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September 30, 2011

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I've been pimping Dwight Murphey's "Shared Market Economy" on these kinds of posts lately. It's an interesting book about the problem of excess labor in an automated economy, with the "Shared Market Economy" as his proposed solution. I'm not fully qualified to validate his prescription, which I read as being basically a federally managed index fund against the overall economy which pays dividends to those extra people who are made unnecessary by automation. It's an interesting proposal, and some aspects of it I find quite appealing. I think he does a good job of describing the conditions under which such a scheme would have to operate in order to be successful. You, and some of the other commenters might like it, or at least have some comments I hadn't thought of.

http://dwightmurphey-collectedwritings.info/SME-TofC-2.htm

Half Sigma,

I respectfully suggest that you under estimate the price sensitivity of the demand for labor.

Please take a look at Hong Kong - Hong Kong has a population similar to that of NYC. Hong Kong has plenty of immigrants with very low skills. The unemployment rate is exceptionally low.

In Hong Kong, it is just expected that every single able bodied man needs to accept a job. If a man thinks that he deserves and "office job" but can't get one, he will suck up his pride and accept a job as a janitor or as a waiter.

There is certainly enough work in the United States today - if labor prices were allowed to fall to the market clearing level no able bodied man with a clean criminal record would be unemployed for the long term.

Half Sigma, let me illustrate this for you. Let's take a typical "value creator" a middle aged man working as a computer programmer in DUMBO. This middle aged man is taking home let's say $100 thousand a year after taxes.

I am sure that this value creator would enjoy living in a little bit larger apartment. Why is it that newly constructed sky scraper apartments in DUMBO sell for $900 a square foot? Much of it is the high cost of labor for the ironworkers needed to build modern steel sky scrapers. Move down the wages of the ironworkers and the price of apartments falls and the value creators will gladly buy them.

I am sure this value creator would like to have his apartment cleaned and his laundry done for him three times a week. But probably he is only having his apartment cleaned and laundry done once a week due to the relatively high cost of maid service in DUMBO vs in Hong Kong, again allow the price of labor to fall and demand will rise.

Finally, this value creating computer programmer probably has a parent or grandparent who is elderly and needs home visits by "home health aids" Today this cost of home health aids is such that the computer programmer only has them visit his elderly relatives 15 hours a week. Push down the price and he will have them visit much more often.

Half Sigma, there is indeed demand for labor in our economy, just not enough demand at today's labor price. I respectfully encourage you to brainstorm ways to persuade workers to "lower their standards" and accept jobs that they consider "beneath them" at wages that are lower than they would like. I believe we can have a society where there is essentially zero unemployment among non criminal able bodied men.

I've thought this was coming for a little while now. The big question I forsee, is how does a society balance 80+% of people who can't contribute with 10-20% of those who can? Or why should the contributors work to support the rest of society? Someone's still got to design, finance, build, and maintain the automated factories.

And yet the government's bringing in more unskilled workers, the very people who we need less and less, by the de facto open border policy with Mexico, and our welfare policy encourages the breeding of the most useless people. Certainly, there are things the government could do to alleviate the coming difficulties, but democracy has failed as badly as the free market in actually producing realistic solutions to these problems.

HS,

What makes your arguement different from the exact same one made 20, 50, or 100 years ago? It seems humans always find new ways to occupy themselves no matter how much technology advances.

Even today, I can think of all sorts of jobs I would have liked a human for, but didn't have one. And these tasks weren't the kind of thing I need a genuis for. For instance, I need to get my car inspected. Doesn't take a genuis to drive it to the inspection station. Maybe that's a "useless service" but its a service that would save me 1-2 hours and I'd be grateful for. Maybe one day I will have a self driving car, but even then there will need to be someone that can hand the form over to the guy and talk to him and bring it back. If you somehow had an invention to do that I can think of others. There will always be bullcrap I don't want to do.

I think that realistically it will take a LONG time before we are at that level of automation (a couple generations at least) not because of lack of technological progress but just because of of social expectations and human stubbornness.

