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Distribution of Wealth in a Robot-Driven World
An anonymous reader sent another piece by Marshall Brain. He continues his examination of a society where most manual labor is performed by machines, idling a large fraction of the current workforce. See his previous piece for background.
Therefore, he misses the key point in his analysis.
PRICES WILL ADJUST TO ACCOMODATE THE NEWLY AVAILABLE LABOR
Since everyone is both a worker and a consumer, losses in income from decreases in the wage are offset by gains from the fact that when labor costs fall then other prices that depend on labor fall as well. What counts is how much in the way of real goods and services you are able to consume in the end, not the monetary income that you earn.
Try a thought experiment. Assume that right now an unskilled laborer can earn a wage of $5 per hour in a service job, say flipping burgers. In equilibiruim, the worker must have chosen the $5 per hour job over some other job that pays less, say washing cars for $4.50 per hour.
A new robot comes along that can perform the job for $4 per hour. The worker is forced to either (1) accept a pay cut to $4 per hour for flipping burgers or (2) find another job at $4.50 per hour in an industry where robots cannot substitute for him or her, such as washing cars.
The worker may be better off. Counter-intuitive? Yes. The worker is making $0.50 less per hour, and he or she can be better off? Yes.
Why? The overall price level must fall, as the cost of burgers has fallen. Working 2,000 hours per year (unrealistic, but makes the math easier) the worker was making $10,000 per year but is now making $9,000 per year. However, the Consumer Price Index will also fall in such a situation -- from a level of 100 to a level of 85 (for example). The worker's new income level is equivalent to $9,000 *100/85 = $10,588.24.
This is admittedly a simplistic and optimistic example. There may be distributional changes as the change in the CPI will depend upon whether the fall in the cost of flipping burger represents a large or small part of consumption. Furthermore, there are second order effects involved because the cost of hamburgers factors into the production of other goods and services -- for instance, if a business traveller can now purchase meals at a lower price, then the eventual cost of a computer might go down as well.
The point is that the introduction of a new technology that displaces workers may or may not end up benefitting them in the end. You can't simply say that because a robot comes along and displaces a person from their job that the worker is definitively worse off. In fact, it is a proven theorem that if you allow transfers from people who don't lose their jobs to people who do, then the net impact of the introduction of labor-saving technology is unambiguously positive for all members of an economy. This is essentially unemployment insurance.
How does this work? In the worst case, all of the people who were flipping burgers are now unemployed and are earning zero. However, the output of goods and services is exactly the same as before. The people who still have jobs are now unambiguously better off by an amount that is equal to the total of what the buger flippers used to consume. That amount can be taxed and transferred to the now unemployed burger flippers, and everyone is at the same level of consumption as before. Everyone is at least as well off as before the introduction of the new technology, and the burger flippers are better off since they now have 2000 hours of extra leisure time per year. If even one of the burger flippers finds new productive work, then the economy as a whole is producing (and thus consuming) more goods and services than before, and the transfers can be adjusted so that everyone is able to consume more than before.
In fact, it has been shown that in actual situations it costs us more to save an obsolete job than it does to pay the worker to sit on his or her hands. Case in point, the U.S. steel industry. It has been estimated that for every steelworker's job saved through the imposition of tariffs and quotas, it cost consumers in the U.S. $110,000 per year. Since the average steelworker only made $50,000 per year, it would have been much cheaper to simply pay t
Nationalsozialistische Deutsche Arbeiterpartei, translated to English MEANS National Socialist German Worker's Party, you mongoloid lummox.