thenextwave

1964: James Meade and the automation problem

Posted in Uncategorized by thenextwavefutures on 19 November, 2013

A good post by Stuart White at Open Kingdom looks back at the work of the left-centre economist James Meade, who was concerned in 1964 that automation would cause a crisis of work.

Meade’s book, Efficiency, Equality and the Ownership of Property, “was motivated immediately by a concern about future technological and economic development. The scenario he contemplated was one in which automation of production reduces the demand for labour”, writes White.

Meade’s hypothesis:

‘This could happen if, in spite of the net accumulation of capital equipment, the new labour required with the new automated machines was actually less than the growth of the labour force plus the labour made redundant by the scrapping of physically worn-out old machinery’ (Meade 1964, pp.25-26).

So, notes White: “Even if wage rates are not depressed in absolute terms, the automation process could lead at least to a shift in labour’s and capital’s shares of output, a higher share going to capital.”

Of course this view is all but mainstream now, at least in some places – and hence this blog. What’s interesting about Meade’s book is that it has scenarios in it about how a society could respond if this happened.

White’s article describes it like this:

Meade’s 1964 book considers four possible responses: ‘the trade union state’; ‘the welfare state’; ‘property-owning democracy’; and ‘the socialist state’.

Under the first heading, Meade means any action, whether through collective bargaining or legislation, to maintain a ‘minimum real wage’. He is sceptical of this approach on the grounds that it will come at the expense of jobs.

Under the second heading, Meade has in mind tax-transfers which shift resources from the capital-holding rich to the wage-earning poor. Again, he is sceptical that this approach can go far by itself. The tax rates necessary, he thinks, could undermine economic incentives.

It is the latter two responses that Meade advocates. If the return to capital is rising relative to labour, then the way to prevent this leading to growing inequality of income is to democratise claims over wealth – over returns to capital. [My emphasis] This can be done in two ways.

First, the state can enact policies to encourage a wider dispersion of privately-held wealth. This is what Meade means by ‘property-owning democracy’. Meade himself puts a lot of emphasis on designing an inheritance or accessions tax in a way that will break down large concentrations of wealth and encourage people to give wealth to those who have yet to receive much from this source. One can readily imagine other, complementary policies to help with this goal. In one interesting response to Paul Krugman’s article on the ‘rise of the robots’, Noah Smith argues along Meade-type lines, suggesting the idea of a universal capital endowment as a right of citizenship. (Back to the Child Trust Fund?)

Second, the state can itself build up a stake in national wealth and distribute this as income to citizens. For much of his career Meade was an advocate of what he termed ‘Topsy Turvy Nationalization’. He was not supportive, in general, of the state buying up private sector firms and then trying to manage them. But he did strongly support the creation of a state investment fund. The state would own a portfolio of assets across the economy. The return on these assets could then be returned to the citizenry, e.g., as a uniform social dividend or basic income. One might call this a Citizens’ Trust. …

In his ideal scenario, he envisaged the community owning 50% of national assets as a Citizens’ Trust and using the return to provide a social dividend for all. In Meade’s utopia – or what he himself called his ‘agathatopia’ (a good, if not perfect, place) – a downward shift in the return to labour, e.g., due to automation, has a more limited impact on the overall distribution of incomes. If there is a change in the relative reward of labour and capital, then while one source of an individual’s income (wages) falls in relative terms, other sources of their income (the returns on more widely held private and shared public assets) will correspondingly rise.

One place where such a Citizen’s Trust has been created is Alaska, oddly, where a community fund was created which channels a modest citizens’ income from oil royalties. (Karl Widerquist, Open Democracy, 24 April 2013). Arguably (my note, not White’s) is that Norway’s Sovereign Wealth Fund works in a similar way, although disburses public benefits and public assets rather than a citizens’ income. Scottish politicians have been talking about a similar model, post-independence. (Angela Cumminem Open Democracy, 6 November 2013).

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Work & automation: a festival of links

Posted in Uncategorized by thenextwavefutures on 18 November, 2013

This post is extracted from one by Izabella Kaminska, written in December 2013, who was one of the first people to dive into this area – and took quite a lot of flak for doing so. The links are all hers.

There’s an important theoretical point buried implicitly in here, one that David Harvey makes in his readings of Capital, that only human labour can create value. It’s quite technical, though, and I need to spend time on it to understand it better

One of her theories – that we have a crisis in the value of work because we are being too productive with our leisure time is interesting – and a bit Clay Shirky, though I’m not completely persuaded. But the point of a research blog is to catch all this stuff.

