Tim Worstall: Automation Isn’t Nearly as Disruptive as You Might Think

Another day, another bloodcurdling report about how robots are going to steal all our jobs and smash all that is holy about the dignity of work. This time it’s from PriceWaterhouseCoopers, and they tell us that by the 2040s some 30 percent of jobs will be automated, perhaps 44 percent for those requiring a low level of education. Actually, the report isn’t quite as “woe is unto us” as it sounds, although it does contain a couple of crucial errors.

What the authors get right is that there will be economic growth over this time, which will help create new jobs to replace the ones lost to automation. It’s a logical conclusion; after all, we’ve been doing this automation of heft and grunt for 250 years now and there’s no particular reason to think that the underlying processes have changed.

“Destroying” Jobs Frees Up Labor

The fact artificial intelligence and other technical advances will replace human skill should not be a cause for dismay—after all, the same has been true of every stage of technological change from the loom to the washing machine.

That automation destroys or displaces jobs is not an error or problem; it’s the whole point.

However, the PWC report has misidentified the mechanism here. It’s not that economic growth absorbs labor, per se. It is the way automation frees up previous working hours for more productive uses which grow the economy and make us richer.

Imagine it takes 100 units of labor to make 100 widgets until a new machine now means we need 50 units to make 100 widgets. We can, with that labor, now have 200 widgets—we’re richer—or we can have 100 widgets and 50 units of labor’s worth of clothes, fancy food, or tickets to the ballet. We’re richer, the economy is larger, by whatever value we place upon the extra things we can buy.

This is more than mere nitpicking. It is only by grasping this that we can understand our task here. That automation destroys or displaces jobs is not an error or problem; it’s the whole point. We want to kill jobs with automation, always and everywhere, as it is what that newly freed labor does next which makes us richer.

True, Transitioning Can Be Painful

As Keynes noted, it’s entirely possible for this to be happening too quickly. Writing in 1930 he tells us:

We are suffering, not from the rheumatics of old age, but from the growing-pains of over-rapid changes, from the painfulness of readjustment between one economic period and another. The increase of technical efficiency has been taking place faster than we can deal with the problem of labor absorption…

In this case, the twin assault on established systems of the mechanization of agriculture and the replacement of steam by electrical power was freeing up labor faster than people could work out how to use it to do new things.

Transition can certainly be a problem, but our end state isn’t going to be. The question is not whether there will be anything for people to do, it’s can we find new things for them to do at the same rate as the old things are dying out.

The rate is what matters. In common with many other such reports, PWC’s report suggests 30 percent of jobs (or 44 percent in some sectors) will be killed off in the next few decades. Is that a high rate or not? Is it even something we need to do anything about?

The Numbers Aren’t as Bad as They Seem

Here’s the key point that many people fail to grasp—the UK’s market economy (the US numbers are little different) kills off some 10 percent or more of jobs each year as it is, and creates some 10 percent of jobs anew. The unemployment rate is only ever the mismatch between the two, perhaps the timing difference between them.

What we are really looking at is a marginal addition to a well-known process, not some step change nor gross unknown to deal with.

Our adaptation to shifting technology is not a dramatic rupture, but a constant process involving some 10 percent of the population each year. With that in mind, the addition of another 1.5 percent (30 percent over two decades) or so due to automation becomes much less bloodcurdling. What we are really looking at is a marginal addition to an extant and well-known process, not some step change nor gross unknown to deal with. And that’s assuming that artificial intelligence is an addition to our usual annual rate of 10 percent, rather than just the 21st-century version of that well-worn process.

There is still the question of what we do about it, of course. What is automated and how isn’t the interesting thing here. Rather, it’s what will that newly liberated labor go and do—what are the jobs of the future?

While we can make some educated guesses, the answer is that we don’t know. There are plenty of things we as a species would like to do more of, but the only way to find out how that translates into economic activity is to leave people to suck it and see. Rather than governments trying to second-guess the future, we should rely on the experimentation which only a market economy provides.

Reprinted from CapX

Tim Worstall


Tim Worstall

Tim is a Fellow at the Adam Smith Institute in London

This article was originally published on FEE.org. Read the original article.

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18 Responses to Tim Worstall: Automation Isn’t Nearly as Disruptive as You Might Think

  1. John Constantine

    Lot of women to be dropped as banks go branchless.

    Once the artificial intelligence software replaces all the safe, clean office jobs done by women, this will trigger a demographic wave away from two income mortgage payers.

  2. John Constantine

    The major consumers of bespoke experience labour are the women that will be first replaced by machine learning.

