This is part two of four from my thoughts on the impact of the rise of artificial intelligence [Part 1]. Here I discuss economic issues, mainly inequality, in relation to the AI revolution.

Yet another technological revolution

With the rise of artificial intelligence, automation is seeping into areas of work where it was originally thought to be irreplaceable by machines. AIs are now writing scientific articles, driving cars, and translating multiple languages at a higher level than human experts. If you are multilingual, you can marvel at the newly (September 2016 and improving) updated Google Translate. It’s frighteningly good. In fact, I wrote this entire post in Latin and you are reading a translated version.

At a glance, things might not look too different to other types of automations we have had in the past; just in larger scale, with more wealth inequality. As the working class got shafted, the ones who could adapt to the new opportunities made transitions. The ones who couldn’t, joined the increasing welfare class and became another powerless unheard voice.

This time, there is a big difference. Jobs will be cut through all classes of the society. It will impact jobs of all kinds; technical writers, bankers, lawyers, accountants, sales people, doctors, drivers, pilots, programmers, and eventually to your job. You are next. Once the algorithm finds the optimal way of doing your job better than you, you will be joining the new useless class of people.

Both the working class and the middle class will have to adapt to the unstable shifts in the job landscape. A mass of newly poor will be created, and they will be the democratic majority, with voices, and enough disruptive power to challenge the flaws of our current system.

A broken game

Pikkity piketty paw (Source: Gobierno de Chile CC 2.0 via Wikipedia)

Thomas Piketty’s book Capital in the Twenty-First Century shows an inherent flaw with current implementations of capitalism around the world. He points out that the rate of capital return in developed countries is always greater than the rate of growth in economy. This creates growing inequality and wealth gap that is impossible to close.

Capitalist free market system is devised on a flawed assumption that providing for market demands creates wealth and in turn value. Behavioural economists would tell you that people don’t know what they want, especially in this era where everyone is vying for attention and manipulation.

There is also a common misconception that there will be trickle down effects from free market. Various studies show that the living standards of the working class in USA has not improved much in the past 20 years, and the unemployment rate (which in itself a limited measure) has risen slightly despite all the growth in GDP and other measures of wealth. This shows there was no trickle down effect, also evident from the inequality graphs shown here (income) and more importantly, here (wealth).

Some lines moving about next to some numbers. Source: Congressional Budget Office, “Trends in Family Wealth, 1989–2013,” August 2016 (via inequality.org)

Despite all the bashing, I’m not against capitalism. I believe in a system that appeals to the self interest of people, and it is the only way to create momentum. After all, the momentum is needed to get people to do undesirable things, and much undesirables had to be done for the greater good.

Communist society would not work for the same reason. What is built with good intentions can drag us all down to hell, as we are creatures with limited capacity and energy to care. It is a fast lane to creating an inflexible governance, when the role of the government should be adjusted by the society, culture, and the times.

It is a very complex problem we are dealing with, where no single solution will apply to more than a small frame of time in a small region. In the modern days we have seen some good mixed implementations of capitalism with variations of socialist elements, particularly in Europe. However these do not fully address our future issues, and the system must remain flexible.

The rising inequality on wealth is problematic by itself, but added to it is the artificial intelligence and automation which will further the narrow concentration of wealth. It is time we really need to think together what this all means.

Think outside the box

Two extremes

Imagine a dystopian future with technological ruling class who can buy their way into prolonged life and genetic enhancements. A world where happiness is bought, classifying people who do not produce as useless and letting them to eventually die out.

In a way, this version of our future is just a continuation of ‘survival of the fittest’ according to the logic of Laissez-faire economists. They argue that what is good and powerful will remain, and build stronger society. Except that the most powerful will be much less human, literally. The only human trace left might be genetically modified and cybernetically enhanced few with prolonged life, served by robots. These remaining few would be basically not doing anything useful in the very same metrics they shunned the useless class, except their fathers may have one day been involved in the upper ranks of banking systems.

On the other hand, we could imagine a society where the standard of living is increased for all classes of humanity. Work could be redefined as something we do out of passion and love, not out of survival. We would recognise human beings as innately useful, in a sense that the very existence is a contribution to the society, and that we are the society.

What can we do?

An era for new economic theories

In developed countries, a new flexible system must be implemented, addressing the flaws of free market. Survival of the fittest had been undermining human rights; with all the global armed interventions and media manipulations. In the name of liberty, much atrocities have been committed. We must think democracy and basic human rights first, and then free market.

Technological aid

Rising technologies such as blockchain and 3D printing are great examples of creating more decentralised society which leads to less inequality. With 3D printing and its variations, manufacturing is shifting from large factories to our homes. Blockchain and distributed ledger technology is being used for creating various forms of decentralised digital transactions and records, removing our reliance on concentrated silos of information and transferring the power to the people.

More ubiquity of The Internet also helps us understand the problems we will be facing, and ready us for creating self sustaining systems with less dependency on large corporations or government. We still have a long way to go, but the technological landscape is becoming more decentralised.

Be very afraid of technology

Universal basic income

Milton Friedman’s negative income tax [related article] proposal addresses welfare by suggesting people with earnings below certain amount will be paid by the government instead of being taxed, ensuring the minimum standard of living for anyone not making enough money, minus all the existing welfare bureaucracy. The extreme political right seems to embrace Friedman’s free market theories and always leave out NIT that reflects his view on basic human rights.

The universal basic income is the new version of the same idea, simplified further. Instead of paying the people under the income threshold, the government will pay everyone a small sum enough to sustain the basic standard of living, regardless of their income. It will remove the need for the much debated minimum wage policies.

Some might not immediately see that they are the same, but imagine a scenario where a government implements a UBI that pays $15k a year. The economy and market rate and demands for jobs will adjust accordingly such that people who used to make $50k would happily do the same work for $35-40k, and for most jobs new equilibrium will form. The employers no longer have to pay as much, and the workers have more flexibility in finding the work they want.

The money could come from many different sources, but with the benefit of companies not having to pay as much to their employees, their capital tax can be raised. It is the most logical solution that will addresses job automation at the same time, because anyone that hires humans get more savings in operational costs, while more automated companies won’t get the same level of benefits.

Parting notes

The economic landscape of the future looks to be headed towards a very unpredictable times. With the rise of artificial intelligence, we need to rethink what it means to be a skilled worker, and what it really means to be a contributing member of society. We owe it to ourselves and to our future generations to learn and think about these issues a lot more.

Stay tuned for [part 3] where I plan to discuss the impacts of technology on our ecology.

References

Capital in The Twenty First Century by Thomas Piketty

Global Challenges Foundation

Capitalism and Freedom by Milton Friedman

Economics: A User’s Guide by Ha-Joon Chang

Homo Deus: A Brief History of Tomorrow by Yuval Noah Harari