The narrative of technical progress is the closest that the Orthodox Economist gets to relaxing in a Sensory Deprivation Tank. Finding a more unsophisticated world characterised by a simple production function, the theoretical certainty oozes away all notions of real-world stress. There are two key elements in this meditation. First, the isoquant curve. This describes the input flow needed to float towards some desired output. Second, the isocost line. This decreases blood pressure by linearising factor cost comparisons. Technical Progress is then characterised as the relevant isoquant gliding inwards towards some cost nirvana. The firm can produce more with less. Drawing a new point of tangency between this isoquant and a more homely isocost initiates a rush of cost-cutting endorphins. But might the Sensory Deprivation Tank be springing a leak? The issue to consider today is a possible game changer: Artificial intelligence and the related Automation opportunities that it engineers.
The assessment of Artificial Intelligence by non-economists appears to mimic a brawl at a sci-fi convention. On one side, we have the Trekkers. Automation is a magical science akin to Spock acquiring a Saurian brandy via a Replicator. The end outcome is Star Fleet utopianism. It spawns the end of scarcity and therefore ends the very definition of economics used in most introductory texts. On the other side, dressed up as a John or Sarah Connor, we have the dark fantasists. Singularity will occur and, losing control over Artificial Intelligence, a Terminator-esque dystopia is just a few steps down the road. Surely more grounded economic analysis, focused on long term effects, will avoid this hyperbole? Ironically, it doesn’t. A similar good-bad dichotomy, as we will turn to next, ensues.
First up are the Trekking economists. Refusing to give up on the orthodoxy, there is continued focus on heartening productivity gains. Job losses are not ignored, but ultimately there is cause for celebration as new opportunities evolve. Economic growth ensures more income, creating conditions for the ultimate ‘creative destruction’ process. The mundane jobs are lost; but they are replaced with jobs in creative industries, driving us towards cultural sophistication. The monotony of 9 to 5 existence, as we work people to a crippled retirement, is finally over. And to profit from this process? Playing close attention to LinkedIn skill trends, you just need to continually fine-tune your human capital.
The other side of the literature mirror the dark fantasists. We need to factor in the apocalyptic magnitude of job losses. In this shadowy realm anxiety is nurtured as catastrophic thinkers consider the possibility that more than a relatively small number of low productivity jobs will be lost. Automation could end up liquidating over half of the current job markets. In the light of this, replacing those jobs with creatives deriving the next Grand Theft Auto then appears to be naive and reckless optimism. The impact of such structural change would suggest such a hollowing of the middle classes, that it would be accompanied by the threat of an economic crisis with severe income polarisation.
This latter dystopian perspective is gaining traction, undoubtedly impacting on other discussions such as welfare policy reform. Take good old Bill Gates. Back in 2017, he said that it would soon be time for the introduction of Universal Basic Income. Perhaps that time has since arrived? Indeed, Universal Basic Income schemes are increasingly trialled. The most beige politician is prepared to pencil them in their manifesto. This advertises a seismic shift in economic attitudes. Previously, Universal Basic Income has been deemed to be radical philanthropic folly. Trying to cheerily aid people, it merely engineers highly destructive work disincentives. Most Labour Economic modules would confirm that as automatic outcome. Armed with indifference curves and budget constraints, the theory scorns the creation of a corner solution. This is polite language for welfare dependency.
So why have we seen this narrative change? Up steps the Luddite for elucidation. You will undoubtedly recognise the dictionary definition: a derogatory term for a person who is opposed to new technology or ways of working. The history, however, is more ambiguous. Debunking the popular myth of anti-progressive ignorance is the fact that the Luddites were highly skilled workers. Rather than rebelling against the technology that made their trades safer and easier to perform, they were really tormented over a lack of labour rights, a lack of wage growth and a high threat of food poverty. In comparison might the need to deter the march of modern day Luddites be the reason for proposals such as the ‘robot tax’? A mechanism to replace lost income tax, it could fund Universal Basic Income and ensure a non-reactionary population. Such a palliative tax could neutralise the menace of Luddite working class militancy that threatens the reproduction of capitalist profit.
If Universal Basic Income is the new orthodoxy facilitating the idea of progress, where might the radical now gain purchase? The capital-labour share of Gross Domestic Product offers an insight. Automation, given the severe job losses, will drastically reduce the share apportioned to labour. There is a balance to be restored and every radical thrives in disparity. How might then we restore this balance? Well, rather than adopting a Universal Basic Income designed merely to ensure people do not starve to death, we could proffer the Universal Basic Dividend. Its purpose? To directly redistribute profit from the automating corporation to the general population. It is a shift towards equity without efficiency loss.
My contemplation culminates here, but I leave you with just one question to consider: Do you see wisdom in adopting the Universal Basic Dividend? Have a ponder. If you do, then you may well be a Luddite.