Like many people, I long worried about the specter of technological unemployment – as machines get smarter and gradually can do the jobs that people do, will we reach a point where machines can do everything people can do?

If and when that happens, we may have a paradise of abundance – machines will make everything we want, without any people needing to work.

But at the same time, how will people get money to buy these things?


I no longer think that’s going to be a problem.

Last week’s Economist has an excellent report on “The return of the machinery question”, which examines the problem from a historical perspective. People, after all, have been thinking about this problem since the start of the industrial revolution.

Despite all the hand-wringing, the economy always seems to generate more jobs than automation displaces.

Now I understand why (others have understood for a long time).

I’ll explain with a simplified economic model.

LIMITED STUFF-MAKING ABILITY

At any given time, the world (or national) economy has the ability to produce a certain amount of stuff. Food, clothing, houses, cars, entertainment, etc. – all the things we humans want.

How much stuff we can produce at any given time depends on:

  • Labor: How many people exist (each has hands and brain)
  • Capital: How many machines, factories, buildings, etc. we’ve accumulated. How much education people have received, etc.
  • Resources: How much raw materials we can easily get at – metals, chemicals, energy, land, etc.
  • Technology: The ways we know to do things and use the things we have.

Of course how well we use these things matters – we can run factories 24×7 or only 8 hours/day. We can have rules that make us waste time and materials, or incent people to be efficient. We can work long hours, or take lots of vacations.

And over time how much of these things we have changes – population can grow or shrink, resources can be discovered or run out, and we can discover new ways to do things that are better.

But, still, there are limits. At any given time, we can only produce some given amount of stuff.

LIMITED MONEY

Also at any given time, there is a (again, roughly) fixed amount of money in the world.

Sure, we can print more, but that doesn’t help. If we can make a billion stuffs each day, and there are a billion dollars of money, then the billion dollars will buy all the stuffs, so 1 stuff for each dollar.

(I said this was simplified.)

But if we print another billion dollars, that doesn’t help. Now there are 2 billion dollars, but only 1 billion stuffs each day. So you need 2 dollars to buy each stuff.  (This is inflation.)

MONEY CAN ONLY BE SPENT ON PEOPLE

When someone buys something, they give money to some person.

Yes, you can buy a building, which is not a person. But to buy it, you give money to a person (who owned it).

The same is true with everything – whether you’re buying labor or capital or resources or technology – the money goes to people.

There’s no place else it can go, except to people.

NOW INTRODUCE ROBOTS

So, we can make a given amount of stuff, and the given amount of money will buy that stuff.

And money can only be spent on people.

Now we introduce lots of robots that can do most of the jobs that people do. The robots are cheaper to use than humans, so they get used instead of people.

So now there are people doing nothing, who used to be making stuff.

I just said “the robots are cheaper”. This is key.

Let’s simplify some more and assume we’re still making the same amount of stuff (actually we’ll be making more, which makes things better, but let’s ignore that for now).

So we’re making the same amount of stuff, but the robots are cheaper. That means somebody has extra money left over (probably whoever is using the robots, but that’s not important, as we shall see).

Same amount of stuff. Extra money left over. Which can only be spent on people.

The extra money will eventually get spent.

If it’s spent on stuff made by robots, there is still extra money left over. Because robots don’t get paid, only people do.

Yes, robots cost money, but that money is paid to people – the people who make or own them.

So there is still extra money around. Held by people. They can spend it on more robot stuff as much as they like, but that doesn’t use up the money – it just moves it around to other people.

And since we’re already making as much stuff as before, that means it has to be spent on new stuff made by people, that wasn’t being made before. That’s the only place it can be spent.

So now we’re making more stuff than before. And that new stuff was made by people. And the only people available – who aren’t already busy making the old stuff – are the ones who lost their jobs to robots.

So those are the people who get hired to make the new stuff.

That’s it.

That’s why despite 200 years of worries, technology has never caused mass unemployment.

Because it can’t. There is only so much money around at a given time. If money is saved by cheaper robots, that money gets spent on people.

(Yes, technology has caused, and will cause in the future, temporary problems as people switch jobs. That’s different.)

Finally – Since the robots are cheaper, prices for the stuff they make go down. Which means people can afford to buy more of them.

