond your neanderthal mind. Go do everyone a favor and get yourself educated before you come back here. If you want to argue why Marx is wrong, then you need to actually know what his argument was.

Anonymous said...

"Unemployment is not a disease, but the natural, healthy functioning of an advanced technological society" - Robert Anton Wilson

http://www.deepleafproductions.com/wilsonlibrary/texts/raw-RICH.html

Leverage said...

Is not a problem of 'jobs' but a problem of productivity distribution.

What if there is less 'jobs'? I see jobs as an obligation to get a living income an inconvenient. What you have to fix is how the higher productivity ends up being used by the population.

If you do eventually you will see these 'job problems' be fixed either by creation of new jobs or lower need of work to consume due to higher productivity.

Off course if you mix automation with increasing costs thanks to cost push inflation you have a problem, but this is a different problem: productivity investments are not really increasing efficiency on resource usage. If this does not happen then is not a problem of lack of jobs, is a problem of lack of proper distribution.

In short: Get over with the obsession of paid jobs to earn a living income. This is not the cause of problems, is just a consequence. People is not going to stop being creative because of lack of jobs ffs. Jobs a necessary nuisance, eradicating redundant jobs is GOOD and not investing new burocracy and unnecessary service jobs is even better, as it will force fix the damn real problems.

Leverage said...

Anon quote makes the point in a clever short phrase.

Get over with the obsession of jobs and fix REAL problems (like lack of proper distribution of goods).

paul meli said...

There is a recurring theme being presented by visiting commenters that as we disenfranchise workers and more and more people are excluded from the benefits of the "system" that these folks are just going to go away quietly.

Matt Franko said...

This is another classic case of a lack of mathematical cognition... you have a rate of productivity increase vs a rate of what Lev points out as the creation of new jobs or rate of policy adjustment required to lower need of work to consume due to higher productivity.

It's a simple case (or SHOULD BE) of just comparing one flow vs another flow and making the appropriate policy adjustments.

Instead the morons cannot see how simple this is and have no choice but to leave it up to "the invisible hand".

rsp

Matt Franko said...

Lev,

I think we can look at earlier retirements as an interim "step 1" imo....

Resp,

Roger Erickson said...

What's the problem with ramping up the rate of exploring new options? Launching new industries? Provisioning everyone well enough to unleash distributed innovations?

Only Luddites. Aka institutional momentum of human habits, just when we need continuously more cultural agility, not linear momentum & tradition.

We may have to start condensing education and shortening reproductive cycles. More options requires faster turnover or practices, not necessarily people ... but it may come to that if we can't keep people children up past age 50. :)

Prolonged childhood & expanded play behavior is part of what makes primates more adaptive. More time to more widely sample complex cultural environments, before dedicating oneself to fixed behavior patterns.

Who was that Italian writer who said that "If we want [some] things to remain the same, everything's must change"? What's so complicated about that? It's called evolution, and has been going on for ~4.5 billion years on planet earth alone.

We're Context Nomads! Quit whining & start migrating - through context, not just geography.

Pete said...

Payam:

Nobody has "falsified" Marx's commentary.

Oh yes they have. They spectacularly falsified his prediction that wage rates will tend towards subsistence. They falsified his prediction that raw communism (dictatorship of the proletariat, e.g. USSR) will spontaneously transform into stateless communist utopia. They falsified his labor theory of value. They falsified his claim that profits are a deduction from wages, rather than the other way around.

There have been so many falsifications of Marxism that only intellectual frauds will claim otherwise. Even Marx's followers moved beyond Marx's actual writings.

In fact, even those intellectually honest enough (even if they disagree with bits and pieces of it) admit that nobody has ever reached the depth and breadth of his analysis, and he didn't even get to finish what he was writing.

One cannot "admit" something that isn't true. It is too often that illogical and incoherent babbling is mistaken for genius. Marxian economics is just a garbled Ricardianism. Marxian epistemology is just ancient polylogism redux.

He didn't finish what he started because he couldn't solve the non-existent problem he thought was inherent in capitalism as another one of his "contradictions of capitalism". This problem is explaining why profits tend to equalize across different industries despite the differences in labor and capital. His fixation on "labor exploitation" prevented him from getting what the marginal revolutionaries had no trouble in explaining.

There are a few problems with some of Marx's statements, like extending his value theory onto prices of production, but these are queries far beyond your neanderthal mind.

