Cowen says some interesting things but I don’t think he makes the best case for technological unemployment; not sure what you mean by McAfee—Brynjolfsson is the lead author on Race Against the Machine, not McAfee.
I’m not sure you really address the central point either; why can’t the disemployed people find new jobs like in the last four centuries,
As my initial comment implies, I think the last century is qualitatively different automation than before: before, the machines began handling brute force things, replacing things which offered only brute force & not intelligence like horses or watermills. But now they are slowly absorbing intelligence, and this seems to be the final province of humans. In Hanson’s terms, I think machines switched from being complements to being substitutes in some sectors a while ago.
and why did unemployment drop in Germany once they fixed their labor market, and why hasn’t employment dropped in Australia, etcetera?
I don’t know nearly enough about Germany to say. They seem to be in a weird position in Europe, which might explain it. I’d guess that Australia seems to owe its success to avoiding a resource curse & profiting heavily off China in extractive industries, along with restricting its supply of labor.
(And note that anything along the lines of ‘regional boom’ contradicts ZMP and completely outcompeted humans and other explanations which postulate unemployability, not ‘unemployable unless regional boom’.)
ZMP is ‘marginal’; if the margin changes, ZMPers may change. During booms, a lot of margins might change. And even factors like human capital can change in importance: you can hire more dishonest employees if you switch to automated cash registers which they can’t easily steal from. Or even the most dishonest evil wretch can be profitable to hire to stand on the sidewalk in a costume if you’re in the middle of a real estate bubble.
Why is the IQ 70 kid not able to do laundry as so many others once did earlier, if the economy is so productive—shouldn’t someone be able to hire him in his area of Ricardian comparative advantage?
Ricardian comparative advantage isn’t magic pixie dust; it doesn’t guarantee there’s anything worth hiring him for. Another example: imagine you have this IQ 70 kid who can do laundry—I personally don’t know how to do laundry well for anything but my own clothes and would ruin someone else’s stuff, but let’s assume you spent a few weeks training this kid how to do laundry, how to read the tags, separate clothes correctly, treat lingerie differently, not to mix bleach and chlorine, properly treat the different kinds of stains etc* - what makes you trust him with your laundry? He can be impulsive, short-sighted, not understand other peoples’ emotions or responses. Well, what can he do with your laundry besides clean it that’s so bad? Here’s a random thought: he could masturbate with your underwear. Question: how much money do you think a random woman would pay to know that the guy doing her laundry is not fishing out her lady-things and masturbating with them? Ask the nearest women, if you dare, how much they would pay. Even allowing for CFAR/MIRI people almost completely lacking the purity moral axis and reasoning consequentially and being highly deviant compared to the general population, I bet the figure is non-zero...
* and until you’ve actually tried this, don’t assume I’m exaggerating here. You live in a high IQ bubble.
Again, the economy of 1920 seemed to do quite well handling disemployment pressures like this with reemployment, so what changed?
People had many fewer clothes in 1920, for starters: the task was intrinsically simpler. Here’s an interesting quote:
In 2008, Americans owned an average of 92 items of clothing, not counting underwear, bras and pajamas, according to Cotton Inc.’s Lifestyle Monitor survey, which includes consumers, age 13 to 70. The typical wardrobe contained, among other garments, 16 T-shirts, 12 casual shirts, seven dress shirts, seven pairs of jeans, five pairs of casual slacks, four pairs of dress pants, and two suits—a clothing cornucopia. Then the economy crashed. Consumers drew down their inventories instead of replacing clothes that wore out or no longer fit. In the 2009 survey, the average wardrobe had shrunk—to a still-abundant 88 items. We may not be shopping like we used to, but we aren’t exactly going threadbare. Bad news for customer-hungry retailers, and perhaps for economic recovery, is good news for our standard of living. By contrast, consider a middle-class worker’s wardrobe during the Great Depression. Instead of roughly 90 items, it contained fewer than 15. For the typical white-collar clerk in the San Francisco Bay Area, those garments included three suits, eight shirts (of all types), and one extra pair of pants. A unionized streetcar operator would own a uniform, a suit, six shirts, an extra pair of pants, and a set of overalls. Their wives and children had similarly spare wardrobes. Based on how rarely items were replaced, a 1933 study concluded that this “clothing must have been worn until it was fairly shabby.” Cutting a wardrobe like that by four items—from six shirts to two, for instance—would cause real pain. And these were middle-class wage earners with fairly secure jobs.
There were many more jobs suitable for the mentally handicapped, like agriculture, which was far less automated and scientific than it is now.
Maybe eventually AI will disemploy that kid but right now humans are still doing laundry!
Certainly, but to compare with 1920, laundry got way easier with the invention of washing & drying machines (I spend more time folding my clothes and putting them away than I do ‘washing’ or ‘drying’), and we value our privacy way more than we used to, one of the luxuries of the rich. Even drycleaning is more complex than it used to be, as the process is evolved to be more environmentally friendly, among other things.
Quick question: To what extent are you playing Devil’s Advocate above and to what extent do you actually think that the robotic disemployment thesis is correct, a primary cause of current unemployment, not solvable with NGDP level targeting and unfixably due to some humans being too-much-outcompeted
See the sibling comment’s link. I am of mixed minds about it, but I think your counter-arguments are bad. I don’t know how much of current American unemployment is due to it but if it exists, I think it’s pretty much insoluble since there are no more remaining IQ boosts left like iodine, the Flynn effect seems to be hollow gains, and so on. We’re basically stuck until some miracle happens (AI? Hsu’s embryo selection?), and so America would benefit from serious discussion of things like Basic Income and consolidating the current patch-work of welfare which encourages things like fraudulent disability.
As my initial comment implies, I think the last century is qualitatively different automation than before: before, the machines began handling brute force things, replacing things which offered only brute force & not intelligence like horses or watermills. But now they are slowly absorbing intelligence, and this seems to be the final province of humans. In Hanson’s terms, I think machines switched from being complements to being substitutes in some sectors a while ago.
The key Hansonian concept is that replacing humans at tasks is still complementation because different tasks are complementary to each other, a la hot dogs and buns; I should perhaps edit OP to make this clearer. It is not obvious to me that craftspeople disemployed by looms would have considered their work to be unskilled, but as that particular industry was automated, people moved to other jobs in other industries and complementarity continued to dominate. Again the question is, what’s different now? Is it that no human on the planet does any labor any more which could be called unskilled, that nobody cooks or launders or drives? Obviously not. But there are many plausible changes in regulation, taxes, phasing-out benefits, college credentialism, etc.
I’d pay $5/hour for someone to drive me almost anywhere if availability was coordinated by Uber, but not taxi prices. House cleaning and yard work is not possible for me to find at a price I’d currently pay ($150 can’t pay someone to trim your trees, at least not well). I strongly suspect that things would have appeared otherwise to me in 1870, when maids etc. were far more common. This looks to me like a barrier-to-entry, regulatory-and-tax scenario, not “Darn it we’re too rich and running out of things for labor to do!”
Unless you want to pin unemployment on changes in people’s trustingness, there is nothing obvious about your stated fears of the IQ 70 kid which would have prohibited equal fear in 1920. More to the point, a change in this characteristic is not a change in automation. A few weeks of training may indeed be necessary—I’m sure I live in a high-IQ bubble but I try to be aware of this—but people managed to get jobs requiring a few weeks of training in 1920.
I would favor Basic Income, though I would favor zero taxes on the bottom 20% even more. But this has to do with my beliefs/model/worries about distribution of gains and negotiating power, more than a belief that unemployability due to machines outcompeting many humans at literally everything is the source of the Great Recession and possible Long Depression (though I’m not sure we can get properly stuck in a Long Depression while China, India et. al. are still growing).
I’d pay $5/hour for someone to drive me almost anywhere if availability was coordinated by Uber, but not taxi prices… This looks to me like a barrier-to-entry, regulatory-and-tax scenario, not “Darn it we’re too rich and running out of things for labor to do!”
Federal minimum wage has been falling relative to productivity for decades. Also, Australia has a much higher minimum wage than the US but a lower unemployment rate. They also don’t have at-will employment, implying that the risks of hiring are larger. So I’m not sure the regulations are actually the problem here (that said, I oppose many of them anyway on various grounds).
