Tag: Economic Growth

Yes: The CBO’s Growth Forecasts Are Not Unreasonable…

Posted on by Brad DeLong

The Trump administration (I won’t say “Donald Trump”, because I am not convinced that Donald Trump knows what the Congressional Budget Office is) wants people to take on the CBO’s projections that real GDP growth is likely to average a hair less than 2 percent per year.

And professional Republicans John Cogan of Stanford, Glenn Hubbard of Columbia, John Taylor of Stanford, and Kevin Warsh of Stanford deliver.

Michael Strain provides them with a warning—which they do not and will not heed:

Michael Strain: Stop Bashing the CBO, Republicans: “A word to the wise from a fellow conservative: Expert analysis isn’t your problem; bad legislation is… https://www.bloomberg.com/view/articles/2017-08-01/stop-bashing-the-cbo-republicans

…The nonpartisan agency… was the subject of a bizarre attack ad by the White House last month. Mick Mulvaney, President Donald Trump’s budget director, has publicly questioned whether “the day of the CBO” has “come and gone.” Former House speaker Newt Gingrich recently advocated: “Abolish CBO. It is totally destructive. It is totally dishonest.” Last week, members of the House Freedom Caucus authored amendments that would cut the CBO’s funding in half and eliminate the division responsible for producing cost estimates of legislation…. The GOP is unwise to delegitimize the CBO even out of pure political self-interest. The agency frequently produces analysis that Democrats could live without…. Republicans are in power now, but they won’t be forever…

And Michael offers advice on how to criticize the CBO:

I often find myself thinking a particular CBO analysis is a little off base, that I would have used different assumptions, or done the analysis differently. There is often significant uncertainty in analysis as ambitious as that frequently produced by the CBO. And it would be good for the CBO to be more transparent about its analysis and with its models…

In short: Present a better analysis than the CBO does! And argue your case!

This is advice which Cogan, Hubbard, Taylor, and Warsh do not follow.

As best as I can see, their critique of CBO is not what I would recognize as an analysis of CBO’s growth estimates, or, indeed, any other sort of quantitative and reality-based growth-accounting exercise. It is, rather, a few stray sentences like:

The data are not supportive of the popular contention that the United States is in the midst of a long-term decline in productivity growth…

supported by a fake graph—the one on the left, when they should be plotting something much more like the one on the right:

Preview of The Trump administration I won t say Donald Trump because I am not convinced that Donald Trump

Drawing random arrows to try to fool naive readers into thinking that statistical trends are things that they are not is not something that should be done by anybody I would call an economist.

So what is to be done about this degradation of public discourse? Commenters at Bloomberg have ideas and observations:

Mark Buchanan: Economists Are Cheating Their Profession: “Ideology remains a problem… https://www.bloomberg.com/view/articles/2017-08-01/economists-are-cheating-their-profession

…“Economic theory and historical experience,” it boldly asserts, “indicate economic policies are the primary cause of both the productivity slowdown and the poorly performing labor market.” This willfully misrepresents current thinking. Economists hold diverse views on the roots of the recent malaise, and remain divided and uncertain about the fundamental causes of growth…. When professional economists write as experts and claim theory as a basis for their views, they also have a duty to present that theory—and other economists’ thoughts about it—honestly. Their failure to do so is “unprofessional,” as University of California at Berkeley economist Brad DeLong rightly put it….

What, if anything, [will] the profession… do about it[?] Does it have standards? If so, can it enforce them?… How can the profession combat such capture? [Luigi] Zingales has suggested public shaming, following the example of media efforts such as the film “Inside Job”…. Shaming seems appropriate. After all, public trust is a resource from which all economists benefit. If they want to preserve it, they should draw guidance from Nobel Prize winner Elinor Ostrom. She showed that successful management of such resources typically requires an effective means to maintain group standards and values—for example, by punishing and deterring self-serving behavior…

Noah Smith: Supply-Siders Still Push What Doesn’t Work: “Few critics have focused on what I see as the weakest part of Cogan et al.’s essay… https://www.bloomberg.com/view/articles/2017-08-01/supply-siders-still-push-what-doesn-t-work

…the claim that lower taxes, deregulation and reduced government spending can boost growth significantly. Tax cuts have generally proven to be a big bust…. The most glaring example is Kansas Governor Sam Brownback….

On deregulation, I’m much more sympathetic to the supply-sider concerns. Some regulations are probably hurting economic dynamism by protecting incumbent industries, while others would fail a cost-benefit test. But other regulations probably help the economy…. It’s no easy job to tell the good regulations from the bad. The Trump administration has promised to tackle this thorny problem, but given its record of general ineffectiveness, there’s no reason to assume, as Cogan et al. do, that it will make wise choices….

