Tuesday, May 30, 2017

Robots are going to radically reduce the need for human workers and we are about to run out of workers and desperately need people to have more babies.

What’s wrong with this picture?

In the mainstream corporate media there are currently two major themes being pounded home.  They are mutually contradictory, and yet somehow no note is ever made of this.  They are also, each of them, wrong.

We hear over and over that robots are soon going to radically reduce the need for human workers.  But if this is so, surely all those other articles demanding that we need more and more people because we are ‘running out’ of workers and we need a lot of young people to be working and supporting older retirees, are wrong.  But these robot apocalypse articles never make any mention of that.  These articles are therefore at best intellectually incoherent, if not downright fraudulent.

We hear over and over that we need more and more people because we are ‘running out’ of workers and we somehow need a lot of young people to be working and supporting older retirees.  But if robots are going to vastly reduce the need for human labor, surely having fewer workers would be a good thing?  Or, at least, not a bad thing.  But these demographic apocalypse articles never make any mention of the robot apocalypse articles.  Therefore these articles are also at best intellectually incoherent, if not downright fraudulent.

Automation can indeed significantly affect some part of the labor force, but only in a few places.  Automated call centers, for one, and no matter how cheap labor gets, nobody is going to mass-produce nails by hand any more.  But, despite over a decade of intensive development, the “Roomba” robotic vacuum cleaner remains an expensive toy that has had zero impact on the market for janitors and maids.  The research on self-driving cars and trucks remains interesting, but so far has replaced exactly zero professional drivers.  And so on.

It should be noted that while we still don’t know how to make really trustworthy self-driving cars, we have had the ability to make fully automated shirt-sewing machines for decades.  But almost all of our clothing is still sewn by hand in the third world by people making something like 50 cents an hour.  In general, automation is expensive.  It doesn’t matter if an automated shirt-sewing machine can sew more shirts per hour than ten of the fastest humans ever, if it costs a million dollars up front, and $50,000 a year in service contracts, and insurance because a million-dollar machine is not disposable if it breaks, and you might lose your investment entirely if the demand for shirts falls...  If the total amortized cost per shirt is greater using automation than using disposable 50-cents-an-hour human labor, then as long as it is available, we will use disposable 50-cents-an-hour human labor.  As we are.

Some electronic gadgets are getting cheaper (not iPhones!).  Industrial-grade electromechanical devices that can stand up to sustained use are NOT getting cheaper.  Commercial airplanes are not getting cheaper, nor are heavy trucks, or industrial milling machines, or oil-drilling platforms, or medical x-ray machines.  Why do we think that robot farm-workers are going to be 3D printed for $2000 a pop?

Automation does not reduce wages.  Automation is a response to expensive labor.  Because automation is also generally expensive, the ability of automation to reduce wages is self-limiting: if workers were completely replaced wages would fall to the point of making the automation non-economic (I leave working out the equilibrium kinetics as an exercise for the reader).

The notion that any society could possibly ‘run out’ of workers is simply false.  It has never happened, and it never can happen.  What does sometimes occur is that the economy ‘runs out’ of people who have no option but to work for a poverty-level wage.  This is otherwise known as prosperity. 

At least for societies that do not have an open frontier, and excepting a few tiny countries with populations that are small in the absolute and have stumbled onto a pot of gold (Saudi Arabia and oil; Hong Kong and acting like a toll booth shipping goods made in Chinese slave-labor factories, sticking a ‘made in Hong Kong’ sticker on them, and collecting a percentage), all prosperous societies have a record of FIRST limiting their fertility rate, and THEN slowly developing real per-capita wealth.  No society in all of recorded history has ever gone extinct for want of people having babies; but many societies have reacted to economic downturns with temporary reductions in the fertility rate.  The United States during the great depression had a very low fertility rate, but it rebounded after things got better, and did not result in America ‘running out’ of workers at all.

