How to protect workers against robots

by on January 15, 2013 at 2:44 am in Economics, Law | Permalink

Noah Smith has an excellent proposal:

First of all, it should be easier for the common people to own their own capital – their own private army of robots. That will mean making “small business owner” a much more common occupation than it is today (some would argue that with the rise of freelancing, this is already happening). Small businesses should be very easy to start, and regulation should continue to favor them. It’s a bit odd to think of small businesses as a tool of wealth redistribution, but strange times require strange measures.

Read the whole thing.

Alex Godofsky January 15, 2013 at 2:48 am

Has he ever heard of a 401(k)?

RM January 15, 2013 at 3:17 am

I am not sure what in particular you are commenting on, but the author points out that people are actually divesting in capital now, rather than investing in capital (by, for example, as companies go private; although I am not sure that there is evidence for that, but I will take the author’s word for it). Point is that the vast majority of Americans do not own capital, or at least not in sufficiently critical quantities.

Anon. January 15, 2013 at 5:28 am

That’s not an issue of “ease” though, it’s an issue of people not wanting to own capital. Usually because they’re financially illiterate and fail to anticipate their needs during retirement.

IVV January 15, 2013 at 10:08 am

Or by being unable to meaningfully invest in capital. I’d be happy to own portions of businesses or equipment that would allow me to have a say in their activities, but the opportunities for that are slim without investing a million dollars first.

Note that the stock market isn’t that meaningful capital–unless you’ve got those aforementioned millions. Even if you’re a prudent person who has hundreds of thousands, it’s still not enough.

john personna January 15, 2013 at 9:38 am

In the spirit of the Alex’s reply, you “protect workers” by protecting them all. While 401(k)s and “let them buy robots” are fine, excellent, for subsets, they can never be universal. Those are for prudent people who already have an income stream. And of course, some that will invest in 401(k)s will place it on the wrong bet. Some who buy robots will buy the wrong model. None of it makes for an actual safety net.

Andrew' January 15, 2013 at 9:49 am

On the other hand, noone wants to see a trapeze act that is nothing but people jumping on a trampoline.

john personna January 15, 2013 at 9:52 am

You are certainly noble to encourage high-flyers. Generally though, a circus does not have 20,000 people on the high wire.

Andrew' January 15, 2013 at 11:46 am

The point is that the safety net is not for everybody, it is for the people who fall because of bad luck.

Alex Godofsky January 15, 2013 at 11:10 am

Uh, the quoted article is the one demanding they be allowed to buy robots.

Michael January 15, 2013 at 11:31 am

I’m reminded of some story about the early 20th century and how anyone of decent intelligence could see that automobiles would be very important. So why didn’t everyone invest in cars and get rich? Many did invest in cars. It’s just that most of those car companies failed.

You’re absolutely right. Some will buy the wrong robots. In fact, I’d say most will. This future world where we all make a living by being passive small-time investors sounds too much like living in an economy run like an OTB. Everyone is just standing around hoping they’ve picked the right horse. You never know what will happen. Barbaro won the 2006 Kentucky Derby and looked like a real winner, but in 2007, he had to be put down. You could say the same thing about Nortel and RIM. And you will definitely be able to say the same thing about picking the right firms/robots in the future. Plenty of “smart bets” will fail and what do those people do then?

And if you think that if even a weaker version of the EMH holds, then how two people with the same initial endowment end up comparing years down the line may be the result of little more than uncontrollable randomness. It’s only one short step away from having everyone’s income determined by a lottery.

lemmy caution January 15, 2013 at 2:21 pm

This is a good point.

To me it comes down to a situation of who has the power. Humans will want resources directed to the humans and robots/AI will want resources directed to the robots/AI. There are lots of ways this could go well and lots of ways this could go poorly.

MotorBoatingSOB January 15, 2013 at 3:31 pm

Robot index funds.