As for fiscal austerity, there is no reason to think that any further gains can be made there…. Basic economic theory says that low deficits boost growth by lowering long-term interest rates — but with rates already near record lows, there isn’t much scope for improvement in this regard…

Justin Fox: Yes, Financial Crises Do Bring Hangovers: “I was struck by the second paragraph of the piece, written by John F. Cogan, Glenn Hubbard, John B. Taylor and Kevin Warsh… https://www.bloomberg.com/view/articles/2017-07-20/yes-financial-crises-do-bring-hangovers

…The view that periods of weak economic growth tend to follow major financial crises rests heavily on the work of Harvard economists Carmen Reinhart and Kenneth Rogoff…. After I wrote a column in March that relied heavily on Reinhart and Rogoff’s research, the abovementioned John B. Taylor responded thusly:

Old hangover theory of weak recovery http://bloom.bg/2nxEJSI @foxjust was demolished by Bordo http://on.wsj.com/2mT5cHa others. Problem=policy

Hmm, I thought when I saw that. There were financial crises of 1973 and 1981? Yes, there were a couple of prominent bank failures in the U.S. in the wake of the 1973-74 and 1981-82 recessions (Franklin National Bank in 1974 and Continental Illinois in 1984), but they certainly didn’t cause those recessions. The 1990 recession did occur in the midst of the long-running U.S. savings and loan crisis, but a) it was followed by a really weak recovery and b) that crisis, however painful, was still nowhere near as dire as the global shock of 2008.

When I looked at… Bordo and… Haubrich… my puzzlement did not abate…. Nobody in the 1890s thought the aftereffects of 1893 were modest and brief. The recovery that followed the recession that started in 1929… was indeed quite impressive, but it didn’t start until 1933…. That’s why they call it the Great Depression, people!

In sum, I find Reinhart-Rogoff much more convincing than Bordo-Haubrich. This doesn’t mean that economic hangovers following financial crises are inevitable…. But… Bordo came nowhere near “demolishing” the hangover theory…

Cogan, Hubbard, Taylor, and Warsh is not a contribution to the economic literature either on growth-accounting trends or on the effects of financial crises, it is not a summary and survey of either of the two literatures, and it is not a better analysis of what the future economic growth baseline should be than CBO has provided. So what do these professors and fellows from Stanford and Columbia think they are doing, if not providing ammunition for what Michael Strain has correctly identified as an extraordinarily dubious enterprise? And why are they doing it?

DeLong: The Future of Work: Automation and Labor: Inclusive AI: Technology and Policy for a Diverse Human Future

Posted on by Brad DeLong

Thank you very much.

Let me follow the example of our Lord and Master Alpha-Go as it takes the high ground first.

Let me, therefore, take the hyper-Olympian and very long run historical point of view.

The human brain is a massively parallel supercomputer that fits inside half a shoebox. It draws 50 watts of power. It is an amazing innovation, analysis, assessment and creation machine. 600 million years of proto-mammalian and mammalian evolution coupled with the genetic algorithm means that almost every single human can solve AI problems far beyond our current engineering reach—so much so that much of what our machines find impossible our brains find so trivially easy that we call such capabilities “unskilled”.

When combined with our brains, human fingers are amazingly fine manipulation devices.

Human back and leg muscles—especially when testosterone soaked—are quite good at moving heavy objects.

Thus back in the environment of evolutionary adaptation, we used our brains, our big muscles, and our fingers to lead cognitively interesting if stressful and short lives.

But history has rolled forward since the hunter-gatherer age. And as history has rolled forward, we have figured out other things to do to add economic and sociological value than their uses in the hunger-gathers paradigm. Over the long historical sweep, the ability to add value using our backs to move heavy objects and our fingers to perform fine manipulations in cognitively-interesting ways has, relatively, declined. We have, so far:

  • turned many of us into robots ourselves, performing simple routinized repetitive and vastly boring tasks to fill in the gaps in value chains between the robots that we know how to build.
  • found jobs as microcontrollers for domesticated animals and machines—the horse does not know what plowing the furrow is.
  • found jobs as relatively simple accounting and software bots, keeping track of stuff, what it is useful for, and how its use is to be decided.
  • become personal servitors.
  • become social engineers—trying to keep all those things and all those people—especially, perhaps, trying to keep those brains soaked in testosterone—somehow working in harmony, somehow pulling together, although admittedly with limited success.
  • remained innovators, analyzers, assessors, and creators as well.

Backs started to go out with the domestication of the horse. Fingers began to go out with the invention of the spinning jenny. But humans-as-microcontrollers, humans-as-accounting-‘bots—paper shufflers—and humans-as-the-robots we cannot yet build—took up all the job slack. Every horse needs a microcontroller. And a human
brain was the only possible option. Even today, to a large amount every textile machine needs a human watching it at least part of the time. It doesn’t know when it’s gone wrong. It has no clue how to fix itself. It no more understands the idea of “fixing” any more than Alpha-Go understands that it is playing Go, and not just solving a problem of outputting a two-element vector in response to a 19 x 19 matrix of inputs with the additional structure that the output changes the matrix and that the possible matrices have a value-function structure.