There are already large amounts of jobs that a prime candidates for automation with the technology that we have right now (and in many cases had 10-20 years ago).

Some years ago I worked in a call centre where my job was basically to answer the telephone and work my way through a script that was displayed on my computer screen, asking a set of predetermined questions.

These questions would almost never change and we were not qualified or allowed to give any advise beyond what was displayed on these screens. In fact our calls were monitored and we were punished for any deviation from the script. An entire 100+ people workforce could have been trivially replaced with a simple PHP web form or an automated telephone service.

This was not to be however , I believe mostly because many people will still expect to talk with a "real" person even when for all intents and purposes that person may as well be a computer program.

Also , when the global recession first hit I remember some supermarket chains were still opening many new stores but instead of staffing these with people they kept the human staff to a minimum and instead used automated self service checkouts.

These checkouts despite having some teething problems now seem to work pretty good, however most people of 40+ still opt for a human checkout even if it will take longer. The result was that many of the self service checkouts were closed and replaced with people again.

Of course I think younger generations (i.e people born today) will be more used to these things being a part of everyday life and will simply accept them as normal.

However perhaps we do the future generations a disservice if we assume they will not find alternative ways to employ people and make them otherwise productive
when we cannot mostly because our imaginations have been blinkered by our life experiences.

Who is to say that our children will not scoff at our arcane and backwards 'free market' beliefs then implement their own Marxism 2.0 or other system.

" Government couldn’t even prevent the housing crisis, which should have been pretty obvious."

The government didn't just "not prevent it" -- the government *actively caused it* (see Morgenson's "Reckless Endangerment").

Love the comment Arnold.

The truth is there will always be low status work that people need done, that will never change. In a pure free market with no payroll tax, no wierd welfare laws, no host of regulations that double the cost of having low skilled labor, you probably could find these people jobs to do. That's a big part of the reason to hire illegals, you don't have to deal with the governments bullcrap.

As I've stated before, I have wealthy friends from the third world that can afford many servants on a salary that can barely pay for a decent living here in America.

The main variables are
1) How long will it take for the economy to marginalize enough smart people that America's bipartisan consensus around the fundamental soundness of meritocracy is broken? (The left with its credentialism and the right with its doctrine that hierarchies are market-created and therefore Good)

2) By the time 1) happens, will the critical mass of the culture still tilt toward self-organization or will our neighbor's passivity and fatalism have put us to sleep?

No revolution in sight. We have a model of a country where work is superfluous: Saudi Arabia. They busy themselves in studying the Quran and getting doctorates in religion. Everybody has a job guaranteed, that is, a government salary, and a free house and so on. Nothing happens, no revolution in sight.

If a future society produces so much through automation that its output makes our current output look pathetic (and it probably will) then laborers will need to produce ALMOST NOTHING to trade for what they want. You can't envision what that labor might be, just as I doubt Malthus could have seen a society employed primarily in the service sector... all of those agricultural jobs lost forever. Boo hoo!

And what if tech makes people think better? It's already ended forgetting by making recording, retrieving, and collating of information simple and ubiquitous. Other improvements are on the way.

Reading your stuff is like reading Obama's science advisor (John Holdren) on the "Population Bomb." You're impressed with your creative envisioning of problems and imagined solutions to them. All the while you're probably dead wrong the way that Malthusians have been for centuries. And you want to give people with guns more power just to be sure.

Note how similar your thinking generally is to this persistently wrong genius:
http://en.wikipedia.org/wiki/Thomas_Malthus

I'm certain that this will become an absolutely horrible problem, particularly as the industrial revolution begins to reverse once the massive flows of energy start to diminish.

The future's going to be more agrarian, not less.

Also, the value of physical labor is going to increase.

Also see Light at The End of the Tunnel. Book on same theme

"No revolution in sight. We have a model of a country where work is superfluous: Saudi Arabia. They busy themselves in studying the Quran and getting doctorates in religion. Everybody has a job guaranteed, that is, a government salary, and a free house and so on. Nothing happens, no revolution in sight. "

But Saudi Arabia doesn't give citizenship, lavish benefits and voting rights to the children of their Filipino manual laborers...

