ROBONOMICS – PRINCIPLES, BENEFITS, CHALLENGES,

SOLUTIONS

Stanislav Ivanov

Professor, Vice Rector (Research), Varna University of Management, 13A Oborishte str.,
9000 Varna, Bulgaria; email: stanislav.ivanov@vumk.eu; web: www.stanislavivanov.com

Abstract:
The next 15-20 years will witness the massive introduction of robots – both as consumer robots (including
companion robots) and industrial robots as result of the advances in robotics, artificial intelligence and automation.
Economists expect this with mixed feelings. While some extort the benefits artificial intelligence and robotics will
bring to societies, others predict a darker scenario. The massive introduction of robots and the transition of the
economic system to robonomics (robot-based economy) will cause many people to lose their jobs, new jobs would
be created, production facilities will scale down and change their geographic location, and the sources of
employees’, companies’ and countries’ competitive advantages will change drastically. This will have profound
implications on the nature of work, level and sources of incomes, leisure time, politics, international trade and
relations, ownership rights, etc., hence leading to major social, economic and political challenges and tension.
Societies will be forced to find unconventional solutions to these challenges – birth right patents, universal basic
income, constant and fluid free life-long education of population, robot-based tax system, redefinition of human
rights, etc. This paper elaborates on the economic principles of robonomics, pinpoints its benefits and challenges,
and sketches some of the solutions to its challenges.

Key words: robots, robonomics, robotisation, robot-based economy, artificial intelligence, automation, Fourth
Industrial Revolution, Industry 4.0, workless society, technological unemployment.

Citation: Ivanov, S. (2017). Robonomics - principles, benefits, challenges, solutions. Yearbook

of Varna University of Management, 10, 283-293.

1. Introduction
The “Fourth Industrial Revolution” (Schwab, 2016), a.k.a. Industry 4.0 (Andelfinger and
Hänisch, 2017), is transforming the global economic landscape. Following the progress in
robotics, artificial intelligence and automation technologies (RAIA) (Neapolitan & Jiang, 2013;
Warwick, 2012), companies from various economic sectors adopt RAIA to decrease costs,
generate additional revenues, provide consistent product quality, streamline operations, expand
production/service capacity, improve company’s competitiveness. This is valid not only for
manufacturing companies, where industrial robots have been used for several decades now
(Colestock, 2005; Cubero, 2007; Low, 2007; Pires, 2007), but in warehousing and logistics
(Min, 2010), agriculture (Driessen & Heutinck, 2015), education (Ivanov, 2016; Timms, 2016),
financial trade (Dunis et al., 2017), medicine (Kaur, 2012; Mirheydar & Parsons, 2013;
Schommer et al., 2017), transportation (Heineke et al., 2017; Maurer et al., 2016; Tussyadiah,
Zach & Wang, 2017), journalism (Bollier, 2017; Clerwall, 2014), tourism and hospitality
(Ivanov, Webster, & Berezina, 2017; Kuo, Chen, & Tseng, 2017; Murphy, Hofacker, & Gretzel,
2017), and other industries too. The search results in search engines (e.g. Google), newsfeed on
social media website (e.g. Facebook), or product recommendations in online retailers (e.g.
Amazon) are based on artificial intelligence. Companies start using chatbots for online

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communication with their customers (Hill, Ford & Farreras, 2015; Xu et al., 2017), while sex
robots challenge the definition and nature of ‘sex’ itself (Cheok, Devlin, & Levy, 2017; Lee,
2017). Robotic systems are used in military warfare (Crootof, 2015; Sparrow, 2007), artificial
intelligence helps in legal lawsuits (Remus & Levy, 2015), while consumers more and more
often engage with social robots (Agah et al., 2016). These examples show how RAIA permeate
our lives and transform business operations (Makridakis, 2017; Talwar, 2015). Some authors
have even raised voice that companies should start treating robots as consumers themselves
(Ivanov & Webster, 2017).

