Baumol meets Marx

I read Jason Smith’s Smart Machines and Service Work: Automation in an Age of Stagnation because there was a positive discussion of it on Twitter. I’d describe it as a mash-up of Baumol (‘cost disease’) and Marx (‘exploitation’).

The first part of the book is a rant about technology and why today’s tech will not increase productivity. It channels Robert Gordon and criticises economists like Erik Brynjolfsson (or before him Paul David) for arguing there are delays between innovation and the productivity effects they produce.

I have the same problem with this as with Gordon’s magnum opus: it might turn out to be correct that today’s techs have no productivity impact, but focusing only on digital entertainment and communication devices is completely unpersuasive. Vaccines, hello? The wave of biomedical innovation like the development of mRNA vaccines has rested on the plunging cost of gene sequencing, enabled by computation applied to massive amounts of data. Lab benches, test tubes, and also computers. The transition to green energy supply will require large-scale computation to manage storage, networks and grids. Additive manufacturing has many potential applications including printing organs and tissues. These applications are genuinely slow to emerge: large additional investments in equipment are needed, the organisational and ethical hurdles are high, other discoveries might be required to make them economically viable. We’re lucky so much of the prior mRNA research had been done before 2020.

Anyway, the book halfway through then turns to the growth of the service sector, the automation of routine tasks, and the debate about the potential impact on jobs. It looks back, too, at the well-known decline in middle-income jobs and growth of the contingent workforce. Having introduced Baumol’s familiar ‘cost disease’, it then turns to a Marxist analysis. Having never learned Marxist economics I found this quite interesting but heavy going, as it has its own jargon. Still, it is surely right to consider the impact of automation in the context of power struggles, or class conflict.

The book has some sections where it pauses to ask what is actually meant by ‘productivity’, a question of evergreen interest to me. It touches here on the issue of time use and time saving in services, and on activities crossing the production boundary, making it hard to measure ‘true’ productivity. As it points out, many previously household (uncounted) activities became marketed during the 20th century (‘commoditised’), and are often low-pay and precarious. However, the book then veers back to the more abstract class struggle.

All in all, I found the book quite interesting for its novel (to me) perspective, and it is well written. But much of the (non-Marxist) economic literature it draws on will be familiar to many people enticed by the subject matter. What it adds to the technology debate is, quite rightly, the issues of power and deregulation of the labour market,  beyond discussions of gig platforms. But it didn’t tell me anything new about the productivity puzzle.

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Humans in the machine

There’s some very interesting insight into the human workforce making the digital platforms work in Ghost Work: How to Stop Silicon Valley from Building a New Global Underclass by Mary Gray and Siddarth Suri. The book as a whole doesn’t quite cohere, though, nor deliver on the promise of the subtitle. The bulk of the book draws on interviews and surveys of people who work via platforms like Amazon’s famous Mechanical Turk, but also the internal Microsoft equivalent, UHRS, and a smaller social enterprise version, Amara.

This is all extremely interesting, about how people work – in the US and Bangalore – their tactics for making money, dealing with stress, how many hours they have to work and when, how much or little agency they have, and so on. Not least, it reminds or informs readers that a lot of AI is based on the labelling done by humans to create training data sets. However, not all the ghost work described is of this kind and some, indeed, has little to do with Silicon Valley except that a digital platform mediates the employer and the seeker of work. As the authors note, this latter type is a continuation of the history of automation, the role of new pools of cheap labour in industrial capitalism, and the division of labour markets into privileged insiders and contingent – badly paid, insecure – outsiders. The new global underclass is just one step up from the old global underclass; at least they have a smartphone or computer and internet access.81uywR4bPoL._AC_UY218_ML3_The survey results confirm that some of the digital ghost workers value the flexibility they get reasonably highly – although with quite a high variance in the distribution. Not surprisingly, those with least pressing need for income most value the flexibility. Some of the women workers in India also valued the connection to the labour market when they were unable to work outside of their home because of childcare or family expectations. Similarly, with the Amara platform, “Workers can make ghost work a navigable path out of challenging circumstances, meeting a basic need for autonomy and independence that is necessary for pursuing other interests, bigger than money.”

