Tag Archives: economy

Robots Aren’t Here Yet, But That Doesn’t Mean They Never Will Be

Mother Jones

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Robert Gordon is one our preeminent scholars of economic growth. He’s also a well-known pessimist about the future: he believes that well-known trends in demographics, education, inequality, and government debt will suppress growth rates over the next several decades.

Fair enough. But what about the possibility that advances in robotics and artificial intelligence will have a huge impact between now and 2050? In a new paper, Gordon dismisses the idea in a few disdainful paragraphs. Here’s an excerpt:

Much attention has been paid in the popular media to small robots since “Baxter,” the inexpensive $25,000 robot, made his debut on the TV program 60 Minutes….Reflections on Baxter lead to skepticism that it/he is a major threat to American jobs outside of routine tasks in manufacturing, which only makes up 8 percent of American employment. For his demonstration at the TED conference in Long Beach in late February, 2013, Baxter had to be packed in a suitcase. He could not get his own boarding pass and walk onto the plane. This is the problem with robots — they are both mentally and physically limited to narrow tasks. They can think but can’t walk, or they can walk but can’t think.

….This lack of multitasking ability is dismissed by the robot enthusiasts — just wait, it is coming. Soon our robots will not only be able to win at Jeopardy but also will be able to check in your bags at the sky cap station at the airport, thus displacing the skycaps. But the physical tasks that humans can do are unlikely to be replaced in the next several decades by robots.

….What is often forgotten is that we are well into the computer age, and every Home Depot, Wal-Mart, and local supermarket has self-check-out lines that allow you to check out your groceries or paint cans by scanning them through a robot. But except for very small orders it takes longer, and so people still voluntarily wait in line for a human instead of taking the option of the no-wait self-checkout-lane. The same theme — that the most obvious uses of robots and computers have already happened — pervades commerce. Airport baggage sorting belts are mechanized, as is most of the process of checking in for a flight.

I promise that this is a fair excerpt (and of course you can decide for yourself by clicking on the link). Gordon’s entire argument is that computers were invented a long time ago and we still don’t have smart robots today. And if we don’t have them by now, we won’t have them anytime soon.

This is an embarrassingly bad argument. I can somehow imagine a circa-1870 version of Gordon arguing that all this folderol about electricity is ridiculous. Why, we’ve been studying electricity for over a century, and what do we have to show for it? Some clunky batteries, the telegraph, a few arc lamps with limited use, and a steady supply of techno-optimist inventors who keep telling us that any day now they’ll invent a practical generator that will replace steam engines and change the world. Don’t believe it, folks.1

It’s funny. Every time I write about AI, I get email from some friends and regular readers telling me that I’m all wet. And these correspondents have good arguments. I don’t happen to think they’re right, but they’re good arguments from people who have obviously thought about this stuff. Gordon, however, doesn’t even pretend to engage with the AI literature. He just says that since the current level of AI is primitive, it’s obviously all a bunch of bunk.

But if that’s all you’re going to say, why even bother? A little over a year ago Gordon wrote an op-ed in which he dismissed the prospects of several evolving technologies, but didn’t even mention AI. At the time, I wrote that this was a blinkered view: “At the very least, you need to acknowledge it, and then explain why you think it will never happen, or why it won’t produce a lot of future growth even if it does.” This time around, Gordon hasn’t ignored AI completely, but he certainly hasn’t taken it remotely seriously.2 This is, to be frank, not the work of a scholar who seriously wants to engage with the prospects of future technological growth. It’s the work of someone who’s just checking off a box in order to fend off critics of his pre-ordained conclusion.

1Ironically, Gordon writes that in the mid-1870s everyone knew what was coming: “Inventors were feverishly working on turning the telegraph into the telephone, trying to find a way to transform electricity coming from batteries into the power source to create electric light, trying to find a way of harnessing the power of petroleum to create a lightweight and powerful internal combustion engine. The 1875 diaries of Edison, Bell, and Benz are full of such ‘we’re almost there’ speculation. Once that was achieved, the dream since Icarus of human flight became a matter of time and experimentation.” But for some reason, similar feverish work on intelligent machines in the 2010s is treated as obviously going nowhere.

