Rethinking the Political Economy of Automation

The White House recently released two important reports on the future of artificial intelligence. The “robot question” is as urgent today as it was in the 1960s. Back then, worry focused on the automation of manufacturing jobs. Now, the computerization of services is top of mind.

At present, economists and engineers dominate public debate on the “rise of the robots.” The question of whether any given job should be done by a robot is modeled as a relatively simple cost-benefit analysis. If the robot can perform a task more cheaply than a worker, substitute it in. This microeconomic approach to filling jobs dovetails with a technocratic, macroeconomic goal of maximizing some blend of GDP and productivity.

In the short run, these goals appear almost indisputable–the dictates of market reason. In the long run, they presage a jobs crisis. As Michael Dorf recently observed, even though “[i]t is possible that new technologies will create all sorts of new jobs that we have not imagined yet,” it is hard to imagine new mass opportunities for employment. So long as a job can be sufficiently decomposed, any task within it seems (to the ambitious engineer) automatable, and (to the efficiency-maximizing economist) ripe for transferring to software and machines. The professions may require a holistic perspective, but other work seems doomed to fragmentation and mechanization.

Dorf is, nevertheless, relatively confident about future economic prospects:

Standard analyses…assume that in the absence of either socialism or massive philanthropy from future tech multi-billionaires, our existing capitalist system will lead to a society in which the benefits of automation are distributed very unevenly. . . . That’s unlikely. Think about Henry Ford’s insight that if he paid his workers a decent wage, he would have not only satisfied workers but customers to buy his cars. If the benefits of technology are beyond the means of the vast majority of ordinary people, that severely limits the ability of capitalists and super-skilled knowledge workers to profit from the mass manufacture of the robotic gizmos. . . . Enlightened capitalists would understand that they need customers and that, with automation severely limiting the number of jobs available, customers can only be ensured through generous government-provided payments to individuals and families.

I hope he is right. But I want to explore some countervailing trends that militate against wider distribution of the gains from automation:

1. Closed Circuit Economics: Assume for now that a small percentage of the population will own most of the robots. To the degree that group’s wealth is invested in the debt and equity of corporations that sell goods and services to consumers in general, perhaps it needs to balance its concern about squeezing wage concessions from workers, with some concern about those workers being able to buy goods and services. But a great deal of wealth is socked away into real estate or art or other stores of value, whose primary worth may derive from what other very wealthy people (or governments) are willing to pay for them.

Wealth can be a closed circuit, confined to an economic stratosphere. A tycoon may sell his home for $30 million; use that money to buy a Damien Hirst; whose former owner socks that cash into a yacht. The manufacturer of a $30 million yacht is not very concerned about whether her workers can ever afford one. Their wages appear on her balance sheet as just another debit against the expected profit from the sale.

2. Collective Action Problems Facing Enlightened Capitalists: But let’s assume for now these are edge cases. And let’s assume that the owners of financial wealth (and the technologies it controls) want their workers to be able to consume. Henry Ford’s approach was based on paying his own workers well, and depended on a certain level of philanthropic impulse. But it has not been widely emulated since then. During the trentes glorieuses, unions had to strike to demand higher wage and benefits. Most CEOs know that only a small fraction of the extra money they’d pay to workers would eventually be spent on their firm’s products or services.

Of course, Dorf is advocating something like a universal basic income–“generous government-provided payments to individuals and families” to enable consumption. But the revenue necessary to make that fair poses other collective action problems, familiar from the history of taxing the rich. A sizeable number of voters subscribe to an “equal treatment” theory of taxation, and are suspicious of overly progressive rates. An anti-UBI coalition of elites can easily activate those feelings, and may well do so if they feel they have more to lose from a tax than to gain from the increased purchasing power of those who’d receive a UBI. In other words, the UBI solution doesn’t just depend on some critical mass of enlightenment among elites–it’s also vulnerable to defection by a relatively small number of them willing to fund demagoguery against UBI (or to hijack veto points in our complex system of government).

3. Extant Government-Supported Purchasing Power is Under Threat from Austerity: To be sure, we already have some redistributive programs in place. For the elderly, Medicare pays for health care; youth can count on income based repayment as a backdoor public financing of their post-secondary education, if their degree turns out not to raise their adjusted gross income sufficiently. But programs like these are under fire from budget hawks and technocratic cost cutters. Even though federal student loan programs have been operating as a negative subsidy for the education sector for years (producing profits for the government), powerful private lenders (and their allies in think tanks) are trying to make their terms even worse. Medicare, like the rest of the health care sector, is under siege from constant cost-cutting schemes–even though a far better goal would be increasing the value we get from the health sector.

4. A Question of Power: The idea of a basic income is not new, and has bipartisan appeal. Milton Friedman and other neoliberals proposed a grand bargain as early as the 1960s: Dismantle welfare programs and price ceilings like rent control, and give everyone a check instead. Silicon Valley technolibertarians are also enthused about cutting red tape and subsidizing cheap labor for startups. But we should be cautious about retreating to such a crabbed conception of the political. As Nathan Schneider has argued, “A basic income designed by venture capitalists in Silicon Valley is more likely to reinforce their power than to strengthen the poor.” And even in 1991, a French philosopher, Dominique Méda, worried that basic-income schemes “contain the seeds of a process of polarization . . . leading in all likelihood . . . to a second-rate existence [for most people] compared with that led by the managers of the established productive system. A life with less security, fewer rights, and lower status.”

In short: present trends make the extreme precarity of Ready Player 1 look like a far more probable future than the pleasant egalitarianism of Looking Backward. That’s one reason Ryan Avent concludes: “Some time in the future, a wonderful new politics might well emerge that provides a robust minimum standard of living to all . . . .[but] are not yet able to conceive of such a system or to understand what balance of political forces needs to emerge to bring it into existence and sustain it.” I think it’s “inconceivable” because the real task of political economy and law is far more than redistributing the spoils of the economy. It’s to ensure more productive investment, fairer compensation, and democratization of social relations. Sharing the skills and power to understand and program robotic systems is just as important as ensuring the fair distribution of the goods and services they produce.

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