The tendency to use RAIA in the production of goods and services will accelerate in the future
until society reaches a point when all (or an overwhelming share of) goods and services are
produced by RAIA with limited human involvement. Such an economic system, based on
robots, artificial intelligence and (service) automation, is called ‘robonomics’ (Crews, 2016).
The massive introduction of RAIA will lead to profound economic, social and political changes,
the most obvious of which is that the majority of currently existing jobs will disappear. For
example, Frey & Osborne (2013) assess the probability of computerisation for 702 detailed
occupations in the USA and conclude that 47% of total jobs in the country are at risk of being
substituted by AI. Researchers’ attitudes towards RAIA range from the positive appraisal of
liberating humans of manual labour and creating new business opportunities (Brynjolfsson &
McAfee, 2014; Frank, Roehring & Pring, 2017; LaGrandeur & Hughes, 2017; Talwar, 2015)
to fear of pauperising and making humans obsolete in a fully robotised society (Barrat, 2013;
Crews, 2016; Leonhard, 2016). While the economic, social and political changes induced by
robotic technology are relatively well explained in the academic literature, the economic
principles of robonomics seem neglected. In this regard, this paper contributes to the body of
knowledge by elaborating on the economic principles of robonomics, its benefits, challenges
and highlighting some possible solutions to these challenges. We acknowledge that this is quite
an ambitious task that requires a whole separate book, rather than a short journal article. That
is why this paper will only provide some of the building blocks of the theoretical framework of
robonomics that will serve as a stepping stone for more in-depth and comprehensive
investigation in future studies.

2. Foundations of robonomics
2.1. Robots vs. Human employees
Robonomics is an economic system that uses robots, artificial intelligence and (service)
automation technologies as production factors, instead of human labour. There are many
arguments why a company would prefer to use RAIA for production of goods and services
rather than human employees, summarised in Table 1 (for the sake of simplicity we use the
term ‘robot’ as an umbrella term for all RAIA technologies). They relate to the number of work
hours a robot can work (24/7 which is much more than the usual 40-hour work week of human
employees) and the possibility to implement various tasks and expand their scope with suitable
software and hardware upgrades. Furthermore, robots can implement the same routine, tedious
and/or dangerous work repeatedly, correctly and in a timely manner without any complaints,
strikes, or negative emotions. In the future, RAIA technologies could be bought or rented easier
than human employees get hired. At the same time, contracts between RAIA producers and

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their business customers can be terminated easier and with less hustle than labour contracts with
human employees, especially in developed countries with well-established labour unions, high
wages, and long history of employment-related lawsuits. On the other hand, robotic technology
will not be independent of human supervision any time soon. This means that full substitution
of human employees by robots may not happen in the foreseeable future, but a significant
decrease in the number of human employees in the currently existing jobs can be expected.
Furthermore, robots lack creativity and personal approach in service delivery (partially
overcome by the possibility of multi-language human-robot communication), and, at least
currently, need structured (predictable) situations to operate properly. Nevertheless, rapid
advancements in robotics and artificial intelligence indicate that in the future robots would be
capable of performing more and more diverse tasks, currently implemented only by humans.
This means that companies will start to actively consider employing robots rather than human
employees, hence fuelling anti-robot technophobic Neo-Luddism movement (see for example
McClure, 2017).

Table 1. Arguments for employing robots rather than human employees

Why robots?
 Robots could work 24/7
 Robots could implement various tasks and
expand their scope with software and hardware
upgrades
 Robots could provide constant or improving
quality of their work
 Robots could fulfil their work correctly and in a  Robots may (will) be perceived as threat by human
timely manner
 Robots could do routine work repeatedly
 Robots do not complain, get ill, go on strikes,
spread rumours, discriminate, quit their job without
notice, show negative emotions, shirk from work
Why not robots?
 Robots lack creativity
 Robots will not be any time soon completely
independent of human supervision
 Robots lack personal approach
 Robots can orientate in structured situations (at least
for the moment)
employees (e.g. Neo-Luddism movement)

In any case, comparing robots and human employees, the future does not look bright for the
human employees, and many of them will see their current jobs disappear and taken over by
robots (Frey & Osborne, 2013), especially those employees whose jobs include repetitive,
tedious, and/or dangerous tasks, and are subject to strict algorithmisation. For such jobs the
adoption of RAIA would have a downward pressure on wages (DeCanio, 2016). Of course,
new technologies will generate new jobs for people with new skills, but they may create too
few jobs too late. This gives ground to many authors to claim that robots will have profoundly
negative impact on society, because hundreds of millions of people will be unemployed and
they will lack the skills required to work in a robotised economy (Barrat, 2013; Crews, 2016;
Leonhard, 2016). Metaphorically, we may say that in robonomics ‘silicon will replace carbon’.

