Wealth created by smart machines to accrue only to their owners - Krugman

[Jaco Strauss]

On 19 January 2013 you quoted the following Krugman statement from an "Economics blog":

Smart machines may make higher GDP possible, but also reduce the demand for people — including smart people. So we could be looking at a society that grows ever richer, but in which all the gains in wealth accrue to whoever owns the robots.

You did not provide a link to the blog so I am not sure if it had been from a "fellow liberal", but I suspect it wasn't Mises.org. Anyway, are you able to spot some problems with it? 

(Hint: At the time you eventually conceded that "Science and technology drive growth and make us much better off.")

J

[Paul AH Hjul]

There is something really big that Krugman simply ignores in what is being setup as a dilemma between progress and "fairness" is that in a free market one is free to buy an ownership interest in things, in a free mature market their are legal instruments and protections which allow people to pool resources to make investments and to 

The construction of robots has high capital costs and carry great risk, the firms involved in the computing and robotics industries are many and they offer very different propositions to investors - some firms are white label producers generating stable but low returns through component manufacturing whilst others are high IP holding lucrative but risky ventures and you have everything in between. Nobody "owns" control of the tablet market - Apple may dominate to an extent but only to an extent - just as nobody "owns" the PC market, robotics is the same. To purchase robots a person needs to effect payment to the manufacturers and in the process you acquire a single robot - not ownership of robots.

If you have an honest economy which depreciates rent seeking and more importantly is built on the principle of not coercing risk onto others - and you should spot a thread here - then the owner of tomorrow's wealth is not pre-determined and drawn from the pool of contributors of today's capital. The cost of a robot is the only barrier to entry to being an owner of robots. What leads to problems is when coerced transfers are built into the system - nationalization does this, special corporate immunities and privileges do this, failed legal systems do this.

[Jaco Strauss]

And just for clarity, I was referring to Garth who provided the original quote and conceded the eventual point...

J

2013/4/15 Jaco Strauss <jacos...@gmail.com>

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Jaco Strauss
Kaapstad

[Frances Kendall]

Libertarians generally agree, as far as I know, that minimum wage regulations encourage businesses to replace workers with machines and thus cause unemployment.

Isn't krugman making the same point re robots?

Sent from Frances iPhone

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[Garth Zietsman]

Yes I admit I think he is mistaken here and I believe I can see why.  I also admit I bought it initially.

[Garth Zietsman]

What he said below.

This was weak on Krugman's part and I will add that I think most of his recent forays into the role of technology have also been weak.  It happens when Nobel laureates step outside the bounds of their expertise as the prize seems to embolden them to do.

[Frances Kendall]

Well yes, a weak argument in the long term, but is it weak in the short term?  Doesn't the rise of technology cause unemployment and hasn't it always?  Eg when cars took over from horses, printing machines from hand writing etc?  It takes time for training to catch up with new opportunities. And I think a lot of the gains in wealth do accrue to those who invent or exploit the robots -- Steve Jobs etc.

But in the long term we are all better off, and as Leon likes to say "the rich get richer and the poor get richer faster".

[Garth Zietsman]

He may be making the same point but he has also been pro minimum wage - quoting a meta-study showing it has no effect - so maybe he needs to clear up the contradiction.  Bryan Caplan had a great discussion of the minimum wage in response to the same study in which he makes a solid case that it does matter.

I don't agree with everything Krugman says.  No one is immune from silly thinking from time to time.  In this case I bought it because I was kind of thinking the same in a wooly sort of way until I was alerted by some of the folk on this forum about some of the factors I was missing.  I just don't think this kind of mistake is characteristic of him or that he makes more of them than those people on this forum would grant genius status.  Furthermore I have seen him admit errors and correct his model many times which is more than I can say about his critics who have been predicting massive inflation any day now for 5 years.

[Garth Zietsman]

As I understand it there is always labor churn due to technology changes.  It shouldn't be reflected in the larger than normal unemployment figures we see now.

I fear that Krugman may also have been referring to the medium to long term.