Anthony Patt — How Changing My Economic Model Made Me a Climate Change Optimist

Neo-classical economics doesn’t offer useful insights for disruption.

Evonomics
How Changing My Economic Model Made Me a Climate Change Optimist
Anthony Patt | Professor of Climate Policy at ETH Zurich, the author of Transforming Energy: Solving Climate Change with Technology Policy (Cambridge Univ. Press 2015), and a Coordinating Lead Author for Working Group III of the Intergovernmental Panel on Climate Change.

Bill Mitchell — Automation and full employment – back to the 1960s

On August 19, 1964, the then US President Lyndon B. Johnson established the – National Commission on Technology, Automation, and Economic Progress. He established the Commission in response to growing concern during the deep 1960-61 recession that the unemployment had been created by the pace of technological change. Ring a bell! He wanted to an inquiry to explore this issue and come up with recommendations on how to deal with the possibility that automation was wiping out jobs and the future would be bleak. Before the Commission had reported, the Federal government had reversed its fiscal austerity and the resulting stimulus had driven the unemployment back down to relatively low levels. The Commission noted that unemployment was largely the result of inadequate total spending and that the Government had the tools at its disposal to eliminate it. They considered that there would be workers (low-skill etc) who would suffer more displacement from technology than those with more skill etc, but that ultimately even those workers would be able to get jobs if the public deficit was large enough. In this regard, they eschewed pointless training programs that did not provide immediate access to jobs. Instead, they recommended (among other things) the introduction of a Job Guarantee (Public Service Employment) financed by the Federal government but administered at all levels of government. It would pay the Federal minimum wage and be available on demand. This is the preferred Modern Monetary Theory (MMT) approach and rejects solutions that rely on the provision of a basic income guarantee to resolve the problems created by unemployment.

Technological innovation has often been disruptive historically, but the disruption has always proved temporary, and progress ensued. The problem is not technological innovation. Evolution always brings new challenges along with new opportunities. The primary challenge is to adapt to change. Standing in the way of change is seldom successful.

The currency-issuing government has the responsibility of maintaining aggregate spending at a level sufficient to generate sufficient jobs overall.

This level changes as the pace of labour force growth and productivity changes. But the fact remains – the government can always purchase anything that is for sale in the currency it issues, including all idle labour.

There is never a reason for persistent mass unemployment. Mass unemployment is a political choice not a financial necessity.

This doesn't imply that technological innovation is not disruptive. It may be disruptive to those that lose their jobs, or are otherwise affected, such as new industries being born (tires) and old ones shuttered (blacksmiths, horseshoes, and horseshoe nails). There was huge disruption in customary employment as a result of the transition from the agricultural age that centered on farming to the industrial age that centered on manufacturing. We can anticipate something similar in the transition from the industrial (analog) age to the information (digital) age. For example, if leisure increases as a result of disruptive technology, so will work in areas that serve it. People won't just sit around — as long as they can afford to do something of interest.

A currency issuing government has the ability to address change in a timely way so as to minimize the effects of disruptive innovation by maintaining full employment and keeping the economy on track. It's a matter of maintaining demand so resources that technological innovation and increased productivity make available are not idled owing to lack of demand.

A currency issuer is capable of addressing this by maintaining the flow of money at the level of effective demand commensurate with supply at full employment to the degree that the private sector does not. In this sense, government uses its "power of the purse" to act as a buffer against unemployment.

Technological innovation increases the potential for prosperity and also leisure. Managing the transition involves political decisions along with a correct understanding of economics and government finance. Then it is a distribution issue

Distribution is a political issue with respect to who wins and who loses, rather than just an economic one. Currently, this is where the problem can be traced. Its' a matter of ignorance about economics and government finance, but also involves ideology heavily.

Bill Mitchell – billy blog
Automation and full employment – back to the 1960s
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Ryan Avent — How Automation with a Robust Safety Net Increases Productivity

Workers replaced by technology don't drop out of the labor market because then the would face poverty, alone with bankruptcy and seizure of assets if they are indebted, as most workers are. So workers replaced by technological innovation have to seek reemployment. This drives down the wage and employment conditions that workers in general are willing to accept.

So there you are: continued high levels of employment with weak growth in wages and productivity is not evidence of disappointing technological progress; it is what you’d expect to see if technological progress were occurring rapidly in a world where thin safety nets mean that dropping out of the labour force leads to a life of poverty.

Technological innovation that increases productivity provides the opportunity for increased leisure but this doesn't mean that this opportunity will be distributed, especially when the benefits accrue chiefly to owners, top management, and highly skilled workers associate with the technology.

