Will Robots and Automation Make Human Workers Obsolete?

PBS News Hour recently had a special on the main topic I've been writing about here on The Huffington Post and elsewhere: unemployment and inequality caused by technology and, in particular, automation.

You can watch the video below:

The video includes input from two very prominent technology futurists: Ray Kurzweil and Peter Diamandis. Kurzweil is author of the book (and forthcoming movie) The Singularity Is Near and believes we're headed for a future where humans and machines merge (sort of like the Borg on Star Trek, but hopefully better-looking). Peter Diamandis is one of the leaders of the personal space flight industry and chairman of Singularity University, which offers graduate courses in futuristic technologies and their implications.

Both Kurzweil and Diamandis are strong believers (and advocates for) the so-called "technological singularity." The singularity is a future event in which technological progress begins moving at an incomprehensibly rapid rate. Things would be changing so fast that humans wouldn't be able to understand or follow the progress. Most people who believe in the singularity (singularians) associate it with the development of true artificial intelligence. Kurzweil, for example, believes that we'll build the first truly intelligent machines by 2029, and then the singularity will follow at around the year 2045.

While all this may seem a bit far-fetched, the singularity and proponents like Kurzweil and Diamandis have a strong following among the technology elite -- and in particular among Silicon Valley billionaires. People like Google founders Larry Page and Sergey Brin, as well as Facebook investor Peter Thiel, have all been associated with the idea.

In the video above, Ray Kurzweil is asked about the possibility of a "digital divide" -- meaning that only a small percentage of the population is able to take advantage of new technologies, even as traditional employment opportunities are destroyed. Kurzweil seems to argue that we won't have a problem, because these new technologies will be affordable and widely available (he gives the example of cellphones). A little later in the video Diamandis makes essentially the same point.

These views strike me as both unrealistic and elitist. There is little evidence to suggest that most average people are going to be able to parlay access to a cellphone, social media, or other personal technologies into a livable income. Even among the minority of people who actually have the necessary skills and training, there is a strong element of luck associated with the success of any entrepreneurial activity. Most new businesses of any type fail. Assuming that a huge percentage (perhaps most) of the population will someday generate a meaningful income by independently leveraging technology is really quite a stretch.

A second problem with techno-optimists like Kurzweil and Diamandis is their near-exclusive focus on the cost side of technology. Many technologists believe that advancing technology and increased automation are likely to drive down costs and possibly make most products and services far more affordable. At the extreme, some techno-optimists believe in the promise of a "post-scarcity" economy. Even if we go along with that -- and there are certainly powerful opposing arguments based on energy and resource depletion and environmental degradation -- simply making "stuff" cheaper is not an adequate solution.

Imagine for a moment that you were living in the year 1900. Suppose you could look through a time portal and see the world of 2012. You might well suppose that a "post-scarcity" world had already been realized, given the far higher living standards that average people now enjoy. On the other hand, if you got a look at 2012 prices (as opposed to what you were used to in 1900), you certainly wouldn't feel that things had become more affordable!

The reality, of course, is that prices have increased dramatically in nominal terms since 1900 -- but average incomes have increased even more. The average U.S. worker in 1900 earned just $438 per year. Over the past 112 years, incomes have increased dramatically in real terms (after adjusting for inflation), leaving nearly everyone better off, even as prices have increased.

The problem is that if, rather than a period of 112 years, we look at just the last 30 years -- say since the mid 1980s -- the story is very different. Incomes (wages) for most average workers have been completely stagnant in real terms; after adjusting for inflation, most workers have made little or any progress. And for a number of big-ticket items -- like health care, housing, and education -- the situation has actually worsened significantly for most Americans.

So will making all kinds of stuff cheaper, even as incomes continue to stagnate and even fall, solve our problems? No, it will not. If we actually had a situation where prices for nearly everything fell while wages likewise fell and unemployment increased, that would be deflation. You won't find many economists who would advocate long-term deflation as a good strategy for the future.

Deflation destroys the incentive to invest in the future and, if prolonged, would likely slow the pace of innovation. The problem with deflation is that while incomes, prices, and asset values may well fall, debts do not deflate. The result would be widespread insolvency, potentially catastrophic financial crises, and lower living standards for virtually everyone.

The true challenge we face in the future is really about incomes. As technology and globalization advance, how do we get incomes for the majority of the population to continue increasing in real terms? This has been the historical path to prosperity, and we have to figure out how to maintain that trend going forward. One of the main ideas I focus on in my book The Lights in the Tunnel is that incomes power consumers -- and consumers ultimately power the economy.

If we can't find a way to maintain, and even increase, real incomes for the majority of our population, broad-based prosperity will become increasingly elusive.

See also this post on my EconFuture blog: "Technology, Globalization, Consumer Spending and Purchasing Power"

Martin Ford is the author of The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future (available from Amazon or as a PDF download). The book argues that accelerating information technology, and in particular robotics and artificial intelligence, is likely to have a disruptive impact on the future job market and economy. He also has a blog at econfuture.wordpress.com.