Haha, you wouldn't know Marx if you were hit in the head with Das Kapital. You're a troglodyte masquerading as an informed person.

Go do everyone a favor and get yourself educated before you come back here. If you want to argue why Marx is wrong, then you need to actually know what his argument was.

You haven't shown even the slightest criticism against what I actually wrote.

Get educated and actually read Marx and then read criticisms of Marxism to get a clue.

Pete said...

Paul:

There is a recurring theme being presented by visiting commenters that as we disenfranchise workers and more and more people are excluded from the benefits of the "system" that these folks are just going to go away quietly.

Who's disenfranchising workers? Those who print money and reduce the purchasing power of worker income, as well as distort economic calculation such that workers go into lines that they never should have gone in the first place, which of course leads to their eventual unemployment when the impossible to maintain but necessary to prolong the boom accelerating inflation fails to transpire.

Hint: Printing more money benefits the wealthy more than the poor.

Matt Franko said...

Pete,

Check it out, we dont print "money" anymore, it's all done on these new things called computers... really fascinating stuff these new fangled computers, suggest check into them...

rsp,

paul meli said...

@Pete

"Hint: Printing more money benefits the wealthy more than the poor."

I don't think so. Not currency creation anyway, maybe printing in the form of credit creation does. I am not a big fan of unnecessary use of credit.

Government spending makes the economy go, feeds the poor guy and everyone in between, eventually ending up in the rich guy's pocket as accumulated wealth.

After a certain point the additional money doesn't mean much to the rich guy except for more power, but the poor guy is always hungry.

Without expansion of the money supply (not including credit) the system will wind down due to demand leakages (wealth accumulation) and a growing economy must function on lower and lower levels of currency resulting in deflation.

Deflation is bad for creditors and good for debtors, plus psycologically works contrary to a persons instincts, paralyzing transaction decisions for one thing (If I wait to buy it will be cheaper).

I can't reconcile a deflationary economic enviroment with that of a stable (non-decaying) system.

There's nothing mechanically wrong with a car that has no gas in the tank. It just won't do anything unless it's parked at the top of a hill.

Tom Hickey said...

Anonymous: "Unemployment is not a disease, but the natural, healthy functioning of an advanced technological society" - Robert Anton Wilson

Yes, makes greater leisure possible.

All that is required is a change in cultural mindset and a more appropriate distribution. Humans have not yet developed an economics of that. Humanity is still looking backward rather than forward.

Septeus7 said...

I've recently been thinking about this kind of issue for some time now. I don't believe we will ever run out things we could have people do for each other and thus receive wages for but issues the efficiency of the displacement period relative to the
Entrepreneurs ability to create new business models with the needed wages to clear the market.

The wage system is kinda stupid if you think about. Why should future production be based indirectly on private wage contracts rather than physical demand?

Since wages determine future demand and sales determine future production directly why should be expect anything but inefficient distribution as wage levels have nothing to with the amount of physical production that is physically needed or wanted but rather what the wage level can sustain based on personal political arbitrage? The reality is that people already do with credit cards in order survive. Why should we have take on debt whether private credit or government deficit to be able to consume our own production? Doesn’t the very notion of consumer credit/debt prove inefficiency?

Why can’t we do it the other way? Measure the physical demand based on requests for goods and services and then distribute the income as needed within the constraints of full capacity? I know it sound crazy but inventories are done this way all the time and I just don’t understand the reason hook it consumption to wages rather than physical demand?

I’m just throwing out an idea. What I am questioning is the very idea of needing to link the ability to be able to consume with a personal favors system that we call money/credit in the first place. Shouldn't an advanced society place the development of the quality of social and cultural aims rather linking it to basic consumption? Why the organization of the economy have to be linked with a system of tallying up personal favors of who owe who?

If NASA where to find out that an massive Asteriod is heading our way by within a few years , should we ask the our economist and accountants if can afford to do something about? Do we need a system that requires us to "call in all the favors" as the principle means to organizing the response?

I submit the entire idea of wrong. I seems to me that logic of accounting for favors would be meaningless in a advanced society of abundance.

If one had the power to alleviate want or injury shouldn't we be like the Good Samaritan and provide the services under our power without regard to whether or not the injured man is going to repay us or not? If we have the physical power to feed everyone why should our ability to act that effect be constrained by systems of favor?

Leverage said...