Now, however, we can finally peer into a future in which the microcontrollers and the accounting bots are on their way out in a manner analogous to the backs and the fingers. Fortunately, this brings with it the forthcoming extinction of the the jobs that treat humans as simple robots: simple cogs in the machine that is Henry Ford’s River Rouge assembly line. Many occupations that vastly underutilize the massively parallel supercomputer that fits in half a shoebox are on the way out—and good: for those are not properly “human” jobs at all.

That leaves us with a future of work—not next year, and not next decade, but further out by some unknown time—in which humans’ jobs will be as:

  • personal servitors,
  • social engineers, and
  • innovators, analyzers, assessors’ nd creators.

And here we might well, someday, have a huge problem.

The market economy will amply fund AI research that replaces workers in capital intensive production processes by machines. Such industries have mammoth returns to scale. They thus tend to be characterized by large oligopolies. And so the firm that funds such labor-replacing research will capture with its own scale and in its own value chain a substantial part of the benefits of such R&D. But the market economy will to amply fund AI research that assists and amplifies workers in labor intensive production processes. Such tend to be small scale. The inventors and the innovators cannot capture even a small part of the benefit in their own production processes and value chains. And intellectual property is a very weak reed indeed to rely on to fix the problem—in fact, intellectual property is more likely to be the problem than the solution, cf. Nathan Myhrvold, and Intellectual Ventures.

That means that the combination of coming AI with a market economy will be absolute poison for equity and equitable growth. It will race ahead with the first: shedding workers in capital intensive production processes. Yet AI could be gold for equity: amplifying the capabilities of workers in labor intensive production processes would, as John Maynard Keynes once said, bring us vastly closer to economic El Dorado.

Utopia or dystopia? Heaven or hell? I turn that over to you. And by “you”, I definitely include our engineering dean Shankar Sastry. Because firms will not invest on a large scale in AI that amplifies the capabilities of labor in labor intensive industries, it will not happen unless some NGO does. How about an engineering school? How about an engineering school like an engineering school at a public university?

And let me stop there.

As prepared for delivery:

Inclusive AI: Technology and Policy for a Diverse Urban Future https://www.eventbrite.com/e/inclusive-ai-technology-and-policy-for-a-diverse-urban-future-tickets-31896895473: Wed, May 10, 2017 10:30 AM – 5:30 PM

Panel 3: The Future of Work: Automation and Labor

  • Ken Goldberg
  • Brad DeLong,
  • James Manyika
  • Costas Spanos
  • Laura Tyson
  • John Zysman

https://www.icloud.com/keynote/0w1qzB37W6lJ8pGCYZplqbGcw

NewImage NewImage NewImage NewImage NewImage NewImage NewImage NewImage NewImage

Since I get to go first, I will preemptively take the hyper-Olympian and very long-run historical point of view…

The human brain is a massively parallel supercomputer that fits in half a shoebox. It draws 50 W of power. 600 million years of proto- and mammalian evolution mean that almost every single human can solve AI problems that our machines cannot—what our machines find very hard or impossible, our brains find so trivially easy that we call such capabilities “unskilled”.

Human fingers are amazingly fine manipulation devices. Human back and leg muscles—especially when testosterone soaked—are quite good at moving heavy objects. And so, back in the environment of evolutionary adaptation, we used our brains, big muscles, and fingers to lead interesting, if stressful and short, lives.

But as history has enrolled we have done other things to add economic and sociological value than use our backs, our fingers, and our brains to innovate and create. Over the long historical sweep, backs and fingers have declined and we have turned many of us into, instead:

  • robots performing repetitive tasks,
  • microcontrollers for domesticated animals and machines,
  • relatively simple accounting and recording software bots,
  • personal servitors,
  • social engineers trying to keep all those things controlled by brains—especially by the testosterone soaked ones—working together harmoniously. With limited success.

while remaining innovators and creators.

Backs started to go out with the domestication of the horse. Fingers with the invention of the spinning jenny. Microcontrollers and accounting ‘bots, we can see, are now on the way out too. So, fortunately, are the jobs that treat humans as simple robots.

That leaves us with a future of work made up of:

  • personal servitors,
  • social engineers,
  • innovators and creators.

The market economy will fund AI that replaces workers in capital-intensive production processes. Such are large scale and oligopolistic: firms profit from R&D because they capture a significant portion of efficiencies in their value chains. There is no equivalent market force funding AI that assists and amplifies workers in labor-intensive production processes.

The first is poison for equity and inclusion. The second is gold.

That second is one thing this NGO institution that surrounds us would be good at doing, and needs to do.

Utopia or dystopia? Heaven or hell?

Over to you, James. And, in a broader sense, over to all of you—in the audience, and out there in Internet land.