2This would actually be fine if he’d just say so. AI is speculative enough that it would be perfectly reasonable to simply treat it as a wild card: write a paragraph acknowledging that, yes, it could upend everything, but that this particular paper is a look into a future in which AI remains immature for the foreseeable future. Nothing wrong with that.

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Robots Aren’t Here Yet, But That Doesn’t Mean They Never Will Be

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Compound Inflation Is Probably Higher Than You Think

Mother Jones

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Atrios wants the older generation to get it through their heads that kids today don’t exactly lead cushy lives:

I increasingly do think nominal illusion is part of it, as, say, $50,000 sounds like A LOT OF MONEY for a starting job for the older generation, but in 2014 it isn’t that much money.

Yes, yes, yes. If you’re my age, that sounds like a pretty good income for someone a few years out of college. But it’s nothing special. It’s the equivalent of $18,000 in 1980 dollars. If you’re part of an even older generation, think of it as the equivalent of about $6,000 in 1960 dollars.

This isn’t a poverty-level income or anything. But it’s not nearly as much as it sounds like if you’re just vaguely comparing it to what you made in your first job. What’s more, it’s not as if every 20-something college grad makes $50,000 either. Plenty of them make $35,000 or so, and that’s the equivalent of $12,000 in 1980 bucks. That’s what I made in my first job out of college, and although I was never in danger of starving or anything, I wasn’t exactly living like a king in the room I rented out from some friends.

People don’t always have a good sense of just how much inflation compounds to. But as a quick rule of thumb, prices have gone up 3x since 1980 and about 10x since 1950. Keep that in mind whenever you’re mentally comparing current prices and incomes with those from your early adulthood.

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Compound Inflation Is Probably Higher Than You Think

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Does Winning $800 Really Make You More Right Wing?

Mother Jones

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A few days ago a pair of British researchers released a paper that presented a startling conclusion: winning the lottery makes you more conservative. Apparently, having money, even if it’s just money you won randomly, pushes you to the right.

This got a lot of attention, and last night I finally got around to reading a summary of the paper. I was struck by the actual results, which nobody had highlighted. You can see it in the chart on the right, which shows the percentage of people who switched from supporting the Labor Party to supporting the Conservative Party. It’s about 13 percent for non-winners, 14 percent for small winners, and 17 percent for winners of £500 or more.

And….I dunno. Aside from technical arguments about sample size, appropriate statistics, robustness, and so forth, I just have to say that this seems unlikely. Even for people with modest incomes, a lottery win of $800 just can’t be that big a deal. I know that four percentage points isn’t really that large, but even four percentage points seems like an implausibly large effect for a one-time windfall of a few hundred dollars.

At first, I thought I had a clever explanation for this: perhaps being taxed on lottery winnings pushes people a bit to the right. It’s a big bite all at once, and it’s the kind of thing that often strikes people as unfair. But no. It turns out that lottery winnings are tax-free in Britain. So that’s not it.

Bottom line: the results of this study are intuitively appealing, since having money is pretty obviously associated with being more conservative. But I have a hard time believing this result anyway. I’d sure like to see a follow-up in some other country before I take it too seriously.

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Does Winning $800 Really Make You More Right Wing?

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The Fed Chairman Wore Sensible Shoes Today

Mother Jones

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Elizabeth Williamson of Real Time Economics, the home for “economic insight and analysis from the Wall Street Journal,” analyzes Janet Yellen’s first appearance before Congress today:

She took her seat at 10:01 a.m., clad in a monochrome suit and sensible shoes, carrying a black vinyl binder with rainbow-colored tabs. Once chided by an uncharitable commentator for wearing the same black dress twice in a row, Ms. Yellen hadn’t bought a new suit for the occasion, her spokeswoman, Michelle Smith, confided to a reporter. “I’ll try to come up with some color for you,” she whispered.