"I think we can look at earlier retirements as an interim "step 1" imo...."

This is something I've been promoting for a long time and yet we see morons pursue the contrary policies, after all rational policies must not be pursued under any circumstance (economic advisers are the contrary of their supposed homo rationalis).

See my own country case for example (Spain), with close to 50% young unemployment and the idiots in Europe and at home are extending retirement age! How idiotic can this be!?!

Instead of 'freeing' jobs they are pushing more people to stay in the workforce for a longer time. So if the situation is already 'bad' thanks to productivity (not in my book, but luddites think so, again, a matter of distribution of time and wealth) you keep more people unnecessarily in the workforce. Is a conspiracy to force labour market into surplus so wages go down? Or is sheer idiocy given that actually the contrary policies where being pursued (correctly) just few years ago?

The usual suspect ('we have run out of money') appears once more as the excuse to pursue this idiotic policies.

Leverage said...

" Shouldn't an advanced society place the development of the quality of social and cultural aims rather linking it to basic consumption? Why the organization of the economy have to be linked with a system of tallying up personal favors of who owe who? "

I question the basic notion that our societies are advanced watching the sort of idiocy we see when talking about this issues. If policymakers and the people can't add up how can we say we are an advanced society?

We are constrained by semantics and cognitive biases, so we can't advance much. As Matt has pointed other times, it looks like even romans and greeks had better grasp of monetary systems back then (and I would add that even in the Middle Ages there were periods with more clever monetary knowledge and policy that nowadays).

I don't know, it looks like we are certainly very limited in our options when society does not have notions that infants develop at the age of 2-4 (addition and subtraction). The 'moneyness' block and the irrationality it triggers is a big problem to overcome.

And at the same time I suspect it's all tied tot he same self-perpetuating wage-labour system ('money does not fall from trees--you must work to earn an income' is extrapolated to macro functioning of society, notions - wrong 'common wisdom'- you learn when you 'transit' to adulthood).

Matt Franko said...

Sept,
Good stuff here....

I think this part: "without regard to whether or not the injured man is going to repay us or not?"

This is what we have to get past ultimately.

But remember there are tax laws that in effect require us to be paid because taxes are due, and if we dont get paid, then we may not have balances available to pay taxes.

I think this is called receipt of a gift of "in kind" services and they may trigger a tax liability depending on the value.

The fellow who was pummeled and left for dead in the Good Samaritan story in todays day may incur a tax liability if the gift services the Samaritan provided of medical care and lodgings was in excess of I believe $13,000.

All net of barter is taxable in USD also.

So here today you have tax laws acting against the true good nature of humans, because blind morons in govt think the govt needs revenues in order to provision itself.

This was similar to the set up in Jesus time also as the priest and scribe who walked right by the guy laying there left for dead would have had to have gone thru a tremendous legal hassle under the Mosaic Law if they came in contact with a dead body.

Off the top of my head I think they had to quarantine themselves for a while and take numerous baths, burn their clothes, etc.

And then that would have prevented them from performing other legally required priestly duties, etc.. so again you had the law back then which could end up working counter or perhaps demotivating people when they were considering helping other people.

No one is under the Mosaic Law today, but we have morons in charge who are in effect acting to put us under the yoke of Laws because they think money is exogenous.

There is a scripture: "For freedom Christ frees us!".... none of these morons (many who are even nominal Christians) have the faintest clue what this means...

Resp,

Pete said...

Matt:

Check it out, we dont print "money" anymore, it's all done on these new things called computers... really fascinating stuff these new fangled computers, suggest check into them...

It's a euphemism.

It's quicker and easier to say "print money" than "digitally increase member bank reserve accounts through ethernet communications."

Pete said...

Paul:

"Hint: Printing more money benefits the wealthy more than the poor."

I don't think so.

Oh I do think so. Who gets the new money first when the Fed increases the money supply? The primary dealer banks. Not Joe the poor farmer in Nebraska.

Not currency creation anyway, maybe printing in the form of credit creation does. I am not a big fan of unnecessary use of credit.

Define unnecessary and why your definition of unnecessary should overrule those who do believe it's necessary.

Government spending makes the economy go, feeds the poor guy and everyone in between, eventually ending up in the rich guy's pocket as accumulated wealth.

No, private food producers feed the poor. The state doesn't produce a single loaf of bread.