Which means that people actually get wealthier, in terms of how much stuff they can afford to buy. (They don’t necessarily have more money – they might have more or less – but they can afford more stuff.)

They can’t buy more of the stuff made by people, but they can buy more of the stuff made by robots. Which means stuff made by people is more expensive – more valuable – than stuff made by robots.

Which means the wages of the people who make stuff has gone up, in terms of what the money you pay them will buy.

Up, not down.

Technology makes wages rise. Not decline. Rise.

And that is why we have nice things today, like houses, and medicine, and clean rivers, and airliners, and indoor toilets, and the Internet, that our ancestors with little technology didn’t have.

Free speech and the left

May 29th, 2016

What is going on with the left and free speech?

Decades ago self-described liberals were consistently in the forefront of defending the right to free speech and the first amendment.

Lenny Bruce was the poster boy/martyr for this cause. Liberals defended pornography and communists. They consistently said “the answer to speech you don’t like is more speech” – not controls on speech.

The ACLU became famous for defending unpopular speech, even to the extent of defending the right of neo-Nazis to march though the largely Jewish Chicago suburb of Skokie.

From George Orwell’s 1984 to the Berkeley Free Speech Movement to denunciations of Joe McCarthy, much of the left seemed to define itself as defending freedom of expression.

Mario Savio and FSM - Sather Gate, UC Berkeley, November 20, 1964

Mario Savio and FSM – UC Berkeley Sather Gate, 20 November 1964

But in recent years it seems the situation has turned 180 degrees. The #1 cause célèbre among all my left-of-center friends is reversing Citizens United. Campus protests demand censorship and “safe spaces”, and aim to drum professors advocating politically incorrect views out of the academy.

And then we have:

Arrest Climate-Change Deniers – Gawker

New Inquisition: Punish climate-change ‘deniers’ – WND.com

Al Gore at SXSW: We Need to ‘Punish Climate-Change Deniers’ and ..

Climate “Deniers” Must Be Jailed or Killed | – Acting Man

This all seems a very long way from the impassioned defense of free speech the left (in the US) used to stand for.

What happened? Why?

I asked an insightful slightly left-of-center friend, who said,

“Liberals will care about free speech if and as it fights harm and oppression and advances equality. There are a handful of people who care about free speech as an end in itself, but not many.”

I’m not sure if that’s correct. But if it is, what does that say about the contemporary left?

If the left of the 1940s, 50s, and 60s thought that free speech would advance its goals, helping to undermine the status quo, does it now oppose free speech because it sees itself in a position of power, able to dictate what are and aren’t acceptable ideas?

When and how did that change? Did the fall of the Soviet empire strengthen the left in the west, instead of discrediting it?

I’m confused. But as someone who really does care about free speech, it’s terribly disappointing.

As far as I can tell, the popular image of a “millionaire” in the US comes from the 19th century.

images

Whether you figure by the gold price or by the CPI deflator, one million dollars would buy between 1 and 2 tons of gold during most of that century.

Here in 2016, a ton of gold is worth about $35,000,000.

That’s inflation for you (which I suppose is why many people today use “millionaire” to mean someone who earns $1M/year, instead of someone with a net worth of $1M).

But gold doesn’t inflate. A ton of gold is a millionaire. A nice visualizable amount.

For a shock, read Francis Wayland’s The Elements of Moral Science (1835; try also here), “one of the most widely used and influential American textbooks of the nineteenth century“.

As Wayland explained, prior to Darwin’s theory of evolution, conventional mainstream Christian morals were based on the idea that Man was made by God, and so had special moral responsibilities.

Darwin knocked that bucket over, and in the process broke the long-accepted rationales for all kinds of legal, moral, and ethical rules. The reverberations from that were still being felt at least into the 1970s, and included socialism, progressivism, communism, the sexual revolution (of the 1920s, not the 1960s one), fascism, bad art, ugly buildings, environmentalism, hippies, flower power, and more. Some of it was good, more of it was bad. Things didn’t really start to settle down until the 1980s in the US, the 1990s in Europe, and still aren’t settled in the Islamic world.

And there are plenty of people – all over the world – who still haven’t made peace with it.

In Asia there wasn’t as much commotion about Darwin because Asian societies tended to take their social rules from non-theistic sources (as the West does now, mostly); Darwin’s revelations didn’t invalidate them.