Seriously?

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The Fed Chairman Wore Sensible Shoes Today

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Paul Ryan Votes Against the Debt Ceiling Increase

Mother Jones

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With John Boehner finally crying uncle over the debt ceiling and dumping the whole thing on Democrats, the only suspense left was which members of the Republican leadership would suck it in and vote yes to get the bill over the finish line. Here’s the answer:

Speaker John Boehner, Majority Leader Eric Cantor, and Majority Whip Kevin McCarthy voted for the increase. House Budget Chairman Paul Ryan, on the other hand, voted against the bill.

There you go. Even Eric Cantor gritted his teeth and voted for the increase, but Paul Ryan didn’t. Kinda makes you think he might still be keeping a presidential run in the back of his mind, doesn’t it?

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Paul Ryan Votes Against the Debt Ceiling Increase

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Gregory Clark Says We Humans Suck at Social Mobility

Mother Jones

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Gregory Clark writes interesting books. His last one, A Farewell to Alms, made a contentious argument about why, after a hundred centuries of zero average economic progress, growth suddenly exploded around 1800 in the tiny island of England and then spread throughout Europe and the world. Basically, Clark argues that the Industrial Revolution started in England because of “accidents of institutional stability and demography….and the extraordinary fecundity of the rich and economically successful. The embedding of bourgeois values into the culture, and perhaps even the genetics, was for these reasons the most advanced in England.”

Bourgeois values! Genetics! Rich people reproducing faster than poor ones! That was bound to piss off some people. I myself found it pretty fascinating, but I also felt like Clark was drawing some pretty spectacular conclusions from some pretty scant data. Sadly, I read Farewell to Alms on one of the original Kindle reading devices, and thus found it virtually impossible to follow. It relies heavily on tables and charts, and those rendered so poorly that I had a hard time following Clark’s argument. Shortly after that I ditched my Kindle.

I’ve since replaced it with a succession of tablets, all of which render the book just fine. But I’ve never gone back to reread it, and now Clark has a new book out, The Son Also Rises.1 His latest big idea is that status is remarkably stable over periods of centuries. Families that were well off in 1700 are, on average, still pretty well off. Basically, we suck at social mobility. Josh Harkinson interviewed him for Mother Jones:

MJ: How do you measure status?

GC: I have a number of different measures for different societies. So for England, where we have some of the best data, we know everyone who went to Oxford and Cambridge from 1200 to the present. That tells us who the educational elite were in England over 800 years, and then we can ask, “What are the names that are showing up in that elite, and how persistent is their appearance in this elite?”

….We find that there is a very strong persistence of elite families at the universities. In recent years, the universities have tried to become more meritocratic and more democratic: They admit students based on performance on national exams. They don’t give any privilege to the fact that your parents went there. And public financing for tuition is now available. But what we find is that elite families persist at Oxford and Cambridge at the same rate as they did in the 19th century. It hasn’t managed to change the rate of social mobility.

Clark uses this strategy of following family names in other countries as well, and comes to similar conclusions. Is this legit? Are family names enough to figure out who’s going up and who’s going down? I have my doubts, but I haven’t read the book. And I have to say that my personal experience is a data point in favor of Clark’s thesis. Many years ago I got interested in genealogy and started digging up my family tree. Roughly speaking, I managed to go back about 200 years through most of my branches. And one of the things that intrigued me was just how homogeneous it all was. Some of my ancestors were better off than others, but mostly within a pretty narrow band. As near as I can tell, none of them were destitute and none of them were rich. They were small farmers, shopkeepers, linen drapers, sign painters, electricians, and stonecutters. Over seven or eight generations, social mobility has been pretty close to zero.

So maybe there’s something to this. I’ll let you know what I think if I end up reading the book.

