The Luddite Fallacy Fallacy
I’ve spent a lot of time considering (here, here, here, and here) the notions of technological unemployment and the Luddite Fallacy: the idea that technologically driven productivity — machines — will replace, are replacing, human labor. I’d like to revisit that here.
My basic conclusion: the Luddites were obviously wrong at the time. But they’re right now — at least in the U.S. Even a stopped clock is right eventually.
I think the Luddite Fallacy argument ignores two things:
1. The limits to human capabilities. By definition, 50% of people have an IQ below 100. I don’t think anyone who’s reading (or writing) these words can begin to imagine how hard it would be to make a go of it in modern America with an IQ of 90 — to build a prosperous and secure life, raise a stable, happy family, or ensure that you can be self-sufficient in your waning years. Even getting through high school would be really hard.
The original Luddites weren’t hitting that cognitive limit — not even close. Today, tens of millions of people are slamming right into it (over time, hundreds of millions). Increasingly, only those at the right end of the bell curve are able to claim a decent (or any) share of the American pie. As the American economy is constituted (in its global context), diligence and hard work are not sufficient to give you that claim.
2. The declining marginal utility of innovation and consumption. As I pointed out in a post a while back:
Pretty much every important invention of the modern world – trains, planes, automobiles, air conditioning, antibiotics, painkillers, telephones, radio/television, computers – had already been invented and was in at-least-fairly widespread use when I was growing up in the sixties. The only thing since then has been the internet.
Post-’70 it’s just been distribution, improvements (i.e. cell phones over land lines), and price reductions — important stuff, no doubt, but compared to the germ theory of disease or the electric motor? (Arguably even the internet is just a distribution thing.)
The innovations that the Luddites were facing all delivered massive increases in human utility (via increasingly inexpensive and higher-quality goods and services). So while the losses to particular groups — and their required readjustments — were painful (sometimes horribly so), in the big picture they were overwhelmed by the overall increase in utility.
You just can’t say the same thing about Twitter, or inexpensive heated car seats. The human essentials that early innovations delivered (food, clothing, shelter, medicine, transportation, communication) were massively more valuable than the improvements we’ve seen in my lifetime.
Yes, the utility pie is still getting larger (far more slowly than it was in the past), but the slice that machines can’t provide — especially at the margin — is getting smaller, faster.
Combine these two realities to perceive a world in which:
1. A great (and increasing) proportion of human utility is, can be, delivered by machines.
2. Humans who do not (don’t have the wherewithal to) control those machines can only compete among each other to deliver an ever-decreasing slice of lower-utility goods and services. And they are compensated — given a slice of the pie — based on the steadily smaller amount of utility they can deliver. Left to itself, the market will provide many with a sub-subsistence level of compensation.
In the great log-rolling exercise that is our economy, an increasing number of people over the decades are falling off the log, and finding it hard or impossible to climb back on. Many — millions — are drowning.
And that magical log — which miraculously grows as more people climb on and have the sustenance to run faster — is not growing as fast.
Have I mentioned the Earned Income Tax Credit lately?
Cross-posted at Asymptosis.
I have to admit that this is an argument I’ve never been able to understand at all.
Take it to the extreme. Say that machines replace absolutely all of the “work” that people currently do.
From growing the food through manufacturing things to writing the blogs and being lawyers, doctors and nurses. Absolutely everything is done by machine.
Including, of course, building the machines that build the machines. Even the machines that build the machines that repair the machines that build the machines.
Just absolutely every single piece of production that goes into our current $60 trillion or so of global GDP is done by robots with no human intervention at all.
The problem with this scenario is what? Sure, there’s 7 billion humans without jobs as we currently know them. That could be seen as a problem.
But who actually cares about jobs? We don’t even care about incomes, people having them. We care only that people are able to consume.
And in our extreme case there we’ve got exactly the same $60 trillion worth of goods and services to consume among 7 billion people do today. But without anyone having to break a sweat to get it.