The book’s recommendations boil down to recommending that platforms should introduce double bottom line accounting – in other words, find a social conscience alongside their desire for profit. Without a discussion of their (lack of) incentives to do so, this is a bit thin. Still, the book is well worth reading for fascinating anthropological insights from the field work, and for the reminder about the humans in the machine.

 

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The Technology Trap

Anybody interested in the economic impact of digital and AI, in particular on jobs, will want to read Carl Frey’s new book, The Technology Trap: Capital, Labor and Power in the Age of Automation. He is probably best known for his rather gloomy work with Michael Osborne (original pdf version here) highlighting the vulnerability of many jobs – almost half in the US – to automation in the next couple of decades. The book expands on the issues that will determine the actual outcomes, and is – as the title indicates – still quite pessimistic.

The structure of the book is historical, with sections on pre-industrial technologies, the Industrial Revolution (which saw widening inequalities), the mass production era (which reduced inequalities and created an affluent middle class), the recent polarization in the era of globalisation and digital, and future prospects. The key distinction Frey draws in between technologies which substitute for labour and those which complement it. Whereas the 19th century and the present seem to involve the replacement of people with machines, the 20th century innovations needed increasingly skilled labour to work with them.

Although I am probably not as gloomy about future prospects for work and incomes, I really enjoyed reading the book, which covers a wide range of technological applications in addition to the well-known historical examples. It leaves open two questions. One is about the present conjuncture: what explains the combination of seemingly rapid technological change and adoption with – in at least some OECD economies – very low unemployment rates? The answer might just be ‘long and variable lags’ but the question surely needs addressing.

The broader question, or set of questions, is really about the interaction between technology and labour market and other economic institutions. Although automation is likely to have the same general effects everywhere, the outcomes for workers will be refracted through very different national job markets, education systems, tax systems and so on. How much can any individual country lean successfully against the wind? Frey is not (unlike Robert Gordon) US-centric but does not get into these issues.

And beyond the response to technological change, what is it that determines the direction of technical change in the first place? The book treats the labour substitution or complementing as exogenous. But why were electric unit drives in auto plants and internal combustion engines created as complementary and yet automation in today’s car industry seems like it will substitute for labour? It seems to me this must be an institutional story too, but I don’t think it’s been told yet.

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Work (and more) in digital times

This week I’ve been dipping in to Work in the Digital Age: Challenges of the Fourth Industrial Revolution, edited by Neufeind, O’Reilly and Ranft. This is a collection of short essays brought togoether by Policy Network, the centre-left ‘progressive’ think tank. It’s a chunky book, starting with sections essays on prospects for employment and the character of work. These cover, for example, the likely impact of automation in destroying and creating jobs, and the nature of work in the ‘gig’ economy. A section on labour relations and the welfare state follows. There are then chapters on individual European countries, ordered according to the ‘digital density’: Scandinavia and the Netherlands are classed as high, the UK and Germany medium, France, Italy and Central and Eastern Europe as low. There are also chapters on the US, Canada and India. The comparisons between countries were at the heart of the project, and I admit to not having read these chapters.

Given that I read so much of the economic literature on these issues, I haven’t found anything startlingly new so far, although there are some interesting perspectives. For example Martin Kenney and John Zysman consider the question of financing technology start-ups when they face a long period of losses because of what’s known in the platform literature as the chicken and egg problem: a platform needs users on both sides – riders as well as drivers for instance – because it won’t attract riders without enough drives and won’t have enough drivers unless it has a user base. The winner-take-all success stories then look for a long period of rents to recover those early losses, although many platforms simply fail. The essay argues that it is not clear whether this financing model is creating economic and social value. (I argue in a forthcoming paper that this is one aspect of the wider failure of competition economics to have figured out how to compare static welfare gains and losses to dynamic ones.)