2.2. Principles of robonomics

The advent of robonomics will have huge impact on economic theory and practice. While most
of the basic economic principles will still be valid, other principles and their reflection in real-
life business practice will need reformulation. Specifically, we expect the following principles
of robonomics:

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 High level of automation of production – This is the fundamental principle of robonomics:
all or most of the products (goods and services) are produced/provided by robots/artificial
intelligence/self-service/automation technologies. Human labour is used mostly to oversee the
production process without much involvement in the actual production of goods or service
delivery.
 Fewer but more knowledge-intensive jobs – Most humans do not work, and those who do
have predominantly highly paid knowledge-intensive RAIA-assisted creative jobs.
 Disconnection between employment and incomes – This is one of the most fundamental
characteristic of robonomics. Due to the low number of humans employed in economic
activities, employment is not the major source of incomes for households. Governments provide
universal basic income to the citizens.
 Active use of variety of single- and multi-purpose industrial, service and social robots –
Robots are not constrained to manufacturing, warehousing, or transport, but provide services
and act as companions to humans, including sexual partners.
 High cost-efficiency of production – New technologies allow economically efficient on-
demand single/few unit(s) production of (most) goods. Society will reach the stage of ‘radical
abundance’ (if we use the terminology of Drexler, 2013) or ‘abundance economics’ (Swan,
2017).
 Small and dispersed factories, close to consumers – This is a direct outcome of the high cost-
efficiency of automated production processes, which allows smaller producers to enjoy
economies of scale, be closer to consumers and save on product delivery time and costs.
 High level of standardisation of services – Strict algorithmisation of service provision due
to the use of RAIA.
 Labour and capital abundance are not sources of competitive advantages, but knowledge
and creativity.

The principles of robonomics will have huge economic, social and political implications.
Robonomics will not happen overnight – after the initial hype and disillusionment, usually
accompanying the introduction of every technology (Gartner, 2016), we will observe gradual
spread of RAIA among industries and countries. Small automated factories will be located near
the cities where customers live, meaning that countries that rely on lower labour costs and
outsourcing to attract foreign investors will lose their source of competitive advantage. For
example, a US-based company that manufactures its products in South-East Asia, Latin
America or Eastern Europe and imports them back in the US, may not need to continue with
this practice. RAIA can offset the lower labour costs in countries in these regions and it may be
more economically efficient for the company to construct smaller automated factories, located
in/near major cities in the US, thus saving on logistics costs and delivery time. In a similar vein,
most of the employees in customer call centres in these countries could be substituted by
chatbots. Therefore, when a transnational corporation introduces RAIA, this influences not only
its home country workforce, but its employees based abroad as well. Hence, in the future we
will observe spill-over effects of RAIA from developed to developing economies in the form of
substituting low-cost labour in developing countries for automated factories in developed
economies and bots.

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2.2. Benefits and challenges of robonomics
Table 2 summarised the benefits and challenges of robonomics. The most obvious benefit is the
improved quality of life in the long term due to the liberation of people of hard manual,
repetitive, intellectually unchallenging work. People will enjoy drastic increase of their leisure
time that will allow them to pursue more creative, wellness, pleasure and self-actualisation
activities and will have more time for travel. We can expect no work-related stress which
combined with advances in medicine will lead to improved health and increased life expectancy
of people.