I just don’t see this as a problem. I really don’t.
It’s probably escaped your elevated attention but the wealth and property and political power of this great nation are not evenly distributed. About 50% of populace, most of them in the richer and more powerful group, are firmly convinced that (a)income should not be paid to physicially healthy individuals without jobs, (b) anyone without works who seeks for it digilently will find employment if his request for wages is small enough, and (c) access to health care, higher education, and other “public” goods should be determined by the ability to pay for them.
Start breaking a sweat.
@Tim Worstall: it’s not about what’s available. It’s about who gets to lay claim to what’s available. That’s why we care about employment and income in your scenario — because it’s through employment and income that people are able to lay claim to the stuff that’s produced.
It’s not a problem if the capital is recognized as social property and the product is shared amongst the population in some manner that at least considers their individual needs.
It is a problem if all of that capital is majority owned by a tiny group at the top, with about 10% of the rest of the world able to eke out some sort of independent production/trading strategy that allows them to gain whatever trade goods or money is required to buy the output, and then the other nearly 90% of the world is in abject poverty at the subsistence level or below.
We’re increasingly close to that scenario, not the rose-tinted-glasses position where everyone gets what they need because magic robots ensure we all have enough.
Goodwin:
Darn close to the entire answer.
I would add that since the eighties the productivity gains resulting from Labor+Capital have been skewed in an increasing percentage as gains to Capital at a lesser tax rate than payroll wages.
Technology can rid us of the drudgery, but not the drudges.
And yet, China keeps producing employment opportunities in the type of jobs that the high school grad would have performed here.
As productivity rises, prices fall and thus more people can afford and thus more demand, thus a need for more production at the given level of productivity.
Yeah, fewer people needed over all, but we have a very large population on this planet that are not buying much of anything…that is production opportunity waiting.
I think resources will be the bigger issue, depleted resources as it comes to how to keep this model of work for pay for consumption and life sustanance going.
Hey Steve,
You beat me to a post…well done. I will post as a follow up.
Tim,
Please tell me how free markets might solve the distribution problem? And no one mentioned no jobs for humans. And if we use real world and current replacement of workers versus robotics, and workers who maintain the robots and build them in a robotic manufacturing facility, what are replacement ratios/ productivity gains.?
Dan B.,
Both china and Foxcomm, for instance, are switching to advanced robotics as they modernize. You know, three shifts a day and actually faster than humans, and a lot simpler to re-train in the same assembly line…not so much re-tooling. Warehousing 1 million humans with needs is a lot of work.
I do not have quantitative data on this modernization.
Resource constraints are a problem, but at what price (frakking and tar sands etc).
Andrew McAfee is having much the same misgivings about the fallacy myth:
http://andrewmcafee.org/2012/08/mcafee-robots-technology-employment-statistics/
The original Luddites weren’t just angry about the number of jobs. It was wages, working conditions, living conditions and tyranny of the bosses as well as unemployment that set off the uprisings.
The limit on the growth of jobs doesn’t come from the lack of things to do. I could hire twelve or twenty people today to do things that robots can’t and ultimately employ thousands — if I had boundless wealth to pay them with. But I don’t. Hypothetically, there is no limit on demand but practically demand is constrained by purchasing power. Purchasing power expands slowly and steadily through the accretion of material goods — both consumer goods and capital equipment. It can also expand rapidly through the expansion of credit. But the expansion of credit is unstable because it ultimately rest on people’s subjective expectations about the future. If those expectations are overblown, you get a bubble and when things don’t turn out as rosy as expected, the credit dries up.
Tim the problem arises when some guy decides to mess with a machine and turn it on other machines, and then people. And there will be that someone that will influence others to cooperate in the en devour.
Some crops aren’t get picked this season due to a lack of workers.
