In 1850 the French economist Frederic Bastiat published an essay titled: That Which is Seen, and That Which is Not Seen. The essay is most famous for introducing the concept of ‘opportunity cost,’ the limits, alternatives and choices – to obtain more of one thing, we give-up the opportunity of getting the next ‘best thing,’ or because we “can’t have it all,” we must decide what we will have and what we must forgo. That sacrifice is the opportunity cost of the choice.
Many argue that opportunity cost is applied in business, once the cost of marginal labor rises too high, it makes more sense to replace minimum wage jobs with robots or other automated technology – leading to increased production and profits.
Of course this is not a new phenomenon. In his 1850 essay, Bastiat wrote:
“A curse on machines! Every year, their increasing power devotes millions of workmen to pauperism, by depriving them of work, and therefore of wages and bread. A curse on machines!
This is the cry which is raised by vulgar prejudice, and echoed in the journals… machinery must injure labour. This is not the case.”
It is a cry echoed in media today, just as it was 164 years ago – 164 years during which humans have seen the greatest advancement of technological progress, resulting in more luxury goods, improved health, longer life expectancy, better housing, and sanitary, clean water, electricity, instant communication around the globe via the Internet for free, mobile phones, planes and automobiles, heart transplants, and so on. Ninety nine percent of the poorest people in the ‘developed world’ have amenities that the wealthiest people of Bastiat ‘s time could not imagine.
Machinery does reduce some labor, but as Bastiat points out new labor from new industries is quickly created. The very industry, robotics, that is said to be eliminating jobs is in fact creating hundreds of thousands of jobs.
According to the European Union Commission, by 2020, service robotics could reach a market volume of more than 60 billion euros per year, and are forecasting 240,000 new jobs in the EU alone, backed by an investment of Euro 2.8 billion during this period.
The International Federation of Robotics has reported that Robotics will be a major driver for global job creation creating more than one million jobs by 2016.
Many of these new jobs will come from investments into the Robotics sector which is currently experiencing a major boost.
Startup Robotic companies like Jibo blasted through their crowd funding campaign raising $1,270,193 in a matter of days against a goal of $100,000. Much of the investment will allow Jibo to recruit new staff as the company delivers its artificially intelligent robot helper.
Another robotics startup, Airware the drone manufacturer raised an additional $25 million series B round on top of the $12.2 million it raised in it’s A series round. The company said it had raised the new funding: “to build out its staff.”
The South Korean government is mooted to invest $2.5 billion US dollars by the end of 2018 in joint projects with robotics companies, creating more jobs and targeting more than $6 billion US dollars in annual sales.
Japan is building a huge drone fleet. The country will invest ¥3 billion (approximately $372 million) in the coming decade to drastically expand its military unmanned aerial vehicle (UAV) program.
An estimated $6.4 billion is currently being spent each year on developing drone technology around the world, according to a report published earlier this month by the Teal Group Corp.
Whilst jobs will disappear, there are literally hundreds of companies and governments investing tens of billions of dollars in drones and robotics and in doing so creating a significant number of new jobs.
The current generation of engineers and roboticists are making science fiction stories of magical realism come true and creating millions of jobs in the process. As Bastiat put it: “to curse machines is to curse the human mind.”
Update – see also GE Reports on the Cyborg Workplace.