The Future of Education and Lifelong Learning: DeLong Opening DRAFT

Posted on by Brad DeLong

Harvard Class of 1982 35th Reunion :: Science Center B :: Saturday, May 27, 2018, 10:45-12:00 noon

  • Seth Lloyd, MIT: Moderator
  • Brad DeLong, U.C. Berkeley
  • Ivonne Garcia, Kenyon
  • Noel Michele Holbrook, Harvard
  • William Sakas, CUNY
  • Carol Steiker, Harvard

In the spring of our freshman year, then-young economics professor Richard Freeman came to Ec 10 to tell us that going to Harvard would not make us rich.

He was wrong.

Up until 1980 America was winning, and Richard Freeman expected it to keep on winning, the race between education and technology: Thus there were ample numbers of people to take the increasing number of jobs requiring formal education for first class performance. Thus the amount the market paid you extra for taking a college requiring rather than a high school requiring job was modest: 30% or so–not enough to make up for the income you would’ve earned, had you taken the tuition you would not have spent and the extra wages you would have made from working, and put them into some reasonable investment.

But after 1980 America began to lose the race between education and technology.

The expansion of American higher education slowed massively. Higher education for native-born males simply froze in its tracks. As a result, in the world in which we have worked for the past 35 years employers have been betting up the relative price of college graduates: Rather than making 30% more than our counterparts who went straight into the job market after high school did, we have on average received double.

The freezing and of the relative numbers of native born American males taking advantage of hire education as demand, supply, and heterogeneity components.

On the demand-side, states withdrew tuition subsidies. Public college ceased to be free. Those whose parents were not rich worried about their student loans: what if they didn’t succeed and finish and could not get one of those high paying jobs? How were they going to pay back their loans? Americans almost surely over worry about this. But people are who they are, and not who economic theory dictates they should rationally be.

On the supply side, states stopped building campuses. Getting the courses you wanted and needed at public universities became iffy: five or six years rather than four.

And on the heterogeneity side, our colleges are designed for those who take to print literacy and to Arabic mathematics like ducks to water–if you do not have that, or are not trained to have that, learning the way we are taught to teach becomes much more difficult. We economists see this every semester, as even Ec 10 requires great facility in reading, in arithmetic, in algebra, and in algebraic geometry. The extra slice of the population that we would have been sending to higher education in a better counterfactual world in which America had not lost the race between education and technology would have been less well prepared and less suited to benefit.

What is the balance between these supply, demand, and heterogeneity considerations? That, we say, is a research problem.

How important is all this? I would say that about 1/3 of the problem is with America that have developed over the past 35 years–1/3 of the ways in which I see America today falling far short of what I confidently helped America would be by now–are due to our losing the race between education and technology.

Let me make one final point: Over the past generation, Harvard has not helped. We had 1600 in our class. Last week’s graduating class was essentially the same size. Worldwide, between five and ten times as many people are well-qualified to join my niece as freshmen this fall. In our class there were perhaps four times as many people well-qualified to attend as Harvard admitted. Today there are between twenty and forty. Yet Presidents Bok, Pusey, and Rudenstine seemed to have little interest in helping America and the world in the race between education and technology. Contrast that with the University of California, which, under Chancellor and President Clark Kerr and California Governor Pat Brown, set in motion the plan to clone itself across the state and increase enrollment tenfold.

If you are thinking about giving money to help America win this race with education and technology, I would not recommend Harvard. U.C. Berkeley, Columbia, and MIT for moving people whose parents’ were in the bottom quintile into the top 1%. And for overall bottom fifth to top fifth mobility? CUNY. U.T.-Pan American. TCI. SUNY Stonybrook. Pace. and Cal State-LA. That is what Yagan, Turner, Saez, Friedman, and Chetty say… http://www.equality-of-opportunity.org/papers/coll_mrc_paper.pdf.

https://www.icloud.com/pages/03URgLnTOy7BZ-FIR9S23Dh8w

The Benefits of Free Trade: Time to Fly My Neoliberal Freak Flag High!: Hoisted from March 2016

Posted on by Brad DeLong

Hoisted from March 2016: The Benefits of Free Trade: Time to Fly My Neoliberal Freak Flag High! http://www.bradford-delong.com/2016/03/the-benefits-of-free-trade-time-to-fly-my-neoliberal-freak-flag-high.html: I think Paul Krugman is wrong today on international trade. For we find him in “plague on both your houses” mode. On the one hand:

Paul Krugman: Trade and Tribulation and A Protectionist Moment?: “Protectionists almost always exaggerate the adverse effects of trade liberalization…

…Globalization is only one of several factors behind rising income inequality, and trade agreements are, in turn, only one factor in globalization. Trade deficits have been an important cause of the decline in U.S. manufacturing employment since 2000, but that decline began much earlier. And even our trade deficits are mainly a result of factors other than trade policy, like a strong dollar buoyed by global capital looking for a safe haven.