“We just left them in the field,”
http://www.cnbc.com/id/48725145
this one is about california; ive seen the same story for georgia & alabama
it’s hard to believe Worstall didn’t understand that the problem was how do people get paid if the machines do all the work.
so maybe he will explain what he meant better.
i personally don’t like the idea of universal welfare. but if the machines really did do all the work, i could weaken.
or maybe people would discover that they enjoyed making furniture and trading it for home made pie.
From robots according to ability,
To people according to need.
😉
Steve Roth,
You seem to be echoing Marx, at least the Marx, at the start of Part ll, Introduction, of Red Plenty. Where Sputford says that Marx says that Capitalism produces a world of wonderful machines and ragged humans.
well
blogger ate my attempt to agree with Sandwichman.
I think the luddites weren’t against progress… that was the propaganda used against them… they were against the bad treatment of labor…both working and unemployed.
we have the same situation today.
it’s not that there are no jobs for those without “education,” it’s that the jobs are badly paid.
this has nothing to do with the “economic” value of those jobs. it has to do with cultural history. we are unwilling to pay people decent wages to do the work we used to get slaves to do.
meanwhile the sons and daughters of the “better class” can walk out of school and get a job which benefits no one and which they don’t do well and get paid six figures.
i am afraid that even liberal, educated people would faint at the idea of paying the cleaning lady or the guy who picks their lettuce an actual living wage.
“Please tell me how free markets might solve the distribution problem? And no one mentioned no jobs for humans.”
OK, let’s rewind the argument a couple of centuries.
90% of people worked on the land to grow the food.
Now we’ve got 1-2% of the people working on the land to grow the food. All the rest of us are off doing something else. Something that didn’t exist two centuries ago.
We’re all vastly richer than anyone was two centuries ago. For we’ve both the food that the 2% are growing and all the other stuff that the 88% are making. And it was indeed free markets that managed this transformation.
So, what’s the problem again?
Min sees things clearly.
Worstall
now i am worried about you.
the problem, again, is that while “we” have all that stuff people and machines are making, there are people who aren’t working, and people who are working for less than required for a human life.
and the claim is out there that these people just “can’t produce” enough to deserve to be paid.
i have heard of brain damage caused by strokes or other injury in which a man, for example, shaves only one side of his face, because he can’t “see” (nothing wrong with his eyes or his mirror) the other side.
have you had a stroke?
The Chartist movement was very violent and only ended, achieving many of its aims, when the king sided with his subjects and threatened to appoint lords to pack the House of Lords with reformers. In other words, economic justice in the industrial age, such as it was achieved in England, was pushed through by medieval mechanisms. As many a Whig historian has noted, by 1850, working class conditions were starting to improve and the queen issued the first congratulations to centenarians in the 1950s.
@Tim Worstall:
It seems to me you’re completely ignoring the points made in this post — human capabilities and marginal returns to innovation and consumption — and simply rehashing the Luddite Fallacy argument. Would love to see any responses to those, and new contributions to the thinking.
Society ahas made progress as Tim suggests, but there is no evidence that the cornerstone of the progressive change was the “free market.” And when exactly was it that markets were free? Was that when the oil barons were fixing the markets to benefit themselves to a far greater extent than a free market might have allowed? Was that when the railroad owners were fixing every aspect of transportation and doing their damned best to limit free enterprise that did not include their personal gain? Or was it more recently when bankers were manipulating virtually every aspect of finance to the great dysfunction of the current economy? Is that what is meant by the “free market” that never seems to operate free from the manipulation of market monopolization?
Tim,l there is not now and has never been a free market. It’s a myth created promoted by economists like those from the U of Chicago (or should that be called Rockefeller’s Project?) since the earliest 20th century.
Thank you. Glad to see someone else beating on this drum. I’d add the problems of the energy pinch that will rapidly follow upon the slide off the oil peak…paying the bill in resources for all the technological gadgetry and machines is going to be rough in a post-carbon world.