More left wing than Krugman. I've always suspected that down in the deep, deep tunnels of your little heart there was a spring of liberality. Now you admit it. I can sleep now.
REH From: [email protected] [mailto:[email protected]] On Behalf Of Keith Hudson Sent: Monday, December 10, 2012 6:13 AM To: RE-DESIGNING WORK, INCOME DISTRIBUTION, , EDUCATION Subject: [Futurework] Old-fashioned Krugman Even the title of Paul Krugman's latest piece in the NYT (see below) is evidence of his old-fashioned way of looking at the world. It's not that he's left-wing (I'm great deal more left-wing in some of my beliefs than PK -- a member of the high-earning elite -- will ever be) but that he doesn't appear to be up-to-date on several highly important players in the economic game (e.g. demography, biology, energy resources). The refrain that comes through time and again, and really shows that Krugman is living in a Keynesian past, is the way he thinks about where profits come from -- that is, by rich people exploiting workers, simply because the rich exist. (This argument is the same as saying that the industrial revolution could never have come about because the existing land-owning aristocracy already owned pretty well the total wealth of the country.) Profits don't come by exploitation when using anything like the usual meaning of the word. Profits come from encouraging the largest possible mass market (with adequate wages) to come into existence and to stay in existence, furthermore in persuading workers within it to buy houses and non-essential goods of the highest possible price in order to keep up with the Jones or, for the more ambitious individuals, to lay claim to higher social status. Well, I'll tell Krugman what 'profit' is if he really wants to know. Profit comes from making a product with a new method that uses less energy than one's competitors or of a previous method. (Colloquially, you can be said to be making a profit from a slave but only because you are using his total available energy. If you pay someone he will use his energy more efficiently and you'll get more profit. If you are making a products with a purely automatic method and, subsequently, competitors drive your profits down to zero, then your only recourse is to devise a more efficient automaton.) Although he mentions Brynjolfsson's and McAfee's book ("Race Against Machine") with seeming approval, Krugman still hasn't taken on board the likelihood that every possible job or profession which consists of regular methods and outcomes is going to be automated sooner or later. Krugman complains about the decrease of mass market incomes in the last 30 years. This is not only going to continue but the mass market itself will decline in numbers at the same time -- as it has done in Western Europe in the last 50 years. America is following, too, with less-than-replacement birth rates in the last two or three years. As far as livable wages are concerned, they will disappear over the coming decades due to automation -- as will the people also! There'll be plenty of non-routine jobs remaining, albeit a minority of what, today, is the total range. Whether the elite and the highly skilled will go against the majority and improve their birth rate to ensure that they will have heirs who can enjoy a less crowded world remains to be seen. There's some anecdotal evidence that the elite (what I call the 20-class) are now having more children. Many career women are not only deciding to have a child but are also retiring from work completely and becoming what has become that much despised profession "mother and housewife". If the 20-class decide that they want children to enjoy but don't want to go through the 'labour' bit then it will not be long before we will be able to add Artificial Gestation to the hospital curriculum. In the case of Krugman, the needle got stuck when he heard his first lecture about Keynes. It's a pity that he is not a polymath as Keynes was. He'd then be much more in touch with other important trends. Keith As far as livable wages for the present majority are concerned, they will disappear over the coming decades due to automation as will the people also. There will be plenty of jobs remaining -------------------- Robots and Robber Barons Paul Krugman The American economy is still, by most measures, deeply depressed. But corporate profits are at a record high. How is that possible? It's simple: profits have surged as a share of national income, while wages and other labor compensation <http://www.bls.gov/opub/mlr/2011/01/art3full.pdf> are down. The pie isn't growing the way it should - but capital is doing fine by grabbing an ever-larger slice, at labor's expense. Wait - are we really back to talking about capital versus labor? Isn't that an old-fashioned, almost Marxist sort of discussion, out of date in our modern information economy? Well, that's what many people thought; for the past generation discussions of inequality have focused overwhelmingly not on capital versus labor but on distributional issues between workers, either on the gap between more- and less-educated workers or on the soaring incomes of a handful of superstars in finance and other fields. But that may be yesterday's story. More specifically, while it's true that the finance guys are still making out like bandits - in part because, as we now know, some of them actually are bandits - the wage gap <http://www.clevelandfed.org/research/commentary/2012/2012-10.cfm> between workers with a college education and those without, which grew a lot in the 1980s and early 1990s, hasn <http://www.epi.org/press/wages-young-college-graduates-failed-grow/> 't changed much since then. Indeed, recent college graduates had stagnant incomes even before the financial crisis struck. Increasingly, profits have been rising at the expense of workers in general, including workers with the skills that were supposed to lead to success in today's economy. Why is this happening? As best as I can tell, there are two plausible explanations, both of which could be true to some extent. One is that technology has taken a turn that places labor at a disadvantage; the other is that we're looking at the effects of a sharp increase in monopoly power. Think of these two stories as emphasizing robots on one side, robber barons on the other. About the robots: there's no question that in some high-profile industries, technology is displacing workers of all, or almost all, kinds. For example, one of the reasons some high-technology manufacturing has lately been moving back to the United States is that these days the most valuable piece of a computer, the motherboard, is basically made by robots <http://economix.blogs.nytimes.com/2012/12/07/when-cheap-foreign-labor-gets- less-cheap/?partner=rss&emc=rss> , so cheap Asian labor is no longer a reason to produce them abroad. In a recent book, " Race Against the Machine <http://www.theatlantic.com/business/archive/2011/10/why-workers-are-losing- the-war-against-machines/247278/?single_page=true> ," M.I.T.'s Erik Brynjolfsson and Andrew McAfee argue that similar stories are playing out in many fields, including services like translation and legal research. What's striking about their examples is that many of the jobs being displaced are high-skill and high-wage; the downside of technology isn't limited to menial workers. Still, can innovation and progress really hurt large numbers of workers, maybe even workers in general? I often encounter assertions that this can't happen. But the truth is that it can, and serious economists have been aware of this possibility for almost two centuries. The early-19th-century economist David Ricardo <http://www.econlib.org/library/Ricardo/ricP7.html#Ch.31,%20On%20Machinery> is best known for the theory of comparative advantage, which makes the case for free trade; but the same 1817 book in which he presented that theory also included a chapter on how the new, capital-intensive technologies of the Industrial Revolution could actually make workers worse off, at least for a while - which modern scholarship suggests <http://www.econlib.org/library/Enc/IndustrialRevolutionandtheStandardofLivi ng.html> may indeed have happened for several decades. What about robber barons? We don't talk much about monopoly power these days; antitrust enforcement largely collapsed during the Reagan years and has never really recovered. Yet Barry Lynn and Phillip Longman <http://www.washingtonmonthly.com/features/2010/1003.lynn-longman.html> of the New America Foundation argue, persuasively in my view, that increasing business concentration could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees. I don't know how much of the devaluation of labor either technology or monopoly explains, in part because there has been so little discussion of what's going on. I think it's fair to say that the shift of income from labor to capital has not yet made it into our national discourse. Yet that shift is happening - and it has major implications. For example, there is a big, lavishly financed push to reduce corporate tax rates; is this really what we want to be doing at a time when profits are surging at workers' expense? Or what about the push to reduce or eliminate inheritance taxes; if we're moving back to a world in which financial capital, not skill or education, determines income, do we really want to make it even easier to inherit wealth? As I said, this is a discussion that has barely begun - but it's time to get started, before the robots and the robber barons turn our society into something unrecognizable. New York Times 9 December 2012
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