Blog Post

AEIdeas

It’s my experience that technologists — at least of the entrepreneurial persuasion — are generally a bit more aggressive than economists with forecasts of rapid tech advancement as well as the potential disruption to labor markets. But maybe the economists are starting to come around to the Silicon Valley view. This from the Bank of England blog:

There is growing concern in the global tech community that developed economies are poorly prepared for the next industrial revolution. That might herald the displacement of millions of predominantly lesser-skilled jobs, the failure of many longstanding businesses which are slow to adapt, a large increase in income inequality in society, and growing industrial concentration associated with the rapid growth of a relatively small number of multi-national technology corporations. Economists looking at previous industrial revolutions observe that none of these risks have transpired. However, this possibly under-estimates the very different nature of the technological advances currently in progress, in terms of their much broader industrial and occupational applications and their speed of diffusion. It would be a mistake, therefore, to dismiss the risks associated with these new technologies too lightly.

In other words, this time just might be different. So why exactly are BOE economists Mauricio Armellini and Tim Pike taking seriously the idea that tech progress won’t be labor augmenting as opposed to labor replacing, on net? Part of their argument is that not only are there plenty of general purpose technologies with huge mass application potential, but they’re far more scalable and spreadable than in the past:

The technologist Hermann Hauser argues there were nine new General Purpose Technologies (GPTs) with mass applications in the first 19 centuries AD, including the printing press, the factory system, the steam engine, railways, the combustion engine and electricity. … Most of these GPTs took several decades to gain traction, partly because of the large amounts of investment required in plant, machinery and infrastructure. So there was sufficient time for the economy to adapt, thus avoiding periods of mass unemployment. But the pace of technological progress sped up rapidly since the 19th century. Hermann identifies eight GPTs in the 20th century alone, including automobiles, aeroplanes, the computer, the internet, biotechnology and nanotechnology. Most recent innovations have been scalable much more quickly and cheaply. They have also been associated with the emergence of giant technology corporations — the combined market capitalisation of Apple, Google, Microsoft, Amazon and Facebook is currently about $2½ trillion. The faster these new waves of technology arise and the cheaper they are to implement, the quicker they are deployed, the broader their diffusion, the faster and deeper the rate of job loss and the less time the economy has to adapt by creating jobs in sectors not disrupted by GPTs.

And how fast will it take for deep disruption? Again, Armellini and Pike:

The timing and magnitude of these structural changes to the economy are extremely hard to predict. But the speed at which developed economies adopt robotics technologies is perhaps increased by policies in many countries that seek to reduce income inequality in society, such as increases in minimum wage rates, thereby incentivising R&D and capital expenditure in labour-saving machinery and equipment. Another factor stimulating global investment in robotics technologies is demographics. Japan has experienced a declining population since 2010, reflecting minimal immigration levels and falling fertility rates since the 1970s. With the population (and labour force) projected to decline by as much as one-fifth over the next 50 years, incentives to invest in automation technology are high. So it is perhaps not surprising that Japan has one of the largest robotics industries in the world, employing over a quarter of a million people.

So what to do about the cabbies and delivery truck drivers? Should we slow down the pace of automation with a robot tax, as Bill Gates has mused? Certainly there are tech folks worried about a backlash. And perhaps that is seeping into the political conversation. I noticed this on Twitter from savvy RealClearPolitics analyst Sean Trende, commenting on an Axios piece about self-driving trucks: