First of all I think Larry Summers gets much right, especially with respect to how many people are unemployed and have been displaced by a multiple of factors, of which robotics is one of them, albeit not a major factor (yet). I’m not quite sure why Summers mentions disability insurance – would be grateful if he would clarify that.
He also considers that robotics will have a major impact on future employment and indicates that Thomas Piketty does not emphasize the threat of robotics and associated technologies enough. Here’s what Summers writes:
I am not sure that Piketty’s theory emphasizes the right aspects. Looking to the future, my guess is that the main story connecting capital accumulation and inequality will not be Piketty’s tale of amassing fortunes. It will be the devastating consequences of robots, 3-D printing, artificial intelligence, and the like for those who perform routine tasks. Already there are more American men on disability insurance than doing production work in manufacturing. And the trends are all in the wrong direction, particularly for the less skilled, as the capacity of capital embodying artificial intelligence to replace white-collar as well as blue-collar work will increase rapidly in the years ahead.
This is very similar to many critiques that wonder whether Piketty is right to think the future will look like the past.
But the critiques fail to appreciate that Piketty does look to the future, in fact he specifically states in his book the extreme example is a society where robots produce the entire output, and that in this case the returns will go entirely to the owners of robots and factoral income distribution would be 100% capital, 0% labor.
In Capital in the Twenty-First Century Piketty talks of an “entirely robotized economy in which one can increase production at will.” (Page 217). He sees this as techno optimism (or pessimism depending upon which side of the fence you sit).
He talks about how capital will always find new and useful things to do, such as producing “ever more sophisticated robots,” and the impact this will have on inequality. (Page 221)
And he refers his readers to his online technical slides where he speaks of the “extreme case” being a “pure robot-economy.” And the people to worry about are those “that own the robots.”
I’m in agreement with Noah Smith who writes: “If robots are to blame, then Piketty is right:” If R, the rate of return on capital (which is different than the safe interest rate “r”) is greater than g, the rate of economic growth, and that this fact can be expected to continue into the indefinite future, resulting in an ever-rising capital share of income and an ever-falling labor share.”
Yes we should take the threat of robots and potential mass unemployment seriously as Summers says and I believe Piketty emphasizes this, in fact Piketty also states that “education and technology are the decisive determinants in wage levels,” although maybe he could have expanded upon this. But more importantly we should consider Piketty’s warning on who owns the robots, or as he says:
It is too soon to warn readers that by 2050 they may be paying their rent to the Emir of Qatar (or Norwegian sovereign fund).” And he later adds: “Nevertheless it would be a mistake to ignore the issue.”