Sure, there can be more than one solution to a problem; Australia and Germany took different paths, one regularizing NGDP, one deregulating labor markets, but neither is suffering from unemployment despite robotics. Basic Income might also solve it. Getting rid of huge marginal tax rates on the poor might solve it. Or making it easier for someone to sign up with an online service that lets them offer me a ride somewhere for $5 might solve it. Since I don’t think unemployment problems are due to literal lack of labor that anyone can be paid to do, there are potentially all sorts of things that might solve it.
This would also require some amount of decreased taxes on the next quintile in order to avoid high marginal tax rates, i.e., if you suddenly start paying $2000/year in taxes as soon as your income goes from $19,000/year to $20,000/year then that was a 200% tax rate on that particular extra $1000 earned
Am I misreading this part? As in the UK the tax-rates are done on % of your income in a certain bracket, so you pay nothing on the first £15k, then 20% on £15-30k (I forget the exact brackets) then 30% on £30-45k and 40% on everything above that.
So if you were earning £19k a year for example you would pay nothing on the first £15k, then 20% of the £4k you earned that sits in the higher bracket. So you don’t suddenly pay loads of tax as it only affects the income that sits in the taxed brackets so if you earned £35k you would pay (0*15)+(0.2*15)+(0.3*5)=4.5k in tax and so you avoid having any massive discrete leaps.
I thought that’s how all progressive taxation systems worked as otherwise people could be better off refusing to take raises etc. and I’m almost certain that isn’t the case anywhere in the world.
He’s talking about effective marginal tax rates—the USA has a lot of welfare programs with hard cutoffs, which effectively mean more gross income can lower your net income until around $20k or so.
$150 can’t pay someone to trim your trees, at least not well
I think you need to find an enterprising teenager? I currently pay a local kid $100 a month to do the overwhelming majority of my (very elderly) parent’s yardwork. He mows the lawn, does the edging, weeds the flower bed and trims back the bushes. He butchered things a few times the start, but he has gotten quite competent and I fear the day he realizes he is worth more than ~$10 an hour + a christmas bonus + free lunch served by my mother when he is working.
Of course if you have trees > 20-30 feet tall you’ll probably need a more expensive professional service.
He has been doing the work for about 3 years now, and was the third kid I tried to hire. The first two didn’t work out. My parents know him decently well now, because my Mom usually insists he come in and have lunch with them during days he is working. None of us knew him when he started.
Unless you want to pin unemployment on changes in people’s trustingness, there is nothing obvious about your stated fears of the IQ 70 kid which would have prohibited equal fear in 1920.
In 1920 if that kid was caught doing something like masturbating with the laundry, and he got fired, he might starve to death. Also, even barring that, the fact that upper class people could do almost anything they want to lower class people could lead to serious sanctions (for instance, all his family could be fired as well, or he could be beaten up) that serves to deter such behavior.
You’d think that more severe punishment would have a correspondingly greater deterrent effect, but that doesn’t seem to be the case. What matters much more than the severity of the punishment is its likelihood. Sure, you might starve in the streets if you get caught jacking off in some high-born lady’s nether-garments—if you get caught. And, let’s be honest: you’re probably not going to get caught, and if you get caught, you’re probably not going to be reported to your employer.
In any case, all that talk of starvation is far-off, way in the future; the laundry is right here, and offers immediate gratification. IQ is pretty strongly correlated with the ability to delay gratification, and (though I don’t have a citation for this) people seem to care about the future a lot less when they’re horny.
Not treating starvation as important will lead to the 1920′s person repeatedly doing such things until he gets unlucky, at which point he’ll starve and he’ll have selected himself out of existence. You can’t just say that people will ignore deferred gratification under circumstances where ignoring deferred gratification will lead to not surviving—natural selection will ensure that the only ones remaining are the ones who don’t ignore it.
Furthermore, starvation isn’t such a remote threat for people who are on the edge of starvation anyway.
What evidence would get you to revise your thought that evolution via natural selection would work in such short time frames? (OK, now what about updating your evidence about starvation levels in the 1920s? Until 1929, almost no-one would have been starving, full employment was normal.)
If servants who do stupid things starve, the only surviving servants will be the ones who don’t do stupid things. This does not involve evolution; the servants are not passing the information down to another generation. It does however involve natural selection.
And there’s no point in “updating evidence”, unless you have some evidence that deals specifically with the case of lower class people who work as servants and routinely piss off their employers. Whether people in general starved is irrelevant.