"What makes your arguement different from the exact same one made 20, 50, or 100 years ago? It seems humans always find new ways to occupy themselves no matter how much technology advances."
Does there have to be a difference? In the last thirty years, wages in general have stagnated, and the wages of the least skilled have actually fallen in many places. The unemployable underclass has grown. Pretty much every prediction made by the people who expressed similar concerns has been borne out by reality, if not to the extremest extent possible.

I think that every single person on this blog understands that certain immigrants to the USA have IQ under 125. I think that there is complete agreement on this blog that the US should not allow mass immigration of people with IQ under 125.

Now, we don't agree on a few things. There is fierce disagreement on this blog between those that think that the US should allow massive numbers of people with iq over 125 to come here and those that don't. This thread is not the place for that argument.

We also fiercely disagree on whether there are enough jobs to keep every single able bodied non criminal citizen born in the USA at full employment going forward. I personally believe the answer is yes, however other people here disagree with me.

In my humble opinion, reason for high unemployment is the unwillingness of most unemployed able bodied men to (1) move to the parts of the USA where there are jobs desperate and hungry for people, and very low unemployment (2) accept humble or hard and dirty jobs.

Does anyone else on this blog watch Portlandia? Ever been to Portland? Plenty of able bodied, reasonably intelligent males in Portland choose to live the hipster slacker life and work only 20 hours a week. these self same able bodied men could earn $80k a year working hard in the places in North Dakota where there is a desperate shortage of labor.

do yourself a favor, follow this link
http://www.youtube.com/watch?v=AVmq9dq6Nsg
or alternatively, just google "dream of the 90s youtube"

you will see the face of hipster unemployment

The future labor saving technology that will supposedly replace humans will need energy to run on. For that to happen we have to make the assumption that we will always have plenty of fossil fuels or a feasible replacement. We've already used up most of our oil and have to spend huge amounts of money importing it. Nuclear power is a possibility but it's been years since we've built a new nuclear power plant in this country. Running an advanced industrial economy on something like solar power is a fantasy. Instead of technology replacing humans, our future may end up being the exact opposite.

HS, the economist Gregory Clark wrote a piece for the Wash. Post a couple of years back dealing with this precise issue, I think you'd be interested:
http://www.washingtonpost.com/wp-dyn/content/article/2009/08/07/AR2009080702043.html

His book "A Farewell to Alms" is also quite good.

This was the most compelling argument of Karl Marx, who spoke of labor-saving devices. I would add that we have an underground barter system for sharing all manner of art and books through the Internet. Lower-middle-class people can feel rich by having so much free access to intellectual wealth. Many of the intellectual jobs that can be done have been done and the results are widely shared. Also, the education bubble and dumbing down of higher education are creating a self-imposed dismantling of meritocracy. Education will increasingly mean less about a person’s IQ. I feel that Charles Murray is off for thinking that meritocracy has already pulled all of the smart people out of the working class. Newt Gingrich also once said that jobs in nanotechnology would replace jobs in the traditional computer industry, but I think nanotechnology will not require so many workers. If we achieve a workless utopia, violence might become more common because work creates discipline. Also, if work no longer allows upward mobility, how will white people separate themselves from black people and the growing numbers of Hispanics? I think that self-segregation promotes racial tolerance because black people are so much nicer in the abstract and on television.

This all reads like "For Us, The Living."

"Today this cost of home health aids is such that the computer programmer only has them visit his elderly relatives 15 hours a week. Push down the price and he will have them visit much more often."

Nothing holds the prices up except supply and demand. No one decent wants to do the work. They have to go to old people's homes and bathe them and deal with shit. I know in Socal the nurses's aides are mainly illegals from Central America. The few whites who take it up in desperation are flaky and jum from place to place, or try to scam the elderly patient somehow.

Demand for manufactured goods is elastic, there is no reason why we can't have traditional levels of employment, barring mass immigration or unfettered free trade with 3rd world nations.