It is telling, I think, that East and West had more-or-less similar rules (and still do, post-Darwin), despite supposedly getting them from independent sources.

I think that shows the rules really came from social evolution, a la Friedrich Hayek (certain rules tend to make societies dominant). Ironic, no?

Why does almost everyone (even me) feel disgust at disaster profiteering?

On the face of it, that’s the market at work – big needs bring high prices, which bring lots of supply, right? It seems (looking at it economically, not emotionally) the quickest way to get help to those in need. But it disgusts me, too.

My hypothesis is that people instinctively fear that profiteers will engineer a crisis if they can make a profit from it. To prevent that, there’s social opprobrium for profiting from a crisis.

Just a thought.

How to deal with tailgaters

March 29th, 2015

I learned the hard way not to speed up.

Once at night I had a tailgater on a two lane road (no easy way to pass), and, being a nice guy, I sped up to accommodate him.

A mile later, the tailgater turned on his blue lights, pulled me over, and gave me a ticket for speeding. Asshole.

So, now:

1) I get as far to the right as possible (left in countries that drive on the left).

I hope that’ll let them pass. Sometimes it doesn’t.

2) So then I slow down. Gradually (no “brake checking”).

And keep on slowing down. Until they pass me.

Occasionally I’ll have to slow down a lot before they’ll pass me – it’s amazing. Sometimes I end up going 15 miles/hour on a limited access highway! (interstate/freeway/autobahn/etc.)

[I wonder if these people just think it’s normal to drive 16 inches behind the car in front of them – once they finally pass, they look…confused.]

One time, on a small road, I had to come to a complete stop before the guy would pass me!

Guess what – he turned out to be a cop. Once I stopped he, very slowly, went around me and drove away.

A brief overview of history

March 29th, 2015

In the traditional inverse-log focus:

Big bang. Galaxies. Earth. Life. Bacteria. Plants. Oxygen in the atmosphere. Animals. Smart animals. Then fire and cooking. A lot of fighting.

Then agriculture. Soon after, writing was invented around 10,000 years ago. Recorded history begins.

Then wheels. Empires and a lot more fighting. Classical civilization (Greece and Rome) rose and fell. Big organized religions.

Printing press. Perspective drawing. Global travel by sailing ships. Epidemics. First global maps. Securities markets. Corporations. The beginnings of science around 1650, mostly in northern Europe.

18th century: Notions of human rights proposed. More empires. Symphonies. European colonization of Africa and Asia. Newtonian physics. Bach. Beginnings of chemistry.

The great 19th century: Industrial revolution – steam engines, precision machines, factories, mass production, electronic communication. Photography. Railways. The first time substantial numbers of people lived at above bare subsistence level. Periodic table. More empires and wars. European domination of the world. Slavery mostly abolished. Darwin’s discovery of evolution. Classical physics.

20th century: Relativity. Quantum physics. Aviation, cinema, automobiles, radio. Ideological extremism. Nuclear power, electronics, computers, primitive space travel. Rock and roll. Molecular biology. More wars, less empires. The early Internet.

21st century: A majority of Earth’s population lives above bare subsistence, mostly thanks to reforms by the Chinese Communist Party (not communist in anything but name). Advances in cosmology and computer science. Wars, but less so.

And here we are.

Thank you, Lee Kuan Yew

March 23rd, 2015

lee-kuan-yew

Lee Kuan Yew passed away yesterday.

Much to my regret, I never met him. I did not agree with him about many things.

But he was the greatest single benefactor of mankind in history.

As a direct result of the actions of Harry Lee and his “socialist” People’s Action Party, billions of people were lifted out of abject poverty, through reforms first in Singapore, then copied in China and in much of Asia.

Billions of people.

Today Reuters quotes Lee as saying in 1986 “We have to lock up people, without trial, whether they are communists, whether they are language chauvinists, whether they are religious extremists. If you don’t do that, the country would be in ruins”.

He outlawed long hair on men in the 1970s. Banned the sale of chewing gum. And, of course, many drugs.

Those things don’t fit with my politics. But look at the result. Singapore, once almost a synonym for filth and poverty, today is arguably both the freest and wealthiest country in the world. And – billions of people.