Table 2. Benefits and challenges of robonomics

Benefits of robonomics
Improved quality of life in the long term due to:
 People will be liberated of hard manual work
 Drastic increase of leisure time
 Time for creative and pleasure activities
 Less (no) work-related stress
 Improved health, increased life expectancy
Challenges of robonomics
Short- and mid-term challenges due to:
 Unemployment and relative overpopulation – fewer
human employees and lower salaries:
 Possible functional illiteracy – humans may forget
how to do things once robots do them
 Division of society between employed and
unemployed
 Changes in social values – is human life valuable?
Do we need other people to satisfy our needs when we
have robots?
 Psychological problems of people who find
themselves with too much free time, nothing to do and
no need to work
 Social unrest and political instability – due to
substitution of human employees with robots
 Migration
 Wars

Although the benefits of robonomics seem lucrative, society will enjoy them in the long-run. In
the short- and mid-term, however, it may need to pay a high social price. Due to increased
technological productivity, the loss of many jobs due to RAIA may not be compensated by
newly created jobs, while unemployed may not be able to requalify so easily to face the
qualification needs of the robotised economy. Therefore, in the short- and mid-term (e.g. 10-15
years) society will face significant technological unemployment and oversupply of human
labour relative to its demand by companies and governments, which may even continue in the
long-run. This may lead to significant psychological problems for the millions unemployed who
will find themselves with too much free time and no work to fill it in, resulting in social unrest,
emergence of populist robophobic parties and political instability. Increased domestic and
international migration can also be expected fuelling social tension even further. Ultimately, if
social processes are not properly controlled, the fabric of society may tear at places due to
changes in human values: people may start wondering whether they need to communicate and
maintain (family) relationships with other people when the RAIA can satisfy their needs.

2.3. Proposed solutions to the challenges of robonomics

Prior literature has elaborated on some solutions to technological unemployment like mandating
employment, government job creation, work sharing, employment impact statements, tax

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policies and financial incentives for job creation, etc. (e.g. Stevens & Marchant, 2017). These
solutions assume that given the right stimuli the economy will create enough jobs to keep full
employment. However, they may work on the road to robonomics as tools to mitigate the
impacts of technological unemployment, but not during robonomics when society reaches full
robotisation of economy and people do not need to work. Some specific solutions to the
challenges of robonomics may include:
 Constant and fluid free life-long education is the most obvious solution to the technological
unemployment. People will need to accept that education does not finish with graduating
university, but it is a life-long continuous process. In fact, they will need to take regularly
(online) courses in their professional field and every 5-7 years to enrol in master programmes,
sometimes completely unrelated to their previous education, in order to remain employable on
the labour market.
 Entertainment, tourism, leisure activities, volunteering – Having too much free time might
be psychologically challenging for many people. A robonomics society needs entertainment,
tourism, leisure, volunteering activities to fill in the gap left by the lack of employment activities
to keep people’s minds busy.
 Universal basic income (UBI) is widely discussed as a solution to technological
unemployment (e.g. Sheahen, 2012; Santens, 2017) and DeGruyter even publishes an academic
journal dedicated on the topic – Basic Income Studies. Under the UBI scheme, every citizen of
a country receives a fixed amount of money every month regardless of his/her employment
status. All other social payments are ceased and replaced by UBI. The main advantage of UBI
is that it will provide income for all people in a society and will serve as a social safety net –
even if people fail in their entrepreneurial activities the UBI will provide them with resources
for their families’ existence. Furthermore, the UBI system will be easy to administer – one and
the same amount of money is transferred to all people every month without the need for people
to prove anything. Hence, fewer government employees will be required compared to the
current heavily bureaucratic social welfare systems. On the other hand, UBI will require a lot
of resource to finance the payments for every person in a country, which at the absence of or
limited proceeds of income taxes (due to the fewer number of people working) may be difficult
to finance. Furthermore, UBI may suppress many people’s stimuli to work and improve their
skills, thus making them permanently unemployable. Moreover, if UBI is introduced in one or
few countries only without strict migration control, they will definitely experience a huge influx
of immigrant who would apply for citizenship in order to take advantage of UBI. Hence, in
order to be successful without causing social pressure through immigration, probably UBI has
to be introduced on a global scale, which raises the question about the formation of a global
government to administer it.
 Robot-based taxation is considered as one of the ways to finance the UBI. In essence, under
robot tax scheme, every company that installs a robot must pay tax, and the proceeds are used
to support the UBI of displaced human employees. While robot-based taxation sounds quite
attractive, the practicalities of its implementation make it unfeasible. It will be practically
impossible to provide an exhaustive list of definitions and types of robots which are subject to
taxation. Robot manufactures will make small changes in the robots in order to fall beyond the
legal definitions. People may not agree on where the boundary between an ordinary machine
and a robot lies. And how will online bots be taxed? Will an automated factory be treated as