Now today young Americans are having a harder time getting their careers started, and their fertility rate has declined somewhat.  Left to themselves, eventually the job market would improve and fertility rates would also modestly increase.  It’s just that by importing the surplus labor of the overpopulated third world, wages are being held low, and the native fertility rate is also being held low.  But we are not importing foreign workers because Americans are refusing to breed: Americans are having fewer children because importing foreign workers has reduced their job prospects. 

The notion that we need a high fertility rate to maintain elderly retirees is simply absurd.  In Switzerland there are something like three or four workers per retiree.  But a slowly growing population has over time allowed the accumulation of significant per-capita wealth.  GNP per capita per year is about $80,000 U.S. Dollars.  It simply does not matter what fraction of the workforce is retired: there is a lot of per-capita wealth.  Oh, retirees and active workers may squabble about how to divide the pie, but it’s a big pie with plenty for all.  If you can maintain a high GNP per capita then the fraction of retirees does not matter.

On the other hand, in places like Nigeria, high sustained fertility rates have driven per capita GNP down to about $1,000 U.S. Dollars or so.  Sure, the young age distribution means that there will be many young workers for every older retiree, but so what then there is simply not enough to go around?  And while there will be many young workers per old retiree, there are also many young children per worker: the total number of dependents per worker may even be higher in Nigeria than in Switzerland!

Pre-WWII, the Japanese government deliberately created a population explosion, and their society very nearly collapsed into chaos.  In the poverty of post-WWII Japan, the fertility rate fell, and Japan slowly achieved a very high standard of living.  By the standards of anthropology, which considers longevity to be the single most important indicator, Japan is now the most prosperous major country to ever have existed in all of human history. 

However, while their stable population has allowed the accumulation of significant per-capita wealth, the consequences of the previous population explosion mean that the absolute population density remains quite high.  Resources are expensive, and Japan has to trade in increasingly competitive markets for manufactured goods to survive.  And yes, their aging society will have some costs and will force some tradeoffs, and there are other ways to mess up: for the last decade or so their financial system has been a disaster.  Japan is not utopia and will face many challenges in the decades to come.  But.  If Japan’s population were to remain stable or even slowly decline to only (only!) 80 million or so over the next century, so what?  It’s hard to see that as a disaster for anyone other than a landlord or rentier.  Japan is not that big a place, and 80 million is still more than enough people for all practical purposes, and a century is a long time for things to maybe improve and then the fertility rate will maybe tick up a bit.  But what if the Japanese instead had ‘enough’ babies to suit the rich?  Well, check out how well that’s worked in Bangladesh, or Yemen, or Egypt, or the Philippines, or Syria, or Mexico, etc.etc.  

We keep being told that we need a high fertility rate to afford a decent social security system for the elderly, but then, why is it that in high fertility societies social security systems are either abysmal or absent altogether?  Why is it that, overwhelmingly, societies with decent social security systems have a long history of moderate fertility rates? 

Who are you going to believe, economists whose livelihoods are dependent on saying what the rich want said, or your own lying eyes?

The elites in many prosperous countries are increasingly using imports of third-world refugees to flood the market for labor, thus driving wages for the many down and profits for the few up.  But the elites don’t want to come right out and say that, so they insist they are doing this to eliminate a ‘labor shortage’ or to ensure the long-term viability of the social security system.  Then when this policy inevitably drives wages down, they need a scapegoat, so they blame robots – oh those nasty robots are making human workers obsolete and so that’s why wages are falling.  The fact that these two assertions are mutually exclusive apparently does not bother professionals whose livelihoods depend on vigorous unrelenting doublethink.

No, we are not going to run out of workers.  No, robots are not going to create mass unemployment.  Rather, the last century of cheap-labor pro-natalist and pro-mass immigration policies by governments across the world will, slowly and erratically but increasingly surely, reduce the vast bulk of the human population to a third-world style level of miserable bare subsistence.  That is what we should worry about.  But because short-term this cheap labor maximizes the profits of the rich, we can’t talk about it. 

Intellectual incoherence is a strong indicator that a fundamental truth is being denied.

In the essentials, Malthus (and Mills and Keynes and Franklin and Ma Yinchu etc.etc.) were right.

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