After a certain point the additional money doesn't mean much to the rich guy except for more power, but the poor guy is always hungry.

So the Fed creates more money for the bankers. That of course doesn't benefit the bank's owners. That of course does benefit the poor who don't receive that new money first.

Without expansion of the money supply (not including credit) the system will wind down due to demand leakages (wealth accumulation) and a growing economy must function on lower and lower levels of currency resulting in deflation.

Falling prices on the basis of production is not bad deflation.

Demand doesn't leak in the long run. At most, there might be a rise in the demand for cash holding, but in no way can there be a continuous rise in demand for money holding. Even if there were, everyone else's money would just be more valuable anyway.

Less money does not mean less to eat. It means more valuable money that can buy more goods.

Deflation is bad for creditors and good for debtors, plus psycologically works contrary to a persons instincts, paralyzing transaction decisions for one thing (If I wait to buy it will be cheaper).

Inflation is responsible for people psychologically expecting rising prices. You can't blame people for adapting to the monetary system in which they are forced to take part by way of the IRS demanding taxes in dollars.

I can't reconcile a deflationary economic enviroment with that of a stable (non-decaying) system.

That's because you don't understand money. You view money as a sort of good that is consumed, like food, where if people make less nominal money per capita, that their standard of living goes down. No. If there is less money earned per capita, then the monetary unit becomes more valuable, and people can buy more goods with a given dollar.

Just like prices can adjust upwards with new money and production that doesn't keep up, so too can they adjust downward with unchanged money and increased production.

There's nothing mechanically wrong with a car that has no gas in the tank. It just won't do anything unless it's parked at the top of a hill.

Who said there won't be any gas at all?

The correct analogy is to imagine what if technological progress makes cars more fuel efficient, such that the quantity of gasoline per car goes down? That would be "gasoline deflation", and it would be absurd to demand that oil companies produce more gasoline lest we can't drive as many cars, that if this "gasoline deflation", i.e. increased fuel efficiency, keeps up then soon there won't be any cars left!

It's the same thing with money. With production, the "money efficiency" of goods goes up. More goods can be traded at lower prices per good.

You guys need to stop fearing price deflation like it's the plague.

Pete said...

Paul:

You said: "Government spending makes the economy go"

Government spending doesn't make the economy go. It makes the state go. It hampers the economy because it is based on coercion, not consent.

paul meli said...

@Pete

"Government spending doesn't make the economy go. It makes the state go. It hampers the economy because it is based on coercion, not consent."

I don't know how you get to this conclusion.

(Our) economy is based on spending, whatever the source of spending, whether it's fiat money or gold, promises or whatever, without it our definition of an economy doesn't exist.

If the economy doesn't exist, at least not as we know it, what kind of economy are you talking about?

How would it work? A brief description will do.

How does government spending hamper the economy?

BTW, your posts are too long. Many of the questions you raised missed my point, others I don't agree with. Lets keep the discussion more narrow, please.

"You guys need to stop fearing price deflation like it's the plague."?

This is a simple one - it's an either/or choice. I prefer the consequences of inflation over those of deflation. YMMV.

Pete said...

Paul:

"Government spending doesn't make the economy go. It makes the state go. It hampers the economy because it is based on coercion, not consent."

I don't know how you get to this conclusion.

The monetary system we have is backed by coercion, not consent. The state has forcefully monopolized money production. Do the math.

(Our) economy is based on spending, whatever the source of spending, whether it's fiat money or gold, promises or whatever, without it our definition of an economy doesn't exist.

People naturally come to use a commodity for medium of exchange purposes when their property rights are protected.

If the economy doesn't exist, at least not as we know it, what kind of economy are you talking about?

Do you honestly think I am suggesting the abolition of money?

Wanting the government out of money is not a desire to abolish money. I am reminded of this quote of Bastiat:

“Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society. As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to its being done at all. We disapprove of state education. Then the socialists say that we are opposed to any education. We object to a state religion. Then the socialists say that we want no religion at all. We object to a state-enforced equality. Then they say that we are against equality. And so on, and so on. It is as if the socialists were to accuse us of not wanting persons to eat because we do not want the state to raise grain.” - Frédéric Bastiat, The Law

You can add "We object to a state-enforced fiat money. Then the socialists say we want no money at all."

How would it work? A brief description will do.

Google it. Google "Free market in money"

How does government spending hamper the economy?

It distorts economic calculation.

