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Advances in machine learning and mobile robotics mean that robots could do your job better than you.
Image: REUTERS/Wolfgang Rattay
Written by
John Lewis, Writer, Bank Underground
Friday 3 March 2017
Advances in machine learning and mobile robotics mean that robots could do your job better
than you. Thats led to some radical predictions of mass unemployment, much more leisure or
a work free future. But labour saving innovations and the debates around them arent really
anything new. Queen Elizabeth I denied a patent for a knitting machine over fears it would
create unemployment, Ricardo thought technology would lower wages and Keynes famously
predicted a 15 hour working week by 2030. Understanding why these beliefs proved to be
wrong gives us important insights into why similar claims about robotisation might be
incorrect. But automation could nevertheless have sizeable distributional implications and
ramifications well beyond the industries in which its deployed.
But thats not the only thing going on rising productivity tilts the relative prices of leisure and
consumption in favour of the latter what economists call the substitution effect. Gregory
Clarkes fascinating dataset suggests that in 1700 a craftsman needed to work for almost 10
hours to earn the 2 old pence required to purchase a kilo of beef. But by 2014 a median UK
worker can earn the ten pounds or so need to buy that kilo of beef in less than hour. And so
measured in beef, or goods in general, the reward for working that extra hour is much bigger.
The overall effect on hours depends on the balance of the two. Angus Maddisons 2001
magnum opus estimates that between 1820 and 1998, real GDP per capita in Western Europe
increased 15-fold. Over the same period hours declined by about a half. So the productivity
dividend was split about 7:1 in favour of consumption. On that basis, unless automation leads
to vast productivity gains, any fall in hours would be modest and slow. It would take a 75%
rise in productivity to deliver a 10% fall in hours. Or a 150% rise to knock a day off the
working week.
Is robotisation different?
So to argue that robotisation will benefit capital at the expense of labour you have to believe
there is something intrinsically different about it compared to innovations that went before.
One thing that might, and I stress might, be different is the substitutability between labour and
capital. Under labour augmenting technological change, if this parameter is less than one,
then rising capital to output ratios over time increases the labour share, if its equal to one, the
labour share is unchanged.
Looking at back data suggesting a constant or rising labour share, for the bulk of the post-
industrial era many economists concluded the elasticity was less than or equal to one. So
more capital meant its relative price had to fall by more than its quantity increased hence a
lower share of income goes to capital. How might technology change this?
Imagine a taxi and its driver there is in essence no substitutability between the two. They
have to be combined in fixed proportions, and so having a taxi with two drivers, or a driver
with two taxis creates no extra output. Earlier technological progress, faster cars, satnav,
Uber, didnt change much on that score. But perhaps robots will make labour and capital
much more interchangeable so the driver can be substituted by a computer, and the
passenger rides round in a driverless car. If this pushes substitutability above one, growth in
the capital stock over time leads to a higher share of income for capital. Indeed Piketty and
Zuchmann argue this applies to a much broader range of technological change than just
robotisation and has driven up inequality in the past two decades.
But by reducing the cost of trading, containerisation opened up the possibility of new supply
chains and trading arrangements that were previously too expensive to undertake. And, inso
doing, the resultant trade flows led to a substantial spatial reallocation of economic activity.
The real macro impact of containerisation didnt occur at sea or on the dock side. Perhaps the
biggest effect of robotisation might occur far away from the industries which adopt the robots,
and in ways which todays macroeconomists could never imagine.
Written by
The views expressed in this article are those of the author alone and not the World Economic Forum.
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