August 17, 2016
Steve Pearlstein used a Washington Post column to correct an earlier scare story about robots taking all the jobs by fellow columnist David Ignatius. Pearlstein gets the story mostly right. If robots reduce the need for labor then someone will have additional money to spend. Either workers will get higher wages or prices of the goods produced by robots will fall, allowing people to buy more stuff. Most likely it will be some combination, but there is no basis for assuming that there will be no demand for workers. (This is true even if it goes to profits, since rich people will hire more help.)
There are two important qualifications to this argument. First, there is no evidence of massive displacement of workers by robots. This is exactly what productivity is about. Productivity is how much the economy produces for each hour of human (non-robot) labor. If robots were taking jobs in large numbers then productivity growth would be very rapid. In fact, productivity growth has been very slow. It actually has been negative in the last three quarters.
Of course this could change, maybe the robots are lurking just around the corner. But for now, just about all the economists I know are worried about the slow pace of productivity growth, not a huge surge in productivity displacing tens of millions of workers.
The other point that needs to be plastered across the top of Trump tower, is that when people benefit from “owning” technology it is because the government has chosen to subsidize their innovations. The issue here is patent protection, which is a main reason why the benefits of technology often are not widely shared. Patents give their owners monopolies over technology which allows them to charge prices that can be several thousand percent above the free market price.
There is an obvious rationale for patents — they give individuals and corporations an incentive to innovate. But in the last four decades we have implemented a variety of policies designed to make patent protection stronger and longer. As a result, more money is going to people who own patents. This money comes out of the pockets of the rest of us.
It is possible to argue that the strengthening of patents has been justified by its effect in promoting innovation (weak productivity growth suggests otherwise), but the fact this was a policy choice is not arguable. So when someone says that “technology” has caused inequality they are displaying their ignorance. Insofar as new technologies have been responsible for an upward redistribution of income, it has been the result of the political decision to provide these technologies with patent monopolies.
In other words, it is the folks in Congress and the White House who are responsible, not the robots.
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