Saturday, January 8, 2011

Nation of Slackers

So I was reading an article in Foreign Policy that talks about the current high levels of unemployment. The culprit, it says, is that there were unproductive workers in the economy - which is why even with a high unemployment rate, "real GDP is now higher than it has been in the entirety of U.S. history," excepting the housing boom of 2007 and 2008.

The fact that the United States has pre-crisis levels of output with fewer workers raises doubts as to whether those additional workers were producing very much in the first place.
10 Percent Unemployment Forever?
This conspicuously leaves out productivity growth as a factor. Not so much in the idea that productivity has gone up, but in the idea that productivity never reaches a maximum at any point in time, and that said maximum increases over time - it seems to me that assuming that just because one only needs 10 people to reach a certain level of production now can be taken to mean that you only needed those same 10 people 3 years ago - or ever - requires some backing up. (Especially when the Bureau of Labor Statistics seems to be constantly reporting increases in productivity.) But I guess it's easier to cast people as slackers than to deal with the idea that one of the things that technology does is make labor less valuable - specifically because you need less of it.
Econ 101 is that you have some assets, some resources, and you use them to get things you want. One of the assets you have is your ability to work. But you work in part because that's a way to get other stuff. If there was a way to get other stuff, you wouldn't work so much. You might work, but you'd call it volunteering, leisure; you'd fill your time. Some of that time-filling might be productive, but you wouldn't be doing it because you need the money. This requires that you have other assets, of course. If your only asset is your ability to work, and that asset becomes less valuable, then your portfolio becomes less valuable.
Hanson on the Technological Singularity
Now, What Robin Hanson was talking about is pretty much the doomsday scenario for the working person, the point where technology and artificial intelligence becomes so advanced that you can pretty much replace people with machines in a wide variety of jobs that can't be done by machines now - "We're talking about machines that would do things like give you a haircut--some of the services. Revise your will, sue for you in court, write a script for a movie. Teach economics. You'd put your head in a box and you'd know economics!"

The Hanson podcast is long - while most EconTalk podcasts about an hour, this one is an hour and a half, and I haven't finished it yet. From the partial transcript posted, it seems that they do eventually circle around to this idea of what do people do, when machines can replace them. The answer seems to be find something scarce and control it.

Right now, labor is not scarce. And advances in productivity make it less so every day. And it doesn't take technology to boost productivity - economies of scale do the same thing. If I merge two companies, a certain level of redundancy will be created. The fact that I let go of workers that are no longer needed in the merged company doesn't mean that they were never needed in the separate firms.

An unsaid part of the Foreign Policy analysis is that if all workers were productive, they would create enough goods and services to make employing them worthwhile, because people would purchase all of those goods and services - "If weak demand was the main problem, profits should be collapsing too, but they are not." But I don't know that you can make the assumption that no society will ever reach the point where it can satisfy native demand without the need to employ its entire workforce - that is, that efficiency can never outstrip desire. After all, even during the Great Depression, when the unemployment rate rose as high as 25%, we don't hear anything about shortages - there was enough stuff - just not enough free wealth to purchase it. I think that our confidence in materialism - that we'll always want so much stuff that we'll all always need to be engaged in making it - is misplaced. If we don't plan for a future where production is efficient enough that we don't need all of the eligible workforce, we're going to be in real trouble when it arrives.

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