Paul Krugman, “Rise of the Robots“
Nick Rowe, “Capital-biased technical change vs. low interest rates?” Worthwhile Canadian Initiative.
Also, ozider, “Why Krugman isn’t quite right on Education & the Rise of Robots,” owenzidar.
Noting Economix‘s discussion of reshoring jobs and handing them to robots, Krugman concludes:
[T]he college premium hasn’t risen for a while. What has happened, on the other hand, is a notable shift in income away from labor:
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.
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.
A few months ago, Krugman wrote the introduction to his favorite book series from his adolescence, Isaac Asimov’s Foundation, which is a centuries-long saga of a plan implemented by social scientists to ensure the restoration of a galactic empire after a 1000-year dark age. (So much for Asimov’s commitment to democracy.) It’s based on the fall of the Roman Empire, which in real life didn’t need psychohistorians so much as a better successor to Marcus Aurelius than his son Commodus, who was about as stable as L. Ron Hubbard.
Instead of the Foundation series, the more relevant Asimov book to this discussion is The Naked Sun, which takes place closer to our own times. In this era, humans have colonized other planets and use robots to do their labor, allowing Asimov to toy with his famous “Three Laws of Robotics” as well. The book’s plot is a murder mystery that takes place on the planet Solaria, which depicts robot labor taken to its logical conclusion. Solaria’s population is only 10,000, but everyone lives spaced out on vast robot-serviced latifundia. In fact, people rarely see one another.
What happens as we move towards a Solarian society? Turns out Henry George visited that planet long before Krugman.
[I]f laborsaving inventions went on until perfection was attained, and the necessity of labor in the production of wealth was entirely done away with, then everything that the earth could yield could be obtained without labor, and the margin of cultivation would be extended to zero. Wages would be nothing, and interest would be nothing, while rent would take everything. For the owners of the land, being enabled without labor to obtain all the wealth that could be procured from nature, there would be no use for either labor or capital, and no possible way in which either could compel any share of the wealth produced. And no matter how small population might be, if anybody but the landowners continued to exist, it would be at the whim or by the mercy of the landowners — they would be maintained either for the amusement of the landowners, or, as paupers, by their bounty. (Progress and Poverty, Book IV, Chapter 3)
What George is asking—and what Asimov didn’t as I recall the book from my adolescence—is, what happens if you are a non-landowner on Solaria?
Answer: You are a trespasser, and because your labor is worthless compared to a robot’s you always will be.
George is very bold here because he’s taking on the Luddite fallacy, which states that as productivity increases jobs will still be created, e.g. the robot manufacturers Apple will use require humans to design them. And those humans will need educations at technical colleges. I interpret ozider above as restating this argument. Okay, so what happens when we create robots to create the robots?
If you read Mason Gaffney’s study guide, (which is an excellent read in itself) he points out that J.S. Mill answers that as land becomes scarcer, land productivity increases, like those conurbations you see from the train in Yokohama. Still, given the decline of labor compensation as a share of GDP, it appears that capital substitution for labor is having an effect. Krugman says that this contributes to job polarization and education won’t help. I agree.
Where I disagree is his assertion that watered-down Marxism is the solution. Marx didn’t separate land from capital, so confiscating or taxing capital fosters contradictory results: less productivity in exchange for labor stability. It’s a false compromise. We can have progress without poverty—or as the terms have been recast today: productivity without polarization—by taxing the land rent and using it to fund government services and to provide a citizens dividend to the trespassers of Solaria.