Monday, July 26, 2010

A Glimpse of the (not so near) Future

It would take a lot more research to really flesh this out but there are two stories today that I think illustrate what I believe the (very) long term trend for the economy will be.

The first of these is on how companies are enjoying high profits despite lower revenue due to heavy cost cutting in the work force. Obviously this is currently not long term sustainable but it does serve to illustrate the increasing substitution of capital for labor. It's only a matter of time before even developing countries can't compete on price with machinery for production so I am highly sceptical of anyone claiming that some sort of industrial policy or just a greater focus on manufacturing will help our employment situation. While it would be premature to think this recession marks a turning point, I would be surprised if machinery hasn't fully replaced human labor in the production process for the mass market (there will always be a place for labor in craft production) within my lifetime.

The second is an Economix blog post calling for more focus on improving home care services to create jobs. This particular article is focused on the elderly and people with disabilities but I think this represents the long term trend for job creation. Machinery can never replace human interaction so there will always be employment for people in human services. I expect this to be the long run trajectory for employment, aside from technical jobs, I expect virtually all employment to eventually involve people interacting with people rather than things. I also don't think this will be the crisis those focused on manufacturing seem to fear it will be, there's enough employment for everyone in these fields, though it will be an economy vastly unlike the 18th and 19th century economies so much of our economic theory ultimately rests on.

Of course, this is very speculative long term thinking and not something that I think will apply to this recession except in a very limited fashion. There's also a third piece that hasn't happened yet that I believe will be necessary for this transition to hit full force, and that is a commercially available software program that can pass a Turing test. This will allow all those annoying scripted phone calls that you either receive or make to be replaced by capital. I am pretty strongly convinced this will happen within a medium term time frame, I'm curious what the long term effects will be. This conviction is also part of what makes me less worried about outsourcing these jobs, I don't think they'll be around all that long.

Of course, this is all very speculative. The advantage to not being an established scholar is you can safely publish wild musings like this without worrying too much about it.

[Update: Despite high US manufacturing output there does seem to be a significant robot gap. This may threaten my confidence in a post-industrial society. Do we need hyperbolic rhetoric to close the robot gap as we did to close the missile gap? Time will tell. Hat tip: Economix.]

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