> The automators will continue to get very, very rich, while the automated will have to find something else to do.
Part of me thinks this will lead to make much more apparent the paradox of capitalism: Those with the most money can... make the most money. Over time this means it all gets funneled into just a few families' pockets, until they own everything (which is silly and most likely would not be put up with after a certain extent).
Another part of me thinks that automation has been part of our society for a long time, and that taking it further only changes the kind of jobs everyone has, maybe even promoting equality by eliminating the more menial tasks (and therefore making every worker's skill and experience important, instead of them being just a replaceable cog).
Either way it seems absolutely inevitable in the long term, and I don't see a point in pretending it's not going to happen.
A huge part of the problem here is the low, low interest rate environment we're in. Low interest rates make expensive machines cheaper than humans. High interest rates make humans cheaper than machines. (For a range of values of cheaper)
Being able to afford a $300k house on $50k/year is great until you don't make the $50k/year anymore because you've been automated out of a job.
In the past people with a lot of money could invest their money and see a fairly stable, secure return of 5-15% a year depending on the exact risk profile of their investments; savings accounts -> stocks.
Now if you have a lot of money you can buy businesses and replace people with capital equipment. Better returns than investing in the stock market (or bank accounts!) and it's basically off-limits to people who don't have 7+ figure amounts of cash. Which statistically is basically everyone.
Higher interest rates would let the rich enjoy more work-free income but it also keeps normal people in jobs. And it provides some kind of incentive to save; interest in a bank account is basically scale-free.
I think maybe that's another one of the problems we're seeing, opportunities to grow your wealth aren't scale invariant. A little money has very, very few opportunities to earn interest. A lot of money has a many opportunities to be grown.
This is nonsense. Various funds available to ordinary people, including pension funds, do invest in the hedge funds and private equity funds. If anyone were actively buying businesses and replacing people with capital equipment, it would be these groups.
Low interest rates are present to stimulate spending. It allows for investments in capital expenditures (e.g. machines) that would otherwise have up front fixed costs that made it unattainable.
This can allow for businesses to invest into new markets or expand where they otherwise would have not spent anything.
> opportunities to grow your wealth aren't scale invariant.
This can be solved by pooling your capital with a group of people until you reach the scale at which the opportunity you were looking for becomes available. One way this has been done for over a century is via mutual funds.
I agree completely. But "owning" a $300k house makes people feel a lot richer than "owning" a $120k house, even if they're the exact same house! You're right that payments are the same, because housing prices are driven by monthly payments not the dollar amount that you're signing for.
Which is part of the problem, too. When mortgage interest rates fluctuate between 6-10% say, a person doesn't get terribly underwater that fast. But when they fluctuate between 3% and 7% a person can go from equity->underwater in a hurry, because the price fluctuations are so much larger.
It's basically a y=1/x kind of problem and the closer you get to x=0 the closer you get to y=infinity in a very nonlinear way. Which is great if you bought a house a x=more and sold a house at x=less because you made huge gains. But if you bought at x=less and are trying to sell at x=more you can be very, very underwater.
Over time this means it all gets funneled into just a few families' pockets, until they own everything...
Yes, this is a popular theory, but it doesn't appear to be happening. To quote Larry Summers:
> the Forbes 400 list also provides only limited support for Piketty’s ideas that fortunes are patiently accumulated through reinvestment. When Forbes compared its list of the wealthiest Americans in 1982 and 2012, it found that less than one tenth of the 1982 list was still on the list in 2012, despite the fact that a significant majority of members of the 1982 list would have qualified for the 2012 list if they had accumulated wealth at a real rate of even 4 percent a year.
For comparison, I'm personally achieving well over 4% returns by trading my own account. Those with the most money can't possibly do the same thing (my strategies won't scale).
The churn in the top .0001% means basically nothing as to how serious wealth accumulation is. It's a horrible indicator.
Looking at the world cup results of 1982 (Italy, W. Germany, Poland, France) and 2014 (Germany, Argentina, Netherlands, Brazil), you could assume that there is a healthy amount of churn happening, so there's not really an accumulation of medals happening. Every country has a chance! In reality, there are only 8 winners and maybe 12 who have ever had a chance to win (out of 24 who have ever even made it to the top 4). There are ~196 countries in the world. The wealth distribution of FIFA medals is not good if you haven't already been a winner.
I'll give you the same reply I gave to yodsanklai, who made the same (incorrect) response:
> a significant majority of members of the 1982 list would have qualified for the 2012 list if they had accumulated wealth at a real rate of even 4 percent a year.
Further, your world cup analogy shows how inequality of results is not strong evidence of gboudraias' claim: "Those with the most money can... make the most money. "
Owning a 2006 or 2010 world cup does not give you a greater ability to play soccer - the World cup inequality between Germany/Brazil and India/USA is purely meritocratic.
Well, that "few families' pockets" end up owning everything is not incompatible with WHICH those families are changing over time.
Besides, 1982 was a very different time compared to 2012. China wasn't as much of a world player in manufacturing etc yet (and Japan was only beginning to get big). Plus, the whole computing explosion happened since then, throwing off many older established players, and then the Internet one. Lots of old fortunes died in those 30 years. In the last 10-15 years though?
Index funds do about 4% real return over time and scale very well.
You are right that wealth is more dynamic than most people think but the reason is rather that the most effective way to get really rich is to leverage everything into one company, which is a strategy that hurts you on the way down as much as it can help you on the way up.
>a significant majority of members of the 1982 list would have qualified for the 2012 list if they had accumulated wealth at a real rate of even 4 percent a year.
This part of the quote, which you snipped, is in fact a good argument that they didn't accumulate much. As I said before, that's far less than I earn from trading.
Presumably very few people in that list are rich in purely cash or near cash terms. They're rich because they own businesses at the apex of their valuation? As technology changes businesses rise and fall which probably accounts for the turnover in the list.
> Another part of me thinks that automation has been part of our society for a
long time, and that taking it further only changes the kind of jobs everyone
has, maybe even promoting equality by eliminating the more menial tasks (and therefore making every worker's skill and experience important,
instead of them being just a replaceable cog).
