Robotic Comparative Advantage

Robots are going to take over all of our jobs. Except comparative advantage says that they probably won’t.

First, consider the stylized fact that investment in software and information technology hasn’t really grown as a share of private non-residential investment over the past decade. Sure, it had a dramatic run-up in the many decades prior to that, but it seems surprising to think that everybody is talking about how machines are going to take over everything while investment in the actual machines has been fairly low.

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Ok, but let’s try and use theory to think about what might happen in the far future. The conventional view takes the set of jobs as some fixed quantity, and then argues that machines will take that fixed amount away. For a quote reflecting this view, consider a paragraph from the HBR article cited above:

And here is the even more sobering news: Arthur speculates that in a little more than ten years, 2025, this Second Economy may be as large as the original “first” economy was in 1995 – about $7.6 trillion. If the Second Economy does achieve that rate of growth, it will be replacing the work of approximately 100 million workers. To put that number in perspective, the current total employed civilian labor force today is 146 million. A sizeable fraction of those replaced jobs will be made up by new ones in the Second Economy. But not all of them. Left behind may be as many as 40 million citizens of no economic value in the U.S alone. The dislocations will be profound.

In this view, the math is obvious. There’s around 146 million workers in jobs. Machines will take away 100 million jobs. So then there are only 40 million jobs left. Throw on some people who can transition, and then the remaining 40 million will have no economic value. Take this to an extreme in which machines get even better, and even more jobs are displaced. In the limit, then there are no jobs (or perhaps only 1% of us will have jobs), and then the rest of us will be, as the HBR article describes “of no economic value”.

But this doomsday scenario is a direct contradiction of the theory of comparative advantage. Introductory economics teaches us that the relevant measure to figure out if someone can offer economic value is not the person’s absolute advantage at doing tasks, but rather their comparative advantage at doing something else. So long as not everybody’s opportunity costs are the same, then there are opportunities for trade. Sure, the U.S. has an absolute advantage at making clothes — we have fantastic factories and machinery to back them — but because we have higher value goods to produce we do not have a comparative advantage in clothes. As such we import most textiles from overseas.

In the robot scenario, there will be tasks that robots are relatively worse at, even if they can outcompete humans at most tasks. So long as there is some finite supply of silicon and metal and servers, then there will be more and less productive uses of computing power, and so there will be better and worse things that humans can do. Sure, computer vision might get really good, but are we willing to spend our computing power to make better toys relative to, say, more complex tasks in medicine? And if there is this allocation of computing power, then on the other side there must be an allocation of human power to do other jobs.

Now, we might need a sea change in the way we do regulation to make this workable. Minimum wages might need to be lowered so that it stays worthwhile to hire everybody. A stronger safety net and wage subsidies might be needed to make sure nobody falls through the cracks as overall material wealth increases. But fundamentally there’s no reason to believe trade will be impossible in a future in which most of our wealth comes from robot production.

 

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  1. Pingback: Our glorious future — more robots, more human flourishing – JonBoguth.com

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