Frey - The technology trap: capital, labor, and power in the age of automation

1. CONTENTS
2. ix

Future historians may wonder why we failed to learn from the past. Historically, when large swaths of the population have found their livelihoods threatened by machines, technological progress has brought fierce opposition. We are now living through another episode of labor-replacing progress, and resistance is seemingly looming. According to a 2017 Pew Research Center survey, 85 percent of Americans now favor policies to restrict the rise of robots. The underlying concern is not hard to understand. Aided by advances in artificial intelligence (AI), robotics, machine vision, sensor technology, and so on, computers have become capable of performing a wide range of tasks that could be done only by humans a few years ago. Top-down programming is no longer required for automation to happen. In the age of AI, computers can learn themselves. What used to be distant moon shoots in computing are now reality.

In September 2013, my Oxford friend and colleague Michael Osborne and I published a research paper estimating the potential impacts of advances in AI on jobs. We found 47 percent of American jobs to be at high risk of automation as a consequence. A few months later, I was invited to speak at a conference in Geneva. I was in good company, with one former prime minister, one chancellor, and a couple of labor ministers. After my talk, a well-known economist in the audiencelets call him Billapproached me and dismissively remarked, Is this not just like the Industrial Revolution in England? Didnt machines displace jobs then as well? Bill was right, of course, but it was only on my way back to the airport that I realized how right he actually was in suggesting that things are no different this time around. Some jobs will disappear, but people will find new things to do, as they always have, and therefore there is nothing to worry about. Unfortunately, that is only half the story.

The long-term economic benefits of the Industrial Revolution, to which Bill alluded, are uncontested. Before 1750, per capita income in the world doubled every 6,000 years; since then, it has doubled every 50 years. But the industrialization process itself was a different matter. While economic historians are still debating whether the pains inflicted on the workforce by the Industrial Revolution were worth it, for later generations they surely were. Yet many contemporary laborers, who saw their livelihoods vanish as their skills became obsolete, would just as surely have been better off had the industrial world never arrived. As the mechanized factory displaced the domestic system, traditional middle-income jobs dried up, the labor share of income fell, profits surged, and income disparities skyrocketed. Sound familiar? Indeed, so far our age of automation largely mirrors the early days of industrialization in economic terms. It took over half a century until average people saw the benefits of the Industrial Revolution trickle down. And unsurprisingly, as many citizens experienced a reversal of fortunes, the consequence was cascading opposition to machines. The Luddites, as they were called, raged against mechanization, and they did everything they could to resist it. If this is just another Industrial Revolution, alarm bells should be ringing.

The idea underpinning this book is straightforward: attitudes toward technological progress are shaped by how peoples incomes are affected by it. Economists think about progress in terms of enabling and replacing technologies. The telescope, whose invention allowed astronomers to gaze at the moons of Jupiter, did not displace laborers in large numbersinstead, it enabled us to perform new and previously unimaginable tasks. This contrasts with the arrival of the power loom, which replaced hand-loom weavers performing existing tasks and therefore prompted opposition as weavers found their incomes threatened. Thus, it stands to reason that when technologies take the form of capital that replaces workers, they are more likely to be resisted. The spread of every technology is a decision, and if some people stand to lose their jobs as a consequence, adoption will not be frictionless. Progress is not inevitable and for some it is not even desirable. Though it is often taken as a given, there is no fundamental reason why technological ingenuity should always be allowed to thrive. The historical record, as we shall see, shows that technologys acceptance depends on whether those affected by it stand to gain from it. Episodes of job-replacing technological change have regularly brought social unrest and, at times, a backlash against technology itself. In this regard, the age of automation, which took off with the computer revolution in the 1980s, resembles the Industrial Revolution, when the mechanized factory replaced middle-income artisans in large numbers. Now, as then, middle-income jobs have been taken over by machines, forcing many people into lower-paying jobs or causing them to drop out of the workforce altogether.

To capture attitudes toward technology over the centuries, this book brings together much of the technical economics literature with historical accounts of technological change and popular commentary. Though it concerns the future, it is not a prediction of it. Prophets may be able to foretell the future; economists cannot. The objective here is to provide perspective, and perspective we get from history. As Winston Churchill once quipped, The longer you can look back, the farther you can look forward. Thus, before looking forward, we shall begin by looking back. The Industrial Revolution was a defining moment, but few people grasped its enormous consequences at the time. We are now in the midst of another technological revolution, but fortunately this time around, we can learn from previous episodes. Bill dismissed our study as Luddite. And indeed, parallels are often drawn between the Industrial Revolution and now to suggest that the Luddites were wrong in trying to halt the spread of the mechanized factory. Artisan craftsmen, whose feelings were stronger than their judgment, rebelled against the very machinery that came to deliver unprecedented wealth for the commoner, or so the story goes. This story is an accurate description of the long run, but in the long run we are all dead. Three generations of working Englishmen were made worse off as technological creativity was allowed to thrive. And those who lost out did not live to see the day of the great enrichment. The Luddites were right, but later generations can still be grateful that they did not have it their way. History is made in the short run because the decisions we make today shape the long run. Had the Luddites been successful in bringing progress to a halt, the Industrial Revolution would probably have happened somewhere else. And if not, economic life would most likely still look similar to the way it did in 1700.