This is the theory, but the realities of this promoting equality are really to be doubted. An increase in the supply of labour has two fairly predictable effects - it both lowers wages overall (more supply, less demand) and provides a pool of cheap workers should things pick up. When there are more unemployed there is also typically an increase in the intensity of work in the jobs that remain - people tend to work much harder for the same or less pay under the looming threat of unemployment. One prevailing myth is that the unemployed workers are simply retrained for new jobs created by automation, however even with government subsidized retraining this doesn't seem to work [1]. In reality automation seems to be a source of widespread immiseration beneficial to only a few.
> In reality automation seems to be a source of widespread immiseration beneficial to only a few.
Are you serious?
The printing press alone has benefitted humanity as a whole immensly over the last centuries.
And there were piles and piles more of automation necessary for us to be able have this discussion right now - on a global scale and at virtually no cost to either of us.
This talk about technology taking jobs from people is utter nonsense. This has happened before - the Industrialization. People are freed from unnecessary chores like harvesting or standing at the cashier, for example. Soon enough new types of jobs were in high demand - mathematicians, engineers, professors. This enabled further development in other professions - more doctors, teachers, historians, etc.
Same thing will happen now. Just look at the education landscape. Data science is taught EVERYWHERE.
Industrilization made humanity able to focus on exact sciences. The advancement in exact sciences will enable us to focus on social studies, philosophy, history, ecology, medicine, law, system design.
One big issue that people tend to miss when comparing current situation to the previous years is the fact that machines are making more machines. See, when combine harvester or loom was invented people were needed to build these machines, so it was fairly easy to move them from doing one manual job to another. Right now however, that one machine can be build by another machine.
When I recently helped build a machine to automate some test processes at a local company it took us about 120 hours in total to do it. The machine will replace three people. All of the components that were used were either computers, software or electronics. This is not something that any of these employees will be ever able to do, as they are simply a very low skilled, uneducated workers, from impoverished neighborhood. The next machine that we may be building for this company will take us even less time, as we have everything already designed, and tested. We just need to put few components together and verify that it works. It will maybe take us 16 hours to do it.
When it takes you less than a week of work to replace three people, there is no way that the jobs for these employees can be created fast enough.
It's not only about intellectual jobs; it's also about more powerful abstractions.
With the same resources spent on the same amount of workers for example, a company will produce more than in the past.
It's not necessarily true that in such conditions, the company would choose to keep the productivity constant employing less workers.
You seem to be discussing net human effects and cherry picking a particularly positive example. I'm discussing the immediate effects of automation on the lives of the workers formerly employed in the automated jobs.
> An increase in the supply of labour has two fairly predictable effects - it both lowers wages overall (more supply, less demand) and provides a pool of cheap workers should things pick up
"and therefore making every worker's skill and experience important, instead of them being just a replaceable cog"
Problem with this is that most workers don't have the skills and experience, and self-teaching can only go so far in a lot of specialized areas.
Further, you run into the issue of a worker who is, say, 50 and has just been 'automated out'. Learning an entirely new skill set and trying to get into a field where your previous experience may not even be applicable at that age would be brutal, if its even possible in many instances.
To make matters worse, some developed countries (UK and USA to name a couple) have taken to the mindset of cutting education and skills training and prioritized those areas even lower so that it'll only become that much harder for workers to build up skills in the first place...
I suspect most of what is said in there is well known to the HN crowd, but it's all put together in a very pleasant video and is a nice thing to link to people who don't understand just how far along we are in the process of automating a lot of people's jobs.
>Part of me thinks this will lead to make much more apparent the paradox of capitalism: Those with the most money can... make the most money.
This is not workable. Capitalism value is built on having people transfer their assets (money) in exchange for products and services. For this to work it needs paid laborers, not just in order to create the stuff but also to form the large market that buys it.
One could conceive of a future society were automators can make everything and those "automated" don't have anything to do. But that society wont be capitalistic anymore, as it wont contain any market (the majority of the people, those automated wont be part of any market).
Isn't what you've described capitalism's analog to physics' perpetual motion machine? It just seems that there should be frictions and inefficiencies and equilibriums such that it would require severely anti-capitalist intervention to make it happen.
Now, that's not to say we aren't seeing severely anti-capitalist intervention on a daily basis. A major consulting firm in my state got passed a bill to require consulting software developers to be licensed as engineers, then promptly got themselves exempted from it, claiming their "economic interest" compelled them to secure well-trained engineers, even if they weren't licensed.
But if a single actor has all of the money, then wouldn't the money becomes useless? People need things--shelter, food, clothing--not money. Money is only useful if it is a convenient medium for trading labor for things. And if people can't get the things they need, then wouldn't we all just walk away from the old system.
And if a single actor has all the property, then what's the point if there's nobody to charge rent?
Again, barring severely anti-capitalist intervention, like a government ban on travel.
I don't think it is specifically about capitalism.
When you look at how empires fall you can argue that it can often be attributed to increasing wealth inequality to unsustainable level.
And revolutions / civil unrests are often romantically portrayed as a battle for democracy / free rights while they seem to me more about food and jobs.
I know we always talk about rich families accumulating wealth, but what about corporations? Apple has $150 billion in cash sitting idly, accumulating more every time someone buys an iThing. That's money that's disappearing in the short term.
From my understanding of this issue, that money is "owned" by the Apple stockholders, and is incorporated into the company's stock price. If a corporation has a lot of money, its shareholders have that money. Same with anything else the company owns--buildings, equipment, etc.
From my understanding, all the capital (money) and other assets (equipment etc) all belong to Apple, where Apple isn't just "a group of people", but is an entity in itself.
To make it clearer, if apple has $150 Billion cash lying around, none of the stockholders can just withdraw some of it, or even their percentage share of it. What they can do is sell their "share", where the share itself can be considered a separate object that is less related to the company's assets, and more concerned with the market's perception of the company. To illustrate the last point, suppose all of Apple's stockholders suddenly decide to sell their shares. The market would be flooded by sell orders and the price of the shares would begin to plummet, even though there has been absolutely no change in the company's assets. The price drops simply because apparently no one wants to own the share. Similarly when a lot of people want to own it, the price rises. (yes, this is an over simplification)
When you buy a share, you aren't buying a percentage of the company's assets, you are buying:
- a stream of future dividends.
