Must-Read: Ryan Avent: Welcome to a World without Work

Must-Read: Pretty much everybody’s marginal product these days is vastly less than their average product: only those among the high paid who are lucky enough to be essential and irreplaceable cogs in machines that produce things for which rich people have a strong irrational jones can claim that if they weren’t there the total value of useful stuff produced would fall by anything close to their high pay. Much more likely is that somebody else could fill their slot in the global division of labor and receive the rents they receive with a reduction in useful stuff of only a small proportion of their high pay. And as time passes, the fact that our knowledge and our institutions have grown to the point where our average product vastly exceeds our marginal product will have strange, subtle, and unforeseeable consequences:

Ryan Avent: Welcome to a World without Work: “The digital revolution alters work in three ways… automation… globalisation… productivity…

…Automation, globalisation and the rising productivity of a highly skilled few… are combining to generate an abundance of labour: a wealth of humans…. The global economy is misfiring in worrying ways…. The institution of work… can no longer be counted on to fulfil its many crucial roles, from the ordering of our days, to the allocation of purchasing power, to the strengthening of the social ties that are nurtured when individuals feel as though they are contributing positively to the community. Workers are unlikely to take these woes lying down. Something has to give. Either society will find ways to shore up work or develop substitutes for it or workers will use the political system to undermine the forces disrupting their world….

The value-generating pieces of successful companies were once satisfyingly tangible, consisting of buildings and machines, patents and people. That is ever less the case…. Today, more than 80% of the value of Standard & Poor’s 500 firms is “dark matter”: the intangible secret sauce of success; the physical stuff companies own and their wage bill account for less than 20%, a reversal of the pattern that prevailed in the 1970s. A large proportion of that dark matter is an amorphous “know-how”: the culture, incentives and tacit knowledge that make a modern company tick…. As social wealth becomes more important, fights about who belongs within particular societies–and can therefore share in that social wealth–will intensify. To take full advantage of its promise, countries must become better at sharing social wealth. Yet the better countries become at sharing social wealth among members, the greater the pressure to shrink the circle of social membership….

We should… anticipate that voters in many countries, rich and poor alike, will want something more predictable than life governed by supply-and-demand matching apps; more structured than life on the perpetual dole; more comfortable and familiar than life surrounded by people who do things in different ways, speak different languages and worship different deities…. People of all backgrounds… value narratives of personal ambition and responsibility… wish to have control over their economic lives and to be seen as contributing…. People desire agency. They do not wish to be forced into unpleasant work by the need to feed their families, but neither do they want to be written off…. The conflict between what people want and what economic and political systems are able to provide will play out in the political arena….

Some time in the future, a wonderful new politics might well emerge that provides a robust minimum standard of living to all regardless of race or nationality, which supports a multitude of different conceptions of the “good life” and which does not rely on some underlying fear of some outside other to maintain its popularity. We are not yet able to conceive of such a system or to understand what balance of political forces needs to emerge to bring it into existence and sustain it…