Evonomics
How Automation with a Robust Safety Net Increases Productivity
Ryan Avent | senior editor and economics columnist at The Economist

Drake Baer — Billionaire VC Peter Thiel Says Silicon Valley's 'Obsession' With Disruption Is Totally Misguided

Über-Libertarian Peter Thiel pushes monopoly as the entrepreneurial goal rather than "disruptive technology.'

This is interesting since Austrian economic holds that competition free of government interference results in a level playing field and that monopoly is only achievable through government intrusion. Monopoly is only achievable over time in the tech field through legal protection of intellectual property, which is a government intrusion in the free market. 

If there is no government, then there are no intellectual property rights through patents, trademarks, copyrights, etc. So some government intrusion is good, like privileging intellectual property, and others are bad like undertaking social welfare? What is the justification of criteria for deciding which intrusion is good and which bad? Other than self-interest or class interest?

Clusterstock
Billionaire VC Peter Thiel Says Silicon Valley's 'Obsession' With Disruption Is Totally Misguided
Drake Baer

Aaron Martin and Ben FitzGerald — The Future of the Military is Robots Building Robots

Foreign Policy

The Future of the Military is Robots Building Robots
Aaron Martin , Ben FitzGerald

Why is this important? Historically, the military has been in the forefront of technological innovation, which is then adopted by private industry. The military has the political clout to get virtually unlimited access to financial capital directly from the Treasury, with the risk perceived not as a consequence of acting, but of not acting in a timely fashion.

Jonathan Larson — Ikea to start selling solar panels at UK stores

This is a solar story with all the great elements. It is proof positive that solar has moved out of the experimental stage. For years I have advised people to follow the Home Depot rule "Don't buy any technology until they start selling it in places—like Home Depot—used to dealing with the problems of the general public." Well, Ikea certainly qualifies. This is really a big deal because MOST Ikea customers are barely qualified to assemble a desk much less install solar panels on a roof and hooking them into the electrical systems—no matter how reliable or cost effective the panels themselves may be. After all, I once heard someone describe assembling a couple of Ikea kitchen cabinets as an "ordeal."

My guess is that Ikea will be providing more detailed installation manuals than their typical pictograph instructions. In fact, they will probably recommend professional installers. Even so, solar is well on its way towards being a normal player in the energy mix. I have been waiting a very long time for this day.

real economics
Ikea to start selling solar panels at UK stores
Jonathan Larson

INET — Mazzucato and Wray: Making Finance Work for Innovation (video)

This episode features Institute for New Economic Thinking grantees Mariana Mazzucato andRandall Wray, who are working together on an Institute grant on how to best finance the innovation we need in the 21st century.

Building on the seminal work of Joseph Schumpeter and Hyman Minsky, Institute for New Economic Thinking grantees Marianna Mazzucato and Randall Wray are bringing the disparate intellectual traditions of finance and innovation together in the search for insights about how finance might better serve the purpose of capital development. A key question in their exploration is whether financial innovations support value creation in the real economy or if they extract value from the real (productive) economy and, as a result, undermine the value creation and capital development process.

Wray and Mazzucato both have unique career trajectories for an economist. Wray came to economics relatively late in his academic career after studying psychology as an undergraduate, and Mazzucato studied history before finding the discipline. These diverse backgrounds have a strong influence on their research, as both Wray and Mazzucato approach economics as outsiders. Specifically, Wray’s perspective is informed by Minsky’s work on money and finance, while Mazzucato’s view is deeply influenced by Schumpeter’s thinking on innovation.

Together, they offer a unique perspective on the economics of innovation and on how well the financial sector is serving society. Is finance engaged in "creative destruction" or is it's speculation really a case of "destructive creation?" Watch the interview to see what they have to say!

INET
Mazzucato and Wray: Making Finance Work for Innovation (video)
L. Randall Wray | Professor of Economics, UMKC and Mariana Mazzucato, RM Phillips Professor of Science and Technology at the University of Sussex

So much for the myth that MMT downplays the role of private investment in the economy.

James Allworth — Explainer: How Corruption Is Strangling U.S. Innovation

Tesla. Uber. Netflix. Most economies would kill to have a set of innovators such as these. And yet at every turn, these companies are running headlong into regulation (or lack thereof) that seems designed to benefit incumbents. The reason? The devastating impact of money in politics and how it discourages disruptive innovation among new businesses. Click through this explainer to learn more about legal bribery and U.S. competitiveness:

Harvard Business Review — HBR Blog Network
Explainer: How Corruption Is Strangling U.S. Innovation
James Allworth