- A sell-able "share" which you may hope to sell at profit in the future.
They could also all get together (a shareholder meeting) and vote in a board of directors who would then agree to disburse that capital to shareholders as dividends. It's not quite as direct as going to an ATM and taking out cash, but there are mechanisms for the shareholders to reclaim some of the 'locked-in' value.
Cites recent layoffs but has no real stats on the decline of outsourcing, near shoring, etc. Weak.
Part of the problem with India is lack of standards.
There are people who are good at programming in both the US and India and people who are bad at it.
The problem is in the US most of the bad ones don't end up getting a CS degree where in India they do. This means there are a lot of people in India who have a little bit of skill and can get a job but not do it that great. Their US counterpart might have switched to business or something else as they are less expected to get a tech (viewed a good a job) related job by their family. Obviously there are more complexities but bottom line its not just the cost it is the quality of work.
To add to this; a lot of companies in India just gather as many people as they can with a CS degree in a building (often 1000s) and hire them out in 'teams' to western companies. This is a valid (currently) business plan which makes them a lot of money. It also gives outsourcing a really bad name, but that does not seem to deter companies from hiring these kind of, let's call them what they are, sweatshops. The idea is definitely appealing; you hire educated women and men, usually they are monitored (often by camera's!) to make sure they site and work 8 hours / day, 5-6 days / week and they have the skills you need. Not happy? You get another person right away! You can expand or shrink your team(s) at any time.
That they are treated like robots sitting in long rows of far too little space and that they are not allowed to get up besides for lunch and tea at set times is not interesting to most; that this kind of environment (not even looking at if they are good at their jobs or not; some are, some are not like you say) is destroying any chance of getting quality anyway is lost on most people who hire. This market is growing as it does sound incredibly attractive on paper. The prices are also still a lot (for programmers you pay around 20-40% of what you would pay in the west, it used to be 5-10%) lower than the same role (on paper) in 'the west'.
I hear some companies actually get work done this way and are very happy with it, growing continuously without worrying about who does the tech; they have 100s of companies to pick from and 100-1000s of employees in these companies. How they manage that, I have no clue, but I do hear a lot of my Indian friends who try to make something 'west' quality in India complain about these popping up a lot and a lot young guys dream of making these, in essence no-risk at the moment, 'brain work' farms.
Yes - this is a common model. But those in the west should also recognize another opportunity: given a couple of months, you can also recruit a great team rather than simply a large one. You just need to do it a little differently than the bodyshops.
There are a lot of good workers stuck in the desk farms described above and they'd love to work for you. The recipe for hiring them:
1. Don't be a dick, your outsourced team here is just as good and deserves the same respect as a US based tech team.
2. Really, see (1). Treat your outsourced team with the same respect you'd give a US based team. Don't be a PHB or a know it all American.
3. Pay above market. Instead of paying $chipotle_wages, pay 2x$chipotle_wages.
I recently helped a startup recruit over here. It was a great team - I'd be very happy to work with such a team in NY or anywhere else. It took about 1 month to recruit them (good luck trying that in the west). Unfortunately they all quit 2 weeks after I stopped being involved - apparently there were failures with steps (1) and (2).
>> I hear some companies actually get work done this way..
This statement and lack of any citations with statistics makes me suspect this as an opinion, not necessarily factual. I am a engineer from Bangalore, India. I worked for a few years with companies that outsource teams to many countries across the world. I lived in Bangalore for over 20 years and I know a lot of people who are in similar line of work. Most software companies provide competitive salaries (according to wages in India based on Indian cost of living, which is lower compared to the US) along with annual leaves, sick/casual leave, maternity leaves, statutory programs like provident fund (retirement benefits in India), gratuity fund etc. Many companies (all companies I have worked with and I know people working in) provide a lot more benefits than the ones I mentioned. I worked with companies that provided facilities like on-campus full time doctors, financial support programs, gyms, swimming pools, libraries, higher education support, employee rewards programs, sports programs, transport facilities etc. I have never heard of CS engineers hired and monitored by cameras to ensure work. I would like some citation on this, and even if it occurred at some place I doubt it's a problem at such a scale that it should be termed that it usually happens.
And, about quality of work, a large portion of the outsourcing projects involve support and maintenance of an existing software/website. Many of such customers do not have software as their primary business e.g. a internal web based software for a huge construction company. Such L2/L3 support work generally tends to be repetitive and does not require highly skilled software programmers. There are lot of companies that work on the same outsourcing model which cost the customers a lot higher and produce high quality work, such companies generally attract the better skilled engineers and customers that require high quality products.
My point, outsourcing software companies in India are definitely not sweatshops. There are sweatshops in parts of India mainly in the textile industry and they most certainly do not hire CS engineers. And, there are good and bad engineers everywhere, it's not determined by where they are from or who employs them.
I didn't say that; I said I see a rise (also in Bangalore) of actual sweatshops (my definition of sweatshops is tainted by the west and especially the EU; I find workplaces where my chair touches my neighbours rather unworkable; I know actual manual labor sweatshops are much much worse than that) with coders; I never said 'Indian outsourcing companies are sweatshops' as I know that's not true at all. I just see a lot of them and it's growing, I believe. And of course it is an opinion; I don't know if anyone does research in this area. I just say what I hear (from friends who own/founded outsourcing companies who live in India, including Bangalore) and see.
I had visited a small company working on their bus booking application. The owner had a big screen in front of him monitoring his employees. My ex-colleague who is now working in TCS says they use camera as well.
I don't really see the problem here. Indians are willing to work under these conditions, which honestly don't sound worse than the US. It sounds like even though they might shrink/grow teams at will, because the building has many teams, the risk for the individual is low. And you said that companies are happy with the work these teams do. So what is the problem?