Deng Xiaoping, architect of China’s rise through market economics, based directly on emulation of Lee Kuan Yew’s policies in Singapore, famously said “it doesn’t matter whether a cat is black or white, if it catches mice it is a good cat”.

Lee’s cats caught mice.

And so, despite everything, I mourn Lee Kuan Yew.

And, about our political disagreements? Maybe I’m wrong.

sm lee press conference

Movie review – I, Robot

January 10th, 2015

60036238[Yes, the 2004 version; I just saw it.]

For decades, movies about humans vs. aliens or humans vs. robots were thinly veiled parables about racism, xenophobia, loving thy neighbor, etc.

Especially so if one of the main characters is black.

No spoilers here, but at the start of this movie Will Smith’s character hates robots. Hates them for no obvious reason.

But this movie is not about racism or foreigners, or anything even vaguely like that. It is actually about robots.

By the end of the movie, Smith no longer hates robots. But not because he’s learned to be a better person. Oh, no, that is not the reason at all. Because this movie is not about that – it’s about intelligent machines.

I won’t say more – see it. But this movie rejects many standard Hollywood tropes and comes up with something genuinely fresh. And it shows that at least some people in Hollywood (Will Smith, anyway – who is also a co-producer) are able to make movies – even starring black people – about things other than racism. Imagine that!

And it has some important things to say about robots – things that may not occur to you until the next day after you see it.

It’s not an Asimov story – it just takes his robot stories as background. But I think Asimov would have liked it (so will Nick Bostrom).

It’s not a perfect movie, so one star off for that. But see it. 4/5 stars.

All wealth comes from arbitrage

December 19th, 2014

Arbitrage is the act of moving things from a place where they’re less valuable (cheaper, if you like) to where they’re more valuable (more expensive).

Normally the term is used in financial transactions – if a ton of wheat is worth $200 in Chicago and it’s worth $250 in Houston, I can buy it in Chicago, sell it in Houston, and make money. That’s arbitrage.

But – that’s just a financial manipulation; a trick played with numbers to cheat the system. I haven’t really created anything or done anything useful.

Right?

Tho it may seem that way, not right. Economics is not intuitive.

Suppose I have a pile of wood. It has some value. I get tools, work hard with them, and turn the wood into a house.

(If you’re outside America, assume a pile of stones – I know you people think making houses out of wood is crazy.)

The house is worth a lot more than the wood pile was.

This also is arbitrage. We don’t usually call it that, but it is – I’ve moved the low-value wood in such a way that it’s now a high-value house.

Yes, I used capital (the tools) and labor (the work) to do it, but that’s how I did it – not what I did.

This is where all wealth comes from – moving things around from less-valuable conditions into more-valuable conditions.

Capital and labor and technology are useful only when they help with arbitrage (digging holes and filling them up again uses labor, and shovel-capital, and scooping-technology – but doesn’t create any wealth).

Another example – when I was in kindergarten, sometimes I’d get sent with a salami sandwich (this was before in-school cafeterias). I didn’t love salami – I preferred tuna. But a friend had a tuna sandwich, and preferred salami. We’d swap. (Yes, I know that’s not allowed anymore.)

By swapping, we turned two not-highly-valued sandwiches into two more-valued sandwiches – because we each preferred the other’s sandwich. The sandwiches remained exactly the same. But the value increased – by arbitrage.

Back to the ton of wheat in Chicago. Let’s ask why wheat is cheaper in Chicago. There must be a reason, even if we don’t know what it is. Maybe there was a bumper wheat harvest in Illinois (where they keep Chicago), so there’s more than people can eat. Maybe they like rice better. Whatever.

In Houston – the opposite. Maybe there’s a pizza holiday that uses up lots of wheat. Or a bad harvest in Texas…again, whatever.

The point is, by moving the wheat from Chicago to Houston, I’m moving it from where it’s needed less to where it’s needed more – afterwards, there is less excess wheat in Chicago (and more valuable money), and less shortage in Houston. So I made both places better off.

Which means it was not a trick – I really did do something useful. I created wealth. And some of that wealth I get to keep (some will go to the seller in Chicago, and some to the buyer in Houston – exactly how much depends on negotiating skills, buy/sell spreads, etc.).

So arbitrage is where all wealth comes from. It is the sole reason we don’t live in caves anymore.