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I'm not an economist, nor do I play one on TV, but I do have a concept that's been rolling around in my head that must surely have some more formal theory associated with it.
Imagine a simple model economy that has only one product, which we can call "saltines". There is a baseline need for saltines, and if you don't get enough, you die. There is also an upper bound to the need for saltines, and nobody is willing to put effort into getting more than that maximum amount.
If production per worker can't keep up with the baseline production of saltines, everybody dies, for reasons that should be obvious - under no circumstances can the population sustain itself.
If production per worker is somewhere between baseline and maximum, everyone is working because everyone wants more saltines than are being produced. This is the "sweet spot" where the free market works as intended; there's always more demand, so the factory owner always has an incentive to hire an unemployed worker until full employment is achieved.
But imagine a process improvement that puts saltine production per worker above the maximum demand. The saltine factory finds it has some idle workers, who are laid off. Because they can't buy saltines anymore, they die, and demand falls a little... so more workers are laid off. And so on. Because of an increase in productivity, the economy descends into a death spiral where the demand for saltines collapses entirely, and everyone dies.
I haven't totally clarified the model in my head, and it's obviously not realistic unto itself - but does this death-spiral mechanism have any relevance to the real world? Could it be a cause, or even THE cause, of increasing economic inequality in today's economy? Can higher productivity per worker lead to not just inequality, but lower total production as workers are kicked out of the economic system entirely? Would the world be a better place if we had lower productivity, less wealth, and a greater emphasis on human input than on labor-saving machines?
The reason I ask is that we are facing a future of super-automation where the labor of just one person could potentially satisfy the needs of hundreds or thousands. The saltine model is ridiculous, but an economy driven by extreme automation is possibly even stranger than that. The very premises of free market economics - that labor has value, that money provides motivation, and that prices can set themselves - might become wholly invalid. What is everyone supposed to do then?
This is basically a Luddite argument, and I spend a lot of time wondering if they weren't right all along.
Imagine a simple model economy that has only one product, which we can call "saltines". There is a baseline need for saltines, and if you don't get enough, you die. There is also an upper bound to the need for saltines, and nobody is willing to put effort into getting more than that maximum amount.
If production per worker can't keep up with the baseline production of saltines, everybody dies, for reasons that should be obvious - under no circumstances can the population sustain itself.
If production per worker is somewhere between baseline and maximum, everyone is working because everyone wants more saltines than are being produced. This is the "sweet spot" where the free market works as intended; there's always more demand, so the factory owner always has an incentive to hire an unemployed worker until full employment is achieved.
But imagine a process improvement that puts saltine production per worker above the maximum demand. The saltine factory finds it has some idle workers, who are laid off. Because they can't buy saltines anymore, they die, and demand falls a little... so more workers are laid off. And so on. Because of an increase in productivity, the economy descends into a death spiral where the demand for saltines collapses entirely, and everyone dies.
I haven't totally clarified the model in my head, and it's obviously not realistic unto itself - but does this death-spiral mechanism have any relevance to the real world? Could it be a cause, or even THE cause, of increasing economic inequality in today's economy? Can higher productivity per worker lead to not just inequality, but lower total production as workers are kicked out of the economic system entirely? Would the world be a better place if we had lower productivity, less wealth, and a greater emphasis on human input than on labor-saving machines?
The reason I ask is that we are facing a future of super-automation where the labor of just one person could potentially satisfy the needs of hundreds or thousands. The saltine model is ridiculous, but an economy driven by extreme automation is possibly even stranger than that. The very premises of free market economics - that labor has value, that money provides motivation, and that prices can set themselves - might become wholly invalid. What is everyone supposed to do then?
This is basically a Luddite argument, and I spend a lot of time wondering if they weren't right all along.
