Discuss the evolution of 21st century economics.

Great Debates
1

It’s 2010. One hundred years ago there probably were at least 2 companies that still made buggy whips. One of them probably made the finest buggy whip money could buy. The other probably made the least expensive, Wal-Mart version buggy whip.

As I grew up in the 1960’s & 70’s there was a business known as Fotomat that populated the parking lot of every shopping mall, plaza, and department store parking lots. Thanks to Polaroid, camcorders, and digital cameras, many of you have no idea what the hell I’m talking about.

Tonight my wife and I rented a movie. We had a choice of paying $4.00 for the movie at Blockbuster or paying $1.00 for it at a Redbox. While $3.00 difference is not very much money, I can buy both a pizza at the Dollar Tree and a 4 pack of beer at the Pick ‘n Save for a grand total of $3.00 for both.

The Red Box is located inside the Pick ‘n Save, which is right next store to the Dollar Tree. The Blockbuster is in the same plaza.

Guess where we got the video?

$4.00 total is a pretty good price for Grandma & Grandpa to get a movie and have a pizza with a couple of beers.

But by us and everyone else not renting at Blockbuster eventually it’s going to fold up (like many in this area have already done) and people will be out of work. When a door closes a window opens: there will be new jobs making/delivering those dollar store pizzas and servicing the Red Box, etc…

But at what point on the matrix will new products overlap the jobs it kills with the jobs it creates? Eventually there has to be a plateau in technology that leaves a significant population with nowhere to go, doesn’t there?

Or will what’s been happening forever continue to happen forever? Will something come along cheaper and more convenient than the Red Box? Will someone come along with beer that’s cheaper than $1.89 a four pack?

At what point will technology make consumer products so cheap that nobody can afford them because the same technology has put most people out of work?

Discuss, please.

2

Short of a robo-commie paradise?

No. There is no reason to believe there is any such plateau.

Your speculation has been made, constantly, consistently, unceasingly, for the last three hundred years. People were complaining about the loss of jobs with the original steam engines that were used to pump water out of mines. They wondered what would happen to the miners if the owners could just replace the workers with a device. And the answer was, and always has been, that the miners would eventually find other work. Starting with those early steam engines and continually through the Industrial Revolution and beyond, that entire 300 years has been characterized by advances in technology that have made us so much phenomenally richer than our ancestors that they could have no conception at all of the kinds of lives we lead today. And yet here you are today, asking the same question that they asked centuries ago. This truly puzzles me.

In the short term, there are losers. This is true, and can be seen especially well in the closing of American factories with the recent wave of globalization. The benefits are less immediately apparent, but they are just as real, and they have always outweighed the costs.

Of course, there has been a broadening in the distribution of income, as the rich have been able to take more advantage than the poor of this latest round of trade agreements. The income gap is increasing. Real median household income actually fell over the W administration, which is something we should never see happening. But the solution to that is not to question the process that has brought us this previously unimaginable prosperity. The solution, instead, is to build up safeguards to ease the transition for those workers that are displaced.

Unemployment benefits, new job training, and yes, even reliable health insurance coverage, are all ways in which we could provide a cushion for those who must suffer the pangs of transition. But our capacity for specialization and innovation is seemingly limitless, as are our desires for more and more material comfort and security, and as long as that remains true, we should always see new job opportunities opening in the future, even if it sometimes involves less than glamorous work. There is simply no reason to believe that the process is anywhere near completion.

That is, until the robots can build and repair themselves with practically no help from us. That will be around the time that it might possibly become sensible to join the Robo-Red Party.

3

2 things…

Fotohuts existed well into the 80s and the buildings stayed intact in many low rent shopping plazas until the late 90s. So more people probably know what you’re talking about than you think.

The other thing is that Polaroids, camcorders, and digital cameras didn’t really kill Fotohuts. Cheap photo processing inside pharmacies and grocery stores (many of them offering one hour service) killed the Fotohuts. But in the long run of “economics”, who cares? Fotohut employees could move to the pharmacy photo counter. And now that digital cameras are all the rage, someone has to be stationed at the photo kiosk because Grandma has no idea how to get the pictures to come out (or she does know and wants 8x10s that can’t be printed at the kiosk).