So Much for Subtlety January 15, 2013 at 4:54 am

This assumes that the costs of capital stops people starting small businesses. I would think that is unlikely. Rather the issues are cultural. Some people like the security of a larger corporation. Some people prefer to run risks and reap the rewards. I doubt the percentages of either in society will change no matter how cheap robots become.

We can see this because some cultures produce people who like to own their own businesses – the Chinese and the Italians for instance – and some produce people who like to work for others – the Japanese and the British for example.

Anyway, why would anyone think robots are going to get that cheap any time soon? When first introduced they will almost certainly be expensive. Over time prices will decline, but it is possible that the software will improve and so remain expensive for some time to come. Car painting robots have not made it easier for someone else to start a car company. Clever software has enabled Amazon to drive thousands of small business, and now some large ones, out of business.

dan1111 January 15, 2013 at 5:10 am

Certainly other factors, such as culture, do influence likelihood to start a small business. But it is absurd to suggest that capital costs have no effect. Lots of people are somewhere in between the two camps you describe, and incentives will push them one way or another.

Cheap robots were the manufactured premise of the article. An inexpensive robot that can replace human functionality is a long way off, but costs are dropping on all kinds of technology. 3D printers are getting cheaper, for example, and they have lots of promise for small business manufacturing. Also, even expensive robots could be cheap for small businesses to use. Better software will allow factories to lower prices for small production runs of custom products.

Amazon may show the opposite of what you are trying to prove. Their sellers program gives small businesses access to the kind of sophisticated global selling and distribution network that once was available only to large corporations.

So Much for Subtlety January 15, 2013 at 5:26 pm

Capital costs are related to incentives, but they are not quite the same. People will start small capital intensive businesses if the profits are high. But for a lot of small business owners, incentives are probably largely non-monetary anyway. They prefer being their own boss rather than working for someone else. Especially in a lot of ethnic communities.

Suppose robots become cheap. That might mean more people would try to start a small business. Say a robot giving you a massage. But lots of people could do it. Pushing down profits. So fewer people would bother. Aren’t you back with the same amount of massage places unless the robots are much cheaper than human workers? It will be interesting to see where 3-D printers go, and at the moment it looks to me that the software will be the deciding factor – and it is likely to remain so for some time. But it could help smaller businesses I suppose.

I am dubious about Amazon. A good example of something like this though would be China’s Alibaba. You want a plastic part made, you can go on and get quotes from several hundred thousand small factories across China. It is the best B2B site I have seen. So it is probably working for them at the moment. If Amazon is going to move that way, good.

However over all isn’t that just an example of how unpredictable technology can be? Thousands of small book shops have gone to the wall. Thousands of small plastic factories may thrive. It is hard to be sure either way.

Steven Kopits January 15, 2013 at 8:01 am

I think Subtlety has a point here which is worth emphasizing. Education should include the management of risk, and experience in doing so. Knowing how and when to break the rules, when to comply and when to rebel, is also a skill.

Michael January 15, 2013 at 11:38 am

“Some people like the security of a larger corporation. Some people prefer to run risks and reap the rewards.”

And which of those two groups would you classify the people who invested in Enron and Worldcomm?

So Much for Subtlety January 15, 2013 at 6:32 pm

Neither. Investment is very different from seeking work.

TGGP January 16, 2013 at 11:26 pm

I don’t think it’s a matter of culture, for the same reasons Scott Shane would give. Richer countries with well-functioning economies reap the benefits of economies of scale, which means fewer small businesses.

Chip January 15, 2013 at 4:56 am

From the comments:

“The 40 hour work week is obsolete, so why do we continue to insist on it being the standard?”

Is the implication here that we can afford more leisure due to increased productivity and leisure?

Because the string of trillion dollar deficits suggests otherwise.

I just spent five months in Bali and a life of leisure gets tired after a while.

I like the writer’s idea of people using robots to start small businesses and embark on activities we haven’t even thought of. A long continuous wave of creative destruction.

Provided the governing class hasn’t built a wall of regulation and taxation around big business and the status quo, as seems their preoccupation today.

