Nathan Fallin Final

12/21/2012
The world is indisputably wealthier due to the industrial revolution with
living conditions far better today for all. But there appear to have been
long periods lasting decades of falling wages for many workers as part of
this time of change (perhaps Britain around 1800 according to some
historians). Perhaps the early stages of any technological revolution will
create losses for some segments of society on the way to ultimate
prosperity for all. It’s possible that we are entering such a revolution now
with automation transforming our economy. Worse, when such a shift
toward automation is combined with other trends increasing inequality that
we discussed in class, it may lead to a profoundly more unequal society.
These trends therefore may actually reduce the wages of many low skilled
or average workers (e.g. not simply the rich getting richer, but the poor
getting poorer). Based on what we have learned in the course, critically
assess this potential outcome. Are we doomed, at least for the next few
decades, into a period of rising inequality and worsening living conditions?
What insights can you glean from the different thinkers about the impact of
technologically driven inequality?

Inequality has remained a fundamental and enduring source of strife not only in recent
decades but throughout the history of economic growth. Even during the industrial revolution,
Luddites smashed gears and protested spinning wheels in fears of job loss. Although Rodrik
identifies that increases to automation have proved statistically more significant sources of
wealth disparities, more identifiable causes like globalization have received more political
attention in recent years. However, the extent to which automation will benefit society at large or
an elite group at the top will heavily depend on structural responses from governments and
institutions. Given the potential for massive productivity gains, automation has the potential and
according to many optimists Economists and scientists differ on the extent of an incoming
automation revolution but a considerable percentage of workers in retail, manufacturing and
even driving will almost certainly face replacement threats from robots. Workers displaced must
be compensated by gains from robot substitution if technology hopes to have equitable benefits.
The likelihood of this approach remains questionable.
Multiple economic factors ensure that technological improvements tend to benefit the top
rather than the bottom. First and most obviously, in a more technologically advanced society
skill biased technological change proves a powerful wedge between workers of disparate
pedigree. Since education and skill level frequently correlates to income level, a shift towards
automation seems likely to dispropratienyl benefit those already ahead of the competition. When
lower skilled workers are competing against both robots and higher skilled humans, they may
not only experience no gains but either lose employment and accept lower wages to remain
financially viable to firms looking to minimize marginal costs.Moreover, thinkers like Marx
highlight the impact of capital holdings on technological advancements. When business owners
experience higher concentration of capital, they become economically consolidating - a
phenomenon already evident with superstar tech firms- and to retain profitability substitute labor
for capital or in this instance, robots. Given that higher rates of capital return have already
contributed to wealth disparities in recent years, disparities in capital seem poised to harshen
inequality as capital can increasingly replace labor. Even Marx, however, modified his stance to
realize that capitalist technological advancements did not make the bottom worse off absolutely
but only relative to the elite. Veblen also predicted higher unemployment resulting from
technological displacement but believed market based economies could utilize socialist policies
as preventive measures. Vebeln’s insight extends further on the topic of automation as he
believed engineers were controlled by businessmen to ultimately invent wants and deliver
useless gadgets. Therefore, the extent to which new technology is utilized to produce
meaningful productivity gains in fields like healthcare or energy production as opposed to
improved advertisement algorithms or luxury goods production could determine the impact on
living conditions and whether labor displacement is justified.
Modern economists have applied these concerns and demonstrated that
technological inequality may not be a failure but a design of capitalism. In addition to the
outsourcing of jobs, Robin Varghese highlights that competition itself among firms has lowered
wages. She reaffirms Marx's previous analysis but confirms that recent tech giants have seen
productivity gains that ironically lower wages of workers at large since their efficiency results in
labor comprising an increasingly smaller share of costs. Moreover, Brynjolfsson and Mcafee
provide both a reassuring and alarming analysis of innovation. The concerns that innovation
eliminates a finite job supply is often referred to as the lump of labor fallacy but in their article
they suggest that even the inherent benefits humans possess over robots, like socialness,
creativity and dexterity, may not protect sufficient jobs for full employment. Many such displaced
workers will be essentially losing their jobs or forced to accept lower wages competitive with
machines merely to produce higher corporate profit margin. Even Keynes predicted innovation
would raise living standards but at the costs of jobs.
Other economists have historically and recently possessed more optimistic tones
regarding the impact of technological improvements, which can apply directly to atomization.
David Ricardo deemed technological improvements a saving grace to a spiral of diminishing
marginal returns and poverty while Bulchoz blames insufficient technological investment in
developing countries for poverty-inducing vision cycles. Finally, one of Smith's core accelerators
of “The Wealth of Nations” are improvements to labor quality from technology. Even pessimistic
economists above would be unlikely to deny automation improves labor quality. However, these
improvements are again unlikely to be distributed equally. Still, Tyler Cowen cites a lack of
meaningful technological innovation as a major cause of stagnant productivity and thus stagnant
wages. With corporate profits rising since 1970 without a similar gain to wages, a lack of
automation may have ironically produced exasperated inequality. Brynjolfsson and Mcafee also
remind readers that humans not only possess aforementioned advantages over robots but also
are unlikely to be fully economically inferior in the short term. Moreover, ulike now obsolete
horses, humans possess the ability to vote for measures like robot taxes, a BIG, retraining
programs and more. Thus, governments have opportunities to mitigate the damage and
exacerbate the benefits of rapid innovation since basic economic theory dictates that major
technological improvements should increase total market surplus.
In determining how developed governments will respond to measures that benefit
humanity but harm targeted groups, examples already provide useful guidance. Globalization
according to the comparative advantage theory of David Ricardo should produce considerable
economic improvements through trade liberalization. However, Rodrik emphasizes that without
established social safety nets, corporations obtain these benefits at the expense of certain
domestic industries, as seen in NAFTA. Automation represents a very similar and dangerous
phenomenon, especially, when coupled with ongoing globalization, since there is precedent for
inequality from supposed economic improvements to remain uncorrected. The public choice
school of thought’s explanation of how targeted groups, like modern oligopolies, possess
inherent political advantages over the democratic populus may ring alarms for the impact of
automation. The incentive to lobby officials for a company like Apple or Uber to block penalties
for firing workers (for example) proves considerably stronger than an individual's incentive to
research this corruption and then advocate against it. Plans to redistribute automated income
will be spread across hundreds of millions of Americans while higher profit margins will be
consolidated in the specific firm or industry lobbying.
However, recent examples of government initiatives curving inequality provide hope. A
recent global wave of legislation and regulation has threatened the market power of tech firms in
recent years. American antitrust lawsuits against facebook and a mandated Australian publisher
fee for Google demonstrate a clear intention to restore competitiveness. However, restoring
competitiveness is not the solution to the harms of automation, as competition drives companies
to lower costs by substituting labor. Still, these measures show that governments will not always
yield to the interest of corporate profits. Furthermore, UBI has been gaining international
prominence as nations like Finland seek to protect workers from unemployment while
encouraging job searches. By providing an income guarantee to all citizens regardless of
employment or income level, UBI can protect against drops in standards of living for low skilled
workers while avoiding Mill’s concern that welfare disincentivizes working. Overall, the populist
movements in recent years show that people can democratically elect shocking different leaders
and policies. There remains no guarantee, however, that public outrage of inequality will be
utilized for productive policies that accept the inevitability of innovation while protecting the most
vulnerable; Trump’s border wall and UK’s Brexit are examples of misguided responses to
globalization. Voters must remember that it will not be scientists or CEO’s that determine
distribution of the automation revolution, but themselves.