1Yes, he’s apparently stuck on Hemingway puns. This is undoubtedly a rich vein for economists. Next up: To Have and Halve Not. Followed by For Whom the Swell Toils and The Gold Plan and Me.

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Gregory Clark Says We Humans Suck at Social Mobility

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Quote of the Day: GOP in a Tailspin Over Debt Limit Increase

Mother Jones

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From an anonymous Republican “leadership aide”:

We are mulling other options and trying to figure out the best way forward on this.

The topic here is the upcoming debt limit increase. Everyone in the Republican caucus with a room-temperature IQ knows that provoking yet another debt ceiling crisis would be a debacle. It didn’t work before, and it won’t work now. What’s worse, it takes attention away from Obamacare and reinforces the public view of Republicans as irresponsible grandstanders who are willing to risk the good credit of the United States for no reason except to kowtow to a bunch of know-nothing tea partiers.

But it turns out that those know-nothings aren’t willing to accept reality yet. They’ve rejected the latest plan—which already demanded more than they were ever likely to get—and now the GOP leadership is stuck. The yahoos won’t let them back down further regardless of how much damage it might do. As a result, it looks an awful lot like Republicans are going to incite yet another debt ceiling crisis a few weeks from now, whether they want to or not. Buckle your seat belts.

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Quote of the Day: GOP in a Tailspin Over Debt Limit Increase

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EU Concludes Google Antitrust Action With a Whimper, Not a Bang

Mother Jones

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The European Union has announced an agreement with Google that resolves a longstanding antitrust action. If you search for, say, gas grills, you’ll no longer see a results page with a bunch of Google ads for gas grills. You’ll see ads from both Google and others. Tim Lee explains:

Instead of showing six Google-selected ads for gas grills, the results would show three gas grills from Google’s product search engine and another three ads from competitors. Google will be allowed to charge these competitors for including these ads at regulated rates comparable to those Google charges for inclusion in its own product search engine. Similar changes will be required in other cases where Google includes results from a specialized search engine in its general search results.

Let me get this straight. There will now be two categories of ads. One will be “Google shopping results,” which you pay Google to be included in. The other will be “Alternatives,” which you pay comparable rates to Google to be included in. Both will be displayed next to each other.

That’s not nothing, I guess, especially since advertisers will have more control over the presentation of their products in the “Alternatives” section. And there are some other tidbits in the agreement that also represent improvement, though they’re mostly things Google had previously agreed to implement. Unless I’m missing something, this seems like fairly small potatoes. School me in comments if I’m wrong about this.

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EU Concludes Google Antitrust Action With a Whimper, Not a Bang

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Let’s Get Our Obamacare Story Straight, Folks

Mother Jones

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Having just berated the nation’s news media for credulously reporting that Obamacare would result in the “loss” of 2 million jobs, I want to push back a bit in the other direction too. Here is Paul Krugman explaining that Obamacare doesn’t destroy jobs, but it does give people more freedom to work fewer hours without fear of losing access to the health care system:

The basic point here is that we started with a system in which incentives were already strongly distorted by the deductibility of employer-paid health insurance premiums. This was a significant benefit, but one in general available only to full-time workers….What we had here was [] a system in which subsidies were available only if you worked more than a certain amount, surely leading some people to work more than they would have wanted to otherwise.

And that’s not a hypothetical — I know a fair number of people in just that situation. I also know some people in “job lock” — feeling trapped in their current job because they aren’t sure they could get implicitly subsidized health insurance if they moved.

Plenty of other liberals have made similar points, and there’s no question that there’s a kernel of truth to it. Someone who’s 62 might retire early because they know they can buy health insurance while they wait for Medicare to kick in. A young worker who wants to start up her own company might be more likely to do it knowing that she can still get coverage for a pre-existing condition. People who lose their jobs might hold out longer for good replacements if they know they can continue to get affordable health coverage while they look.