    The frugality pinch of going from two incomes to one income, as interest rates and council rates rise and mortgage capital debts have never been higher will see to it tax and wealth tax demanded.

  3. Gary

    Australis should encourage automation and AI but its fixated on bureaucracy and migration to prop up numbers.

  4. Entropy

    While what Mr Worstall is mostly correct

    Here’s the key point that many people fail to grasp—the UK’s market economy (the US numbers are little different) kills off some 10 percent or more of jobs each year as it is, and creates some 10 percent of jobs anew. The unemployment rate is only ever the mismatch between the two, perhaps the timing difference between them.

    There needs to be more recognition that the old ten percent and the new ten percent are not necessarily the same people. And the grief of structural change is borne by people. Labour is not as liquid as academics would believe and models suggest.
    This isn’t to stop change, but academics and politicians “need to feel their pain” as Mr Clinton used to say. Recognition of others’ difficulty is half the battle, helps reduce reaction. Politics is the vehicle to address that adjustment issue.

  5. RobK

    Thanks for an interesting article. The rate of change is really the only serious disruptor in my view. It is restricted by some human elements such as education, skills training, legislature and standards, as well as elements such as capital depreciation and rebuilding, which in large business such as say steel making can be a stepwise function over decades. Interesting too, in my view is the mix of large corporates and small enterprises. I have a bias to small enterprises but some kind of spread is probably essential.

  6. max

    THE LUDDITE MENTALITY

    Certain economic ideas that are both logically wrong and unsupported by historical facts, and which have been known to be wrong for 250 years, are still widely held. This annoys economists.
    There is something that seems inherent in men’s approach to thinking about their own wealth that persuades them that what they have seen, over and over, in nation after nation, either did not happen, or, if it clearly did happen, will not continue.

    There is another error, comparable to the error of the pro-sales tax non-economists, which is also widely held. This is the belief that machinery makes workers poorer. It is usually described as the Luddite philosophy. A man named Ned Ludd (or Lud) supposedly broke knitting machines in a fit of rage in 1779. In 1811, an article on Ludd was published in a newspaper. When people then began destroying machinery, they were called Luddites.

    https://www.lewrockwell.com/2013/02/gary-north/the-luddites-among-us/

  7. RobK

    Forcing change, such as changing the electricity grid to RE by way of subsidies, is asking for trouble.

  8. Tim Neilson

    The unemployment rate is only ever the mismatch between the two, perhaps the timing difference between them.

    Is he saying that there’s no such thing as a genuinely unemployable person? That, no matter how sociopathic, how inept, how lazy or how overqualified with Angry Studies degrees, there’s always something that that person could justifiably be paid to do?
    Hmm, not sure about that.

    Also, I think that there is a qualitative difference between various technological changes of the type he describes. First, muscle jobs started being replaced by e.g. steam engines and internal combustion engines. That may not fully have finished yet. But then jobs requiring elementary but responsible alertness started being automated (e.g. traffic lights replaced the traffic cops one sees in very old films – though as I type I realise that traffic cop became a job only because of phase 1). Again, that’s still playing out. Now research type jobs are being encroached on by computers.
    If the thesis is correct, then the next phase of new jobs will have to harness some other aspect of human capacity. Sure, increasing wealth from prior automation will make the comparative cost of paying for that capacity much less than it would be now. But is it axiomatic that there always must be a new human capacity worth paying for?
    I expect that the author is right in the short term. And of course even now people get paid to do things that are utterly useless if not counterproductive (e.g. Human Rights Commission, ABC “journalist”, Fairfax columnist). So there’s no cause for immediate concern
    But I don’t think that it’s as totally inexorable a process as the author states.

  9. NB

    ‘That automation destroys or displaces jobs is not an error or problem; it’s the whole point. We want to kill jobs with automation’
    This is a point well worth making – and repeating ad nauseum. Automation increases productivity and that means greater access to goods per person. It is indeed the WHOLE point. It curdles my blood when the Greens proudly boast that renewables will increase employment in the energy sector. It is doubly galling when idiot media repeats this as though it were a signal of sound economic and environmental management. It is neither.
    The Greens would have me hammer out pins individually, and boast that under their management the pin sector had finally reached maturity. Problem is, I’d only be able to afford to buy one or two pins a year – that is if everything else, food, housing and so on, was also produced so inefficiently.
    Oh, but what of the unemployed? Jobs will arise!!! You think there were manicurists on every street corner or software programmers during the middle ages – or even 75 years ago?

  10. Dr Faustus

    But is it axiomatic that there always must be a new human capacity worth paying for?