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one robot or every single piece of machinery / equipment in it? The difficulties in identifying
the tax base (robot’s value) and the taxable unit (robot, online bot, or an automated factory)
make robot tax unfeasible in the foreseeable future.
 Birth control / birth right patents – Removing the stress of work, having a lot of free time
and receiving a guaranteed UBI will stimulate many families to have more children, leading to
demographic boom. This will create additional social pressure – new people without work, new
people entitled to UBI, and more financial resources needed every year to maintain the standard
of living of increased population. This may motivate some politicians to adopt a neo-Malthusian
approach to the perceived ‘overpopulation’ by introducing stringent birth control – e.g. a
requirement that a family needs to purchase a birth right patent before conceiving a child,
otherwise the foetus is subject to abortion, which may dissuade many families of having more
than a couple of children. Modern society is already familiar with similar birth control practices
(e.g. the one child policy of China) and the birth rates in many developed countries are dropping
significantly (Castles, 2003). Hence, such a policy many not sound unfamiliar to their
populations.
 Redefinition of human rights is the ultimate ‘solution’ which some far-right politicians may
impose if human population grows beyond the limits that the economic system can financially
maintain. These rights include: biological right (the right to reproduce), political right (right to
vote) and economic right (right to receive UBI). We now perceive the right to have children, to
vote and to take part in economic life as undisputable. However, technological unemployment
at massive historically unprecedented rates may force some politicians (and their supporters!)
to redefine them. Each individual can have two options about a right – have it or not. Table 3
presents the eight possible combinations of rights individuals can have and the outcome for the
society if all individuals have the same rights.

Table 3. Redefinition of human rights in a robot-based economy

Situation Biological right Political right Economic right Social impact
(reproduction) (voting) (basic income)

1 Yes Yes Yes Country default

2 Yes Yes No Mass poverty

3 Yes No Yes Country default

4 Yes No No Mass poverty

5 No Yes Yes Demographic crisis

6 No Yes No Demographic crisis

7 No No Yes Demographic crisis

8 No No No Demographic crisis

It is evident that none of the situations provides a feasible solution to the challenges of
robonomics. If all people are entitled to strict birth control (situations [5], [6], [7] and [8]),
society will fall into demographic crisis. If people are allowed to have as many children as they
wish and receive basic income (situations [1] and [3]), society’s economic system may not be

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able to sustain the growing unemployed population and the country will go default. If UBI is
not introduced (situations [2] and [4]), technological unemployment will throw societies into
mass poverty. Our analysis (not included in the paper) shows that only a combination between
situations [2] and [7] provides a stable solution: people self-select whether they want the cosy
life without work, but subject to sterilization and without the right to vote (situation [7]), or
they will not receive any guaranteed income but will have the right to vote and reproduce
(situation [2]). However, such a choice will be definitely considered as unethical, fascist, and
extremist. It will be political suicide for any party or politician who propose such solution to
the challenges of robonomics; thus, people do not need to worry how to make the right choice
at least in the foreseeable future.

3. Conclusion
The advances in robotics, artificial intelligence and (service) automation allow us to project that
robonomics is an inevitable economic system. That is why, economists, politicians,
corporations, financial institutions, education and welfare systems, all citizens need to be
prepared for its advent. When will society reach the robonomics stage of economic development
is the next question? Only a crystal ball gazer can answer this question with certainty (although
definitely not correctly). Robonomics will not happen overnight, but gradually, first in
developed countries and then will spill over the rest of the world. Exciting years lie in front of
us!

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