Robots, uber richness, unemployment: Points to keep in mind

I think the statement “points to keep” in mind is currently my favourite thing around … however, I digress and I haven’t actually started the post yet.

Over at the Dim Post Danyl has an interesting point, derived from this post:

If some future entrepreneur invents a labour saving device that makes them a multi-trillionaire but puts dozens of millions of people out of work, should the government redistribute their private wealth?

To put my value judgments on the line, yes I do think that the more technological advancement we have, and the less “scarcity” exists, the more sense it makes to have more redistribution.  However, that is my values – as an economist I want to put them to the side for a moment and think about the idea of allocation objectively.  Here we go:

tl;dr labour saving devices are really just cost reductions – as society adjusts either people are no worse off, or everyone is better off.

A technology comes along …

Lets call this technology awesome robots – these robots exist, and can do everything humans can do, but better.  However, they are all controlled by one dude.

In this case, he doesn’t face scarcity anymore, and given he can make whatever he wants there is no “need” for anyone else to work.  In this extreme situation we have no scarcity!!!!

However, lets say the guy doesn’t want to play dice – does that actually mean that there will be “massive unemployment” of the kind mentioned in the earlier posts?  Well no.

We have one guy that has built himself enough capital stock that it can satisfy all his wants and desires.  However, we still have all the human capital, and the physical capital stock owned by other people – these can still produce just as much as they did BEFORE the robots.  As a result, we don’t have mass unemployment – we have one guy that’s really, really, well off and a bunch of other people who are as well off as they were before …

THIS is the key misunderstanding here – for some reason there is an idea that production gets centralised in this example – but that only happens if the guy that doesn’t need labour does decide he faces scarcity, and he wants to “trade” with everyone else.  And when that happens EVERYONE involved is better off.

Contrary to the dystopians among us, labour saving devices are the name for things that “reduce the cost” of getting something – they make it less scarce (protip, jobs are a cost).  Any “trade” that actually displaces jobs is a sign that there is additional value being created – and that wealth is being shared due to the innovation.  If there was zero job displacement, this would actually be a bad thing in the face of such a technological change.

But why do you believe in redistribution here then!

Fine fine, ok this is me and my value judgements.  The loose description of allocation was me being an economist, the loose discussion of redistribution is me being a person.

In the example above I believe that many technological improvements have a strong element of “social investment” – where there was some investment from society that helped create it.  In that context, there should be some social dividend.

Add to this the fact that, without scarcity, the pricing mechanism doesn’t need to exist anymore – if we have the technology to remove scarcity then it should be utilized so that no-one faces scarcity.  On this note, I don’t think it is possible to element scarcity – but the closer we get to that point, the lower the cost of redistribution … which implies that more of it makes sense from a “utilitarian” framework, where I’m working from a value judgment that people value income sufficiently equally.

Also, if people have invested in specific human capital and the new capital makes it ineffective – then that person loses out even though society gains.  The least we can do is compensate them right.


Anyway – the main point I wanted to make was about allocation.  People still have other capital stock and there ability to work – jobs aren’t magically called down from the heavens, they come about when people want to trade.  So this device either makes no difference, or everyone benefits (in the long run).

The value judgments are my own – and are not meant to detract from this point.

So lets bring on these robots.

7 replies
  1. Kimble
    Kimble says:

    Why do I get the feeling there is a “what if Star Treks replicators and holodecks were real” blog post floating around in the TVHE ether?

    • Matt Nolan
      Matt Nolan says:

      Why does everyone assume we would talk about Star Trek – the authors here are all Star Wars fan boys from way back.

      I guess deep down we all prefer the more dystopian vision of an evil empire, and people walking around in robes fighting each other with bits of light.

  2. Royal Albert Ross
    Royal Albert Ross says:

    But you are fighting the forces of darkness with bits of light, at least this is how I interpret (for example) the discussion under “Economics and the Environment”

  3. Kimble
    Kimble says:

    “and people walking around in robes fighting each other with bits of light.”

    Hmmm, that DOES describe a blog war as well I suppose.

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