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The World Economic Forum is that gathering of the Great and the Good that takes place at Davos each year. One good explanation for why the world is in the state it is is that the WEF, thus the Great and the Good, don’t actually understand the world we’re all in. This new report about jobs, AI and robots is a good example of this. They’re claiming that the new technologies will create as many, or more, jobs than they destroy. Thus we’ll all be saved and still be able to earn our crust.

This is to entirely misunderstand the process of automation. For if such created more jobs than it destroys then we’d all be poorer from the process. As that’s clearly not true, we get richer by automating work, then the assumption about the jobs must be wrong too. Which leads to the correct answer – automation allows us to go off and do other things, that being what makes us richer.

The rise of machines, robots and algorithms in the workplace stands to create almost double the number of jobs for the global economy by the middle of the next decade than it puts at risk of being replaced.

According to the World Economic Forum (WEF), about 133m jobs globally could be created with the help of rapid technological advances in the workplace over the next decade, compared with 75m that could be displaced.

If that’s true then he robots are going to be making us poorer and thus we’d better not have them. Which is balderdash, so therefore so is the original argument.

The WEF said Monday: “Despite bringing widespread disruption, the advent of machine, robots and algorithm could actually have a positive impact on human employment.”

Yes, it will, but not in the manner they’re talking about.

There’s a lot of uncertainty right now about the future of work, and how emerging technologies will change the nature and availability of jobs in the coming years. It’s tempting and wholly reasonable to believe, as so many do, that technological advances, particularly in the areas of robotics and AI, will result in massive unemployment. At the same, technological progress could also create new opportunities and completely new forms of employment. The big question many of us are asking now is: Will job losses outweigh job creation in the coming years and decades?

Again, that’s just the wrong way to be walking through the logic here.

So, start with the very basics. Human desires and needs are unlimited – that’s an assumption but a reasonable one. There’re some number of people on the planet. This provides us with a lot of human labour but not an unlimited amount. Thus labour is a scarce or economic resource – and we’ve not enough of it to sate all human desires and wants.

OK, so, now we use machines to do some jobs that were previously done by humans. Imagine that this new technology actually required more human labour – that it created new jobs in greater volume than those it destroys. Say, the tractor and combine harvester industry needs more people in it than we used to use to cut the crops by hand. We’ve just made ourselves poorer. We used to have some amount of grain through the labour of some number of people. We’ve now got that grain but by using the labour of more people. We’ve used more of our scarce resource and we’re now poorer by the loss of what they used to make when not hand cutting grain but now no longer are by making tractors.

What makes us richer is if the tractor industry has record production statistics while using less labour than the hammer and sickle. That means that some human labour is now free to go off and try to sate a human desire or want for something other than grain. Ballet dancing for example. We’re now richer – tractors and combine harvesters have made us richer – by whatever value we put on more ballet dancing.

The entire point of any form of automation is to destroy jobs so as to free up that labour to do something else. The new technology doesn’t create jobs, it allows other jobs to be done.

The only point at which this fails is if human needs and desires aren’t unlimited. Which means that we might be able to provide everything that everyone wants without us all working. Which doesn’t really sound like much of a problem really.

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Southerner
Member

Tim you’ve fallen into the zero-sum game trap there. If GDP is one thousand and there is one job, is the economy more or less productive than if there are a million jobs and GDP is ten billion? Of course all models are wrong but a little time spent learning how to use Excel is of huge assistance in understanding how economies fit together.

Arthur the Cat
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Arthur the Cat

I think the basis of the problem is that most people don’t think like economists. When the Man on the Clapham Omnibus hears the word “job” he doesn’t think “economic cost” like an economist, he hears “personal income”. Thus “robots will reduce the number of jobs” translates for MotCO as “less personal income, we’re going to be poorer” and is A Bad Thing. So the WEF, which is ultimately a political organisation that needs to keep the peasants from revolting while the economy does its own thing(*), translates the historically demonstrated “automation enables new sectors of the economy to open… Read more »

Spike
Member

Yup, this is why Trump risks an all-out trade war with escalating waves of tariffs. It is politically popular to protect “jobs” rather than protect the signature ability of the American economy to innovate and adapt. “Everything will be all right, as long as I am at work, stamping out widgets,” rather than a Mexican, says the voting member of the Amalgamated Union of Widget-Stampers. It is a totally static vision of the future, but it’s easier catering to them than broadening their minds.

Rhoda Klapp
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Rhoda Klapp

It doesn’t matter. Nobody’s business but the person who buys and uses (or indeed does noy buy or use) the new tech or whatever. Individual decision based on self-interest. The rest of us will have to adapt. I believe that Scots chappie said much the same a couple or centuries back.