The emptiness of life will save us from mass unemployment

In general, people are too cheery when the economy is booming, and too gloomy about the future during recessions. Right now, pessimism about the consequences of “skill-biased technological change” is fashionable. But such pessimism should be regarded with the same scepticism as the never-ending predictions about the depletion of natural resources. The emptiness of human life and the infinity of human wants have always prevented mass unemployment when technological progress displaced workers. I believe that process will continue as long as there are some things machines can not do, albeit with a vast social difference from before.

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Emil Kierkegaard posted a smooth and slick video which argues that a future is nigh in which supersophisticated robots substitute for unskilled and even moderately skilled human labour. I was captivated by the video until the end, when it very implausibly concluded that 45% unemployment might be in the offing.

In a blogpost entitled “The End of the Middle Class Era“, Razib Khan also appears to predict mass unemployment as a consequence of technological enhancements of productivity growth :

To be fair, I’m not altogether sure whether in the above he foresees mass unemployment, if only because he also references Tyler Cowen’s Average is Over. I found that book kind of vague (and the best parts of it were about chess). Those inclined to see his story as one of mass unemployment can point to the book’s suggestion that the employment-to-population ratio amongst prime-aged workers (25-54) will shrink over time. But Cowen himself waffles about his “zero marginal product” hypothesis, vacillating between the pessimistic “hopeless dregs of the earth” version and the less sensational ‘optimistic’ view.

In the latter, the “zero marginal product” workers are simply those who are the first to be unemployed at the start of a recession and the last to be hired during recoveries. In other words, these workers are only ZMP when general demand is modest but above zero when demand is brisk — such as when the US unemployment rate was at the historic low of 3.9% in 1999 or 2000. They also tend to show up as the primary victims of labour market rigidities. I think that’s the most sensible way to look at the Cowen scenario.

Unless machines can do everything and anything a human being can do, and those machines can be produced more cheaply than human beings can be employed, then I think “zero marginal product” is illusory.

Too many people assume that things like wages, incomes, and employment are nothing more than personality traits of workers, internal (innate and acquired) characteristics, rather than the outcomes of complicated interactions between individual characteristics and those of the rest of the world. Which is to say, too many people focus on the supply side of labour and neglect that there is a demand side.

(2)

In the past 250 years, technological progress has not caused unemployment because human wants have been infinite. Every time productivity (output per unit of input) rises, the implied extra income in the economy still gets spent on something (at least when there isn’t a recession), and extra work gets created to produce that something. In other words, fewer inputs may be used to make one unit of output, but more output always gets desired / created.

Environmentalists understand keenly that when energy prices fall, people frequently just drive more or fly more, or the savings get spent, ultimately, on something else that uses energy. Productivity growth produces the same effect. Which is why you never get mass unemployment.

(Won’t natural resources run out ? If you can believe robots can one day replace humans at everything, then it should be even easier to believe technology will also allow us to use fewer and fewer materials inputs per unit of output. [Or we will just mine the planets.] Materials productivity, better known as materials intensity of production, has also always kept improving and will keep improving. But that’s a different story.)

After the basic needs of food and shelter are satisfied, people go in search of other fulfillments — more caloric, varied, and exotic diets ; more living space to fill with ever more stuff ; 58 changes of clothes instead of 2 per year ; more leisure in the form of vacations and entertainment ; and ever more marginal extensions of life expectancy. That’s all very obvious.

But as people get wealthier, they demand not only more quantity of stuff, but also ever more trivial and even imaginary increments to the quality of goods and services. How else to explain the market for, say, honey in a jar that’s ‘raw’, unfiltered, unpasteurised, ‘fair-trade’, non-GMO, single-country-origin, single-bee-colony, and single-flower-species ?

Ironically, as production becomes more brutally efficient with labour-sparing technology, consumption becomes more ‘inefficient’. The hallmark of consumption by the rich has always been its labour-intensiveness. Think of aristocratic dining halls as recently as the Gilded Age, with one liveried footman for every guest at the long table in the dining hall.

That’s why ‘hand-made’ has snob appeal. Bespoke fetishists may think of it as “valuing timeless artisanal quality”, as does one London financial journalist who apparently has not only suits and shoes custom-made by hand, but also socks, neck ties, and (!) pocket squares. (When those silks stick out of the breast pocket, woe unto those rolled edges sewn with plebeian machine-neatness….) This tailor-blogger with a cult following makes suits by hand, or ‘deconstructs’ famous brands, and blogs about every lovely stitch. But in reality such sartorial epicureanism is about deriving more and more marginal utility out of sillier and sillier quality ‘improvements’. And such things point to the niche consumption fantasies of the merely upper-middle-class.

As long as there are still some things machines can’t do, I don’t see why that infinite-wants process can’t be extended indefinitely in the Cowtopian world where 15% earn a charmed living and 85% can at best aspire to the status of lumpenbourgeoisie. People — rich people — will just get even more petty, demanding, absurd, and elaborate in the infinity of their wants. I can’t imagine how exactly, but don’t underestimate the emptiness of human life !