But on top of all that, these workers are just sales clerks and there will always be a place for sales clerks in another part of the store or in a different store somewhere else.

4

It never will, because that’s just not how the world works.

It’s too early for me to formulate the long, economics-laden answer needed to explain this, but let me put it simply; it obviously could never happen because even if technology did reduce available jos, which it does not, long before you eliminated all jobs, new technology would cease being profitable. Who could possibly have any motivation to install the last robot, which would be making stuff nobody can afford? Or the second to last robot?

Supply and demand are two sides of the same coin. New automation and efficiencies simply won’t be used unless people are buying the stuff they produce.

All the advancement we’ve made so far - and there’s been more than we can even begin to list - has eliminated jobs, and yet most people still have jobs. At some point we have to wonder if Chicken Little might not be wrong.

5

Humans want to work, because by working they are able to eat and survive. Other humans want them to work because they have some idea for some new technology or other venture. When people become available, other people come in and swoop them up, putting them to work on entirely new things.

6

Haven’t we done this thread before? :slight_smile:

Here’s a post I made in a previous one which directly addresses this idea that technology makes things so cheap that it can out-compete human labour, and this will result in widespread poverty. Feel free to read the whole thread, but be warned that there’s some painfully impenetrable ignorance in there.

The short answer is that if you can’t sell your labour because it’s not worth anything, then everything is free and there is no scarcity. Welcome to the post-scarcity utopia, and enjoy your yacht.

7

Many times before. But they are all disguised with different words. Clearly, there is a shared anxiety about the side-effects of human progress that can’t be explained away with intellectual reasoning.

Some examples…
Why do people insist that the market will produce new jobs?
http://boards.straightdope.com/sdmb/showpost.php?p=10580495&postcount=124

What’s so bad about a “service economy”
http://boards.straightdope.com/sdmb/showpost.php?p=10529137&postcount=26

What to do with stupid people?

8

I’m getting the dry heaves already… $1.89 beer sounds foul.

Seriously though… the price doesn’t have much relation to what it costs to make in most cases. I’d guess that most of the actual cost(not price) in your $1.89 six-pack comes from the cans or bottles, with distribution, marketing, grains and labor/production costs rounding it out. The water’s probably so cheap as to be almost free, and the yeast is pretty much the same way.

Someone’s making a reasonable margin on $1.89 beer, and you can bet that other breweries are making an even higher one on their beer.

What RickJay says above is correct. In essence, what he’s trying to say is that there’ll be a balance between what things are priced at vs. what people make. The more people make, the more they can charge, and vice-versa. The companies aren’t going to price themselves out of business.

As for what are those 80-90 IQ people going to do, what are they doing now? There’ll always be a market for construction, service industries and other jobs that don’t require serious brain power.

As for the cry that we’re shipping our manufacturing overseas and screwing these sorts of people… well, do you want to pay quite a bit more for most things, just because we have to pay our guys $6/hr, instead of paying some dude $6/wk in China?

9

It’s a 4 pack of pint cans, Keystone (regular, light or ice, customers choice). It’s really not too shabby for the price.

10

The whole history of modern economics is one of labor being replaced by mechanization. It’s the prime reason why we’re as wealthy as we are.

In 1900, over 40% of the population worked in agriculture. Today, about 5% do. A modern chicken farm has two or three employees per million chickens. Everything else is automated.

You could make a list pages long of all the various jobs that used to be a significant factor in overall employment but which no longer exist or exist in a very reduced size because of technological advance: Switchboard operators, buggy whip makers, pump jockeys, milkmen, typesetters. draftsmen, commercial mathematicians, pinsetters, and on and on…

The average factory today uses far less labor than it used to. Assembly lines used to be long lines of humans doing drudgery. Now it’s mostly automated. Fifty years ago, a large factory might have employed 1,000 people. Now it might employ 100.

And yet, there are still plenty of jobs. Until the recession hit, the U.S. was pretty much at full employment.

This process of increasing labor productivity has been going on since the industrial revoution. It will keep going on indefinitely.

11

Never. There will likely always be work that needs doing. What technology allows us to do is automate (or oursource) the work we find tedious, dirty, repetetive, dangerous or demeaning and pursue other work we find more interesting and fullfilling. In spite of all the negative hype of the dot-com bust, think about how many internet related jobs that exist now that didn’t exist 15 years ago. People in my high school did not dream of working for companies like Google, Yahoo!, Amazon, Ebay, Facebook, Youtube, Cisco, EMC2, and so on for the simple reason they did not exist.

