Alternatives for Krugman’s Luddites

Paul Krugman, “Sympathy for the Luddites,” The New York Times.

Several months ago, Krugman opined on the “rise of the robots,” and I wrote that the lover of Asimov’s Foundation series would be better served by rereading The Naked Sun instead. In that book, Asimov crafted a sparsely populated world where everyone lived on vast, robot-serviced latifundia, and they’re so isolated that they had serious sexual hangups touching one another. (That’s off-topic, but I bring it up to note that I find Asimov to be kind of a pervert, especially as he got older.)

The point was that Henry George, writing well before Karel Čapek’s Rossum’s Universal Robots—the play that coined the term “robot” and which I happened to see earlier this year—already contemplated a world in which technology eliminated the return to labor. George misunderstands that “laborsaving inventions” are in fact capital, and he fails to recognize that some inventions are land-conserving, but he’s otherwise basically right that owning land becomes of paramount importance as capital substitutes for labor. George’s style may be antiquated, but it’s still fun to read:

[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)

Unfortunately, Asimov didn’t create an unemployed underclass in The Naked Sun, which would’ve made it a better, if darker book.

Today, Krugman is back on the topic of education versus laborsaving technology, and he concludes that what I’ll call “liberal interventionism” is the ineluctable answer:

Education, then, is no longer the answer to rising inequality, if it ever was (which I doubt).

So what is the answer? If the picture I’ve drawn is at all right, the only way we could have anything resembling a middle-class society — a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules — would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income.

I can already hear conservatives shouting about the evils of “redistribution.” But what, exactly, would they propose instead?

Okay, this is the first time I’ve seen Krugman endorse a guaranteed minimum income, which is more classical like George (think Thomas Paine’s Agrarian Justice) than liberal interventionist like Krugman, so I’ll give him that. However, I think he’s been a little thin on higher education, particularly during the ’12 election when he called out Romney’s stance on equality of opportunity in accessing higher education. If education was doubtfully ever the answer to rising polarization, then why should government ensure equal opportunity to obtain it?

I’m not a conservative either, but like all Georgists, I prefer taxing land before labor and capital, as best we can if land taxes can’t cover society’s needs, which they almost certainly would if we spent less on the military. The benefits of land taxes are that they avoid the supposed penalties of taxing capital: discouraging innovation, building bigger buildings, etc. George is more of a libertarian than I am, which is partly due to the fact that he wrote Progress and Poverty long before Social Security and modern national medical care existed mostly anywhere. Nevertheless, I think most safety regulations and maybe things like financial transactions taxes would do more good than harm.

But make no mistake, we’d be better off in Krugman’s liberal interventionist United States than the full-employment-is-optional one tens of millions of underemployed Americans are blighted to inhabit. However, the problem with liberal interventionism, which I see as leaning heavily on income taxes and capital gains taxes to provide a floor for the least among us, is its tax system is arbitrary. How many income tax brackets should we have? At what rates? What if the income distribution changes over time and we have to rework the system?

My hunch is that liberal interventionists see these as technical questions, but they’re really political. For example, in the mid-1980s Congress merged a bunch of tax brackets, which placed many upper-middle-income Americans in the same tax bracket as the burgeoning plutocratic class. Merging the brackets enlarged the constituency of Americans who didn’t want to shoulder any income tax increases. Sure, you can point to empirical studies about how high you can raise the highest bracket before people start fleeing the country like French actors to Russia (around 70 percent, I think), but that’s not exactly an election slogan. Liberal interventionists are already fighting an uphill battle convincing the public of the need for tax increases because many Americans are hostile to government. Georgism is much more readily defensible politically because it’s a qualitative argument rather than a quantitative one.

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