Indians are willing to work under these conditions => willing or don't (think they) have much choice? And i'm sure rows of long, room wide desks without any separation between 1m workspaces with touching chairs and cameras pointing at you to keep you in your chair is not normal/allowed in the US? It certainly is not over here. I see quite a lot wrong with it. It keeps the prices low, sure. I didn't say the companies hiring them are happy though; I said they keep hiring them because it seems like a good idea and you have this team doing work, you can show the hours they spent, you can show what they did etc to your boss. It's kind of 'secure' compared to, let's say, Elance, where a really good developer(team) suddenly disappears to turn up a few months later with 'sorry, had some personal/company/financial/cosmic radiation issues' leaving you to explain why you hired this loose cannon.
Quality wise I have not seen anything coming from these shops, however that might be OK for departmental (read CRUD; the type MS Access was made for) LoB applications, mobile apps and internal sites.
Yes they do have a choice. Their choices are more limited because they live in a poorer country. On the American companies, didn't you said I hear some companies actually get work done this way and are very happy with it, growing continuously without worrying about who does the tech; Not saying you're 100% wrong on outsource being a safe option for managers, but you really did say that American companies were happy with outsourcing.
If you apply basic microeconomics to this situation, it is actually very simple. The company makes Indian workers better off, American workers worse off, and American companies better off.
I indeed did say happy. Should have the context on my screen when typing replies. You have a point of course; they do have a choice. Sort of. If you are not very talented but you did get a CS degree (which holds for a lot of people), what are you choices really?
Guess the point was that outsourcing is no longer cheap (it is) and I only know about coders as that's what I encounter every day, I'm not thinking call centre employees etc. So it's rather logical why all try to get a CS degree, as the article probably applies well to call centres or manual labor. For CS is see a bright future; I would just like it more if Indian founders would go for nice, high quality startups offering services for 70% of western prices instead of massive factories hiring anything they can get and selling for 30% (and rising).
> The problem is in the US most of the bad ones don't end up getting a CS degree where in India they do.
The problem is of course that the world is placing too much emphasis on degrees and this doesn't scale, because education costs are going through the roof and because degrees are so desirable, the system is being gamed. I see this happening in my own country and everywhere really. Lets take the US as an example - how many software developers skipped college? How many founders skipped college? Quite many, compared with the rest of the world.
This is one of those cases in which you're not seeing the forest from the trees. Do you think those indian companies you're talking about aren't aware that they are routinely hiring mediocre people? Of course they do and they like the ability of doing so, because consulting scales only horizontally - the more people you have, the more profit the company makes. And if universities would get tougher, they would just hire people without degrees and still access the same projects they are accessing today.
"What does it mean for the economies of these up-and-coming world powers? Well, probably the same thing that it means for everyone else: The automators will continue to get very, very rich, while the automated will have to find something else to do."
Or, you know, basic income. Why is the answer to "there are no jobs anymore" always "well, I guess you can starve, then"?
Its almost like a signaling error. A farmer would gladly grow corn in exchange for a tractor and a mechanic would gladly supply that tractor in exchange for corn, but the corn that theoretically could be factory farmed by automation would be cheaper than the farmer can grown and the robot built tractor would theoretically be cheaper than the mechanic can build so neither do anything. Both farmer and mechanic starve and then the automated systems make neither corn nor tractor while the capital owner wonders why no one is buying.
The whole system would be made richer by injecting the small signal a basic income would provide into the negative feedback loop thats keeping it damped.
> Both farmer and mechanic starve and then the automated systems make neither corn nor tractor while the capital owner wonders why no one is buying.
I don't think your math works out. If a tractor is worth more in the market than the corn then the mechanic is better off to sell the tractor and buy corn in the market than trade with the farmer, and vice versa if the corn is worth more in the market than the tractor. Making the trade only makes sense if the tractor and the corn have the same market value, but in that case they could both just as easily sell to the market rather than bartering.
Automation is only a problem when it lowers the price of the things you're selling but not the price of the things you're buying.
I don't know about impulse response and signal filtering, but the Soviets did try to model their economy with linear models. Cosma Shalizi put up a good analysis [1] of why this is very very difficult. Simply put, any kind of "real" economy has so many variables (in the kinds of goods and services, their various quality levels, and the locations in both time and space that goods and services have to be) that any kind of linear programming quickly gets swamped by the sheer number of variables that have to be adjusted in order to compute an optimal outcome. So yes, in theory you can model an economy using a linear system. It's not even an NP problem. But in practice, the computational complexity is high enough (though still within P) that even toy economies with as few as a thousand elements become impossible to optimize with linear programming.
Very possibly, but proponents of a basic income consistently fail to articulate three things: how these monies will be collected, what rationale there is for distributing it (other than the implicit acknowledgement that the alternative is civil unrest) and why it won't be inflationary.
> what rationale there is for distributing it (other than the implicit acknowledgement that the alternative is civil unrest)
A basic income removes the need for a long list of bureaucratic social programs like social security, food stamps, housing assistance, pell grants, etc. etc. It's the free market solution for social welfare programs. You allow individuals to decide what they need rather than having the government decide from the office of central planning.
It also eliminates means testing much to the benefit of the middle class (and simplicity and economic efficiency).
> why it won't be inflationary
Inflation comes from increasing the money supply faster than the size of the economy increases. Inflation would only occur if the money paid out was newly printed. When it comes from taxation the amount of money in circulation is unchanged, only the parties holding it change.
Inflation comes from increasing the money supply faster than the size of the economy increases.
This is a strange Austrian definition and is not widely accepted.
The normal definition of inflation is increases in the value of a basket of consumption. CPI is a good proxy for this over the short term (in the long term CPI becomes useless for this purpose since the basket changes).
If BI increases demand for consumption (as most of it's proponents claim it will), then the price of consumption will increase - hence, inflation.
"If BI increases demand for consumption (as most of it's proponents claim it will), then the price of consumption will increase - hence, inflation."
Increased consumption does not necessarily lead to a long term price increase. Often it results in lower prices due to ability to invest in projects with larger upfront/fixed costs.
