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Robots, the economy and creative destruction

Several debates have arisen around robotics, of course some of this is science fiction, but then we are increasingly seeing science fiction becoming science fact, there is the debate around ‘strong artificial intelligence’ and robots replacing human being, a notion which is being redefined by Moravec, who predicts that machines will ‘attain human levels of intelligence by the year 2040, and that by 2050, they will surpass us.’

There is the debate around Ray Kurzweil, who forecasts the union of human and machine, in which the knowledge and skills embedded in our brains will be combined with the vastly greater capacity, speed, and knowledge-sharing ability of machines, these two writers and scientists are considered by many to promulgate the highly intelligent anthropomorphic robots of popular culture.

Then there is the debate on the impact of robotics on unemployment in the industrial and service sectors especially that of Frey and Osborne (2013 and for an excellent write up see Andrew Flowers article) who illustrate the impact of robotics on almost 50% of current jobs. There is the debate on the complex relationship between technology and employment, such as Castells, who charts the social and economic dynamics of the information age and its impact on society as a whole.

There is also the change in human machine interactions as a result of advanced robotics as illustrated by Levy (Love and Sex with Robots) and lastly but by far means least, the debate around ethics and the implications of robotics and the law as so well documented by Ryan Calo (2014).

One thing is clear robots create a significant divide whoever you talk to and despite the fact that dates may be slightly off, there is general consensus that the twenty-first century will be the century of robots.

The Economist magazine has a special report on Robotics this week where they state:

“It is quite easy to imagine a future in which “robots” remain an esoteric subject of public fascination even as more and more services are automated with techniques developed in robotics laboratories.”

Whatever we think about robots and their associated technologies they will increasingly become part and parcel of our every day life. The discussions around ethics and laws are advancing, and yet the debate rages on around employment and how to ‘fix it.’ This is not new, in his essay Economic Possibilities for our Grandchildren John Maynard Keynes (1930) predicted what he called “technological unemployment”

“We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come – namely, technological unemployment. This means unemployment due to our discovery of means of economizing the use of labor outrunning the pace at which we can find new uses for labor. “

Automation is not a new phenomenon! Society has come through at least five economic revolutions in the last 200 years (Kondratiev wave).Kondratiev

Yes, more and more services will be automated and yes there will be job displacements as a result. But shouldn’t the bigger question or debates be around creating more inclusive societies in which automatic and robotic systems will contribute to improving people’s lives?

Rumblings have started. Jesse Myerson caused quite a stir with the article: “Five Economic Reforms Millennials Should Be Fighting For.” Likewise Dylan Matthews with his article: “Five conservative reforms millennials should be fighting for.”  Both arguing for better welfare and basic income guarantee.

However, In their paper Technology, Unemployment & Policy Options: Navigating the Transition to a Better World, the authors write: that a basic income guarantee would have a “corrosive effect on the social fabric, would not address the need for people to have a meaningful purpose to their lives, and would likely be politically infeasible in this era of government cut-backs and retrenchment.”

Of the arguments I have seen put forward by modern economists such as Tyler Cowen and as mentioned by Dylan Matthews in his piece referenced above: “to make the government a large institutional investor — basically, to create a government hedge fund, or “sovereign wealth fund.” A number of other countries (Norway and Singapore come to mind) have such funds, as do Texas (which uses oil money to fund public higher education) and Alaska (which dispenses the returns on its fund as a dividend to residents).” Whilst this may work effectively in smaller countries by population I am not as convinced it will be effective for larger populated countries.

Economists also argue that the stability of the labor share of income is a key foundation in macroeconomic models – until this is addressed we will continue to remain in a depressed economy regardless of the advances in technology.

How we achieve an inclusive society and get people back to work is probably best summed up by Schumpeter and creative destruction.  For Schumpeter, technological opportunities ‘are always present, abundantly accumulated by all sorts of people.’ With the rapid progress in Internet technologies, knowledge resources available through Google and others, online courses in computer sciences and machine learning, rapid prototyping through 3D technologies and a myriad of other support systems, opportunities for entrepreneurs to profitably tap into the pool of usable science and technology are abundant… it is up to each and every one of us to grab those opportunities the automation age presents us with.


  1. […] Several debates have arisen around robotics, of course some of this is science fiction, but then we are increasingly seeing science fiction becoming science fact, there is the debate around ‘strong…  […]

  2. bhatmahesht says:

    Whenever the ‘creative destruction’ happened in the past , there were invention of new jobs which can’t be handled by machines. The new jobs could only be done by humans. But with the invention of machine intelligence and robotics there will not be any job that can be done by only humans. Robots will compete humans in productivity. In 21st century robots will be new customers and innovators. But still I believe better basic income and jobs for humans. Will this be more inclusive or just the few capitalists getting all the benefits? The way Google and Facebook getting aggressive on AI , it seems capitalists are keen on getting new customer base of robots

  3. RPG says:

    Not sure about your last para.

    Yes, entrepreneuralism can create new jobs in times of automation, but it will not necessarily get us closer to “a more inclusive societies in which automatic and robotic systems will contribute to improving people’s lives” for a number of reasons.

    Firstly, entrepreneurs will need to follow the demand for goods and services/ the possibility to make profits. In an unequal society, where most robots (i.e. wealth) are owned by a small number of people, this will mean entrepreneurial innovation will cater to the interests of those who have the wealth to demand new products.

    Secondly, most people will not become entrepreneurs. Not everyone will be able to live the uncertain life of an entrepreneur. And it wouldn’t be progress if they did. Imagine a society where most people don’t have feeling of security to their livelihood.. what is more, the existence of a stable labour force with disposable wage income is precisely what gives a certain degree of stability to the aggregate demand in the economy allowing entrepreneurs to plan ahead and make a guess at what market there is for their products.

    So, let’s assume that most people will continue to look for wage labour… what kind of jobs will entrepreneurially driven creative destruction bring about? Well, the future is, as always, uncertain, but based on past performance, the short answer is: bull-shit jobs. And that follows from the first point: how many jobs are created in industries whose sole purpose is to redistribute profits from one group to another (finance, corporate or patent lawyers, marketing…)? How many jobs are created to cater for the whims of the wealthy (again, finance, but also a lot of real estate business, interior designers, personal shoppers etc.) And finally, how many jobs only exist to support people doing the first two kind of jobs (i.e. all kinds of business support services, catering, production of microwave ready meals etc)?

    Then compare this to all kinds of things that need to be done, but are done by too little people, or people who are poorly paid, or have poor working conditions (e.g. providing care to the elderly, a lot of reseach and development on things such as drugs that are not easily marketable)…

    … so I don’t think entrepreneuralism will be enough. Creative destruction alone will fail for the same reason as purported for basic income: it does not address the need for people to have a meaningful purpose to their lives. Basic income – though I’m not a big fan – at least asks the right questions: given the amount of wealth we can create with ever fewer labour, shouldn’t we consider a) redistributing “what the robots produce” and b) consider whether it’s reasonable to keep up the same level of wage employment. I just doesn’t really ask c) what else do we do and d) do we need to re-direct activities to more socially meaningful aims.

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