And yes, Mr. Sanders is demagoguing the issue…. If Sanders were to make it to the White House, he would find it very hard to do anything much about globalization…. The moment he looked into actually tearing up existing trade agreements the diplomatic, foreign-policy costs would be overwhelmingly obvious. In this, as in many other things, Sanders currently benefits from the luxury of irresponsibility….

But on the other hand:

That said… the elite case for ever-freer trade, the one that the public hears, is largely a scam…. [The] claims [are] that trade is an engine of job creation, that trade agreements will have big payoffs in terms of economic growth and that they are good for everyone. Yet… the models… used by real experts say… agreements that lead to more trade neither create nor destroy jobs… make countries more efficient and richer, but that the numbers aren’t huge….

False claims of inevitability, scare tactics (protectionism causes depressions!), vastly exaggerated claims for the benefits of trade liberalization and the costs of protection, hand-waving away the large distributional effects that are what standard models actually predict…. A back-of-the-envelope on the gains from hyperglobalization — only part of which can be attributed to policy — that is less than 5 percent of world GDP over a generation…. Furthermore, as Mark Kleiman sagely observes, the conventional case for trade liberalization relies on the assertion that the government could redistribute income to ensure that everyone wins—but we now have an ideology utterly opposed to such redistribution in full control of one party…. So the elite case for ever-freer trade is largely a scam, which voters probably sense even if they don’t know exactly what form it’s taking….

And, Paul summing up:

Why, then, did we ever pursue these agreements?… Foreign policy: Global trade agreements from the 1940s to the 1980s were used to bind democratic nations together during the Cold War, Nafta was used to reward and encourage Mexican reformers, and so on. And anyone ragging on about those past deals, like Mr. Trump or Mr. Sanders, should be asked what, exactly, he proposes doing now.… The most a progressive can responsibly call for, I’d argue, is a standstill on further deals, or at least a presumption that proposed deals are guilty unless proved innocent.

The hard question to deal with here is the Trans-Pacific Partnership…. I consider myself a soft opponent: It’s not the devil’s work, but I really wish President Obama hadn’t gone there…. Politicians should be honest and realistic about trade, rather than taking cheap shots. Striking poses is easy; figuring out what we can and should do is a lot harder. But you know, that’s a would-be president’s job…. [But] he case for more trade agreements—including TPP, which hasn’t happened yet—is very, very weak. And if a progressive makes it to the White House, she should devote no political capital whatsoever to such things.

So I guess it is time to say “I think Paul Krugman is wrong here!” and fly my neoliberal freak flag high…

On the analytics, the standard HOV models do indeed produce gains from trade by sorting production in countries to the industries in which they have comparative advantages. That leads to very large shifts in incomes toward those who owned the factors of production used intensively in the industries of comparative advantage: Big winners and big losers within a nation, with relatively small net gains.

But the map is not the territory.

The model is not the reality.

An older increasing-returns tradition sees productivity depend on the division of labor, the division of labor depends on the extent of the market, and free-trade greatly widens the market. Such factors can plausibly quadruple the net gains from trade over those from HOV models alone, and so create many more winners.

Moreover, looking around the world we see a world in which income differentials across high civilizations were twofold three centuries ago and are tenfold today. The biggest factor in global economics behind the some twentyfold or more explosion of Global North productivity over the past three centuries has been the failure of the rest of the globe to keep pace with the Global North.

And what are the best ways to diffuse Global North technology to the rest of the world?

Free trade: both to maximize economic contact and opportunities for learning and imitation, and to make possible the export-led growth and industrialization strategy that is the royal and indeed the only reliable road to anything like convergence.

So I figure that, all in all, not 5% but more like 30% of net global prosperity—and considerable reduction in cross-national inequality—is due to globalization. That is a very big number indeed. But, remember, even the 5% number cited by Krugman is a big number and a deal: $4 trillion a year, and perhaps $130 trillion in present value.

As for the TPP, the real trade liberalization parts are small net gains. The economic question is whether the dispute-resolution and intellectual-property protection pieces are net gains. And on that issue I am agnostic leaning negative. The political question is: Since this is a Republican priority, why is Obama supporting it without requiring Republican support for a sensible Democratic priority as a quid pro quo?

That said, let me wholeheartedly endorse what Paul (and Mark) say here:

As Mark Kleiman sagely observes, the conventional case for trade liberalization relies on the assertion that the government could redistribute income to ensure that everyone wins—but we now have an ideology utterly opposed to such redistribution in full control of one party…. So the elite case for ever-freer trade is largely a scam, which voters probably sense even if they don’t know exactly what form it’s taking…

Inclusive AI: Technology and Policy for a Diverse Urban Future

Posted on by Brad DeLong

Inclusive AI: Technology and Policy for a Diverse Urban Future https://www.eventbrite.com/e/inclusive-ai-technology-and-policy-for-a-diverse-urban-future-tickets-31896895473: Wed, May 10, 2017 10:30 AM – 5:30 PM

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Panel 3: The Future of Work: Automation and Labor