The only goods that would necessarily increase in price are ones where the supply is currently at, or close to, capacity, and it is difficult/expensive to increase the supply. This isn't the case for most goods.
1) Many people are currently in jobs producing very low multiples of their cost when they have the ability to produce much higher multiples.
E.g. If JK Rowling spent 10 years writing Harry Potter and spent the next 50 years in total consumption mode she would have still produced far more value than if she had worked in a basic office job for 60 years. How many Rowlings are stuck in low value producing roles?
2) Medium-Large companies are incredibly risk averse to the detriment of the overall market. As such the money they tie up gets very low returns. Forcing a shift in this money into either individuals or into automation attempts would provide far greater returns at an increased risk to a few companies but not an increased systematic risk for the economy.
Inflation is measured by an increase in the price of a basket of consumption, not the value, which is almost unmeasureable. If the size of the economy increases faster than the increase in the money supply then there is a greater demand for money to buy all the new stuff being produced, so money is more valuable, therefore you can buy more with your money, ergo prices fall; all taken with the same amount of handwaving bullshit that applies to any economic argument, of course.
Also, the increase in consumption, from basic income, and hence any direct inflationary effect, is bounded by the level of basic income. For basic income to be worthless the level of inflation on the goods bought by those who are the prime targets of basic income (i.e. the poor) would have to match or exceed the additional cash obtained through the basic income. Inflation in goods and services mostly bought by the rich, due to increased wage pressures, are basically (ho ho) irrelevant.
What is required is an argument as to why the inflation on the price of the relevant goods would be higher than the level of the basic income being used to pay for those goods.
You are correct, I should have said "price" instead of "value". Everything you say about the boundedness of the consumption increase is correct. So we'll get a one time inflation spike.
The main issue I take with your post is this: If the size of the economy increases faster than the increase in the money supply...
With more consumption and less investment, we expect the economy to increase more slowly than in the counterfactual (no BI). So holding money supply constant (which is of course ridiculous), we'd expect more inflation in the BI scenario than the no BI scenario.
The real question here, which is more or less unrelated to inflation: why do we want to shift resources from investment to consumption? Do we have a high discount rate and basically not care about the future?
(If we do have a high discount rate, we should probably shift resources away from long term issues like climate change, education, scientific research.)
> With more consumption and less investment, we expect the economy to increase more slowly than in the counterfactual (no BI). So holding money supply constant (which is of course ridiculous), we'd expect more inflation in the BI scenario than the no BI scenario.
Yes, I agree that it seems like there would be more inflation with BI than without it, though, as I said, that will be irrelevant in policy terms as long as the inflation doesn't exceed the BI cash injection. Presumably the level of BI would be tailored to compensate for projected inflation.
> The real question here, which is more or less unrelated to inflation: why do we want to shift resources from investment to consumption? Do we have a high discount rate and basically not care about the future?
I think the answer to this question comes from the fact that BI is a policy designed to alter the distribution of wealth, rather than the overall level of wealth. You might be keeping the same overall discount rate, but adjusting the distribution of rates across society: increasing it for the poorest in society, and decreasing it for the richest, for no net change. There would, therefore, be no change in the handling of long-term issues.
I think the answer to this question comes from the fact that BI is a policy designed to alter the distribution of wealth, rather than the overall level of wealth.
The issue here is not distribution of wealth, it's consumption. The more we consume now, the less we invest in the future. Do you disagree that BI will increase consumption?
Concretely, we could invest in reducing CO2 emissions, building Tesla factories or developing Tinder for Dogs. Alternatively, we could continue emitting CO2, skip the new Tesla factory and instead just ramp up production in the old Toyota factory, and continue producing goods for poor people to consume.
BI pushes us toward the latter alternative. Why should we favor this?
> The issue here is not distribution of wealth, it's consumption. The more we consume now, the less we invest in the future. Do you disagree that BI will increase consumption?
The point of BI is to redistribute consumption to the lower end of the economic distribution, at the expense of the higher end, not to increase overall consumption, though that might happen as a side effect.
The net increase in consumption minus the net productivity gains will be the cost of BI, paid to increase economic equality. However, I have seen quite a few (in fact I would say most) proponents of BI argue that the "cost" will be negative, that the productivity gains will, overall, exceed the increase in consumption.
A basis for this claim is that the marginal return on consumption for poorer people is higher than for richer people, and so they can more efficiently use the redistributed consumption, leading to higher overall productivity. The issue of consumption is, therefore, only half of the argument, and must always be considered in tandem with productivity.
The answer to your final question in this context is that we should favour BI because it is intended to increase net productivity at the same time as increasing consumption on the low end: we will have our cake and eat it.
I believe the gp is saying that BI won't cause a redistribution of consumption from the high-end to the low-end, but instead of redistribution of investment on the high-end (since consumption doesn't scale linearly with income - probably something logrithmic looking), and this loss of investment will have a much greater negative effect on productivity than any minor increase due to consumption on the low end.
Yes, I think at this point it's really just a difference of opinion as to what the effects of BI would be. My view is that the marginal utility of those dollars spent by the high end on investments is lower than the marginal utility of increased consumption at the low end, especially as the actual amounts involved are not that big. I guess the best way to resolve the issue would be experimental validation! ;-)
> The real question here, which is more or less unrelated to inflation: why do we want to shift resources from investment to consumption?
Putting aside the question of whether a basic income would actually shift resources from investment to consumption, there is a very simple way to offset it. Raise the money using a consumption tax (ideally VAT).
> If BI increases demand for consumption (as most of it's proponents claim it will), then the price of consumption will increase - hence, inflation.
This is a very bizarre argument against BI. You can clearly see how silly it is by applying it to reducing the unemployment rate (or for that matter anything that provides income to the poor) -- if more people have income then consumption will increase and cause inflation.
