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Economist Branko Milanović: Three Fallacies That Make You Fear a Robot Economy

Robotics or fascination with anthropomorphism

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By Branko Milanović

Recent discussions about the “advent of robots” have some rather unusual features. The threat of robots replacing humans is seen as something truly novel possibly changing our civilization and way of life. But in reality this is nothing new. Introduction of machinery to replace repetitive (or even more creative) labor has been applied on a significant scale since  the beginning of the Industrial Revolution. Robots are not different from any other machine.

The obsession with, or fear of, robots has to do, I believe, with our fascination with their anthropomorphism. Some people speak of great profits reaped by “owners of robots”, as if these owners of robots were slaveholders. But there are no owners of robots: there are only companies that invest and implement these technological innovations and indeed they will reap the benefits. It could happen that the distribution of net product will shift even more toward capital, but again this is not different from the introduction of new machines that substitute labor—a thing which has been with us for at least two centuries.

Robotics leads us to face squarely three fallacies.

1. The first is the fallacy of the lump of labor doctrine that holds that the new machines will displace huge numbers of workers and people will remain jobless forever. Yes, the shorter our time-horizon, the more that proposition seems reasonable. Because in the short term the number of jobs is limited and if more jobs are done by machines fewer jobs will be left for people. But as soon as we extend our gaze toward longer-time horizons, the number of job becomes variable. We cannot pinpoint what they would be (because we do not know what new technologies will bring) but this is where the experience of two centuries of technological progress becomes useful.  We know that similar fears have always existed and were never justified. New technologies ended up creating enough new jobs, and actually more and better jobs than were lost. This does not mean that there would no losers. There will be workers replaced by the new machines (called “robots”) or people whose wages will be reduced. But however these losses may be sad and tragic for individuals involved they do not change the entire society.

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2. The second “lump” fallacy which is linked with the first, namely our inability to pinpoint what new technology will bring, is that human needs are limited. The two are related in the following way: we imagine (again, looking only at any given moment in time) that human needs are limited to what we know exists today, what people aspire to today, and cannot see what new needs will arise with a new technology. Consequently we cannot imagine what will be the new jobs to satisfy the newly created needs. Again history comes to the rescue. Only ten years ago we could not imagine the need for an intelligent cell phone  (because we could not imagine it could exist) and thus we could not imagine the new jobs created by the iPhone (from Uber to ticket sales). Only 40 years ago, we could not imagine the need to have our own computer in every room and we could not imagine millions of new jobs created by the PC.  Some 100+ years ago we could not imagine the need for a personal motor car and thus we could not imagine Detroit and Ford and GM and Toyota and even things like Michelin restaurant guide.

Even best among the economists, like Ricardo and Keynes (in “The economic prospects of our grandchildren”) thought that human needs are limited. We should know better today: the needs are unlimited and because we cannot forecast the exact movements in technology, we cannot forecast what particular form such new needs will take. But we know that our needs are not finite.

3. The third “lump” fallacy (which is not directly related to the issue of robotics) is the lump of raw materials and energy fallacy, the so called “carriage capacity of the Earth”. There are of course geological limits to raw materials simply because the Earth is a limited system. But our experience teaches us that these limits are much wider than we generally think at any point in time because our knowledge of what earth contains is itself limited by our level of technology. The better our technology, the more reserves of everything we discover. Yet accepting that X is an exhaustible energy source or a raw material and that at the current rate of utilization it will run out in Y years is only a part of the story. It neglects the fact that with the rising scarcity and price of X, there will be greater incentive to create substitutes (as inventions of sugar beet, synthetic rubber or fracking show) or to use a different combination of inputs to produce the final goods that now use X.  Indeed, the cost of the final good may go up  but here again we are talking about a change in some relative prices, not about the a cataclysmic event. Earth carriage capacity which does not include development of technology and pricing in its equation is just another “lump” fallacy.