The 15% of workers (in Cowen’s reckoning) who will succeed in the future must know how to work with AI-flavoured machines in a very complex production chain of human-machine complements. Such a profile would favour not only intelligence, but also conscientiousness, precision, discipline, and cooperative team work. The 85% who won’t make that cut, Cowen imagines, will scrounge around as petty entrepreneurs, freelancers, ‘consultants’, street-vendors, mobile taquería purveyors, and other genres of precariously ‘self-employed’. The lowest segment of that low segment will be “threshold earners” who proudly just “get by and who do not push ambitiously for a higher wage or stronger credentials at every step”. The culture will change to make that sort of thing hip, respectable, and freedom-enhancing. (Personally I think Cowen has perhaps dined at too many food trucks serving “Korean tacos” handled by tattooed hipsters and transacting with Paypal and iPad.)

And of course jobs should still exist for things like wiping after old and sick people, pet care, companionship services, hospitality, ‘aesthetic’ services, one-on-one tutoring, and city farmers catering to posh demand for heirloom ramps. Cowen also mentions jobs catering to the rich, but does not really take the idea very far.

Why can’t the conspicuous-luxury consumption sector account for a growing share of employment, as the top 10-15% capture a larger and larger share of GDP growth on account of skill-biased technological change (or what ever is the latest cause-du-jour of growing inequality)? Really, why not ?

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With the advent of settled agriculture and the rise of cities, most human beings have most of the time worked for the rich in one form or another — whether as slaves/serfs, or sharecroppers, or free peasants paying confiscatory taxes, or factory workers, or service sector drones. There have been periods of freedom for frontier freeholders, but those don’t last very long.

But production is about creating wealth. My guess is, the future promises a world where the majority will still work for the rich, but less directly in helping to produce wealth, and more directly in enhancing the lifestyles of the rich. From adjutants in production to adjutants in consumption.

The size of the class that can afford absurdly infinite and infinitely absurd wants will expand. In 2013, the 99th percentile of household income in the USA was $385,000 and the average income of the top 1%, numbering approximately 1.7 million households, was $717,000. That’s nothing ! After taxes, after the big mortgage payment for the primary house and the vacation spare, after school fees for two offspring, there’s barely enough income left for a maid and a resident minder for the children. It’s definitely not enough to afford the whimsical last-minute day-trip by 90-minute suborbital flight from New York to Tokyo just to indulge in sushi at Sukiyabashi Jiro.

If economic growth of the future is severely skill-biased and concentrated in the top 10-15%, just think of the potential capacity for expansion in luxury consumption. The lifestyles of the top 0.1% will trickle gradually to aspirants in the 0.9%, just as the 5% will be closer to apeing the bottom of the top 1%, and down the line.

Given the number of workers employed “in service” at stately houses in England or robber-baron America, as late as 1914, or in developing countries today, you can easily imagine such “household establishments” being reproduced in the developed countries, but in more egalitarian-seeming ways. You’ll get the resident in-house staff ranging from manservants to henhouse keepers for each house owned in different locations. But a lot of the luxury service will come in the form of freelance labour that won’t seem nearly as bonded and mediaeval as hereditary footmen in a manor house or a fan-wallah in a maharajah palace. So there needn’t be a total reversion to the Downton Abbey world to suppose that more and more of the top 15% will consume snobbish labour-intensive goods as incomes grow and labour in the bottom 85% gets cheaper.

Why would a 5-percenter go to the chic supermarket or the picturesque farmer’s market for organic milk once a week, which is really for the sad people at the top of the fourth quintile, when he can keep a milk-cow of his own, hire a full-time farmhand to maintain it, and every morning partake of superfresh, hyperlocal, unpasteurised milk from his own arugula-fed, hand-massaged cow with the high-quality but low-yield magic-udder ? That doesn’t mean he won’t send his manservant (aka “personal assistant” in egalitarianese) to the market so he can also now and then try that subtly different, vaguely briney-creamy milk from the clover-fed Bronze-Age heritage-breed cows of the Vendée, delivered daily by the newest version of Concorde. Chic markets will continue to exist because the chic will always talk local and seasonal but will always want winter strawberries and asparagus from Chile and South Africa.

More 5- and 10-percenters will have full-time cooks, who won’t be inordinately skilled, but everything will be made from scratch from their urban gardens and small dedicated suburban livestock menagerie, or collected by the dedicated forager-hunter they co-employ with a neighbour. Right now the well-healed go to restaurants where “innovative” chefs work with ingredients harvested that very day, foraged that very day, caught that very day, and even slaughtered that very day. But the rich of the not-so-distant future could get a less elaborate version of that at home ! And why not, if it involves no effort on their part ? Of course they would still go to restaurants because of the comparative advantage offered by highly specialised chefs in originating more novel, trendy dishes.

I draw my hypotheticals from food because I know something about foodies and cuisines, and because in my unimaginative laziness I really can’t think of better examples. Social arrangements of the future are difficult to predict.

At least that’s the full-employment future I can imagine. And maybe I’m splitting hairs about the best flavour of pessimism ! But there is another version of the full-employment future.

But if human wants are not infinite ? Especially if machines can also replace humans at every task ? See Econ-Fi.