Here is a Brief Answer to Robert Henderson’s Doom Scenario

In an earlier post on this Blog, Robert Henderson argues that technological progress will end by making us poorer and generally less secure. I disagree.

Let it be supposed:

1. That Plutonia is a closed economy, without saving or investment;
2. That it has a single employer, Megacorp plc;
3. That the only production cost of Megacorp is labour;
4. That the only output of Megacorp is an item called “consumer goods.”

Let it be further supposed that, every week, Megacorp pays out £100 in wages, and collects this back in payment for “consumer goods.”

Let it now be supposed that Megacorp is magically equipped with robots, so that it can dispense with human labour. In the first subsequent week of trading, Megacorp will sell “consumer goods” for £100. This money will now be retained in its accounts. In the second week, it must drop the price of “consumer goods” to zero, or cease trading. In either case, a new equilibrium will have been achieved – mass-starvation or work-free consumption. That will be a political choice. Bearing in mind that hungry people, in all but the most total states, tend to make their voices heard, it is not hard to see what the choice will be.

Let us now introduce reality to the model. Suppose that a number of industrial enterprises, in a country like England, completely automate, so that they no longer need ordinary labour. To cut out unnecessary steps in the analysis, we can further assume that demand for their output is inelastic. The prices of their output will fall – or, to be precise, will continue their existing tendency towards convergence with average cost.

In the short term, this will be hard for the unemployed workers. However, for a long time, robots will not be perfect substitutes for all kinds of labour; and the release of workers from one sector will make them available for employment in other sectors, that might expand now that some prices have fallen, or for employment in other sectors that are now able to come into being.

Even for the unemployed workers, some prices will have fallen, thereby increasing living standards. Landowners and investors will also benefit from their own unaffected factor payments. At the same time, people will still be needed for marketing and selling of output. People still need to decide what is to be produced and to find ways of persuading others to buy it.

Let us now suppose that more and more enterprises completely automate over time, and that the robots become more sophisticated. There will be an obvious fall in demand for employed labour – though with some continued human input at the strategic level, and possibly at others. However, prices will continuously fall. The tendency will be towards an economy in which former workers will become largely self-sufficient – there is no shortage of land, or limit to its productivity, given sufficient technology – providing an insignificant share of whatever they produce in exchange for rock bottom manufactured goods. The sellers of manufactured goods might have to accept things like flattery and applause from their customers. They might take this directly. More likely, they will pay for it, thereby providing a circular flow sufficient to buy their goods.

Or goods will be provided free, but will carry paid advertising from religious or ethical organisations.

Whatever the case, in such an economy, it will be hard to see who gains most.

The above assumes a corporatised economy. An alternative model will begin with largely self-sufficient households, possessed of cheap and easily reproduced technology, trading their specialised surplus with each other.

In either case, the final state will be one approximating to the Greek and Roman ideal of dignified leisure. Instead of miserable slaves to do the work, there will be various kinds of machine.

It may be argued that the majority of people are not morally and intellectually fitted to live like gentlemen. That may presently be true. But a few generations of parent-driven genetic engineering, and everyone should be up to exercising and chatting all morning in the gymnasium, hunting in the afternoon, and string quartets in the evening – that or whatever else rich and intelligent people fancy.

Or it may be argued that the technology will be too expensive for ordinary people. There is no reason why this should be so.  In the first place, the price of capital goods is determined by the price of what they help to produce. When the price of final goods is heading towards zero, capital goods are unlikely to be out of reach. In the second place, modern capital goods are like personal computers. They evolve rapidly, and lose most of their value long before they become useless. There will be a brisk second hand market in obsolete but very useful stuff – like in Star Wars.

The argument about the loss of a market economy is also worthless. Extended and omnipresent markets of the sort that emerged in Europe after about 1200 are the best available answer to the problem of scarcity. Take away scarcity, and the need for extended market activity will at least diminish. Markets, however, are only one specialised example of interaction between free people. Interaction in itself will continue for as long as free people wish to mingle with each other.

How we get from here to there depends on political and social structures. We may decorporatise, so that independent households quickly emerge that can take advantage of quickening technological change. Or we may go through a corporatist-social democratic phase, in which the unemployed are given an assured income. Or we may proceed to the kind of total state abundance described in Huxley’s Brave New World. I have my own preferred model for the future. But I see no reason why universal automation should result in mass-starvation.

Oh – one final point. It may be argued that robots will eventually become so sophisticated that they sweep us aside, as in Terminator. This is not likely. More likely is that this sort of technology will be used to enhance human powers, as well as to create semi-sentient humanoids. Give me a civilisation capable of producing machines that look like Arnold Schwarzenegger in his prime, and I shall want my brain put inside one! It isn’t real progress if I have to spend the rest of my rather short life stuck inside dumpy old me, with my crumbling teeth and occasionally aching joints.