Vince January 15, 2013 at 5:26 am

A robot that can do everything that humans do, only better? I wouldn’t worry about it. That innovation has no business model, no major power group in our society is interested in provoking it, nobody who matters sees any reason to create it, there’s no there there.

dan1111 January 15, 2013 at 5:58 am

+singularity

lemmy caution January 15, 2013 at 1:33 pm

If it can happen, it will happen. Do you think the Japanese don’t want to build these things? What do you think AI researchers have been trying to do for the last 50 years? Do you think that they are just big chess fans?

Ted Craig January 15, 2013 at 7:05 am

Most people can’t run a small business. That’s why more than 90 percent of them fail.

A B January 15, 2013 at 7:11 am

Why is it odd to think of small business as a tool of wealth redistribution?

doctorpat January 15, 2013 at 9:28 pm

Because in many people’s minds
All business = evil

prior_approval January 15, 2013 at 7:32 am

Strangely enough, essentially every single person commenting here already owns a typesetting system/printing press, a recording studio, a video production suite, a digital media fab, and has the ability to do programming using state of the art tools, on an array of systems from the smallest microcontroller to massive cloud systems.

And yet, possessing such a vast array of capital (truly worth in the tens to hundreds of thousands of dollars 3 decades ago) hasn’t seemed to make any difference.

It isn’t just about the regulation, or owning something that suddenly is called ‘capital.’

Steven Kopits January 15, 2013 at 8:15 am

In fact, all this technology has made a huge difference. If MR didn’t exist, what would you be reading? The New York Times, maybe.

Thus, computers and the internet have dramatically lowered the cost of mass communication and provided access to those who would have been otherwise shut out of the discourse. Scott Sumner comes to mind. The internet and blogs have converted journalism into a cottage industry. The economies of scale have plummeted. Your reading this converts into financial distress at the New York Times.

I would caution, however, assuming that economies of scale remain small. A variety of business models are being tested in the marketplace all the time. That’s what venture capitalists do when they talk about paradigm disruptors. An example: The department store has given way to the boutique. MR is the Victoria’s Secret to the Macy’s of the New York Times. And yet, at the same time we see the rise of the big box, stand-alone stores: Best Buy, PetSmart, Wal-Mart, Staples and others. So we see mega-specialist chains that slice and dice the market on a different axis. The DrudgeReport is an example of a Trader Joe’s of the internet news business. The site sources news opportunistically, but with a view to serving a conservative audience.

So economies of scale come and go. Right now, the blogging world is in its infancy, with a large variety of providers and open access. A generation from now, another model might become dominant.

prior_approval January 15, 2013 at 10:27 am

‘The New York Times, maybe.’

Not ever, which is why I had to give the IHT when the Post sold its share. A truly foul paper, the NYT.

And with that out of the way, I would be reading the Der Spiegel or Die Zeit – just like I did before the Internet became available in any realistic sense in the mid-90s.

‘Your reading this converts into financial distress at the New York Times.’
Good. But in Germany, a mixture of public and private funding assures a varied stream of information, much of actually grounded in reality, with the belief that those reading it are educated. And yes, I pay my share – it is considered the price of democracy here (well, that statement has earned a bit of mockery when talking about jacking the GEZ rates, but not at the actual idea that democracy requires trusted sources of information that reflect that democracy’s concerns).

‘A generation from now, another model might become dominant.’

I doubt it – what is practiced here has a long tradition, with many variations over centuries, following roughly the same goal. It is the information collection that adds a somewhat new element, because there is more of a feedback loop possible now between seeing how many *.gov domain visitors (or *.whatever domain) click on a link, and from what site that link was referred – lots of insight available in even such basic information for those interested in influencing public debate.

So in a way, I agree – truly effective information gathering will be something a bit new, and attractive to many purveyors of information. Thus ensuring that such places as here continue to exist – it isn’t as the Internet is actually that new, after all, or that its potential as a data network has been ignored.

