Robots will bring manufacturing back to America

As everyone knows, the trend in manufacturing has been to move factories which use menial labor to poor countries to take advantage of lower wages.

But what happens when robots can perform menial labor more cost effectively than any human, no matter how low the wage? (As explained in my previous robot post.) When this happens, the most sensible place for manufacturing will be close to the capital and the consumers. Developed countries will see a resurgence in manufacturing.

Just as unskilled laborers in the United States and other developed countries will be without jobs, entire nations which currently have a high ratio of unskilled labor will become even more impoverished. In other words, the higher the result of the formula,

unskilled labor / (skilled labor * w1 + capital * w2 + natural resources * w3)

the worse off a country will be. The Robot Revolution will cause the rich countries to get richer and the poor countries to get poorer.

Comments

[michael vassar]

This assumes that wages are the only thing pushing manufacturing overseas. If regulatory burdens also contribute that must be taken into account.

[michael vassar]

Also, people in developing countries spend more of their income to buy material goods. If robots reduce cost of production of material goods that should increase their wealth more than that of westerners, who's wealth mostly goes to rent, medical, etc anyway. Cheaper energy would do even more for the developing world, but since energy is created in a capital intensive manner, cheaper capital should = cheaper energy.

[Russ]

There's a famous property law case where detroit tore down a neighborhood so they could build a factory. Lots of people were for it because it would bring employment. I guess the update is that it's filled with robots, today.

[Frank]

Finally some good news...so what do you suggest, for someone in their mid-30s and sick and tired of network IT, to get in this robot business?

[jult52]

"The Robot Revolution will cause the rich countries to get richer and the poor countries to get poorer."

Exactly how do they get poorer? It seems to me that productivity gains from robotization would benefit almost everyone, although in unpredictable ways. But poorer?

[The Superfluous Man]

"Exactly how do they get poorer? "
It all depends on how robots compare with third worlders in making say a pair of shoes. If robots can provide those shoes at less cost, the rich countries will have little use for cobblers in Bangladesh. As for where the robots will be built, it could be a range of countries in terms of cost, but all would have reasonably able people meaning China but not Bangladesh. So countries like Bangladesh and Haiti stand to lose much. But their labor is so cheap that it's much farther off than say supermarket cashiers or pilots losing their job.

Third Worlders sometimes have trouble competing with American farmers, who are just so much more productive even though their wages are much higher. Third worlders often lack the capital (or the know how) to improve their farms.

[mickslam]

Hey-

You're my good twin - Im the evil one.

You've hit on every major theme of mine:

Robots - going to make some people literally worthless
Class in America and lopsided results
Winner take all markets
When and how markets fail
How luck impacts outcome

Keep up the good work

[jult52]

Superfluous Man: I have a lot of faith in the ability of people to adapt and make themselves useful and productive in new economic circumstances. Half Sigma's concerns seem straight out of the early 19th-cent Luddite vision of the future.

[Half Sigma]

jult52,

The difference between traditional labor saving inventions and robots is that the former make labor more efficient while the latter REPLACE labor entirely.

Kind of like how I threw my old notebook computer into the garbage because the replacement notebooks of today made the old notebook worthless garbage.

And while I don't doubt that rich people will prefer to have real humans wait on them (just because it makes them feel more important), the bottom 20% of humans aren't good at this activity. They are the worthless humans.

[mickslam]

What I don't think many people realize is that the replacement is going to come first in what has been traditionally known as knowledge industries. Its much easier to make a program that can simulate a para-legal than it is to make a robot that can clean your room, because the range of ability required is far more defined and able to be stored digitally.

When the lawyers find themselves out of work, then we replace doctors with Nurse practioners and the only people making money are salesmen, its going to be quite ugly.

Nope, you won't be making yourself more productive. Ask any now displaced steel worker. You will be accepting a job with 50% less pay, replaced by a guy in India with a computer program.

[spungen]

HS, the bottom *fifth* of humans (I assume you mean intelligence) can't even be trained to wait on people? There are people with Down Syndrome working at McDonald's. I think people with average or slightly below-average intelligence can do most jobs given proper training, handling and social skills.

Mickslam, *someone's* going to need to work that paralegal program for me. Fields like law will always involve people and their conflicts, and people will never be predictable or functional enough for any computer program to manage their issues. You don't pay a lawyer to find out the answer, you pay him/her to fight for you.

[Macneil]

"The difference between traditional labor saving inventions and robots is that the former make labor more efficient while the latter REPLACE labor entirely."

Here is what an economist might say about your concern: Consider the marginal cost of making one more robot, at $X.

Now suppose that you have a job that needs to be done where one robot would do the job. You could either pay the $X for the robot, or you could pay a fraction of that cost for a human for a year. Factor into this cost the risk of having a human around and that you are only paying them for one year of productivity instead of the life-time of the robot.

Now, whatever $X is, once you have $X, you have quite a lot. You have enough capital to do that big job forever! The human worker would only be paid a fraction of it, but they too would be able to save up and buy their own robot.

How much cheaper the humans are to the robots is also a question of supply and demand: if a lot of people want the job, it would be much less than a year's worth of renting the robot. If not too many people want the job, it might only be slightly less than the year renteal.

At this point you might be concerned that the human would only "get paid pennies." But if the robots are that productive, than the cost of *everything* would drop! Pennies would get you quite far.

While you paint a distopia here, what you are really describing would be a technological utopia. I think that we could only be so lucky.

[michael vassar]

If markets operated efficiently then people could buy lots with a few pennies in this scenario. More realistically, rent seeking activities would protect the current prices of goods produced by the politically connected, making inflation, not deflation, the norm.

[jult52]

HalfSigma: "The difference between traditional labor saving inventions and robots is that the former make labor more efficient while the latter REPLACE labor entirely."

Uh, huh. Because technology works perfectly all the time. Once the PC I am using was installed on my desk, it never, ever had to be fooled with again, in any way. It was PERFECT. (Sarcasm off.) By the way, as I write this post, my landline telephone was currently nonfunctional. But that's not surprising because it's a new, relatively untested technology. (Hmm, guess the sarcasm wasn't off.)

About paralegals, I work with them fairly frequently and I think their jobs are very unlikely to be automated.

[Half Sigma]

"Because technology works perfectly all the time."

There be jobs for robot programmers and robot technicians, but the people too stupid to learn any skills in the present will still be too stupid to learn any skills in the future, and their value to society will be worthless.