Paul Krugman changes his mind on impacts of automation

In the past discussions at Angry Bear on the impacts automation might have on our lives, and the economics   involved,  gathered comments such as “You are a neo luddite”. As if widespread use of automated systems was automatically good for us overall because we would have access to ‘more higher wage and higher skilled jobs’, cheaper goods, and robots need a work force to maintain them…of course, there was no offering of numbers of jobs and whether the wage premium for a college education would be maintained.   This is the time to pay more attention as ‘insourcing’ gains traction as a buzz word,

Paul Krugman calls for a new look at the economics of robotics and economics :

Catherine Rampell and Nick Wingfield write about the growing evidence for “reshoring” of manufacturing to the United States. They cite several reasons: rising wages in Asia; lower energy costs here; higher transportation costs. In a followup piece, however, Rampell cites another factor: robots.

This is an old concern in economics; it’s “capital-biased technological change”, which tends to shift the distribution of income away from workers to the owners of capital.
Twenty years ago, when I was writing about globalization and inequality, capital bias didn’t look like a big issue; the major changes in income distribution had been among workers (when you include hedge fund managers and CEOs among the workers), rather than between labor and capital. So the academic literature focused almost exclusively on “skill bias”, supposedly explaining the rising college premium.

If this is the wave of the future, it makes nonsense of just about all the conventional wisdom on reducing inequality. Better education won’t do much to reduce inequality if the big rewards simply go to those with the most assets. Creating an “opportunity society”, or whatever it is the likes of Paul Ryan etc. are selling this week, won’t do much if the most important asset you can have in life is, well, lots of assets inherited from your parents. And so on.
I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism — which shouldn’t be a reason to ignore facts, but too often is. And it has really uncomfortable implications. 

But I think we’d better start paying attention to those implications.

Hat tip Martin Ford at Econfuture:

The really big deal in the U.S. will be when automation hits the service sector/white collar jobs. Impact on :manufacturing in China might also be very significant.

(Lifted from an e-mail from Martin Ford and pointing to Paul Krugman’s article).

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