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Media loves to create a technophobia frenzy for automation and robots. Would REALLY automation in manufacturing cause the economy to collapse?

Taking an extreme case that is impossible to happen even in the far future due to technical challenges, but consider that EVERY job is replaced by robots. Manufacturing of a product from start to finish would be done by robots and no work from humans necessary. This product would essentially be for FREE. Shouldn't this the ultimate goal of an economy?

Ignoring this dystopia society, even if automation replaces some of the more redundant jobs, like taxi drivers, truck drivers etc. Wouldn't that allow for reassignment of human resources to more important tasks and help the economy grow?

I think the situation is similar to the introduction of steam machines and the fear people had about them replacing men. While in reality they didn't replace them, they re-assigned them to positions that required more skill and knowledge (Such as machine mechanic etc)

I don't see any way that automation in manufacturing is a bad thing. Our society is more data and knowledge focused and I think the ones that are afraid are the ones incapable of expanding their knowledge, learning a new skill or adopting to the changes. But should we stunt the growth of our society due to few lazy, unskilled people and literally wait until they die to introduce progress?

I believe that any human in order to survive will adopt and the people mentioned above are no exception.

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As an answer let me offer a paradox that goes in your direction and is related to automation and the future of jobs:

Despite a century of creating machines to do our work for us, the proportion of adults in the US with a job has consistently gone up for the past 125 years. Why hasn't human labor become redundant and our skills obsolete? In this talk about the future of work, economist David Autor addresses the question of why there are still so many jobs and comes up with a surprising, hopeful answer.

Here is David Autor's TEDx Why are there still so many jobs? and I will have added [despite automation]

Autor's answer is that technology magnifies the importance of our expertise and creativity and since we never get enough the wealth and the time saved by automation boost our endless inventiveness. So, automation will NOT replace EVERY job by robots. There's always new work to do.

The challenge that this automation phenomenon creates, what economists call job polarization, is that it knocks out rungs in the economic ladder, and shrinks the size of the middle class. The share of employment in occupations in the middle of the skill distribution has declined rapidly in the US and Europe. At the same time the share of employment at the upper and lower ends of the occupational skill distribution has increased substantially. A compelling explanation of this job polarization is that middle-skilled manufacturing and clerical occupations are characterized by a high intensity of procedural, rule-based activities which they call "routine tasks", which can relatively easily be coded into computer programs (see Autor, Levy, and Murnane, QJE, 2003).


Update

Daron Acemoglu and Pascual Restrepo have new working papers tackling this important question.

Abstract of Automation and New Tasks: The Implications of the Task Content of
Technology for Labor Demand [emphasis mine]

We present a framework for understanding the effects of automation and other types of technological changes on labor demand, and use it for interpreting changes in US employment over the recent past. Automation enables capital to replace labor in tasks it was previously engaged in. Because of the displacement effect it generates, automation is qualitatively different from factor-augmenting technological changes; it always reduces the labor share in value added (of an industry or economy) and may also reduce employment and wages even as it raises productivity. The effects of automation are counterbalanced by the creation of new tasks in which labor has a comparative advantage, which generates a reinstatement effect raising the labor share and labor demand by expanding the set of tasks allocated to labor. We show how the role of changes in the task content of production—due to automation and new tasks—can be inferred from industry- level data. Our empirical exercise suggests that the slower growth of employment over the last three decades is accounted for by an acceleration in the displacement effect, especially in manufacturing, a weaker reinstatement effect, and slower growth of productivity than in previous decades.

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    $\begingroup$ Nice video. Really nice answer $\endgroup$ – NinjaStars Dec 24 '16 at 9:51
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These are excellent questions. Automation and robotics have been recently presented in the news as this new phenomenon which is it a bit crazy making for me as someone who has been studying this since the 90s because they present like it just started happening.

Automation is eating jobs and has been doing so since at least the 90s, it did not just start at the turn of the 21st Century. It may have even started in the late 80s.

Automation also eats profits, since automation turns labor, services and goods into a commodity. When something is commoditized the price drops because the goods and services are interchangeable and can be produced almost anywhere.

