The General Economics Thread

From a site called the Electronic Engineering Journal tells a tale of a plausible dystopia. An "economic singularity"that takes late-stage capitalism to terminal-stage capitalism and see most humanity itself as a proletariat underclass. A world that sees the end of human labor and with it a reversal of social mobility and inability to buy the goods these robots produce. Something that can only be addressed by Safety Nets like say, a Universal Basic Income? (or preventing it from happening). Though the article mentioned some hurdles (regarding energy and natural resources)

Basically automation in a hyper-competitive market driven to make money for its sake could lead to humans being nigh-unemployable. (assuming this is plausible) I'm wondering how this could be prevented or what should be done once we enter the singularity's event horizon.

Edited by MorningStar1337 on Mar 19th 2019 at 7:47:08 AM

I find it implausible that manufacturers would mass produce items that only a small fraction of the population could buy, and nothing is produced for the larger number of consumers who still have some financial resources however poor they are. Prices fluctuate to meet demand, and so although, say, food prices can be expected to rise relative to average income, it will still be affordable. The situation in underdeveloped countries is case in point.

But we would want to avoid rising wealth disparity regardless, so how? The simplest method is by means of redistributive taxes. Income taxes for the uppermost brackets used to be in the 90% range, which effectively capped income disparity (although not overall wealth disparity. Still, you dont buy bread with stock options, or real estate).

Other methods include economic development policies that favor the lower to middle classes, by targeting their neighborhoods and communities, and the types of businesses that hire them (ie, small retail). Effective policies targeting discriminatory hiring practices (and housing, and education, and healthcare...) would also help, since minority communities are also disproportionally poor. Overall employment growth has been the go-to approach in America for a century now, with varying success...

Paul Krugman takes issue with the "robots are stealing our jobs" narrative in this article, where he discusses the fact that, although automation definitely took major leaps in the late 20th century, the corresponding increase in productivity has failed to sustain itself in recent years.

In other words, there is still plenty of demand for human capital and little indication that we are on the verge of a new wave of automation that will supplant labor. By focusing on the need to provide alternatives to work, we may be attacking the wrong problem.

One limiting factor that automation has always had (its been around for hundreds of years, just not specifically in the form of robots) is that its very difficult to automate the manufacturing process of a brand new product. Innovation ultimately is what drives job growth, and keeps the consumers employed.

The point is that every major wave of automation throughout history has freed up labor to take other jobs, many of which require attributes that machines can't easily do. These include creativity, R&D, entertainment, healthcare, repair/maintenance, and much of the service industry.

When you increase the baseline productivity of a society, most people benefit from wider access to basic resources while gaining the freedom to seek more productive employment... at least in theory, and history bears this out.

There is every reason to think that this cycle of automation->productivity->opportunity->innovation->automation can continue for quite a while before we run into a critical shortage of jobs, but for the cycle to continue, you need all of its elements. Right now, we're missing the productivity part.

We can look at many possible reasons for this. Obviously, monopoly rents among capitalists soak a great deal of hypothetical productivity gains out of society, but we also have the problem of the people "left behind" by automation acting as a drag on economic growth. These people, in turn, act as a political drag, sabotaging the growth of that society as they are lured by promises of a return to a simpler time when they were more valued.

Edited by Fighteer on Mar 20th 2019 at 1:44:23 PM

The relatively higher ROI of financial speculation (which creates few jobs) vs manufacturing and selling of consumer goods (which does) has a lot to do with it.

Edited by DeMarquis on Mar 20th 2019 at 3:12:22 PM

The thing about the jobs that are being opened up by the latest wave of “automation” is that most of them offer worse pay and worse benefits, and/or require incredibly expensive credentials.

It doesn’t require that everyone to be put out of work for automation to have deleterious effects, and at the rate things are going I don’t see this getting any better even if productivity goes up (see the long list of productivity growth vs wage growth charts).

There will need to be a new mass labor movement in the United States, and it will need to go further then the previous ones I think.

The big problem is that automation has already eliminated a lot of the more physically skilled jobs. Advances in AI are now poised to remove a lot of the more mentally demanding but not necessarily creative jobs. Ever fewer people are required to supervise this.

There's a limit to how much population can be displaced into the service sector at the same time as the staffing needs are going to start dropping.

The idea that some swathe of new jobs will come into being that we can't automate is optimistic.

It's making Mega City One more and more prophetic. 98% unemployment rate because of automation, which means almost everyone has to be on basic income.

Edited by GoldenKaos on Mar 21st 2019 at 2:01:01 PM

That level of unemployment is almost silly, but its undeniable that what we need right now are policies that actually promote job growth. To get them, we need to elect a genuinely progressive President.

And a progressive Senate. I still get the impression that people neglect the importance of parliaments.

Tbf, it's a silly setting in many ways. Crimes are very often committed out of extreme boredom. Riots start because of news of a job opportunity. Murders happen because they want to work as a janitor.

A progressive Senate would be helpful.

Somebody mentioned basic income, which reminded me that I've got a terminology question. As I understand it, there are two types of basic income: "If you don't have a job, we will give you a certain amount of money each month" and "we will give you a certain amount of money each month, period, no questions asked." The first one you are disqualified if you have a job, the second you are not.

What are the names for those two types?

I don't know what the first one is called, Unemployment Basic Income I think. The other one is called National Basic Income.

The one I'm in favor of is a straight Negative income tax.

I keep hearing people throwing that around, and I have to say... I still have no clue what it is.

The US has a progressive income tax. There are certain break points after which each dollar gets taxed more then the last. Your 1st dollar is taxed at 30 cents. Your 2nt dollar is taxed at 35 cents. A negative income tax is where people under a certain income rather then paying in taxes actually get money back. So Your 2nt dollar is taxed at 0 cents and your 1st dollar is taxed at -5 cents. In most systems the break points are at significantly farther apart dollar amounts.

Edited by Soban on Mar 23rd 2019 at 10:38:34 AM

I'll be honest...

That doesn't seem like it would change anything, because if you fall below that income line you're probably getting other benefits anyway. Not really an economic shift, just fiddling with the books.

Essentially, the Negative Income Tax is implementing MBI as an automatic function of the tax system instead of as a separate welfare program. It was originally invented by Milton Friedman, one of the former leading lights of libertarian economics. ("Former" because his economic models were too grounded in science to satisfy modern libertarians, who need an economic school that's entirely divorced from reality to justify their beliefs.)

The main difference is that the NIT is pitched differently from MBI. It's meant to appeal to the kind of people who don't want more welfare programs but accept that Americans are not going to vote for gutting the welfare state entirely.

As I understand it, only employed people can qualify for a NIT.

Not according to what I've heard, if you are unemployed then it just counts as an income of zero and there is some amount that comes along with it.

I suppose I can see the logic of trying to appeal to the welfare-hating crowd. Better to sneak it in and maybe improve it later than just sit there with nothing for fifty years.

I would still prefer National Basic Income. Much easier logistically, both for the government and the individual. Just walk into a government building (for some reason I'm imagining the Post Office in charge of this, not sure why) and get your monthly check. No need to worry if someone is trying to cheat the system (or worry if you are accidentally cheating the system) or tax brackets or whatever. Of course you would be able to set it up so that they mail it to you or do direct deposit, but in the early years, there would be homeless people who don't have those options.

A negative income tax also seems far too unstable. If you're just fiddling with tax brackets, far too easy for a future government to remove it.

A future government can change anything that's in law. That's not a reason not to do it.

As noted, there are two basic means of guaranteeing income: one means-tested and the other not. Both take the form of a transfer of wealth, so it's disingenuous to say one is "more progressive" than the other.

Means-tested means that we guarantee you a minimum of X income, no matter what. If you get a job, you get less support, until you reach a threshold beyond which you no longer qualify.

Non means-tested means that we give you X money, period, whether you have any other source of income or not. This is simpler to administer but it does seem slightly ridiculous that we'd be depositing 20k USD per year (for example) into the bank accounts of billionaires.

The age-old counterargument: "How do we pay for this?" is also missing the point. Give people at the lower end of the income scale more money, and they'll spend it. This is consumer demand and boosts the economy, which generates more consumption, in a positive feedback loop. It also generates more tax revenue, helping offset the cost even further. The real question is whether the sudden influx of cash into the consumer economy would lead to serious inflation as supply is unable to keep up, at least in the short term.

Edited by Fighteer on Mar 23rd 2019 at 12:16:52 PM

Agreed. It's also worth noting that most of Friedman's followers have either died, retired, jumped ship (me) or lost their minds, and NIT is kind of a product of a time when people agreed on the reality of basic facts and politicians could do business with their ideological enemies. The practical value of trying to reach across the aisle is unfortunately lessened - though one might argue that that makes it even more morally important.

Milton Friedman saw that people wouldn't vote to abolish welfare; his solution was to try to create a system that he saw as simpler and less intrusive than the existing welfare state. Peter Thiel saw that people wouldn't vote to abolish welfare; his solution is to try to abolish democracy.

Raineh meant that calling it an NIT would make it easier to abolish, politically, than calling it a UBI.

Edited by Ramidel on Mar 23rd 2019 at 8:21:28 AM