Will robots and automation necessarily cause deep unemployment?

Not any time soon.

Automation, and increasing labor productivity, has been happening for well over 200 years. So, we need to ask: how is this different?

People in developing countries need a lot more hard goods, including housing, transportation, etc.  We in OECD countries have enough goods, but their quality and features can improve. We don't have enough services - there's lot of room for growth in healthcare, eldercare, education, etc, without unemployment.  Healthcare has a lot of room to expand, given how much illness there is, and how many people die prematurely (let alone the need to increase our maximum lifespan), so there's a need for a lot of research beyond direct healthcare services.  We have a lot of work to do fixing environmental damage (fisheries, ocean acidification, climate change, species extinctions, etc, etc).

We don't have to worry about finding enough work for everyone to do any time soon. So, automation and robots won't be a primary cause of a structural unemployment problem.

Robots will cause the same transitional problems we have always had: what to do with farm workers, horse carriage manufacturers, railway workers, auto workers, etc, etc, etc.

But, the rate of labor productivity growth isn't accelerating. To the contrary, it's a bit lower than the post-WWII rates. http://www.bls.gov/news.release/prod3.toc.htm  That means that automation isn't putting people out of work faster than the normal historical rate.  Also, we're not seeing any signs of large-scale shortages of people in new industries. On the contrary - medical researchers complain bitterly about a shortage of grant funding - only about 15% of grant applications are currently being accepted.  There are anecdotal reports of shortages of programmers, but this doesn't show any signs of relieving unemployment of new college graduates.  Certainly there are no signs of employers creating on the job training programs - instead, they seem to just complain that there's a shortage of ready-made candidates - this doesn't seem serious.

Lawrence Summers says: "The premium to higher education has plateaued over the last 10 years. We see evidence highly skilled workers have less rapid career trajectories and are moving into less skill occupation if anything. Productivity is not growing very rapidly, and a lot of the employment growth we’ve seen in the past 15 years has been in relatively low education, in-person service occupations." http://www.nextnewdeal.net/rortybomb/one-where-larry-summers-demolished-robots-and-skills-arguments

I'd say the current problems are social, not technological: elites have managed to take more power, and weaken unions and government regulation. Thus, middle class wages have stagnated, and unemployment has grown, while more income is going to capital (as we see in financial rates of return that are higher than overall GDP growth).  Capital income mostly goes to the wealthy, who tend to save their income and not consume, thus causing a shortage of aggregate demand.

Here's Krugman:  "

So what is really going on? Corporate profits have soared as a share of national income, but there is no sign of a rise in the rate of return on investment. How is that possible? Well, it’s what you would expect if rising profits reflect monopoly power rather than returns to capital.

As for wages and salaries, never mind college degrees — all the big gains are going to a tiny group of individuals holding strategic positions in corporate suites or astride the crossroads of finance. Rising inequality isn’t about who has the knowledge; it’s about who has the power.

 

Now, there’s a lot we could do to redress this inequality of power. We could levy higher taxes on corporations and the wealthy, and invest the proceeds in programs that help working families. We could raise the minimum wage and make it easier for workers to organize. It’s not hard to imagine a truly serious effort to make America less unequal.

 

But given the determination of one major party to move policy in exactly the opposite direction, advocating such an effort makes you sound partisan. Hence the desire to see the whole thing as an education problem instead. But we should recognize that popular evasion for what it is: a deeply unserious fantasy."

 

http://www.nytimes.com/2015/02/23/opinion/paul-krugman-knowledge-isnt-power.html?mabReward=R3&src=recg&mabReward=R3&module=Ribbon&version=origin&region=Header&action=click&contentCollection=Recommended&pgtype=Blogs

Can death be cured?

An interesting article http://earlywarn.blogspot.com/2011/07/us-survival-statistics.html#more discussed marginal returns from medical care. I'd describe the curves shown as "squaring the curve". It's what happens when survival rates for individual illnesses improve, but the underlying problem of the aging process isn't addressed.

