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Our Automatic Assumptions about Automation

Our Automatic Assumptions about Automation

January 21, 2015

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Senator and likely presidential hopeful Marco Rubio (R-FL) appeared on last Tuesday’s The Daily Show with Jon Stewart, promoting his new book and weathering an endless stream of jokes about his home state of Florida. While the discussion covered a range of policy ground, we wanted to highlight one comment by Senator Rubio that showed an all too common misunderstanding of innovation and automation.

Rubio said, “The concern I have about the minimum wage increase is that we have been told by the CBO and independent analysts that it will cost certain jobs. And that happens when some businesses will decide that well, you’ve now made our employees more expensive than machines so we’re going to automate. So in 5-10 years it’s going to happen anyway but this will accelerate this process, when you go to a fast food restaurant it will not be a person taking your order, there will be a touchscreen there that you will order from and when you get your order it will be right. [uneasy laughter] But the point is, if you make that person now more expensive than that new technology, they’re going to move to that technology sooner.”

Here’s what Senator Rubio, Jon Stewart, and many, many others (including President Obama) miss: people should be more expensive than technology so that we use more of it. Automating work is one of the main ways we grow the economy, because that’s how we increase per-worker output and raise incomes. As we have written, the minimum wage encourages automation, and that is a good thing because it is how we improve our standard of living. TAs for the claim of fewer jobs, yes there may be fewer restaurant jobs, but there is no negative effect on total employment. This is because raising output creates new wealth for people to spend, and that spending creates new jobs.

The problem is that everyone forgets this second part, where new spending creates new jobs. In general, people assume there is a “lump of labor”, i.e., that there is a finite amount of work to be done and once that work is automated everyone will just be unemployed. As we have shown in Are Robots Making our Jobs or Taking Them?, this idea has been proven wrong time and time again as workers transitioned from agriculture to manufacturing and then to services.

The problem is that many on both the left and the right embrace broad ideological views of the roles of government instead of what really matters: driving productivity growth. While most Republicans like Senator Rubio will admit that “there is a role for government to play” in the economy, they oppose steps to raise productivity if they come with come in the form of government regulation (e.g. a minimum wage increase). In this case, their goal of freedom trumps trumps the goal of getting richer. The left, for their part, often opposes steps to raise productivity if it entails cutting back on the scope of government. We see this in their opposition to new technology-enable business models like Uber. In this case the goal of fairness and compassion trump getting richer.

The truth is more complex than either of these two positions, however: we need good regulation that encourages business to be more productive, efficient, and innovative, and we need to avoid bad regulation that limits investment in new technology. Simply unleashing the market is not enough, but neither is maintaining heavy-handed regulations.

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