The reason the argument is silly is that it's way more complicated than that. Even the assumption that BI will cause increased consumption is based on other assumptions about what people want at different income levels. It could be that members of the lower middle class are hungry for an opportunity to start a business and will use the money to invest rather than consume. It depends entirely on the contours of the economy at a specific time and place and is constantly in flux. Investment vs. consumption is also a false dichotomy, because investments just turn into the consumption of the entity selling the investment, and businesses obtain capital by selling products as well as by soliciting investors. So it's really the difference between consumption of consumer goods and services like food and entertainment vs. of business goods and services like commercial equipment and marketing services, and even that distinction is as clear as mud.
On top of that, whether an increase in demand causes an increase in price depends on the supply of the goods in question. There are many products for which this relationship is negative. Where there is no practical limit on the number of units suppliers can produce, having more demand will give sellers more units over which to amortize fixed costs and can thereby reduce the unit price.
This makes the statement "basic income will cause inflation" completely meaningless. What it will do is cause the price of some goods and services to increase and others to decrease, much as any economic change will do. Whether this change will on net cause prices to increase more than decrease (and to what degree) depends entirely on the contours of the economy and on which specific goods and services you're measuring.
But perhaps most importantly, even assuming it would cause inflation in a particular economy, the amount of inflation is necessarily less than the amount of the basic income because of the existence (and likely preponderance) of products with less than perfectly inelastic supply.
You can clearly see how silly it is by applying it to reducing the unemployment rate...
Reducing unemployment will increase demand but will also increase supply. So no.
It could be that members of the lower middle class are hungry for an opportunity to start a business and will us the money to invest rather than consume...There are many products for which this relationship is negative. Where there is no practical limit on the number of units suppliers can produce...
So if I'm understanding you right, BI will work because the rich have a higher marginal propensity for consumption, Giffen goods are common and scarcity isn't real? Ok.
It depends entirely on the contours of the economy at a specific time and place and is constantly in flux.
If that is the case then the usefulness of a BI will also constantly be in flux. I guess your opinions on the topic are also constantly in flux? If not, why not?
> Reducing unemployment will increase demand but will also increase supply. So no.
That's just the same fallacy. Why can you assume the thing the employee is producing won't have less price elasticity than the thing the employee buys with the income, but I can't?
> the rich have a higher marginal propensity for consumption
Your argument is that the rich have a much lower marginal propensity for consumption, enough to really matter. And that may even be true if you're talking about a matter of $2, which a poor person would almost certainly use to buy lunch or the like but would have no effect on a rich person's level of consumption. But if you give a poor person $20,000, now you have to ask whether they aren't going use it to attend college or start a business. It's an entirely different dynamic.
Also, if the money is raised using a consumption tax then it can inherently never come from someone making an investment regardless of their income level, which kind of destroys your entire argument, since it is based on where the money comes from as much as who gets it.
> Giffen goods are common
Nobody is even talking about Giffen goods, that's the demand side. And goods whose total cost is dominated by fixed costs are extremely common.
> scarcity isn't real
Scarcity is often not relevant. The market price of a computer or pharmaceuticals or recorded music is completely divorced from the cost of the scarce materials necessary to manufacture it. There is no realistic volume of DVDs that could be produced that would materially affect the market price of plastic.
> If that is the case then the usefulness of a BI will also constantly be in flux.
Whether and to what degree it causes inflation or deflation would constantly be in flux. That it might possibly cause a small amount of inflation is hardly a condemnation, and it is unlikely to cause a large amount of inflation for the reasons I've already mentioned -- its tendency to increase prices in some products is offset by its tendency to reduce prices in other products.
Because it's right. Because the marginal utility of money is much higher for the poor, and because inequality is inherently harmful over and above the effects that low absolute wealth has on the poor.
> why it won't be inflationary
Even if it is inflationary, basic income can't fail to reduce inequality, because money is fungible. If we go from a world in which A has $1 and B has $0 to one where A has $2 and B has $1, we go from A getting all of the resources to A getting 2/3 of the resources and B getting 1/3 of the resources.
That said, the argument is that basic income increases productivity by a) improving the marginal incentives for people to start working or work more hours b) increasing consumer demand
Instead of spending all their time being wage slaves and buying the $2 boots that fall apart every month, they can actually invest in the $15 boots that last 10 years (thus of maximum utility) and help signal to the boot market that we don't need crappy boots.
Poor people cannot invest in good products, so companies build shitty things that sell because people need to survive, but are a bad long-term proposition.
>what rationale there is for distributing it (other than the implicit acknowledgement that the alternative is civil unrest)
So that we can reduce work pressure and people can have fun with their lives instead of struggling for a living in a world of plenty. I mean, DUH. Why does this even need to be stated in the first place?
That's why I would like a basic income, but it won't wash with most people. Perhaps I should have said 'individual rationale'. Look at it from a conservative point of view (becuase that's where the opposition will come from): why should my hard-earned taxes be used to give people money for doing nothing, just so that they can 'have fun with their lives'?
This isn't my personal outlook, but I'm playing devil's advocate here.
You parent's argument is poorly stated if the desire is to appeal to conservatives. Indeed, many people will object for the reason you stated.
There are a few premises that must be established to make a case for BI.
1. We are approaching a post-scarcity economy.
2. In a post-scarcity economy, many people will lose the ability to support themselves\their families, as whole industries are automated.
3. In the case of massive unemployment, consumption will drop dramatically.
4. Drastic drops in consumption will devastate the economy. This will be bad for everyone. Less wealth, less progress, less investment.
5. Therefore, to maintain economic growth/stability in a post-scarcity economy, we should provide a basic income.
That's the best argument I can formulate. It really has nothing to do with having fun and not being forced to do menial work. Those are fringe benefits.
I strongly agree with this. I'm being contrarian with my questions above (and may do so again in the future) becuase it seems to me that the big obstacles to a basic income are cultural and political, and I'm trying to figure out good solutions to that problem.
