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The Future of Jobs

September 29, 2011

GDP is higher today than it was in 2005, but most people would say that the economy is worse now than it was then. Why? Unemployment is much higher. People care about employment for many reasons, as I have discussed before, including income, purpose and social connections. To most economists, jobs are primarily a scarce resource to be used to produce goods and services that people value. In this view, the primary value of having a job is the income it provides, but employment seems to have a profound impact on happiness, even beyond the income it provides.

Income can provide the first two level’s of Maslow’s heirarchy, but employment can contribute to the first four. Likewise, employment may be an important source of experiencing flow for many people. A reduction in employment may cause lower economic utility, even if it is efficient in terms of production.

Agriculture used to employ the vast majority of humanity, until technological improvements such as plows, combines, and fertilizer, as well as reduced birthrates reduced the workforce required to feed everyone. Likewise, the industrial revolution introduced mass consumption, providing the common man with goods they had never had access to before. Building the accessories of modern life for the masses kept busy making manufactured goods. What both of these classes of jobs have in common is that they are both forms of arrangement, not recipe making. Arrangements of both matter and information according to an existing recipe is becoming easier and easier with every passing year.

Patterns in specialization and trade are disrupted by relative price shifts. For example, think of a factory producing clocks. It buys raw materials at a certain price and turns the raw materials into clocks which it then sells at a given price to stores. If the prices of the raw materials do not change and the prices of the clocks do not change, those workers can be employed at that clock factory at their current wages forever. No technological growth which does not change either the price of raw materials or clocks will force them from their jobs. As I stated in my article “When robots are better at everything“, I think that relative prices of arrangement (the spread between raw materials and the final product) will fall substantially.

Recipe making is not safe from technological advancement either. Recipes are public goods, and the marginal cost of any public good is 0. I don’t think that anyone making non-custom recipes will fare well either in the future. Not only could we have recipe making computers, but we are already starting to see people freely copying information and recipes. I doubt that technology of restricting communication will win out over the technology of spreading information. Thus, you won’t be able to charge more for recipe creation than however much the highest valued user will pay. The remaining users will simply free ride. Perhaps content generators will be able to bargain with their consumers collectively to capture a bit more of the surplus. The very best in various fields may be able to claim winner-take-all profits for quite some time, but eventually piracy will wear away those huge profits. My guess is that first the wages of arrangers will fall, then those of recipe makers, and that work will shift from general recipe making to custom recipe making over time as recipe makers try to stop their customers from free riding.

Imagine that we are in a world where those people who are not smart enough to be a recipe creators cannot make enough from arranging to pay for their own subsistence. What will they do to survive? I think one option is for them to provide social services to other people, such as child care, keeping people company or playing games with them, but this seems kind of implausible to me. People are social animals and care a lot about what one another think, but Dunbar’s number limits the people we care about and thus limits the amount of social job creation. Another option is for people to get the resources they need to survive by gaining property rights to natural resources. Property rights are distributed using political means which are influenced heavily by moral suasion and capacity for violence. No one makes natural resources – they must be either taken or traded for from someone who has taken them. As the relative price of natural resources increase compared to recipes and arrangements, more and more economic value will be politically allocated. Marx imagined a world where value fundamentally came from arrangement. I imagine a world where value will fundamental come from natural resources, but we agree on the final likely outcome: allocation of resources based on political power.

Further reading:
David Autor on job polarization.
Robots steal your job.
Changes in composition of jobs.
Are jobs obsolete?

Update:
Paul Krugman comments (5 years ago).

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4 Comments leave one →
  1. September 30, 2011 3:22 pm

    Very well written, and very interesting thoughts.

    You count arrangement of information according to recipes as being along the same lines as arrangement of matter? That opens up some interesting lines of thinking. After all, Turing showed us that “data” (equivalent to arrangement of information?) and “programs” (recipes) are ultimately the “same thing”

    • October 3, 2011 4:04 pm

      Thanks. I should clarify what I mean by recipe a bit more. Part of recipes are aesthetic judgements, and part of it is creative problem solving in unusual situations. Computers can carry out recipes, but recipe making is the difficult part.

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  1. The Coming Battle over Intellectual Property « azmytheconomics
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