It took almost a year for me to be taken seriously on the “technology is undermining capital” front, so it was extremely exciting to see the debate blast off in serious economic circles during the last quarter of 2012. I thought it might be useful, as a result, to provide some links to the most recent developments — since the debate really is moving quickly now. …

One of the criticisms I face all the time, meanwhile, is that all this tech innovation has been going on for centuries. Why should there be a crisis of capital now? What makes this time any different? And what makes my sudden focus on tech relevant?

For starters, what I feel is new is the idea that the financial crisis was born out of the tech crash. If not for the dotcom bubble, we would not have had the conditions to create the subprime crisis. The China outsourcing phenomenon and imbalance situation may also have been born out of a need to replace mechanised labour — which compromised capital — with human labour, which still ensured profit and the preservation of capital. It was in a sense, an artificial scarcity response… designed to spread spending power to secure return on capital, rather than extinguish it.

I wrote a “Man in the high castle” type piece on FT Alphaville earlier this year, imagining what might have happened had the West not outsourced labour as extensively back in the 1990s. The conclusion was that the West may have been Japan-ified much earlier on.

But what really makes this time different, I would argue, is that a lot of the competition is now coming from a) the voluntary and crowd sourcing/open source arena and b) it’s only artificial scarcities (patents, monopoly interests) which are preventing complete democratisation of technologically-fueled abundance across the world. It is thus because monopoly power is slipping, challenged as it is by free alternatives rather than cheaper ones… that the crisis is beginning to manifest.

In a nutshell there is too much leisure time being devoted to productivity. We are too productive at ever cheaper (or free) rates, and as a consequence the pool of salaried jobs (those which must offer a good salary to attract specific skills) is diminishing quickly. … That, at least, is my entirely non-substantiated theory.

Anyway, enough drifting. Here are the links as promised:

Kruggers:

Rise of the Robots – Paul Krugman (Dec 8)

Technology or Monopoly Power? – Paul Krugman (Dec 9)

Robots and Robber Barons – Paul Krugman (Dec 10)

Technology and Wages, the Analytics (Wonkish) – Paul Krugman (Dec 10)

Human vs Physical Capital (Krugman’s “mea culpa” moment) (Dec 11)

Is growth over? – Paul Krugman (Dec 26)

Capital-biased Technological Progress: An Example (Wonkish) – Paul Krugman (Dec 26)

Futurism and Policy – Paul Krugman (Dec 27)

Policy Implications of Capital-Biased Technology: Opening Remarks – Paul Krugman (Dec 28)

Kenneth Rogoff

Innovation Crisis or Financial Crisis? – Ken Rogoff (Project Syndicate) (Dec 4)

Marginal Revoluion (Tyler Cowen)

What is the potential for 3-D printing?  (Dec 23)

Are robots and aging demographics self-cancelling problems? (Dec 28)

Peter Thiel and Gary Kasaparov (FT)

Our dangerous illusion of tech progress  (Nov 8)

Noahpinion (Noah Smith)

Rise of the cyborgs   (Dec 26)

Pragmatic Capitalism (Cullen Roche)

Robots Suck, No Robots Rule – What Say Ye? (Dec 10)

Reformed Broker (Josh Brown)

Own the Robots, Bro, Trust Me. (Dec 27)

Laurence Kotlikoff and Jeffrey Sachs

Smart Machines and Long-Term Misery (pdf) – NBER (Dec 2012)

David Graeber

Of Flying Cars and the Declining Rate of Profit – The Baffler (June 4)

Robert Gordon

IS U.S. ECONOMIC GROWTH OVER? FALTERING INNOVATION CONFRONTS THE SIX HEADWINDS (pdf) NBER (August 2012)

Wired

The Patent Problem (13 November)

Climateer Investing

Artificial Intelligence is the Key to Future Growth — Or Stagnation – (Dec 27)

A Roundup on Robots, Capital-biased Technological Change and Inequality (plus how to tell if a person is a fiduciary) – (Dec 18)

The Next Time You Bitch and Moan About the Lack of Jetpacks, Remember Disposable Diapers!” – (Dec 17)

Robots Raise a Row(e) in Economics Land – (Dec 16)

The March of Robots Into Chinese Factories – (Dec 6)

The Paradox of Profit Margins and Another Look at the Theory of Everything – (Sept 24)

The Road to Serfdom: Where the Robots Are Taking Us – Climateer Investing (Dec 11)

The theory of everything – (August 11)

Skidelskys:

Enough is enough of the age of consumption – FT (July 4)

And my tech-related stuff (includes refs or features work of others)

[Alphaville, free, needs registration]

In an economy not so far, far away – FT (Dec 28)