  • Ken Goldberg
  • Brad DeLong,
  • James Manyika
  • Costas Spanos
  • Laura Tyson
  • John Zysman

https://www.icloud.com/keynote/0w1qzB37W6lJ8pGCYZplqbGcw

NewImage NewImage NewImage NewImage NewImage NewImage NewImage NewImage NewImage

Since I get to go first, I will preemptively take the hyper-Olympian and very long-run historical point of view…

The human brain is a massively parallel supercomputer that fits in half a shoebox. It draws 50 W of power. Human fingers are amazingly fine manipulation devices. Human back and leg muscles—especially when testosterone soaked—are quite good at moving heavy objects. And so, back in the environment of evolutionary adaptation, we used our brains, big muscles, and fingers to lead interesting, if stressful and short, lives.

But as history has enrolled we have done other things to add economic and sociological value than use our backs, our fingers, and our brains to innovate and create. Over the long historical sweep, backs and fingers have declined and we have turned many of us into, instead:

  • robots performing repetitive tasks,
  • microcontrollers for domesticated animals and machines,
  • relatively simple accounting and recording software bots,
  • personal servitors,
  • social engineers trying to keep all those things controlled by brains—especially by the testosterone soaked ones—working together harmoniously. With limited success.

while remaining innovators and creators.

Backs started to go out with the domestication of the horse. Fingers with the invention of the spinning jenny. Microcontrollers and accounting ‘bots, we can see, are now on the way out too. So, fortunately, are the jobs that treat humans as simple robots.

That leaves us with a future of work made up of:

  • personal servitors,
  • social engineers,
  • innovators and creators.

Utopia or dystopia? Heaven or hell?

Over to you, James. And, in a broader sense, over to all of you—in the audience, and out there in Internet land…

Notes: Working, Earning, and Learning In the Age of Intelligent Machines

Posted on by Brad DeLong

The key seems to me to build intelligent machines that will assist workers in labor-intensive industries, rather than build intelligent machines that will eliminate workers in capital-intensive industries. The first is a clear win. The second can be a major loss if the things made in capital-intensive industries are close enough substitutes for the products of labor-intensive industries to greatly drop their value.

But what I have to say so far is limited.

It is simply made up of: Five Disconnected Points:

  1. Cast your mind back to 1999. All of this was then viewed not as a threat but as an opportunity. Few things can turn a perceived threat into a graspable opportunity like a high-pressure economy with a tight job market and rising wages. Few things can turn a real opportunity into a phantom threat like a low-pressure economy, where jobs are scarce and wage stagnant because of the failure of macro economic policy.

  2. Those historical cases in which technological progress has been genuinely immiserizing have been relatively few. They have been confined to situations in which technological progress takes the form of greatly amplifying labor productivity in capital-intensive occupations. Those then shed labor massively, as those tasks in which human beings act like robots—filling in the gaps that machines cannot yet do—vanish. But at the same time technological progress must do next to nothing to equip workers in labor-intensive occupations with better tools to assist them. Thus the canonical case is the 19th century handloom weaving industry in Britain and India. That suggests a focus on building robots to serve as tools and assistants for workers in labor-intensive industries, as opposed to further mechanizing and thus replacing workers in capital-intensive industries.

  3. Let me endorse the observation that for the past 200 years the mechanization of manufacturing has to a great degree involved treating humans as if they were robots. We can do better. At least, we hope we can do better.

  4. Let me try to satisfy Barry’s demand for less abstraction and also endorse Nils’s emphasis on human customization by asking you to cast your minds back to the days of Metropolis, Henry Ford, and Brave New World. Henry Ford wanted to satisfy real human needs in the cheapest and most effective fashion by taking massive, mammoth, and total advantage of all possible economies of scale. You can have a car in any color you want: as long as it is black. You can have whatever kind of car you want: as long as it is a Model T. You can wear any clothes you want: as long as they are identical blue overalls. You can play any sport you want: as long as it is Centrifugal Bumble Puppy. That was not the world people wanted. Alfred P. Sloan and General Motors drank Henry Ford’s milkshake by finding a sweet spot, in which you sold everybody mass produced Chevy parts in different, near personalized configurations. We can argue about whether people should value such human touch salesmanship and customization—whether it is a cognitive behavioral mistake stemming from our origin as hunter gatherers seeking to gather the most useful objects. But the fact is we do value such human touch customization. All the evidence suggests that it makes us very happy. That is a very large set of potential labor-intensive occupation that will last for a very long time.

  5. Never forget that back in the environment of evolutionary adaptation we were sociable toolmaking hunter-gatherers—constantly interacting with the complex environment where we would choose and modify objects to advance our purposes—in which we turned ourselves into an anthology intelligence under a geas to learn as much as possible, and immediately tell it to—gossip about it with—everybody else. With the coming of first the Agrarian and then the Industrial Age our jobs became overwhelming boring. Only humans, with our brains being supercomputers that fit into a bread box and draw only 50 watts of power, could be the necessary microcontrollers for animals and machines necessary for first Agrarian Age and then Industrial Age production. But those jobs vastly underutilized the human brain. Do not overromanticize looking at the hind end of a mule or tightening bolt number six on every object coming down the assembly line for four hours without a break.

