Guest post: Why we must distribute the gains from technical change
This is a guest post by Prof. Dr. Luc Soete, a UNU-Merit
research fellow, on the challenges posed to labour markets by growing
automation and the need to distribute the gains from modern technical
change with tools such as basic income or helicopter money. It is based
on remarks made at a panel event marking the 50th Anniversary of the
Science Policy Research Unit at Sussex University earlier this week.
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The concerns about the impact of robotics and artificial intelligence on employment and job displacement, raising the spectre of mass unemployment, sound from a historical perspective not very convincing.
Having written with Chris Freeman in the 80s and 90s numerous articles and books on the topic, there seems to be (again) in economic analyses of the phenomenon, a natural tendency to overestimate both the speed and the impact of robotics and more broadly artificial intelligence.
Just look at the complexity involved e.g. in using robots to lift patients in a hospital, involving numerous physical security and other machine-human interaction problems, or using artificial intelligence in assessing written exams.
Historically the evidence of disappearing skills as a result of new technologies has not really been at the core of the emergence of mass unemployment.
In short, we tend to lack the necessary imagination to anticipate the new types of jobs that can be created by the new technologies. The current debate reminds me in other words of the report written with Chris Freeman (at the request of IBM) in 1985 and which formed the basis of the book “Work for All or Mass Unemployment” published in 1994 .
In that book the technology employment issue is first and foremost described as a distributional issue. The record on what has been achieved over the last 20 years, since this book was published and Internet started to diffuse globally, is disappointing to say the least with respect to those emerging distributional challenges.
The result has actually been polarization, rising inequality, with also a trend towards a “race to the bottom” of existing European social welfare systems, to use Jacques Drèze’s term, focusing on full-time blue or white collar workers following European economic integration and the single market.
Nevertheless, there are certainly new features associated with the current wave of digitalisation. Four features stand out and make the distributional issues today much more difficult to handle than 20 years ago:
Following Jahoda’s study of unemployment in Marienthal in the 30’s, employment could still be considered today to represent one of the most important factors for social integration and personal recognition.
At the same time, and given the tremendously grown opportunities for social contact outside of the sphere of employment thanks to the development of social media over the last twenty years, it is also reasonable to assume that an unconditional “basic income” could well lead to a substantial voluntary shift in labour market participation, based on free choice and ultimately to the benefit of the individual, even to his health and happiness, as well as to the benefit of society.
Once “basic income” is viewed as the monetized “digital manna from heaven” resulting from technological change, the concept seems like a simple and attractive way to redistribute gains from technical change to all.
As a side note, it is interesting to observe, how the case for a basic income fits well the current macro-economic monetary debate on how to combat deflation in the developed countries.
In the extreme version, whereby money would be dropped from the sky, so-called “helicopter money”, the advantages are primarily related to the fact that money is directly put in the hands of people.
As pointed out by many macro-economists, this form of “democratic helicopter money” [that is why the term “drone money” is not used!] is also a monetary policy instrument, using similar QE techniques, but may also be viewed as the equivalent to a tax rebate policy.
However, because it is institutionally distinct from fiscal policy, it offers the central bank (or in the European case, the ECB) a more effective policy tool while maintaining the institutional separation between fiscal and monetary authorities, dispensing with the need for any ‘coordination’ between the two, or the subordination of one to the other.
_________
The concerns about the impact of robotics and artificial intelligence on employment and job displacement, raising the spectre of mass unemployment, sound from a historical perspective not very convincing.
Having written with Chris Freeman in the 80s and 90s numerous articles and books on the topic, there seems to be (again) in economic analyses of the phenomenon, a natural tendency to overestimate both the speed and the impact of robotics and more broadly artificial intelligence.
Just look at the complexity involved e.g. in using robots to lift patients in a hospital, involving numerous physical security and other machine-human interaction problems, or using artificial intelligence in assessing written exams.
Historically the evidence of disappearing skills as a result of new technologies has not really been at the core of the emergence of mass unemployment.
In short, we tend to lack the necessary imagination to anticipate the new types of jobs that can be created by the new technologies. The current debate reminds me in other words of the report written with Chris Freeman (at the request of IBM) in 1985 and which formed the basis of the book “Work for All or Mass Unemployment” published in 1994 .
In that book the technology employment issue is first and foremost described as a distributional issue. The record on what has been achieved over the last 20 years, since this book was published and Internet started to diffuse globally, is disappointing to say the least with respect to those emerging distributional challenges.
The result has actually been polarization, rising inequality, with also a trend towards a “race to the bottom” of existing European social welfare systems, to use Jacques Drèze’s term, focusing on full-time blue or white collar workers following European economic integration and the single market.
Nevertheless, there are certainly new features associated with the current wave of digitalisation. Four features stand out and make the distributional issues today much more difficult to handle than 20 years ago:
- First, the phenomenon of disruptive, primarily organizationally-inspired innovations, whereby incumbents are being undercut by “regulatory free riders” is applying a heavy toll in terms of fixed, full-time employment in favour of more volatile, temporary and unstable employment conditions;
- Second, the distributional issues have become global in nature with what could be called general purpose platforms entering the debate rather than the old general purpose technologies concept, creating now global network monopolists attracting global network rents based on “home” absolute size and political advantages;
- Third, the newly created consumer surplus is in many ways economically invisible, often neither being formally valued (in its contribution to GDP) nor taxed, with hence major difficulties for public authorities to redistribute rents; and…
- Fourth, because of the latter phenomenon, the full deflationary effects of the diffusion of new (digital) technologies combined with globalisation are now becoming dominant particularly in developed countries.
Following Jahoda’s study of unemployment in Marienthal in the 30’s, employment could still be considered today to represent one of the most important factors for social integration and personal recognition.
At the same time, and given the tremendously grown opportunities for social contact outside of the sphere of employment thanks to the development of social media over the last twenty years, it is also reasonable to assume that an unconditional “basic income” could well lead to a substantial voluntary shift in labour market participation, based on free choice and ultimately to the benefit of the individual, even to his health and happiness, as well as to the benefit of society.
Once “basic income” is viewed as the monetized “digital manna from heaven” resulting from technological change, the concept seems like a simple and attractive way to redistribute gains from technical change to all.
As a side note, it is interesting to observe, how the case for a basic income fits well the current macro-economic monetary debate on how to combat deflation in the developed countries.
In the extreme version, whereby money would be dropped from the sky, so-called “helicopter money”, the advantages are primarily related to the fact that money is directly put in the hands of people.
As pointed out by many macro-economists, this form of “democratic helicopter money” [that is why the term “drone money” is not used!] is also a monetary policy instrument, using similar QE techniques, but may also be viewed as the equivalent to a tax rebate policy.
However, because it is institutionally distinct from fiscal policy, it offers the central bank (or in the European case, the ECB) a more effective policy tool while maintaining the institutional separation between fiscal and monetary authorities, dispensing with the need for any ‘coordination’ between the two, or the subordination of one to the other.
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This blogger comment: " I fully agree. And it must be done before the public at large discover how much money was artificially withheld from them through the mismanagement of the accounting of money creation by the banks and the Treasury combined... Banks mismanaged the liability side of money creation while the Treasury disregarded completely to record a matching asset in his books, I calculated that in Italy the monetary rent pro-capita that was hidden by the banks is in the order of 100 times the public debt, i.e. around 4 million euro for each Italian citizen."
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