A more likely scenario is that consumer products will become so cheap that even the lowest paid tiers of society can buy what they need.

12

Isn’t that what has happened already?

13

This. With the exception of health care, most every single person who’s got a job can afford what they materially need in the USA. And then some–I know plenty of not especially well-compensated people who own 30 inch televisions with cable. And on top of that, to the extent that some people can’t afford material goods, I expect that to improve a decade from now, even in the face of widening inequality.

The issue in modern society isn’t so much material necessities. It’s a matter of power and status (which is more or less the cultural projection of power). Since they’re relative, zero-sum games–it’s bad to have twice as much power if everyone else has four times as much–there will always be winners and losers. This is where the widening inequality becomes an issue. Those with power are accumulating more power at the expense of those who already have relatively little. When industry is computerized and mechanized, you’re replacing a hundred skilled manufacturing workers who at least have some power over their work and maybe a union to express that power, with maybe 20 technicians, managers, and IT specialists and 80 transient burger flippers. And though even the burger flipper in 2010 is very likely materially richer than the industrial proletarian in 1970–owing to the cheaper and higher quality car and the cheaper and higher quality burger made available to him through technological progress, it’s still very questionable to say that the burger flipper is “better off” given the loss in relative power.

14

Yes. Mostly because of “evil corporations” like Walmart and Target.

This is really a nonsensical example and doesn’t really address your point. You are basically replacing x skilled workers who physically make y amount of product themselves with z differently skilled workers who maintain the automated systems that allow y+ amount of product to be made.

And in any economy, burger flippers are burger flippers. These are the lowest level, least educated, least skilled workers who always have the least power and the worst choice of jobs.

In the modern economy, all economic power is derived from debt. Debt is essentially a promise to provide labor or services in the future in exchange for financing now. The vast majority of Americans are slaves to it - between their mortgage, the rising costs of education, car loans and their credit card spending. In a sense, it’s almost like voluntary indentured servitude to the bank. In order to maintain the middle class lifestyle people want, they have to work their entire lives in jobs they probably don’t particularly care for.

How much power does Bill Gates, the richest man in the country, have over you or me? Not really that much, if any. But how about the faceless corporate machinery of CapitalOne or American Express or whatever bank or financial institution you take out loans through? You stop making your payments and your house, your car, possibly even your job can be stripped from you.

15

The amount of lawyers will keep increasing until the world explodes from an overload of hot air.

Seriously, as low paid manufacturing jobs go down, service jobs increase.

16

Just a thought on this point, since I agree with the general sentiment of the thread. If we take this to the end point, where everyone is out of work because robots do everything, why would there be a need to charge money for anything at all? That is, it seems to me that, if such a point is achievable–and I doubt it is–that both cost and work would arrive at zero at the same point.

What I think this really says is that things are getting cheaper because of automation, but it seems quite clear over the last 100 years that, even though it’s impossible to count the jobs that have been eliminated by technology, there is no way to justify saying that the number of jobs has not meaningfully dropped. What this means is that we ultimately have more wealth because we generate more stuff and all the stuff is cheaper, so we can buy more of it. By that, consider 100 years ago, no one owned a TV, cars were a luxury only afforded to the rich, no air conditioning, computers, microwaves, etc. Nowadays, even most people below the poverty line have all of these things.

IOW, stuff gets cheaper, so we can buy more stuff, so even though it takes less human work to create the same amount of stuff, because we all want and can afford more stuff, the total number of jobs will remain roughly the same. So sure, we may get to a point where we can produce $5 TVs, but all that means is that more people will buy more of them, or spend money they would have spent on a TV on something else.

17

People would still want to exchange things - time, unique works of art, natural resources, ideas, real estate, services, whatever. Money would still serve a useful medium of exchange. 50 years ago, people thought innovation would bring about a 4 hour work week. That is clearly not the case. As more manufacturing is done through automation, that frees up people to pursue activities that are more artistic, social or intellectual.

18

That’s exactly the explanation I give to all the slaves I capture! :slight_smile: