Predicting the unforeseen is difficult. Trend analysis can be misleading, fooling us to believe things either: 1) Continue according to their current trend path; 2) Revert back to the way things were; 3) Jump off the tracks altogether; or 4) Do anything in between. But humans will make predictions anyway, and especially about the economy. Why? Because - well, we are human. We are motivated by our fears. And, let’s be honest: Predictions are fun.
Matthew C. Klein highlights our economic concerns and some of the predictions being made about the future in his recent column for the Bloomberg View entitled, “Why Work If a Machine Takes Your Job?” He asks:
“Is it possible that machines and trade might eventually polarize the rich world’s labor force into two distinct classes: servants and elites? If we want to prevent that, we may need to reconsider how we think about work and income in an age of abundance.”
Call it the “Post-Scarcity Blues.” What are we going to do for income so that we can survive? Pascal-Emanuel Gobry dubs this the “biggest problem in political economics of the past 20 years.” How bad could it get? Will we descend into some anarcho-feudal-digital state, trading in our gold for bitcoins and bartering with chickens?
Professor Tyler Cowen renders a few predictions based on his own formidable analysis in a new book Average Is Over. In it, he lays out a vision for the new landscape proceeding our current economic period he calls “The Great Stagnation.” In his view, wage polarization continues and economic stagnation persists (kind of like a lingering cough) for the next 20 years. Some of this is due to the advent of smart technology in manufacturing (and elsewhere); some is due to raw demographics. Either way, as we better understand human behavior (with the help of technology) and as we further specialize our labor (with the help of technology), the better we will be able to measure value in the marketplace. He surmises these changes will require a leaner and smarter workforce.
First off, I don’t believe more technology necessarily creates more long-term unemployment. Technology enables innovation, research and development, thereby uncovering new markets while making the old ones obsolete. Technological changes beget labor market changes; this is nothing new. We (or more adeptly, our children) will move on. What makes our current period any different? R. H. Mabry and A. D. Sharplin made predictions about this period in their 1986 Policy Analysis:
“Flatly in error are those that predict no more jobs for a very large sector of the population as a result of advancing technology, creating a massive problem of involuntary unemployment. It is not at all clear that a large number of jobs are about to be destroyed; even if they were, such long-run unemployment as would occur would certainly not be involuntary. Rather, it would take the form of even shorter workdays, shorter work-weeks, and fewer working members in the family, as it has throughout our history.”
Working less is not the crux of the matter. How we spend our downtime, however, is. Do we reinvest that time in ourselves, our children, our communities, and – in turn – our economy, or do we dither it away? Generation after generation hopes their children won’t have to work as hard as they did. Did they – and do we - actually mean that? And how do we even define labor anymore? This is a subject I discussed this past May in my Labor Day post.
So I am not fearful of the post-scarcity future, just as I am not fearful that human activity will have a lasting effect on the earth’s climate, and for similar reasoning: As the earth has the capacity to right its climate (regardless of the insignificant number of people who populate it), market economies also have a self-righting tendency. In other words, this is cyclical. That’s not to say I don’t fear short-term unemployment, or short-term climate effects. I’m just hopeful about our future.
Further into his Bloomberg View article, Klein highlights a Wall Street Journal article “the rising demand for high-end butlers, maids and housekeepers” that, while troubling in the short-term, actually gives me hope for our future:
“These jobs pay as much as $200,000 a year and, unlike many other lines of work, odds are against butlers being replaced by machines. After all, the people who like having human servants probably won’t want to part with the one luxury that never goes out of style. (This also suggests that few people will be able to get well-paying jobs as butlers to the super-rich.)”
This reminded me of something I read about the fall of feudalism, chronicled by none other than Adam Smith, in Chapter 4, Book III of The Wealth of Nations; herein Smith describes what happened when the common rank and structure of feudalism began to break down, which had previously been held together by threat of coercion. The impending threat that had trickled “violence, rapine, and disorder” throughout the countryside was beginning to subside, giving way to trade:
“But what all the violence of the feudal institutions could never have effected, the silent and insensible operation of foreign commerce and manufactures gradually brought about. These gradually furnished the great proprietors with something for which they could exchange the whole surplus produce of their lands, and which they could consume themselves. Without sharing it either with tenants or retainers. All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind. As soon, therefore, as they could find a method of consuming the whole value of their rents themselves, they had no disposition to share them with any other persons. For a pair of diamond buckles, perhaps, or for something as frivolous and useless, they exchanged the maintenance, or, what is the same thing, the price of the maintenance of 1000 men for a year, and with it the whole weight and authority which it could give them. The buckles, however, were to be all their own, and no other human creature was to have any share of them; whereas, in the more ancient method of expense, they must have shared with at least 1000 people. With the judges that were to determine the preference, this difference was perfectly decisive; and thus, for the gratification of the most childish, the meanest, and the most sordid of all vanities they gradually bartered their whole power and authority.”
Indeed, the more that people are allowed to exchange freely, the more equal we become in our resource allocation. That is the essence of the aforementioned “righting arm.” What can neither be measured nor predicted are: 1) The motivating factors towards those resources; and 2) The interference exchange of those resources could sustain; both of which could slow recovery. These topics worry me, as they will lengthen the duration of adverse effects we feel from the economic adjustments being made; I’d rather they not span my entire lifetime. But as I stated, these movements are cyclical. Mankind can – and eventually will – overcome the changes wrought in the post-scarcity marketplace. I just hope it’s sooner rather than later.Share on Facebook