But the CBO report was pretty clear that this is not really the main channel by which Obamacare reduces employment. It mostly reduces total hours of employment among the poor, which is why it estimates that employment will go down 2 percent but total compensation will only go down 1 percent. And the channel for this reduction is straightforward: workers lose Obamacare subsidies as their incomes go up, which makes it less attractive to work more hours. For instance, if you go from 135 percent of the poverty line to 140 percent of the poverty line—something that could happen by the addition of a mere two or three hours of work a week—you might lose access to Medicaid.

More generally, the problem is that Obamacare subsidies decline smoothly as your income goes up. Here’s an example. If you and your partner earn $10 per hour and your family income is $30,000, you’ll pay about $1,250 out of pocket for health insurance. Subsidies cover the rest. But if you work an extra six hours a week and increase your income to $33,000, your premium cost goes up to about $1,600. That’s not a huge difference, but it means that effectively you’re only making $8.80 for each of those extra hours you work. At the margins, there will always be a few people who decide that’s not worth it, and will decide to keep their old hours. That’s especially true since their family now has health coverage and doesn’t have to worry quite so much about catastrophic expenses.

You can decide for yourself whether this is good or bad. In any case, it’s not something unique to Obamacare. It’s a feature of every means-tested welfare program ever. And it’s the main reason that employment will decline. Not because of early retirees or folks who are now free to tell their bosses to take this job and shove it. It’s mainly because it will cause a certain number of poor people to decide that working extra hours doesn’t pay enough to be worth it.

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Let’s Get Our Obamacare Story Straight, Folks

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Here’s Why the CBO Thinks Obamacare Will Reduce Employment Among the Poor

Mother Jones

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The Congressional Budget Office has updated its estimate of the effect of Obamacare on employment:

CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024….Because the largest declines in labor supply will probably occur among lower-wage workers….CBO estimates that the ACA will cause a reduction of roughly 1 percent in aggregate labor compensation over the 2017–2024 period, compared with what it would have been otherwise.

Why will Obamacare reduce employment? Because it’s a job killer? Because employers will push lots of workers into part-time positions? Because its taxes on the well-off will crater the economy?

No. Those effects are tiny at best. It’s much simpler than that. Obamacare will reduce employment primarily because it’s a means-tested welfare program, and means-tested programs always reduce employment among the poor:

Subsidies that help lower-income people purchase an expensive product like health insurance must be relatively large to encourage a significant proportion of eligible people to enroll.

….For some people, the availability of exchange subsidies under the ACA will reduce incentives to work both through a substitution effect and through an income effect. The former arises because subsidies decline with rising income (and increase as income falls), thus making work less attractive. As a result, some people will choose not to work or will work less—thus substituting other activities for work. The income effect arises because subsidies increase available resources—similar to giving people greater income—thereby allowing some people to maintain the same standard of living while working less. The magnitude of the incentive to reduce labor supply thus depends on the size of the subsidies and the rate at which they are phased out.

If, for example, earning $100 in additional income means a $25 reduction in Obamacare subsidies, you’re only getting $75 for your extra work. At the margins, some people will decide that’s not worth it, so they’ll forego working extra hours. That’s the substitution effect. In addition, low-income workers covered by Obamacare will have lower medical bills. This makes them less desperate for additional money, and might also cause them to forego working extra hours. That’s the income effect.

This is not something specific to Obamacare. It’s a shortcoming in all means-tested welfare programs. It’s basically Welfare 101, and in over half a century, no one has really figured out how to get around it. It’s something you just have to accept if you support safety net programs for the poor.

It’s worth noting, however, that health care is an exception to this rule. It doesn’t have to be means tested. If we simply had a rational national health care system, available to everyone regardless of income, then none of this would be an issue. There might still be a small income effect, but it would probably be barely noticeable. Since everyone would be fully covered no matter what, there would no high effective marginal tax rate on the poor and no reason not to work more hours. Someday we’ll get there.

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Here’s Why the CBO Thinks Obamacare Will Reduce Employment Among the Poor

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