Reading List:

Artificial Intelligence and Artificial Problems

Posted on by Brad DeLong

Over at Project Syndicate: Former U.S. Treasury Secretary Larry Summers is fencing with current U.S. Treasury Secretary Steve Mnuchin about “artificial intelligence”–AI–and related topics.

Most of their differences are differences of emphasis.

Mnuchin is drawing the issue narrowly: the particular technologies called “Artificial Intelligence taking over American jobs”. And he is, at least as I read him, is elliptically criticizing high stock market values for “unicorns”: companies with valuations above a billion dollars and yet no past record or clear future path to producing revenues to justify such valuations. **Read MOAR Over at Project Syndicate

Interview: The Politics Guys

Posted on by Brad DeLong

Brad DeLong: Interview: The Politics Guys: “Economic inequality, economic growth, why this is the best time ever to be poor (in the United States, at least)…

…grifters and suckers, alien sinister forces, McDonalds, restaurant gift cards, how the best con artists are those who can con themselves, and lots more….

Mike talks to UC Berkeley economist Brad DeLong. Professor DeLong, who served as Deputy Assistant Secretary of the Treasury in the Clinton administration, blogs at ‘Grasping Reality….

It’s about politics. It’s about ideas. It’s about half an hour.

Measuring Productivity Growth: No Longer So Live at Project Syndicate

Posted on by Brad DeLong

Measuring Productivity Growth: The world’s population today is about 20 times richer than it was back during the long Agrarian Age from 7000 BC to 1500, during which limited resources, slow technological advance, and Malthusian pressures kept the overwhelming proportion of human populations at near-“subsistence”–incomes of less than $1.50 per person per day. Today only 1/15 of the world’s population is that poor. And today if we were to take the total money value of what we produce and use it to buy what people receiving less than $1.50/day buy, at current prices the value of global output would be $30/day per person. That is our roughly $80 trillion of annual global income today.

We cannot but greatly lament the enormously unequal distribution of the fruits of our global productivity. But that we today are such a wealthy global society would strike our predecessors from 7000 BC to 1500 dumb.

Moreover, most of what we make and consume today is not what our near-“subsistence” era predecessors. What good to any of us would 40,000 kcal/day in basic grains be? Most of what we make and consume today are goods and services with analogues back in the Agrarian Age that were absurdly expensive. Could Tiberius Claudius Nero eat strawberries and cream in January? No. For one thing, we think the idea of combining strawberries and cream was un-thought of before the cooks of the sixteenth-century Tudor dynasty courtier Thomas Cardinal Wolsey. There was one and only one person who could see a bloody audio-visual drama about witches in his house in the year 1606. He was named James Steuart, he was king of England and Scotland, and he had William Shakespeare and Shakespeare’s acting company on retainer. Yet today more than 4 billion people with their smartphones, tablets, and televisions live, in this dimension at least, better than kings. Nathan Meyer Rothschild, richest man in the early nineteenth century, died in his fifties of an infected abscess. He would have given the bulk of his wealth for one dose of modern antibiotics. He could not.

Thus when we say that the typical person in the world today is twenty times as well-off, materially, as his or her Agrarian-Age predecessor, we are saying something misleading. The typical person with today’s income would be twenty times as well off if he or she were restricted to only purchase and consume goods and services broadly available back in the Agrarian Age. But our additional range of choice–that we today know how to make more things and more types of things–gives an additional boost to our wealth today.

Now the statisticians at the U.S. Department of Commerce’s Bureau of Economic Analysis and at its sister agencies around the globe by and large cannot measure this “variety” boost to our productivity. They do try. But for the most part they fail. Thus the standard estimates of labor productivity growth in the North Atlantic–1%/year on average from 1800 to 1870, 2%/year on average from 1870-1970, 1.5%/year since and possibly slowing further in the past decade–are for the most parts estimates of how much better we have gotten at making the necessities of the world’s poor, not of how much life has been potentially enriched by higher productivity.

A good deal of this enrichment-via-increasingv-variety is truly game-changing innovations: things that transform human life. Flush toilets, automobiles, electric power, long-distance communications, modern information processing, and so forth. To provide even roughly the same capabilities in earlier eras would have been–was–absurdly, ludicrously, insanely expensive and rare. A political aristocrat in the late Roman Empire might purchase a nomenclator–a slave whose job it was to memorize names and faces and whisper to you what was the name of the person you were about to greet. Is having a smart phone more like having more like 10 or 100 or 1000 nomenclator-like assistants following you around?