In other chapters, Ursula Huws et al report new surveys on the extent of gig work or crowd work – from 9% in the UK to 22% in Italy, usually as part of a broader spectrum of casual work; Monique Kremer and Robert Went set out an agenda for ensuring automation does not increase inequality, covering the direction of robotisation, the enhancement of complementary skills, and distributional policy instruments; and in an introductory essay Luc Soete on the productivity paradox discusses similarities with and differences from previous technological revolutions. The final chapter sets out a reform agenda – education and training; work transitions; social protection; redistributive taxes and transfers; and investing in infrastructure and innovation. This is high level stuff, and therefore a bit motherhood and apple pie. Having contributed essays to this kind of collection myself, I know this pitch of generality is inevitable, but do ache for some policy specifics as opposed to ‘a new inclusive narrative’.

For an overview of the technology and work debate, this is a useful volume, though, and it can be downloaded free from here. It’s certainly a good place to start for a comparative perspective, and the references to country-specific literature look really useful.

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Humans need not apply

As one would of course expect from the economics correspondent of The Economist, Ryan Avent has written a very clear account of the way digital technologies, and the globalisation driven in part by technology, is changing the ways people can earn a living. The Wealth of Humans: Work and its Absence in the 21st Century brings together the debate about robots destroying jobs, arguments about the ‘death of distance’ and literature on the re-emergence of cities as economic hubs, the issue of inequality, and the more recent discussion of whether or not the world is in for an era of ‘secular stagnation’. The focus is on three related trends: automation, globalization, and the enhanced productivity of a highly skilled minority of people.

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It ends up being a rather pessimistic synthesis. The starting point is unarguable: “Society must go through a period of wrenching political change before it can agree on a broadly acceptable social system for sharing the fruits of this new technological world.” A few years ago this would have seemed hyperbole, but no more. And yet the rest of the book tends to suggest that this political change cannot happen. Essentially, Avent does not believe enough people can become educated or skilled enough to share the benefits of automation and globalisation with those happy few whose cognitive skills have made their incomes increase. He does not think as many as 50% can complete tertiary education. “The proportion of highly educated workers to less educated workers is no longer going to grow in the growth-boosting, inequality-dampening way it once did.”

Part of this, I’d take issue with. I don’t agree that skill upgrading has ‘run out of steam’. The character of tertiary education clearly needs to change; we are in a stage like the persistence of classical education in the late 19th century. The educational establishment is slow to change – but it will, or it will be disrupted. But I’m much more persuaded by James Bessen’s argument (in Learning by Doing) that in the later stages of the technological transformation of production, the necessary skills are steadily standardised and thus able to be codified and taught. And, while addressing the ‘lump of labour’ fallacy, Avent nevertheless argues that, “The problem is the sheer abundance of labour.” Yet he also sees technology replacing ‘expensive’ labour. Surely labour=people=knowledge, pretty key in an endogenous growth, knowledge-based economy. It seems more likely that ‘work’ will be redefined, with a role for appropriately skilled humans, as it has been so many times before.

There are some very nice details indeed in the book. I didn’t know that Robert Gordon used to ask audiences whether they would rather give up post-2000 technology or indoor plumbing – the answer used to be the former, until smartphones came along. And indeed in the developing world, people would clearly rather have their phones and the internet. (An aside: indoor plumbing is a great example of why technology is social more than it’s technological. It’s a simple and well-known technology, yet one many countries are unable to make work for them.) Arvind Subramanian’s term ‘fluff not stuff’ for weightlessness (cf The Weightless World) was new to me, although perhaps a little too derogatory-sounding for the source of most of the value-added in developed economies.

Avent concludes that the reason to be pessimistic is that there is ‘no-one in control’, able to pilot society wisely through the upheaval. Looking back over the past 200 years, someone thinking they are ‘in control’ seems a pretty bad idea to me. But, to get back to the starting point, the politics, I’d agree that this is the territory for pessimism. Where leadership to generate a sense of progress and confidence would be desirable (because expectations matter no end for the economy), we have politicians reacting to people’s fears. It’s understandable, but it isn’t what we need.

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