IVV January 15, 2013 at 11:47 am

“…a mixture of public and private funding assures a varied stream of information, much of actually grounded in reality…”

That assures nothing of the sort. If it’s true in Germany, then Germany is lucky. But in my experience, Germany is just as prone to cognitive biases in its reporting as America. It’s just easier to see those biases from outside, in both cases.

dead serious January 15, 2013 at 8:43 am

“Read the whole thing.”

I’ll have my personal robot do that, thanks.

buddyglass January 15, 2013 at 9:03 am

Economists love mitigating legitimately insurable risks via insurance, right?

http://www.nbc.com/saturday-night-live/video/old-glory-insurance/229049/

Brett January 15, 2013 at 9:36 am

If you want more average American buy-in to capital-biased growth, then you’d probably be better off with stronger legal support for profit-sharing agreements. Maybe you could make some form of Employee Stock Ownership Program mandatory for companies that go public, or do the “set-up every kid with X amounts of money at birth in a fund, then put obstacles in the way of just yanking it out all at once to pay for consumption” (something that Noah proposes in that post). Or you could create a more favorable environment for Mandragon-style business organization.

Of course, that might be unnecessary. We’ve got an aging population, and that includes a larger percentage of the population that lives off of publicly-funded pensions such as Social Security. If they have enough political clout to keep them funded, then you could get an economy that increasingly consists of

1. Highly productive, low employment sectors that generate a ton of tax revenue, funneling money into
2. An increasingly large population of elderly people and people on pensions, who through their demand for medical care, personal assistance, and other services create
3. Demand for workers among a shrinking pool of potential workers, with fewer youth entering the labor force (in the rich countries and China), driving up wages and giving workers more clout.

I’m not convinced that will necessarily happen. It could be upset by longevity increases in life span or life quality, the fragmentation of existing professions (and new ones) into new specializations that allow lower investments of skill and education in combination with machines*, or other forms of profitable “machine-man collaboration” set-ups proving more profitable than robots alone. Maybe the public will retain a great deal of demand for human interaction in much of the Services Sector, which isn’t impossible – there are machines that can provide massages, but people still go to masseuses.

Brett January 15, 2013 at 9:40 am

Yuck. The formating of that just got butchered. Here are the points again:

1. Highly productive, low employment sectors that generate a ton of tax revenue, funneling money into

2. An increasingly large population of elderly people and people on pensions, who through their demand for medical care, personal assistance, and other services create

3. Demand for workers among a shrinking pool of potential workers, with fewer youth entering the labor force (in the rich countries and China), driving up wages and giving workers more clout.

lemmy caution January 15, 2013 at 1:47 pm

The other problem is that since the robots continue to get better as a result of smarter than human AI designers, any robot you buy will become obsolete very quickly. If the upgrades are a matter of continually improving software, that is where the money is going to be.

merijnknibbe January 15, 2013 at 6:17 pm

Small company Robots:

The iron milking maiden (video). http://www.lely.com/nl/home/media-center/videos?tagId=33&tagId=54&tagId=&keywords=A4

The dung shuffeler (video). http://www.youtube.com/watch?v=pRlMMblSbNo

The feed pusher (video). http://www.youtube.com/watch?v=rJ8uEwW-86Q

Hazel Meade January 16, 2013 at 11:16 am

“it should be easier for the common people to own their own capital ”

What? The little people exist to consume. We can’t have them saving money and building capital. That would cause a recession.

Floccina January 16, 2013 at 12:13 pm

I think that Democrats would say that this will not work because poor people lack the wisdom to buy capital.

Floccina January 16, 2013 at 12:18 pm

BTW speaking of companies going private why don’t companies become partnerships to avoid the corporate income tax?

Richard January 16, 2013 at 3:18 pm

“Small businesses should be very easy to start, and regulation should continue to favor them.”

This seems to presume that regulation currently favors small business, which sounds dubious to me. Very small businesses get some breaks from specific regulations, but on the whole the burden of regulation is proportionally greater for small businesses, and some regulations are arguably rigged to keep out upstarts.

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