BTW, your posts are too long. Many of the questions you raised missed my point, others I don't agree with. Lets keep the discussion more narrow, please.

My posts are sufficient for what I want to say. I do not want to become a talking point spewer like many here.

"You guys need to stop fearing price deflation like it's the plague."

This is a simple one - it's an either/or choice. I prefer the consequences of inflation over those of deflation.

The consequences of production based price deflation. What are they in your mind? Be specific.

Note that your preference carries with it an initiation of force and coercion against me, whereas my preference does not carry with it any initiation of force nor coercion against you. So you cannot say your preference is innocuous.

Pete said...

Paul:

"How would it work? A brief description will do."

How does food get produced in the market? A simply explanation will do.

Tara said...

Actually it's the opposite: not "printing" money leads to deflation as much as printing money can lead to inflation. Rich people benefit most when their dollars are worth more. Proper policy is like riding a bicycle, use your economic indicators to steer with policy accordingly.

Matt Franko said...

"Government spending doesn't make the economy go. It makes the state go. It hampers the economy because "it is based on coercion, not consent."

I don't know how you get to this conclusion.

The monetary system we have is backed by coercion, not consent. The state has forcefully monopolized money production. Do the math."

There is NO MATH INVOLVED here.

Paul, here is another example how these people have no mathematical aptitude whatsoever.

There is no "math" to do here, yet here Pete is saying "do the math"... Whaaaaaaat????

These people dont know math, dont even know what math is, cant apply it, it's a big problem in general across the population AND most importantly in policymaking.

And Pete insists on using the "euphimism" "printing" money which is false.

This is because Pete would prefer NOT TO ABSTRACT IN HIS THOUGHT PROCESS. It is easier for him to think in terms of the non-abstract ie "print" rather than use the correct, true, and precise terminology or process description.

Textbook case of no Mathematical Maturity:

http://en.wikipedia.org/wiki/Mathematical_maturity

This is a big on-going problem in all of this... you have semantic people trying to operate a system that is best understood mathematically....

rsp,

jamie newman said...

So I took Pete's advice, and I googled "free market in money" and I think I get it. What Pete wants is a world in which we devote most of our waking hours to shopping, which seems to be the libertarians' idea of not just a good time, but the very essence of freedom. Not content with forcing us to squander countless precious hours of our brief lives poring over spreadsheets trying to determine which health insurer, health care provider, internet, wireless, electric, gas, water, and waste disposal provider, et al, is going to give us the "best deal," Pete now wants us to be forced to shop for money. And so instead of actually making things, growing things, hanging out with friends and family, enjoying art and music, we'll bet to spend our days hunched over our laptops speculating in thousands of neighborhood, local, regional, national, and global currencies, shopping for the best deal of the day.

Good times! Great idea, Pete.

paul meli said...

Basically Pete (and others) come here trying to sell some kind of an economic system (or something) completely different from that which we have now or has ever existed in history.

When asked to give a brief overview of how such a system might work - it's a machine after all, we get a response containing many counter-questions going off in all directions.

I have no interest in playing this kind of game.

Tom Hickey said...

jamie newman: "So I took Pete's advice, and I googled "free market in money" and I think I get it. What Pete wants is a world in which we devote most of our waking hours to shopping"

It's the transaction cost, which is huge. The US already permits unlimited hold of gold and PM's, and there is no rule on competing currencies as long as one does conflate them with the USD. Bitcoin and other digital currencies, barter club money, casino chips, etc are all "money." Traveler's checks are denominated in state currencies and exchange for them.

Moreover, people are free to transact in gold, too. All one would need to do is exchange enough gold for state currency to pay one's taxes at tax time.

The issue is convenience and trust. We prefer to use the state's money because it is less costly to do so figuring in transaction cost, e.g., study bank balance sheets to determine which bank is most trustworthy today, and everything can change tomorrow. But the state is not going to become insolvent, even through the currency may inflate. But hyperinflation does occur overnight and most people figure that they can move to gold at the first sign, which many have already done.

I thought that freedom was about expanding choice. The reason that choice is limited is not that free banking is not permitted but that it is not profitable under the circumstances. Banks money cannot compete with state money due to the transaction costs involved, for one thing. Getting firms and people to accept other forms of money is easy either. As Hyman Minsky said, anyone can create money, which is just an IOU, the problem is getting other to accept it.