Robots Won't Own You. You'll Own the Robot.
The robots are not taking our jobs. Yet.
There are few if any signs of this occurring. If robots were replacing us, we’d see significant increases in productivity, but productivity growth is slow everywhere in the world right now. If a mass replacement of humans by machines were happening it would probably cause a large investment boom. Instead, we're seeing an investment drought in rich countries, as companies sit on cash. In addition, there is little evidence that capital-labor substitutability -- the economics term for employers’ ability to replace humans with machines -- is increasing.
But that doesn’t mean that the rise-of-the-robots scenario is unthinkable. It isn't happening today, but it’s something that might take place 50, 75 or 100 years in the future. It would be an unprecedented change and maybe not all that worrisome: previous technological revolutions always ended up making the mass of humanity more valuable, not less. But technological progress often causes unprecedented things to happen. The Industrial Revolution was unlike anything that had gone before -- it broke all the so-called laws of economics. Those laws could be broken again.
So while it isn't worth panicking about, it might be useful to think about how to respond if this scenario does end up materializing.
The best depiction I’ve seen of this scenario isn't in any economics paper, but from a web comic. In early November, Saturday Morning Breakfast Cereal -- a comic written by Zach Weinersmith -- gave a chilling depiction of how it would work.
In the past, machines always complemented humans instead of replacing them. One human operating a machine tool could produce more than several humans using their hands on an assembly line. One human typing at a computer could produce more than several humans writing paper documents and calling each other on the phone. But capital-labor substitutability was still limited -- you needed a human to operate the machine tool or the computer.
But as artificial intelligence becomes more sophisticated and widespread, it may be able to eliminate the need for human control entirely. Imagine totally robotic factories and offices in cyberspace. Artificial intelligences would produce whatever company owners requested. Capital-labor substitutability would increase dramatically, and humans would provide nothing except executive decision-making.
Of course, with such smart AIs to do our bidding, any human could easily be a company owner. But the people who were company owners at the beginning of the artificial-intelligence revolution would start off in a privileged position, able to outcompete new entrants in winner-take-all markets. So the people who started out with the capital would amass essentially all the wealth in society, while those who started out with less would be out of luck.
In other words, the end of labor, combined with the rise of winner-take-all markets, could cause a huge runup in inequality.
Many people argue that since there will always be demand for more products, there will always be more work for humans to do. Weinersmith’s cartoon depicts a world in which humans are pushed into ever more absurd, esoteric jobs. The problem is that such jobs will not necessarily pay a living wage. There is no iron law of economics that says that wages always go up. If capital-labor substitutability increases dramatically, wages may fall a lot.
Humans, like machines, cost resources to create and maintain. Raising kids is expensive -- food, shelter, medicine, education and much more. Adults consume even more. If wages ever fall below the level needed to maintain human existence, then either humans will survive via redistribution, or they won't survive at all.
Would income redistribution be the answer? With a society of robot-provided abundance, wouldn’t it be easy to simply provide all the low-earning masses with a basic income? Unfortunately, redistribution depends on politics, and in an age of robots, the masses may have very little power to compel the wealthy to give up even a small sliver of their wealth. “Once the military became robotic,” Weinersmith writes, “revolution became impossible.” It’s an extreme scenario, but not out of the realm of possibility.
Since there is no guarantee that humans would have any power in a robot future, income redistribution is a shaky solution. A better idea might be redistribution of corporate ownership itself. If everyone in the country owned index funds, it would provide people with a second income -- an income from capital, not labor. That would act as an insurance policy against the economy-wide replacement of labor with capital.
Interestingly, the biggest proponent of this type of policy was former President George W. Bush. Although Bush’s idea of an “ownership society” didn’t get much traction, it might one day become the only way to maintain any semblance of equality. His idea of replacing Social Security with individual investment accounts was a form of mass stock ownership. Although that plan would have dramatically increased risk for American retirees, we may someday want to have the government create individual stock accounts in addition to Social Security.
Of course, as I stated before, this is all highly speculative. The rise of the robots hasn't happened yet, and there are no signs that it will occur anytime soon. But if it ever does, we should be prepared to give all of humanity an ownership stake in the new automated world.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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