Tuesday, March 28, 2017

Ramanan — Robots, Globalization, Unemployment, Etc

Economists have played down the notion of technological unemployment. If production is constant and productivity rises, there’s a fall in employment because less labour is required to produce the same output. So output has to rise to keep employment from falling because of “automation”. In Post-Keynesian economics, the principle of effective demand matters both in the short run and the long run. So technological unemployment is a real possibility. New Consensus economists concede that John Maynard Keynes rules in the short run but assume that Jean-Baptiste Say rules in the long run. The irony hence is that New Consensus economists seem to show worry about automation these days.
In my opinion, this is because the sacred tenet of free trade must be defended by economists at all costs. So they make a concession about loss of employment to robots. Unfortunately that’s not right either. Globalization—both because of competition by international producers and offshoring of jobs via global supply chains—has led to the loss of livelihood for many in the Western world....

Automation and robotization increase productivity, reducing the need for labor, which reduces worker incomes in developed countries. Globalization increases the available work force in open economies, increasing competition among workers in the global labor pool and reducing worker incomes in developed countries. Reduction in worker incomes undeveloped countries reduces effective demand, leading to excess capacity and potential oversupply, unless lagging demand is addressed by government fiscal policy.

Both globalization, which benefits emerging world workers, and automation and robotics, which increases productivity across the board, should be welcomed as an emergent opportunity and addressed simultaneously as an emergent challenge. Government that are currency sovereigns have tool for this, and global economy policy aimed at win-win can be achieved through concerted action rather than harmful competition and a beggar-thy-neighbor approach.

The developing world can be lifted up without necessarily dragging down the developed world.

The Case for Concerted Action
Robots, Globalization, Unemployment, Etc
V. Ramanan

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