The FT Alphaville podcast, with Dylan Grice – FT Alphaville (Dec 21)

Defending the Romans – FT Alphaville (Dec 12)

The robot economy and the new rentier class – FT Alphaville (Dec 10)

The personalised pricing revolution – FT Alphaville (Nov 21)

Whose idea is it anyway – Towards a Leisure Society (Nov 16)

Money as a passion, not a standard – FT Alphaville (Oct 10)

Welcome to the ‘Desert of the Real’ — a postmodern economy – FT Alphaville (Oct 09)

Rubik’s Revolutions – FT Alphaville (Oct 03)

The case against idea monopolisation – FT Alphaville (Oct 03)

The decline or the redefinition of labour? – FT Alphaville (Sept 26)

A time of hoarding and inflation fears, 1930s edition – FT Alphaville (Sept 24)

Beyond happiness – FT Alphaville (Sept 20)

The BoE on Britain’s productivity puzzle – FT Alphaville (Sept 19)

Are UK companies hoarding labour? – FT Alphaville (Sept 12)

How technology is killing the Asian growth miracle – FT Alphaville (Sept 10)

Towards a steady-state economy? – FT Alphaville (Sept 04)

Time to resurrect the ‘missing variable’ – FT Alphaville (Aug 31)

3D Printing: Rise of the machines – FT Alphaville (Aug 10)

Negative rates as a precursor to the death of banking – FT Alphaville (Jul 31)

China flash PMIs — the employment factor – FT Alphaville (July 24)

China as a post capital economy – FT Alphaville (July 12)

Pariah profits in an age of ‘negative carry’ – FT Alphaville (Jul 05)

The negative carry universe – FT Alphaville (July 04)

On abundance, post-scarcity and leisure – FT Alphaville (Jun 20)

On price stability during an ‘abundance shock’ – FT Alphaville (June 26)

Shopping in the future – FT Alphaville (Jun 14)

Redefining labour – FT Alphaville (Jun 12)

The end of artificial scarcity – FT Alphaville (Jun 03)

Space opera, beyond finance edition – FT Alphaville (Feb 29)

Economics, a space opera – FT Alphaville (Feb 03)

Others from Alphaville 

Robots! No Robots! – FT Alphaville

Ahhhh! No robots! – FT Alphaville

Beyond Scarcity – FT Alphaville (series)

On price stability during an ‘abundance shock’ – FT Alphaville

Is that robot going to steal your job? – FT Alphaville (Sept 14)

Robots 101

Posted in history, Uncategorized by thenextwavefutures on 16 November, 2013

We are in the middle of a panic about the future of work. There are fears that the rise of robots – or more exactly, a combination of computing power, algorithms and robotics – will destroy the labour market, even, possibly, the very idea of labour value. On the other hand, the economists’ view, generally, is that we’ve been here before.

Just as the advent of the industrial revolution saw jobs destroyed in agriculture, so new jobs will emerge as a result of our current technological transiiton. And better: those jobs will be higher value, higer productivity jobs, so in the medium term we will all be richer. And let’s face it, the Luddites are still mocked, even if that’s usually by people who didn’t understand their politics. But there’s still something that nags away here.

Back in the 1970s there was a joke about the factory of the future. It would be staffed by a man and a dog. The dog would be there to makes sure that the man didn’t touch the equipment. And the man? He’d be there to feed the dog. The idea that automation would destroy the employment base, in other words, has been swimming around for almost 40 years.[Update: Or 50].

And the other difference between the beginning of the 21st century and the beginning of the 19th century is that then we were about to stumble on a huge amount of the cheapest and most potent energy the human race had found, coal, then oil. Now, we are facing a world of tightening resources, of energy shortage rather than abundance. So; it’s complicated. I’m going to try and untangle it, slowly, on this blog.

The beat’s fashion sense

Posted in emerging issues, history by thenextwavefutures on 5 November, 2013

A spot of social history. I was doing a little light research on the folk singer Wizz Jones after seeing him live, and came across this news report from the BBC’s Tonight programme from 1960. It’s about the steps being taken by the Cornish resort town Newquay to exclude a small group of beatniks from the town – making sure they couldn’t get work in the town or buy refreshments. What’s striking about this clip is the clothes and the hair: the unwanted Beats wouldn’t look out of place in any European or north American city now, 50 years later, whereas the clothes of everyone else place them firmly in the 50s and 60s.

It made me wonder what people are wearing now that won’t have dated in half a century.

For students of British journalism there’s also the sight of the reporter Alan Whicker, mostly remembered now as a parody of himself, forensically getting the leader of the Council to admit that the ban that he had organised had no grounds other than prejudice.

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