"What will happen when we are able to produce robots that can do even more jobs currently done by humans?"

If those robots are perpetual motion machines then they will replace us, the end. If not they require maintenance, programming, materials, R&D to improve upon them, and so on. And businesses will not invest in robots(or any expensive piece of capital), when it makes greater economic sense to hire a person.

"just as I doubt Malthus could have seen a society employed primarily in the service sector... all of those agricultural jobs lost forever. Boo hoo!"

Demand for agricultural products is inelastic, no one eats 20 meals a day, and if we did, all those jobs would still be here. Demand for manufactured goods however, WILL rise. I'd take a planetoid starship, and a jupiter brain or 2 if they were available. Of course I am supremely doubtful it will ever get to that.

Mark,

"For that to happen we have to make the assumption that we will always have plenty of fossil fuels or a feasible replacement. We've already used up most of our oil and have to spend huge amounts of money importing it. Nuclear power is a possibility but it's been years since we've built a new nuclear power plant in this country."

We have endless coal.
Oil shale
http://en.wikipedia.org/wiki/Oil_shale
Masses of Thorium with proven reactors and globe-wide research on improvements
http://en.wikipedia.org/wiki/Thorium_reactor
Rapidly improving batteries
http://newscenter.lbl.gov/news-releases/2011/09/23/better-li-ion-batteries/
http://www.technologyreview.com/NanoTech/wtr_16326,303,p1.html

There's no fossil fuel shortage now. No possibility of shortages anytime soon. Hundreds of years of proven Thorium reserves and quickly improving batteries. There is no fuel and storage shortage in our future, regardless of Malthusian whining.

The commenter "Arnold" above is idiotic.

High apartment prices in DUMBO and elsewhere in NYC are not due to high ironworker wages. High real estate prices there are due to high land values which result from location, population, relatively low land taxes, etc. Lowering ironworker wages will not reduce real estate prices.

And the comparison with Hong Kong is idiotic. Hong Kong has very low to no taxes on things like income, sales, etc. and gets a lot of its tax revenue from land value. NYC by contrast has high income, sales, etc. taxes and relatively lower land value taxation.

It wouldn't be that hard to keep a pastiche of the current system going with socialized medicine, social credit (with an income base and a no child bonus) , free education (not just college but trades) and work sharing if you closed the border and zero'd out immigration.

If technology increases and we want stability (remember even poor guerrillas can ruin a society) we'll need to pay for stuff like this.

However the current and likely future societies wont allow this. Basically we will pull an Easter Island/Greenland Norse long before that.

>"While theoretically, the profits of companies are supposed to go the shareholders, we have been seeing a transformation in which more of the profits go to stakeholders such as C-suite executives and financial industry bigwigs rather than the people who own stock in the company, and we should assume this trend will continue until it stops doing so."

Well, not just C-suite execs--think UAW at GM and Chrysler, with gold-plated pensions and healthcare benefits that get bailed out by taxpayers. Taxpayers are becoming the ultimate suckers, after stockholders who mostly see miniscule returns for providing capital--compared to what management pays itself and its employees. Returns on equity capital have been subpar for over a decade, so it seems to me, the returns required for equity have to go up as the risks are greater than realized.

The idea of less income from work/labor and more reliance on income from capital is a speculation no different from the complaints in the '90s that we would all become hamburger flippers due to the hollowing-out of the economy.

Reliance on capital for more of one's income will likely require a drastic change from the crony capitalism that stifles the US economy because, currently, it is a rigged game of influence peddlers and legalized graft--just read the reports of the "green" and "stimulus" spending (most certainly, these are not investments) by the Obama administration that result in fleetingly few jobs. (Nor did this cronyism start with Obama, and earmarks have been a bipartisan problem.)

[HS: Well you see, under my broad definition of "capital," the CEO has a type of capital that allows him to make hundreds of times more money than the true value of his labor. But it's not a type of capital you can get by saving your money and buying stock with it.]