As a parallel, consider immigration. From an economic point of view, open borders make a lot of sense because the supply of labor can easily adjust to the demand, so I've wondered for a long time why there shouldn't be free movement of labor as well as capital. Indeed, many people agree with this; I can't imagine you'd find anyone in the US that wanted to adopt China's houkou system, and require people from one state to get a work permit before moving to or taking a job in another state. Given the demographic situation in the US with waves of baby boomers retiring but also living longer the resultant worsening retiree:worker ratio, immigration also makes a great deal of sense as a way to keep a lid on payroll taxes and so forth, and this is coincidentally the last opportunity the US is likely to have to exploit a nearby foreign labor surplus just when it needs one (due to falling overseas birthrates and wage equalization eroding the US demand-side advantages).
Pretty much every economist agrees that more immigration with fewer restrictions would be a good thing for the US. But obviously a sizable contingent of the population just cannot stand that idea and any time such proposals are made in DC the objectors melt the congressional switchboard as quickly as possible to express their displeasure.
So I've given up hope that proposals for a basic income would succeed on the grounds of rationality alone.
I agree with you on the immigration front as well. And I agree that it is probably true that immigration reform/BI will not succeed on rational grounds. It seems to me that marketing/emotional appeals have the most effect on political/social systems.
When I discuss these topics, I always attempt to make a valid argument (the conclusion follows from the premises), and try to change the discussion to the truth of the premises. Everyone wants to debate the conclusion without looking at the actual premises/validity of the argument.
I appreciate a devil's advocate because it forces me to clarify my own thinking, which hopefully helps me clarify it to others.
Incidentally, I'm not sure we are really heading for a post-scarcity economy. That seems the weakest part of the argument to me. Or at least the toughest part to demonstrate conclusively. So, i think there are rational reasons to be against BI as well.
Why don't we join together and stablish UNIVERSALY UBI? We are about to finish citizens initiative in Spain. Switzerland is about to make a referendum. UE is discussing it on parlament... This is a global conversation. What inmigration?
In Spain there is already a model with real data. There is no problem to finance, the main difficulty is politic will, not money.
Since you are not injecting money to the system there is no inflation. UBI is a tool for a redistribution of wealth.
Here is the model in spanish: www.nodo50.org/redrentabasica/descargas/RBnoinerte.pdf
Not everyone says that as the answer. Way to straw-man and present a false dichotomy, both in one sentence.
Or, how about if I claim that there is a certain "group" of people that after being presented with any sort of economic problem pipe-up with a "matter-of-factly" and "know-it-all" attitude that we should: "you know, basic income".
Things are a little more complicated than that, beedogs.
Interesting to read all these comments about the "real" problem. What the article actually SAID was:
"Labor in India and China is still cheaper than it is in the United States, but it's not the obvious economic move that it was just a few years ago: Wages in India have increased about 10 percent annually over the last five years"
In other words, it might seem - I say might, because the article is obviously not a real heavy-hitter with data - that the old idea of wages balancing over regions is coming true. I find this interesting because I used to reject this notion, because I feel labor is actually very static (you can't just freely move to China if the jobs move there), but my economics days pre-date the internet and much of what we can do today via technological advances.
So, I'm not really sure about anything based only on this article, but find this to be very interesting.
As far as the Automation part goes, I think in the short- to medium-run it will simply become a case of "Automating things" is the new hot job for a while.
Purely theoretical, long-run thoughts? We are moving closer to that Utopia of machines doing all the labor, while Joe Man-on-the-street gets a guaranteed yearly salary so he doesn't rebel and kill everyone with money. Unless Running Man is your thing.
There is another interesting side-effect : companies from developed countries are unwillingly training low-wage workers from 3rd the world.
As an anecdotal evidence, the company I'm working for has partially outsourced their customer services (technical maintenance, etc.) to Northern Africa in order to lessen the wage bill. Their problem is the following one : as soon as they find a competent employee and training him, he expatriate himself into Europe and sell his skills for a much better payroll. Now my firm is stuck with incompetent salary men and old-timers which aren't willing to relocate themselves.
Putting commentary on things like this is always tricky. Reality is complicated and perspectives tend to be more impoverished.
I think part of this is actually a narrowing of gaps between middle classes in large cheap labour markets like China and the working poor in Europe and the US, mostly due to the rising middle class wealth in the former.
A second major cause is progressing technology and culture.
"Automotion" is not always this literal version of machines directly replacing humans. A website where you can renew your insurance, buy plane tickets, make a complaint or order a pizza is automation of a sort. It's not necessarily a self driving scooter deliver that pizza.
This is harder to fetishize as an ideology. We are not replacing hand looms with steam powered looms. It's more like we decided to just be naked instead.
I know this is a tough sell but I am going to say it anyway. Automation effects every single person and every single job.
For example, if your job is writing custom software, it becomes progressively harder to find problems that don't already have open source solutions.
Or look at how component marketplaces and open source components or modules increases software reuse. There is not an infinite capacity for software complexity to increase. So that reduces the amount of work to be done simply because solutions are being shared rather reinvented.
Currently this is only working to some extent; there is no sign of software development demand going down because of open source or saturation. It's going up, and fast. I would guess the reason for that is that we don't have any way of truly composing those open (or closed; it doesn't matter for your example; closed source works in the same way; if you could buy it you would) source solutions to do something a company needs. You have to find them, test them, hook them together, test them a lot more, deploy them, test them a lot more and then change them over time. Most companies fail at finding them (and write them themselves); if they do, the first testing is done badly, so after hooking them up the solution won't work as expected etc etc. There simply is no robust way of composing 'software' easily without actually blowing your budget (a few times over) to see if the solution(s) fits.
Intuitively I can see that, feature wise, SugarCRM, Solr, Hadoop, HBase, Postres and OpenERP would be a fit for your company if I could integrate them in a certain way; Google gives you enough clues for people who did this (years ago), so how hard can it be? Hard enough to spend massive amounts of money and then still not even be slightly happy about it. Happy meaning that your 1000s of employees can use it and your company runs on it as you, as CEO, envisioned. Is it more or less costly than writing only what you actually need from scratch? No idea, no-one is going to try that; you try SAP/Oracle/MS or this kind of thing and that's it.
Software development to some extent is a creative process, thus eluding automation in many ways, though not for lack of trying.