Some famous economists like Jevons who collected tons of paper in the expectation that the trees would run out entertained the same illogical fears. Not only did it turn out that, with many thousand (or milion?) times greater use of paper, the world did not run out of trees—Jevons simply, and understandably, could not imagine that technology would enable recycling of paper and that electronic communications would substitute for much of what paper was used for. We are not smarter than Jevons because we too cannot imagine what might replace fuel oil or magnesium or iron ore, but we should be able to understand the process whereby these substitutions come about and to reason by analogy.

Fears of robotics and technology respond, I think, to two human frailties. One is cognitive: we do not know what the future technological change will be and thus cannot tell what our future needs will be.  The second is psychological: our desire  to get a thrill from the fear of the unknown, from that scary and yet alluring prospect of metallic robots replacing workers in factory halls. It responds to the same need that makes us go and watch scary movies. When we do not go to a movie theater we like to scare ourselves with the exhaustion of natural resources, limits to growth and replacement of people by robots. It may be a fun thing to do but history teaches us that it is not the one that we should rationally fear.

Originally published at Global Inequality Blog.

2016 September 12


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  • Duncan Cairncross

    This must be the thinnest least well thought out article on this site!

  • Hannes Radke

    I have serious issues with all 3 “fallacies”, but especially the 2nd and 3rd.

    2nd: Agreed that our needs are not finite, the monetary manifestation “demand” can easily collapse and never recover over a single humans lifetime, given the right circumstances. How well is humanity equipped to deal with this? Which force of nature guarantees that human needs can be converted into demand? None. None at all. Mass deprivation can be a pretty stable social condition. See parts of Africa, India, eastern Europe and Sao Paolo,or the Rust Belt.

    3rd: No advance in technology will change the laws of thermo dynamics (except smth really exotic, which might never be discovered). Any excessive use of force heats our atmosphere up. See the concept of “heatsinks” and how difficult it is for a celestial body to shun excess heat. This might be a very long term concern, but given the advances and climatic changes we witness, maybe not so long run at all.

    A nice NASA study found recently there are only 2 existential threats to a civilisation. Social inequality and ecological exhaustion. Just swiping these concerns aside as fallacies … not really intellecutally satisfying.

    • toblerone

      All good points. Add to this the mere replacement of lost jobs isn’t the problem but rather the rate of replacement. I suppose if the US or Canada was more like Denmark and spent more on retraining we might worry less about the rate at which humans are able to fill new jobs, but there is no reason to suppose that retraining will be the preferred solution. As with computer software programmers there may be a best before date.

    • Gear Mentation

      The “heat” thing is not a concern for any economy we’re likely to have in the next hundred years or so. After that our technology will be so advanced as to make speculation useless.

  • Ben Mulvey

    This is just another fail when it comes to addressing this issue, because it doesn’t face up to the big question.

    When AI & Robots can do most existing jobs humans do now, they will also be able to do most of the future jobs that haven’t been invented too. Indeed, they will be more capable than humans for these jobs, as they develop exponentially in capability in a Moore’s Law fashion.

    In a competitive free market economy – which businesses are viable and survive?

    The one who’s employees cost pennies per hour to employ, work 24/7/365, don’t need health & social security contributions & are constantly doubling in power and halving in cost – or the one that employs humans?

    It’s impossible to imagine a future, where Robots/AI can do most jobs & free market capitalism simultaneously supports the majority of humans with jobs & income in a self-sustaining economy.

    Sorry Branko – you’ve just joined the long list of Economist’s who’ve tried & failed to answer this question. I’ve spent a long time with the field of Futurology & I’ve never once found a single Economist credibly explain how this could work.

    I’m an optimist, this will all end up being a huge boon to humanity & we’ll look back at today as the bad old days, but I’m sure whatever we end up with when Robots/AI doing most jobs, it won’t have free market capitalism as the predominant economic system.

    • Gear Mentation

      Yes, that’s true. But we will be enhanced, so our own capabilities will be equal.

      But we’ll have to have a basic income. Economists should look at how slave economies functioned, because that’s how economies with robot workers could function. Or at least there might be some insight.

      • Galileo2

        Yes, it is historically well detailed the effects of sudden massive importation of slaves had on the Roman middle class, for example.

        it was not good either for the short term or the long term. It led to the fall of the Republic.

