John Henry Races the I-pad

John Henry was the railroad worker who beat the new steam driver but collapsed and died in the effort.   He is an example from the first wave (steam) of the industrial revolution of the compettion for work between man and machine.  We have passed through the electrical portion of the revolution, and are now solidly in the implimentaion portion of the information-computational revolution.

It is not a new subject here, we have discussed it before.

A new e-book Massachusetts Institute of Technology’s (MIT’s) Erik Brynjolfsson and Andrew McAfees’ new e-book, Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy, address just these concerns.

They had intended the original book to be more about the wonders of the coming technology, but then someone must have clued them in that a lot of people were out of work, and that technology did not seem to be helping matters too much.  Which is not the way that they put it, but…

Race Against The Machine

Erik Byrnjolfsson, Economics of Information, 23 October 2011(Hat tip: MR).

The good news is that this has radically increased the economy’s productive capacity – productivity is at record highs and increasing at an accelerating rate. The 2000s had faster productivity growth than even the booming 1990s. However, technological progress does not automatically benefit everyone in a society. In particular, incomes have become more uneven, as have employment opportunities. Recent technological advances have favored some skill groups over others, particularly “superstars” in many fields, and probably also increased the overall share of GDP accruing to capital relative to labor. While trillions of dollars of value were created between 2002 and 2007, over 60% of the increase went to the top 1%, as technology made it easier for them to leverage their talents globally.

The stagnation in median income and employment is not because of a lack of technological progress. On the contrary, the problem is that our skills and institutions have not kept up with the rapid changes in technology. In the past, as each successive wave of automation eliminated jobs in some sectors and occupations, entrepreneurs identified new opportunities where labor could be redeployed and workers learned the necessary skills to succeed. In the 19th and 20th centuries, millions of people left agriculture, but an even larger number found employment in manufacturing and services.

It generally continues on in a tone of high spirited techno-panacea, arguing that computers are the universal technology, and that we have more great improvements ahead of us.

As the digital revolution marches on, each successive doubling in power will increase the number of applications where it can affect work and employment. As a result, our skills and institutions will have to improve faster to keep up lest more and more of the labor force faces technological unemployment. We need to invent more ways to race, using machines, not against them.

And this is just odd, what exactly is it we are keeping up with? In an economy with a “spoils-goes-to-the-winner” setup, if you are in second place, you are miles behind in compensation. Sometimes technology means that fewer skills are required, and other times it means more skills are needed.

Most of our advances just break down the discreet tasks into smaller segments so that normal people are able to perceive what is needed within their narrow range of expertise. They do address this to some degree in the e-book.  They do note that Jeopardy!™ playing Computers are not able to use their skills to play Chess. 

The Wall Street Journal runs articles about how employers cannot find workers. They cannot find workers because what they want is so specialized that readymade copies are not available. If you are an expert with the right-handed computerized extractor wrench, you are out of luck because today they need experts in the left-handed variety and they have no training budget.

A review of their work goes further into details.

More Jobs Predicted for Machines, Not People

Steve Lohr, New York Times, 23 October 2011 (Hat tip: MR).

During the last recession, the authors write, one in 12 people in sales lost their jobs, for example. And the downturn prompted many businesses to look harder at substituting technology for people, if possible. Since the end of the recession in June 2009, they note, corporate spending on equipment and software has increased by 26 percent, while payrolls have been flat.

The skills of machines, the authors write, will only improve. In 2004, two leading economists, Frank Levy and Richard J. Murnane, published “The New Division of Labor,” which analyzed the capabilities of computers and human workers. Truck driving was cited as an example of the kind of work computers could not handle, recognizing and reacting to moving objects in real time.

But last fall, Google announced that its robot-driven cars had logged thousands of miles on American roads with only an occasional assist from human back-seat drivers. The Google cars, Mr. Brynjolfsson said, are but one sign of the times.

The authors’ proscription is to work with machines, not against them. This of course is a fine idea. But maybe it is my imagination, but when I go into many of the big retail establishments, it does not strike me that the people they are hiring are cutting edge technocrats just waiting for the machine that will set them free to become entrepreneurial M.I.T.-style whiz kids like the authors. Some of them seem to have a real hard time punching the price into the touch screen.

In another post, we noted that there were many “employees” that did not survive the earlier mechanical-agricultural revolution: they were turned into glue.  The authors also make reference to this specific example.  In fact they may reference to many of the issues and problems. And then they just seem to wave their hands at them in turn and forget about them.  There argument against Tyler Cowen’s Great Stagnation argument is to point out specific counterfactuals and say that “It just isn’t so!”

They make some reasonable corrective arguments.  The decoupling of benefits from jobs would go a long way toward increasing flexibility and dynamism.  Lowering barriers to business creation would be helpful.

Oddly enough, the book may not always do much with all of its factoids, but it does bring up a lot of bad news.  For instance, while noting that entrepreneurship is one way forward: they are honest enough to admit that technology has allowed startups to get started without needing as many people.  So if you want a cornucopia of the basic bad news it is found within in short form.  They bring up so many of them that I am almost surprised that they don’t address resource depletion.

They have a tendency to see all issues as deriving from their thesis.  They don’t note the effects of demographic shifts on U.S. consumption and debt patterns, and they don’t address the network effect of globalization on the wage-arbitration and the winner-take-all phenomena.  Technology is something of an enabler, but some of what looks an awful lot like these phenomena were also taking place in the global economy of the late 19^th century.

Because they did not add resource depletion into the equation, I find their future prognostications.  The very trend they discuss indicates that, even including soft-needs such as entertainment, you would not need so many people to run our world- certainly not the 7 billion people we have today - bringing up the difficult discussion of what you are going to do with them all. 

Are you going to reduce overall wealth by reducing technology and efficiency, but spreading that wealth more evenly?  In such a scenario, the top 1% would not do very well, but certainly the big chunk in the middle (the median) would be better off.   To some extent this is what the Soviet Union was doing inadvertently before they collapsed.   To some degree the bureaucratic and regulatory inefficiency that we have today accomplishes the same end.  Bureaucrats are salaried employees (mostly) after all.

An alternative would be to reduce the overall size of the economy, but grow the share of the ecomony per person.   This to some degree is what the Europeans are working toward, but the problems with a population bulge  and being tied into the rest of the world's expansionary economic model make this difficult to pull off: particularly when it is not your stated goal in the first place.