Tablets and iPads can be assembled anywhere and the software can be coded anywhere.

Big profits flow from scarcity, that is, when demand exceeds supply. If supply exceeds demand, prices fall and profits vanish.

The cost of automation and robotics is falling dramatically. This lowers the cost of entry for smaller, hungrier, more nimble competitors and lowers the cost of increasing production.

So not only can robots assemble those parts for the tablets and iPads, but the profit margins are razor-thin because they're commodities and so yes, software is already free, but the economy is not this single monolith, its a complex system and each industry has its own politics. For example, in my opinion, there already exists a car for every woman, man, child, baby and two dogs, but the price of automobiles continues to go up, that's the internal political nonsense that goes on in the car industry, but that's another topic for another day.

Automation increases supply and lowers costs, so not only is it deadly to the jobs of yesterday its deadly to profits as well.

So although you are thinking about our economy in terms of "lazy individuals" who refuse to adapt or die. As a student of economics and businessperson I am looking at the big picture, but not necessarily disagreeing with you.

Aside from some lazy individuals, you didn't look at the industries themselves. The automobile is fighting tooth and nail to not go the way of the music industry whose profits were cut it half by Napster and that technology.

So they lobby their state officials to refuse to allow the direct sales of Tesla in a futile effort and other dumb stuff they do.

Then there is Ebay, Wal-Mart, YouTube and many others whom have disrupted the industry of yesterday in their own way.

The profits that are going to be bypassed by a bicycle tire manufacturer because you and I used Wal-Mart or Ebay to purchase that tire and YouTube to learn how to fix our flat is an order of magnitude higher.

I myself bypassed the politics of begging a book publisher to look at my work to pubishing my own books on Amazon.com. Sure I don't have the huge marketing resources, but if the topic I cover in them ever go viral, not a single dime will go these publishing houses and I own the rights to revise and republish as I wish.

Unlike a human worker, a robot does not require health and dental insurance, workers compensation, 401(k)s, and all the other costs of labor overhead.

As socio-economist Immanuel Wallerstein has observed, the cost of labor has been rising globally as a result of structural forces that are immune to productivity gains, recessions, tax credits and other credits:

  1. The 'deruralization' of the world is on a fast upward curve.
  2. Externalized costs (i.e., in treating raw materials to make them ready for production, it creates toxic waste, cleaning up that environmental waste becomes a part of the productivity costs.)
  3. Taxation to pay for social services which also becomes a part of productivity costs (Wallerstein, 2000, pp. 261-263).

These trends are especially visible in China, which has seen wages soar, costs of pollution control soar and demand for state services soar.

So where does this leave us regardless of whether we adapt to this new economy or not?

  • Technology no longer creates more jobs than it destroys, so ignore what your politician is telling you, they don't know.
  • Profits decline as automation commoditizes labor, goods and services globally.
  • Digital and robotic tools are falling in price while the cost of human labor inexorably rises.
  • As costs of automation plummet, barriers to entry fall and competition arises, pushing everyone into automation if they wish to survive (and lobbying their politicians to fix the game like the automobile and education-cartel industry).

As profits fall and jobs are eliminated, the tax base narrows and the state collects less tax revenue. Even the state must automate to reduce costs.

Put all these together and the conclusion is inescapable: the conventional narrative solutions are wishful thinking. Whether its the clamoring for putting the breaks on automation or demanding the state create more jobs.

Sure they have the Fed which can lower the interest rate to near zero to borrow money to create these jobs, but creating tens of millions of jobs on borrowed money? That's unsustainable. How will we pay the money back if certain jobs are gone forever? And no they will not be replaced with other equivalents, just more wishful thinking there. So in that sense, yes, adapt or die, figure out what the economy finds as value and do that I guess, but don't forget there is also your local community economy and however you can create value there, the advantage is, while it may be lower income or profit, but your skills will not be tradeable (i.e. bakery, barber shop, bike shop or whatever), meaning someone in India will not be able to take your place in that very local venture.

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