    No, probably not. Western (or at least Australian and UK) society is paying a substantial part of the long-term price of human capacity displaced by technology via welfare payments. Limited jobs for people of limited capacity have gone and become disability support pensions, income support, and long-term unemployment benefits.

    This is not necessarily a bad thing if it is accepted as part of the social compact – and there is little dignity in busy work. But it is a serious problem if one ignores the effect when projecting how future productivity intersects with the need to feed and support the economically unproductive.

  11. Mother Lode

    People have got used to the idea that economies are a zero sum. They don’t understand how value is created, instead seeing only money. This make them blind to how things work because some things cannot be described in money terms.

    They are all familiar with how a shop pays for products that they sell at a higher price, and make a profit. It can be demonstrated with money.

    They don’t consider that when they buy something for $5 it is because what they buy is worth more to them than the $5. If it was really worth $5 they would be ambivalent about the purchase, and if worth less they wouldn’t. They have in fact made a profit. It simply is not traditionally recorded in a ledger.

  12. Kneel

    “But is it axiomatic that there always must be a new human capacity worth paying for?”

    Personal services has grown massively over the last years – personal trainers etc are not solely used by the ultra-rich any more, for example.
    People LIKE a personal, human touch in many things – jobs doing “hand crafted” materials, “personalised” clothing etc, are likely to explode when automation takes away the “muscle” jobs (including the “mental muscle” jobs, eventually). Yes, carpenters etc can still have a well paying job in this system, but the competition will be even more fierce. As will plenty of other “consumer personalisation services” that currently don’t exist and are difficult to automate.

    It’s a funny old business, is automation – a lot of times, people don’t want to change from the systems they know, but if you force it on them, it soon becomes a “how did we ever do without it?”. I know, I’ve created several automation systems over the years, and the biggest thing in making this successful is to gather all the appropriate work-flows currently in use, find the “worst”, and “fix” that. Rinse and repeat until nothing is left. It will NEVER be what it started out as, so you need to be agile, flexible and extremely patient. Gathering the work-flows is best done by talking directly with the people currently doing it, or even better, doing it yourself for a while. The boss can tell you what he wants in vague terms, but it’s the workers who know the nitty-gritty details that automation needs to cope with.

  13. Tekweni

    There are a number of robots doing multiple activities in aged care and hospitals here in Australia. Primary reason is labour saving and reliability of staff doing menial jobs actually turning up to work. The various robots scrub and vacuum floors (450 kg dalek lookalikes) with others delivering and picking up laundry, food containers and medicines. The technology is advancing rapidly and the robots are becoming more intuitive and easier to program. If you transit through Brisbane International Airport you may see one of the floor scrubber versions. Amazes me that no one pays any attention to them. Just accept the technology.

  14. Nerblnob

    Through efficiencies such as automation, capitalism generates the immense surpluses that are necessary for lesbian dance theory to flourish.

  15. Tel

    This is more than mere nitpicking. It is only by grasping this that we can understand our task here. That automation destroys or displaces jobs is not an error or problem; it’s the whole point. We want to kill jobs with automation, always and everywhere, as it is what that newly freed labor does next which makes us richer.

    Who do you mean “we” there?

    It’s strange how many people not only believe in a collective social intelligence that pervades the universe, but even more surprisingly believe they can sit down and have a chat with this entity and come up with an understanding of what “we” want.

    I can tell you that speaking for myself, I don’t want to find myself stuck out of work with all the training I’ve done at some particular task turning to zero value in a short stretch of time. That’s just me.

  16. Nerblnob

    Tel, probably economist-speak for “whatever you say you want, this is what your behaviour really says”.

    Speaking for myself, and only myself, looking back I see a trail of scorched earth littered with the smoking corpses of redundant skills I painstakingly learned.

  17. 2dogs

    what are the jobs of the future?

    Say’s law cuts both ways. The way to answer this question is to look at trends in expenditure.

  18. John Constantine

    When women pay 100 bucks for something, it is because the experience of spending the hundred bucks was more thrilling than having the hundy sitting unused.

    The massive herd displacement, as the entire soft, clean and certain office job sector in regulation and compliance that was invented to move otherwise unemployable women into the workforce the last twenty years is automated will be a shock.

    The sector that is thrilled to go shopping for and experience bespoke personal services will be unemployed overnight.

    Once frugality replaces emotional rush rewards at the top of the shopping list, paying extra for the experience if it has ‘street theatre’ and ‘gloat over your friends’ value will be something that burns with shame, not warms with smugness.

    Comrades.

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