  • MigT

    Whether human wants are infinite is irrelevant. Demand – willingness and means to pay – is limited in a market system, and will be further limited as AI and robots replace human workers. Whether or not we can imagine what stuff we might want in future is also irrelevant if we’re no longer needed to make it.

    The idea that because something hasn’t happened before, it won’t happen in future is itself fallacious. There are good reasons to think it will, which this author doesn’t really address.

    • Gear Mentation

      We can save the market system. After all, there’s nothing wrong with capitalism per se, just the way it manifests. All we need is a basic income.

  • GaryReber

    The author states that “But there are no owners of robots: there are only companies that invest and implement these technological innovations and indeed they will reap the benefits.” What? The companies (corporations) are OWNED by individuals, and that OWNERSHIP is concentrated among a relative few who OWN the bulk of the stock (title). As technological development continues, as it has since the Industrial Revolution, the non-human factor will continue to obsolete jobs affecting far more workers than the new jobs resulting. The solution is to institute financial mechanisms that simultaneously create new capital asset OWNERS simultaneously with the growth of the economy. In other words, EVERY CITIZEN AN OWNER. This can be accomplished by using INSURED, INTEREST-FREE capital credit, repayable out of the FUTURE earnings of the investments, without the requirement of past savings, have to have a job or having any income at all. See the Capital Homestead Act (aka Economic Democracy Act) at the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

  • Gear Mentation

    I’ve been seeing so many FB posts about Evonomics, but haven’t shared them because I suspected that in the end the whole thing would commit the basic and extremely pernicious fallacy of “limited resources.” Thank you for putting that fear to rest.

  • Galileo2

    This economist himself finds himself promoting the Labor Content Fallacy: There is no law in economics that require that goods/services be produced by human labor, so to assume otherwise is to engage in fallacious thinking.

    There will be workers replaced by the new machines (called “robots”) or people whose wages will be reduced. But however these losses may be sad and tragic for individuals involved they do not change the entire society.

    That is another flat out wrong fallacy of economists that they just like to tell themselves to make everything else they say ‘work’. IF enough people are effected in short enough amount of time (say three-five years), that can very well impact society. With truck drivers losing their jobs in a span of a few years alone, for example, that is going to have a big impact on society.

    And most employees between now and 2030 WILL be effected. Mostly towards the end of that deadline, all compacted.

    Which brings up another issue with this author and other economists. They are usually dense when it comes to being ‘accelerating change aware.’ That is, they think such changes will be gradual via a linear nature of change. Those changes will not. They will be more exponential-like. So, the changes at first appear to be linear and then all of a sudden spike up and spike up fast an a highly accelerating rate. See the growth curve of the adoption of cell phones for a good example. That was pretty fast.

    So the delta between the short-term horizon and the long-term horizon shortens as far as the amount of changes happening and their effects. 90% of millions of truck drivers losing their jobs within a 2-3 year timeframe with remaining 10% right after that means lots of unemployed people waiting around for replacement jobs to be created for them in the ‘long-term’. They won’t have that time. And most of those new jobs will require high skills and education. Not to imply that truck drivers are uneducated idiots — far from it — but I don’t see too many of them getting their Ph.ds in genetic engineering or software development during that time either, do you? Apparently Branko Milanović thinks that some magic wand will be waved and so such a thing will actually happen.

    So, Branko Milanović does a good job being the ‘good economist’ to make his case in the perfect make-up world of economists. But that make-up world won’t reflect reality at all as history shows. It took a full generation or two for the kids on the farms to move out to the cities during the industrial age. When commercial airplane service started in the 1910s until the 1960s when jet travel replaced rail for passenger service, someone working for the railroads could live his entire career out while his son could take up new skills like becoming a nuclear engineer or airline pilot, etc. Today, no way. Scope of change is happening way too fast as it is and that timeline will only shrink much further.

    THIS is what economists don’t get and this is myopia is going to damage the credibility of their profession in a big way unless they change their thinking to update with the reality of the times.