25 August 2013

The Luddites Were Right (or Left?)

Eventually, the mainstream pundits figure it out, and write up a nicely remunerated piece for a nicely priced organ. Imagine my delight, tinged with massive envy, at the sight of the headline "How Technology Wrecks the Middle Class". The piece is written by a pair of saltwater (well, at least half) economists.
Are we in danger of losing the "race against the machine," as the M.I.T. scholars Erik Brynjolfsson and Andrew McAfee argue in a recent book? Are we becoming enslaved to our "robot overlords," as the journalist Kevin Drum warned in Mother Jones? Do "smart machines" threaten us with "long-term misery," as the economists Jeffrey D. Sachs and Laurence J. Kotlikoff prophesied earlier this year? Have we reached "the end of labor," as Noah Smith laments in The Atlantic?
(There are links in the on-line version.)

It's an interesting history, but misses out the key point: one might argue that the value judgment can be ignored if the newly invented job types outnumber the destroyed jobs. They simply don't get to the point, which is that replacing 10,000 manual-ish jobs with 1,000 high-level jobs isn't a net positive. Instead, they finesse with this,
In 1900, for example, 41 percent of the United States work force was in agriculture. By 2000, that share had fallen to 2 percent
In 1900, no one could foresee that a century later, health care, finance, information technology, consumer electronics, hospitality, leisure and entertainment would employ far more workers than agriculture.

In contrast, this paper says (page 19)
The relative importance of on-farm technology, pushing labor off the farm, versus off-farm technology, pulling it, remains a matter for conjecture, but clearly both forces were at work along with other economy-wide changes.

But, of course, the real question is whether those job types employ as much of the working population now, on a relative measure, as agriculture did in 1900. I don't find a cite on point, but I doubt it. Moreover, there's that sticky question of whether an economy skewed toward non-productive activities (as much of that list is) is sustainable. So long as the USofA can control exchange rates (i.e., the US dollar is "new gold"), likely so. In 1973, when the Arabs/OPEC flexed their muscle and asserted the existence of petro-dollars, not so much.

Logically, computerization has reduced the demand for these jobs, but it has boosted demand for workers who perform "nonroutine" tasks that complement the automated activities. Those tasks happen to lie on opposite ends of the occupational skill distribution.

As with this assertion for all time, it's a reassuring platitude, but is meaningless without the numbers. Unless the "nonroutine" jobs add up to at least as many as those made redundant, the downward spiral continues. It is often said that, in the USofA, the mechanization of agriculture "freed up" labor to feed the demand for the likes of Henry Ford's assembly lines, well that was a case where one sector's labor could move without much more than the cost of physically moving to another sector's employment. Not even these economists has the temerity to suggest such is going on today.

The problem remains diminished demand, which is driven by diminishing moolah in the hands of those (who were) in the middle. These authors offer neither historical evidence that the demand problem will work itself out organically and happily, or a prescription for changing the rules in order to reach a happy ending.
The good news, however, is that middle-education, middle-wage jobs are not slated to disappear completely. While many middle-skill jobs are susceptible to automation, others demand a mixture of tasks that take advantage of human flexibility. To take one prominent example, medical paraprofessional jobs -- radiology technician, phlebotomist, nurse technician -- are a rapidly growing category of relatively well-paid, middle-skill occupations.
[my emphasis]

These are by no means, alas, alone among the mainstream who assume that today looks pretty much like yesterday, and tomorrow will look pretty much like today. Of course, the Right Wingnuts importantly are attempting to put an end to anything health related. And they don't cite any data that these middle jobs are, in fact, (and will continue to be) firmly in the disappearing middle class. So, the growth sectors for employment are exactly those professions in the sniper sights. What's the matter with this picture?
Following this logic, we predict that the middle-skill jobs that survive will combine routine technical tasks with abstract and manual tasks in which workers have a comparative advantage -- interpersonal interaction, adaptability and problem-solving.

Note, the authors don't say "middle class income".

Which brings us to the crux of the problem, "What Is Economics Good For?". So, I'll start with the punchline (and tie-in to the previous piece):
What made Ben S. Bernanke, the current chairman, successful was his willingness to use methods -- like "quantitative easing," buying bonds to lower long-term interest rates -- that demanded a feeling for the economy, one that mere rational-expectations macroeconomics would have denied him.

Doesn't that sound like the middle-level decision making that is the future? He does make a wage which would skew the distribution, though.

Ben notwithstanding, the piece takes on the notion, rampant since the late 1960's, that economics is somehow scientific. I can't point to a specific date or publication when it happened, but political economics dropped its adjective. Samuelson is as much responsible for that as anyone. Solow, too. The triumph of macro as just aggregate micro, which led to the collapse of the study. But no longer using the adjective doesn't mean that said adjective no longer applies. Far from it.

The trouble with economics is that it lacks the most important of science's characteristics -- a record of improvement in predictive range and accuracy.

Not really; economics is more interested in moving future history in some direction, rather than arriving at some objective prediction. The physicist, generally, doesn't care who wins; that's the essence of science. The economist *only* cares who wins, his side.

In a somewhat limp defense: macro-economics (which is the version on examination here) is dependent on others for its data, and most of that is sampling data, and provided by not-so-permanently-funded programs of central governments. Captains of industry aren't so interested in good data, since such data will expose the nasty skewing in income/wealth over the last few decades. It's not in the self-interest of the winning few for the losing many to know how, and how badly, they've lost.
But economics has never been able to show the record of improvement in predictive successes that physical science has shown through its use of harmless idealizations. In fact, when it comes to economic theory's track record, there isn't much predictive success to speak of at all.
[emphasis mine]

Again, of course not. There is no accepted 'economic theory' in the sense of Newton's Laws universally accepted (modulo relativity and quantum mechanics), just warring factions with agendas. On the one hand, we have economic mouthpieces for the corporations, particularly banks and the rest of financial services. On the other, we have the divisive rancor in the academic setting betwixt the Freshwater economists (running dogs for the corporations who fund them) and the Saltwater economists. At one time there was a thriving sub-genre known as Labour Economics, but not so much today.

Both sides just make up press releases to advance the liege's agenda. Predicting how the 'machine' will turn over the next period isn't the point; shifting the dials on the machine to get it to turn to the advantage of those paying the piper's tune is. The rest is just hand waving.

The authors do throw a sop,
Readers of Paul Krugman and other like-minded commentators are familiar with their repeated complaints about the refusal of economists to revise their theories in the face of recalcitrant facts. Philosophers of science are puzzled by the same question. What is economics up to if it isn't interested enough in predictive success to adjust its theories the way a science does when its predictions go wrong?

The answer, of course, is that economics, in spite of adopting a cloak of science, remains political economics. And political is vastly more about concentrating wealth these days then at any time since the end of WWII. You can take that to the bank.

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