Much like book authors, in the general case, can't really "re-use" subplots of one another's stories, software devs can't really, in the general case, re-use one anoher's implementations. Of course there are many more specific situations in which software may be re-usable than there are for subplots in books .. but that doesn't impact the overall argument.
Much like a detective story will have some crime being commited by some perpertrator, harming some victim and being investigated by some detective, an e-mail client will run on some OS have some GUI and exchange some IMAP and SMTP messages. But the creation of the specific detective story and the specific e-mail client still require creative input by some human before they can come into existence.
Or is your argument that there is less need for e-mail clients and detective stories because there already are enough of them in existence? If so, then this is an issue orthogonal to automation itself.
>> For example, if your job is writing custom software, it becomes progressively harder to find problems that don't already have open source solutions.
Open Source is just software, solutions take people. It will continue to be the case for the next 50 to 100 years. The computer industry is still a baby learning to crawl.
At the same time that means we can work at a higher level of abstraction. I see this daily in my work. There is a load of work to be done in providing tools for the none-Western world and that work has barely started, for example. Or environmental management, which hardly uses modern IT tools yet. I am not afraid of running out of work in my lifetime.
Whatever you do good devs are a limited resource, and all that is made to try to walk around the problem worsen it:
- outsourcing ? => You have to compensate in supervision and you lose in quality. (Indians are not bad coders, but there is something called the Babel tower effect that creates a lot of signal perturbation/costs)
- agile? => Trying to cut on correctness and detailed specifications to ship value faster result in insecure useless softwares. Ofc a startup owner does not care of the sustainability of his product because he will cash out a lot of $$ before the problem will happen. But what about the customers and the economy relying on it?
- Web as an UI because web dev is less expensive than GUI devs/shipping? GUI devs then where making atrocious bugs because they were clueless on asynchronuous coding (reentrant code) and money related data still needs to be transactional (transactional is a property that is exclusive of distributed). Devs that understand this class of problems are still few, and Web dev is causing even more problems.
- The Cloud? It has non linear costing! If you x2 your customers you cannot predict your pricing unless you make fat margins, and swap KPEX and slowly linear OPEX for strongly growing non linear OPEX is kind of totally mathematically irrational (except for the one doing fat margins).
- Containers? In 1999 the problem of the GUI was already the dependency Hell. Well, now instead of solving the satisfiability of dependencies (NP complete problem) in one closed system you do it on a set of M containers that still requires internal KSAT solving (yes instead of solving one KSAT, you solve N KSAT coupled to M KSAT). (so we created the DevOps and more security holes!)
When automation can replace people, it means the industry does not requires skilled people. That is not the case.
Can't you see there is a trivial contradiction in the thesis of this article?
Seriously this insanity never ends? IT industry is just bullshiting the rest of the economy to sustain its totally insane model and paying our daily wages.
I would be happy of this waste of money (I am a still a coder) if only people were not starving in the streets and our economies were not suffering and thus creating instabilities all around the world. I long for the internet 2.0 bubble to explode soon so that we can get back to an economy that profits to everyone not only the IT crowd.
"...if only people were not starving in the streets..."
You have a bigger problem with IT then investment banking and international politics?
I am personally very happy that once in a while engineers are getting a kind of fair deal. Of course let's not forget that salaries in Silicon Valley were artificially suppressed for a while in an illegal agreement between the likes of Google and Apple. So being underpaid is what we should be really complaining about.
We are getting paid peanuts compared to the unfair captation of our values through Intellectual Property.
Let me be clear: we are undervalued by our companies, and overvalued when sold to the customers. Have you looked at apples/googles net (official) margin? 20+% Stuff like Danone are 5%. And They have incentive to underestimate their profit for paying less taxes.
A coder is like 40% ROI once you set your monopole.
The title doesn't seem to match the content. Sure there's speculation about automation, but what they cite as actually happening is the outsourced jobs being brought back to have humans here on the proper side of the timezone and language barriers do them.
The business geniuses who foisted this idiocy on us (software professionals) are now saying what we said 10+ years ago: it's an obviously dumb idea that doesn't actually save money.
I keep wondering, say the rise of automation continues at the rate its going right now, eventually eliminating a lot of opportunities, then what happens to the people? how would a good number of the population be able to further earn a living? I think this growth of automation needs to be taken a bit more serious than it is right now. I can envision it causing quite a problem in the society.
Basic income is a proposed economic solution that would change welfare such that everyone receives enough money to survive from the government and is therefore encouraged to work to earn money for greater comforts. It's been suggested that this model of welfare allows people to work less hours with other possible benefits.
I've not studied economics but I would expect there might be other proposals which could also be suitable for a society with far greater population than jobs.
The author of this weak article seems to surf the waves of "robots are taking our jebs" because he brings no proof that the layoff of Yahoo, IBM, Cisco in India are the results of automation or business shrinking or strategic decision about outsourcing.
Also this site hacks the scrolling wheel in a bad way, small scrolls seems discarded.
It is very interesting that - he uses Yahoo layoffs as an example. Because from what I know, by and large Yahoo hires better engineers than Outsourcing firms. And since I have friends who have worked for Yahoo India, the kind of jobs they did - are not going to be automated away until we invent software capable of writing complex programs. In other words - can a robot write/maintain Yahoo maps? Something tells me - we are not there yet.
Overall the article is load of bull. and I don't think author has expertise required to judge what kinda of IT jobs are going to be automated away and what kind don't.
I dont't understand why people think that's bad. That means that workers are getting paid more and are not willing to sell their labor for a low price. Machines make the work that nobody want to do for what it's worth.
Part of me thinks this will lead to make much more apparent the paradox of capitalism: Those with the most money can... make the most money. Over time this means it all gets funneled into just a few families' pockets, until they own everything (which is silly and most likely would not be put up with after a certain extent).
Another part of me thinks that automation has been part of our society for a long time, and that taking it further only changes the kind of jobs everyone has, maybe even promoting equality by eliminating the more menial tasks (and therefore making every worker's skill and experience important, instead of them being just a replaceable cog).
Either way it seems absolutely inevitable in the long term, and I don't see a point in pretending it's not going to happen.