Whenever we start to try to think about what opportunities economic growth will open up for humanity in the future, we need first to look back and reflect on what economic growth has done and the past. Yet I, at least, find myself stymied even in my attempt to measure how much economic growth there has been in the North Atlantic over the past 200 years. Yes, I am confident that there has been much more than 30-fold’s worth of economic growth. But how much more? And what does that mean? For that I feel I need a philosopher, to tell me who we were, who we are, and who are successors should want to be.

Consulted:

As Cosma Shalizi Says, “The Singularity Is in Our Past”

Posted on by Brad DeLong
Cursor and Preview of As Cosma Shalizi Says The Singularity Is in Our Past Hoisted from the Archives

: As Cosma Shalizi (2010) Says, “The Singularity Is in Our Past”: Look at the bleeding edge of urban North Atlantic or East Asian civilization, and you see a world fundamentally unlike any human past. Hunting, gathering, farming, herding, spinning and weaving, cleaning, digging, smelting metal and shaping wood, assembling structures–all of the ‘in the sweate of thy face shalt thou eate bread’ things that typical humans have typically done since we became jumped-up monkeys on the East African veldt–are now the occupations of a small and dwindling proportion of humans.

And where we do have farmers, herdsmen, manufacturing workers, construction workers, and miners, they are overwhelmingly controllers of machines and increasingly programmers of robots. They are no longer people who make or shape things–facture–with their hands–manu.

At the bleeding edge of the urban North Atlantic and East Asia today, few focus on making more of necessities. There are enough calories that it is not necessary that anybody need be hungry. There is nough shelter that it is not necessary that anybody need be wet. There is enough clothing that it is not necessary that anybody need be cold. And enough stuff to aid daily life that nobody need feel under the pressure of lack of something necessary. We are not in the realm of necessity.

What do modern people do? Increasingly, they push forward the corpus of technological and scientific knowledge. They educate each other. They doctor each other. They nurse each other. They care for the young and the old. They entertain each other. They provide other services for each other to take advantage of the benefits of specialization. And they engage in complicated symbolic interactions that have the emergent effect of distributing status and power and coordinating the seven-billion person division of labor of today’s economy. We have crossed a great divide between what we used to do in all previous human history and what we do now. Since we are not in the realm of necessity, we ought to be in the realm of freedom.

But although we have largely set these post-agrarian post-industrial patterns for the next stage of human history, the human world of this next stage is only half-made. The future is already here–it is just not evenly distributed. Of the 7.2 billion people alive in the world today, at least 25% billion still live lives that are hard to distinguish from the lives of our pre-industrial ancestors. Only 5% of today’s world population lives in countries where income per capita is greater than $40,000 per year; only 10% lives in countries where income per capita is greater than $20,000 per year.

The bulk of the world’s population is on the stairway to modernity. The patterns are set. The top of the stairway is visible–although it is not clear which top we shall reach: many possible tops are immanent in the patterns. Nevertheless, the climb will be hard. And that is what much of the history of the twenty-first and twenty-second centuries is likely to be about.

So how did this great transformation happen? And how did the way it happened shape who we are now and who we will be in the future?

The traditional tools, practices, patterns, and molds of history are not as much help in telling this story as one might hope. The history of how the world was greatly transformed is primarily economic and technological, and secondarily political and social. But historians are not used to placing the economic and technological in first place. In the study of any period back before 1800, there is no way that economic history can be seen as even one of the principal axes. Before 1800, most history at even the century-level–let alone the decade-level or the year-level–could not be economic history. History is change. And before 1800 economic factors changed only slowly. The structure and functioning of the economy at the end of any given century was pretty close to what it had been at the beginning.

The economy was then was much more the background against which the action of a play takes place than like a dynamic foreground character. Changes in humanity’s economy–how people made, distributed, and consumed the material necessities and conveniences of their lives–required long exposures to become visible. Economic history could be–indeed, had to be–a specialized ‘long duration’ history. It required a scope of perhaps 500 years, if not more, to be properly placed in the foreground of any historical canvas. And even then the story told was of recurrent patterns and cycles rather than development and change.

But since 1750 or so things have been different. The pace of economic change has been so great as to shake the rest of history to its foundation. For perhaps the first time, the making and using the necessities and conveniences of daily life–and how production, distribution, and consumption changed–has been the driving force behind a single century’s history. Even in the most long-established of professions, the pattern and rhythm of work life today is so very different from that of our ancestors as to be almost unrecognizable. It is these changes in production and also in home life and consumption, and the reactions to them, that make up the center ring action of the history that has made us who we are.

This post-1750 history takes place in two stages. The first stage is the nineteenth century: the century of the British Industrial Revolution. Call it 1750-1870. It opens up the possibilities. The second stage is the twentieth century. Call it 1870-2010. It sets the patterns into which the human world is likely to grow in the future.

Cosma Shalizi (2010): The Singularity in Our Past Light-Cone (November 28) http://bactra.org/weblog/699.html