"Arnold," you think the problem with America is that Americans who aren't "wealth creators" make too money? Davver, Americans have living standards higher than servants in the Third World, and you think that's a problem? Are either of you guys Americans by ethnicity?

http://en.wikipedia.org/wiki/Player_Piano

Here's a telling passage from Kurt Vonnegut's prescient 1952 novel Player Piano:

"Things are certainly set up for a class war based on conveniently established lines of demarcation. And I must say that the basic assumption of the present set-up is a grade-A incitement to violence: the smarter you are, the better you are. Used to be that the richer you were, the better you were. Either one is, you'll have to admit, pretty tough for the have-nots to take. The criterion of brain is better than the one of money, but" — he held his thumb and forefinger about a sixteenth of an inch apart — "about *that* much better."

"It's about as rigid a hierarchy as you can get," said Finnerty. "How's somebody going to up his I.Q.?"

"Exactly," said Lasher. "And it's built on more than just brain power — it's built on special kinds of brain power. Not only must a person be bright, he must be bright in certain approved, useful directions: basically, management or engineering."

"Or marry someone who's bright," said Finnerty.

"Sex can still batter down all sorts of social structures — you're right," Lasher agreed.

"Big tits will get you in anywhere," said Finnerty.

"Well it's comforting to know that something hasn't changed in centuries, isn't it?" Lasher smiled.

College campuses and the lifestyles of trust fund kids are what i imagine our workerless future will be like. Fyi slate has a series called "robot invasion" about these issues. Work sucks.

My thought reading this post was, as I posted a couple weeks ago, that the modern world seems to have a dysgenic effect, containing:

* Women with 120+ IQs (in NYC, Tokyo, London, etc) working 50 hour work weeks in banks, management, government, creative fields, academia, etc, and having a hard time finding time to have 1 babies each

* Women with 90-95 IQs (in Yonkers, Topeka, Mexico City, Kalkuta, Ankara) working 30 hour work weeks in shops and small offices and having 2-3 babies each

* Women with 70 IQs (in ghettos, shantitowns, and poor villages the world over) - I don't spend much time in these parts of the world, but, I imagine, sometimes working hard, more often working a little, and also often on the public assistance/relief aid - having 3,4,5,6,7,etc babies each

The changes you talk about HS would just exacerbate this dysgenic situation - there'd be less work for the dumb ladies to do other than have more kids, while the diminishing number of smart ladies would still be stressing out keeping the system running, and staying barren.

The sooner the decision-makers in the West drop their blank-slate fantasies and recall "elitist" HBD wisdom, the sooner public policy decisions (regarding labor policy, and all else) will be actually help society grow more prosperous, orderly, and creative.

" I know in Socal the nurses's aides are mainly illegals from Central America."

An excellent argument against amnesty - as soon as they get green cards, they will look for better jobs.

I think the diehard libertarian response would be to let evolution take its course, and stop propping up the underclass. Without government support, the underclass would likely die off, leaving only the productive members of society. The new generation and their offspring would have higher IQs, and would have more natural resources to put to work advancing the race and the world instead of squandering the resources like we are doing nowadays.

Isn't that still a market solution? It will never happen though -- it's impossible to have a free market while governments exist (any government will act in its own incentive -- to protect itself and maintain control -- and you can't assign blame to them for that, I would do the same thing if I was government)

@bluto, In Asia, they purposefully don't automate certain tasks (busy work that keep you moving) so that people are employed. It's the Asian form of welfare.

@aseleuk

I live in Grand Forks, North Dakota.

There are about 18,000 jobs available in the state which would only cover 1/5 of the unemployed people in Portland. Out of those less than half are with the oil fields. The rest are the typical mix of jobs with many of them being dead end low paying jobs like working at Wal Mart or McDonalds.

