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What’s next?

Economists have been loathe to discuss the possibility of machines displacing workers. The facile counterargument is that labour-saving innovation started with the industrial revolution, and subsequent labour-saving innovations coincided with rising employment. Few ever concede that technological innovation could eventually transition from labour-saving to labour-replacing.

Thankfully, that’s begun to change. Nobel laureate Paul Krugman recently reconsidered this long-held economic view.

As have others, including one of our new favourite economists, Tim Harford, whose page we discovered on this University of Toronto Library site (where this page is also linked – thanks).

The robots are coming and will terminate your jobs
Tim Harford, Financial Times December 31, 2013

While we don’t necessarily endorse his views, Rolling Stone’s designated ‘millennial’ Jesse Myerson recently suggested “human workers are increasingly surplus”.

Five Economic Reforms Millennials Should Be Fighting For
Guaranteed jobs, universal basic incomes, public finance and more
Jesse A. Myerson, Rolling Stone January 3, 2014

(Young Mr. Myerson was subsequently called out for his views by Canada’s own Kevin O’Leary, who made a point of embarrassing himself – on US CNBC no less.)

While there seems to be growing consensus that technological innovation will eventually replace many if not most manufacturing and simple service delivery jobs, there seems to be little consensus on – let alone discussion of – ‘what comes next’, in the eventuality.

Will the industrial revolution evolve? Will there be a paradigm shift, a next revolution? Will a new economic system be required to account for the technological impact until then? The current system, where most household income derives from partial compensation for its members’ labour, the ‘surplus’ accruing to the ‘entrepreneurs’ / capital owners, fails when the marginal cost of labour approaches zero. Enforcing inefficiency, the “guaranteed work for everybody” approach, is antithetical to economics. On the other hand, declining labour compensation means progressively less household income available to spend on the progressively lower-cost output. In theory, the downward spiral continues until both demand and surplus disappear (P, MC -> 0).

Canadian households have been getting by in recent years on record levels of debt. That certainly isn’t sustainable either, although the chartered banks are profiting handsomely while biding their time awaiting the economic implosion (with little incentive to mitigate risk, since their deposits and mortgages have already been underwritten by the federal government).

To seriously discuss ‘what comes next’, policy makers need to first acknowledge the challenge ahead. Most are preoccupied with denial: balancing budgets with little regard for long-term socio-economic consequences; citing decreased official unemployment stats, which exclude increasingly large swathes of the population by design, as reassurance that all’s well; anticipating mass baby-boomer retirement to mitigate real rising un(der)employment – while at the same time implementing policies to discourage retirement to avoid paying out social and public pension obligations.

Worst case scenario, they can always kick the can down the road to the next administration, or the next generation.

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