Most major causes of death grow exponentially with age - roughly 7% per year. Demographers will tell you that reducing the death rate from any given illness by 50% will give a pretty marginal improvement in overall longevity because the death rate from other things will grow very quickly and replace most of the improvement. In fact, reducing the overall deathrate by 50% would only increase lifespan by about 10 years.

The answer: research aimed at aging itself. This would be much, much more cost effective than trying to hold back the tide of individual illnesses. Unfortunately, drug companies don't want to tackle that - they publicly say so.

Now, is aging curable? Of course. The human body is not supernatural - it's an engineering marvel that can be reverse engineered and understood.

Why do small mammals like mice live 4 years and very similar small mammals like bats live 40 years? Why do some birds live 6 years, and other 60 years? There are obviously very small genetic differences that can be understood and used to develop drugs or genetic treatments.

To believe otherwise is, IMHO, a religious statement.

Is more spending on medicine good?

It's often said that the US spends twice as much as other countries like Canada and the UK, while it's residents live no longer.

So, are we wasting our money?

No.

Simple comparisons are seductive, but misleading.

The US has significantly more obesity than the rest of the world (the health effects of this - diabetes, heart disease, etc are commonly known as "diseases of affluence - this isn't a moral judgement, it's a reflection of the fact that affluence brings more and cheaper food, and less physical labor), and that obesity has been rising during the last 30 years. Obesity has a very large effect on lifespan and morbidity - this has to be taken into account in any analysis.



Further, the US funds drug development for the rest of the world.

Bottom line: as agriculture and manufacturing shrink due to continuing growth in labor productivity, goods give way to services. Which service sectors of the economy would you consider as value added? Which would you target for expansion: entertainment, law, finance, or medicine???

Medical research

I read http://cassandralegacy.blogspot.com/2011/07/peak-university.html and thought the following:

As best I can tell, medical research is being stifled by "careerism", in which researchers produce as little as possible about a topic which is as narrow and limited as possible, in order to publish a string of papers just important enough to publish. That way they can get the maximum number of papers from the minimum of real research, and preserve and extend their career.

This has the effect of delaying real breakthroughs as long as possible.

What do you think?

I'm testing the Google Docs publish feature.

Let's see if it works:

http://docs.google.com/Doc?id=dcj5264g_0f7t6rsdg

Whither the economy?

I have to admit that I have no idea what's going to happen. We have commercial/industrial RE problems; we have more ARM resets to come; we have Warren Buffet saying 09 and 10 are going to be terrible; we have GM sidling closer and closer to Chapter 11.

In retrospect I think that it's going to look like the Fed and Treasury made a big mistake, when they gave in to those who were complaining about moral hazard and allowed Lehman to go under. It kind've looks to me like the overseas liquidity that was floating us has just disappeared, not to come back except through T-bills. That would mean that the only source to finance the US trade deficit will be governmental, which means enormous federal deficits and borrowing indefinitely. Not good.

Let's hope we get plug-in hybrids going ASAP, to start work on eliminating our oil import portion of the deficit.

More on: we need better medicine

Medical care in the US has many, many deficiencies: care is fragmented; physicians are rewarded for "procedures" and tests, not for thinking; physicians are obsessed with billing, and distracted from real care; there's far too much overhead; medical records and care in general is badly under-automated; far too many people are excluded from the system; etc, etc.

That's not at all the same thing as "health care getting worse". Perhaps we're just becoming more and more acutely aware of what's possible, and how far we are from it.

Also, as frustratingly and tragically far as US healthcare is from what it ideally should be, it still appears to be as good or better than any other system in the world. Elsewhere, coverage is far more universal, but care is very badly rationed; research is a little less oriented toward big pharma (which is good), but fundamental drug research is mostly done in the US, and the US subsidizes the rest of the world by selling drugs at much lower prices than in the US.

The US has a larger % of people who are poor and without good health coverage than many countries, and therefore doesn't compare well. In that case, income distribution is indeed the key thing. OTOH, infant mortality in the US is decreasing, and adult longevity is increasing.