If you do take a roughneck job you can make 60-80K per year with no previous training. However, there is a severe housing shortage and it costs $1200 a month just to rent a parking space for your RV. If you can find a place the last I heard was rent on a 2 BD was $2300/m. There are no women.
You are also in North Dakota, which I like well enough but if I hadn't been born here with a lot of family around I don't think I'd see the attraction. In fact I'm only here now because my parents are old and sick. It's really in the middle of nowhere, not much to do, and the winter weather is some of the worst in the country.

Anyway, I keep reading on political blogs that liberal lazies like the Portland people you mention could move to North Dakota and earn an honest living and reduce our country's unemployment rate.

This might be true for some folks, but it's a very small percentage of the population.

Ray,

How does someone get one of those roughneck jobs? I know someone for whom that type of work would be ideal.

Jeff

This was an interesting idea, the first time I heard about it, which was 30 years ago. Of course, that wasn't the origin of the idea - the idea that automation and robots will produce all we want in almost unlimited supply, as well as the potentially catastrophic impact on society, has been speculated about since the beginning of the Industrial Revolution. Funny, the basic concept hasn't changed much in 300 years.

Soon enough even white collar professions will be automated. Who needs an imperfect human to make legal, executive, or even political decisions when sophisticated algorithms and formulas weight the objective merits of various decisions? Machines, unlike people, are far more responsible and reliable due to their consistency.

Personally, I believe that a benevolent dictatorship under a top notch supercomputer is the objectively best form of government possible. It removes the possibility of human error and today's supercomputers aren't exactly Deep Blue, whose victory to Kasparov was a narrow one. Such a machine would hold no partisan decisions and any faulty programming within it would be corrected via quantum computing. Such a computer would indeed be so powerful that it would refute all current economic systems and political ideologies.

For example, Eureka is a program that can figure out the laws of physics by itself.

One can also deduce from this phenomenon that colleges will have far fewer applicants because of the reduced availability of jobs.

[HS: " I believe that a benevolent dictatorship under a top notch supercomputer is the objectively best form of government possible."

Like in the movie Logan's Run.]

Also, why isn't there a mention of Operation Occupy Wall ST? I find it astounding that for its first couple of days the mainstream media didn't even touch the story. Why would they? Anonymous isn't funded by the Koch brothers or any other plutocratic tycoons. At least the far more credible alternative media sources are covering it. The only big media outlet that I can think of that covered it is Current TV. Cenk of the Young Turks is also going to be on Current.

"These checkouts despite having some teething problems now seem to work pretty good, however most people of 40+ still opt for a human checkout even if it will take longer. The result was that many of the self service checkouts were closed and replaced with people again."

They were closed and replaced with people because NAM "shoppers" were stealing in the self-checkout lines. Theft costs money.

"Soon enough even white collar professions will be automated. Who needs an imperfect human to make legal, executive, or even political decisions when sophisticated algorithms and formulas weight the objective merits of various decisions? Machines, unlike people, are far more responsible and reliable due to their consistency."

You mean like an algorithm to price sub-prime mortgages?

@Jeff
You have to go to North Dakota.

Sometimes there are job fairs at the Alerus Center in Grand Forks or the Fargo Dome in Fargo. This is nice because you can just fly in and you don't have to go all the way out to Williston.

However the best bet is to go to Williston directly. There are job fairs there, too. Here's one that is happening right now: http://www.jobsnd.com/job-fair/2128

Good luck to your friend.

"I believe that a benevolent dictatorship under a top notch supercomputer is the objectively best form of government possible."

Like in the movie Logan's Run."

You´d have to fabricate some really nice story to create legitimacy for it, something present-day democracy does reasonably well. (I.e. it at least provides the semi-illusion that everyone can participate in the process of governing)

HS, meet Louis Kelso:

"The basic moral problem that faces man as he moves into the age of automation, the age of accelerating conquest of nature, is whether he is really fit to live in an industrial society; whether his institutions will adjust rapidly enough; whether he will rivet himself with an absurd institution like full employment in the economic order when it is not only unnecessary but unadministratable in anything but a slave society; whether freed from the necessity to devote his brain and brawn to the production of goods and services, he can address himself to the work of civilization itself."

http://www.kelsoinstitute.org/

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