OK, so I’m trying to understand what evidence you need to update your belief that the economy seeks equilibrium at a point where employment is high. I’ll try to make a structural/theoretical argument against the economic theory in the mean time.
One Micro-economic assumption is that the marginal value of their work is positive, which you claim is true.
I’ll point out that coordination costs are significant, and the dynamic of creating and maintaining trust systems for small tasks is very significant—structuring monitoring so that your cost is still negligible is hard. (In the 1920s, the social enforcement mechanisms for preventing defection in contracts were stronger—local work, local families, etc.)
As direct evidence, I’ll also point out that your time to invest in employing others to do low-value tasks is limited, and I’m going to guess that despite having significant excess income compare to the US average, you employ very few people (even indirectly) in these ways, and your friends also do not do so. (Is that useful evidence?) Instead, there are tasks you simply chose to leave undone, or avoid needing. For instance, most well to do people I know buy non-iron shirts (for a large premium, $40-$50 extra) instead of having the laundromat, or other cheap labor iron their shirts (99c/shirt to clean and iron them, where I am.) The coordination issues around dropping off, picking up, and remembering the dry cleaning make it annoying, so we avoid it.
Another example; do you have a human assistant in India or China that you farm routine computer based tasks out to? (Emails, editing, managing your schedule, researching random things you saw last month, etc.) Your time is limited, so why not? I’d assume it’s trust, training time to get them up to speed on what you need, ongoing costs of coordination driving down value, (and whatever else are you thinking of.)
(Post-post edit: I realize that you are looking at computer replacement of human jobs, but I think that structural unemployment is high because there are few jobs left that it’s worth having anyone do who is not highly trained and smart, and as Gwern said, we live in a high-IQ bubble.)
Is it that no human on the planet does any labor any more which could be called unskilled, that nobody cooks or launders or drives? Obviously not.
I don’t know, I’m not sure I would call those “unskilled”, exactly. Indeed, these days most people achieve those for themselves, so the level of skill required to offer it as a premium, as it were, has only increased.
I suspect there may be better examples out there, though.
I mean that when somebody in the bottom quintile gives me a car ride to Berkeley for $5, nothing else happens to them. They don’t pay Social Security on the $5. They don’t have their health benefits phased out. They don’t have to fill out a form. They just have an additional $5.
Roughly half of Americans don’t owe anything to the IRS each year. Pre-recession I believe this figure was about 40%. They of course pay other taxes, such as payroll (social security, medicare, which most people consider taxes), state sales tax, property taxes, etc. It’d be nice if they at least didn’t have to file tax returns.
The problem isn’t just all those other taxes but phasing-out of benefits—this is what leads to the calculations and observations by which somebody making $25,000/year isn’t much better off than someone getting $8,000/year.
I’m not very well informed on this topic, but isn’t something like that always going to be the case in a society with a safety net? e.g., if we make sure everyone has at least $25k to live on, anyone making $8k a year isn’t going to be any worse off than someone making $25k.
Of course I’m not sure how well America’s arcane maze of benefits, tax deductions and whatnot fit into this simple abstraction.
Safety net should be a slope, not a cliff. Earning your first dollar shouldn’t mean you get $1 less in benefits—there’s actually a good argument for subsidizing the first $X of income - which is what the EITC is. Basically negative income tax.
You mean about half (actually 46%) of all American households did not pay any income tax (which is different from “not owing anything to the IRS”) in 2011.
20% of all Americans don’t pay income tax by virtue of being too young to work.
I thought they wouldn’t need to file taxes, but I just completed a “tax assistant” wizard at the IRS website, for a single, non-retirement-benefit-receiving, single individual with $20k in gross income … and I was told they’d have to file a return.
Regarding the drop of unemployment in Germany, I’ve heard it claimed that it is mainly due to changing the way the unemployment statististics are done, e.g. people who are in temporary, 1€/h jobs and still receiving benefits are counted als employed. If this point is still important, I can look for more details and translate.
It is possible to earn income from a job and receive Arbeitslosengeld II benefits at the same time. [...] There are criticisms that this defies competition and leads to a downward spiral in wages and the loss of full-time jobs. [...]
The Hartz IV reforms continue to attract criticism in Germany, despite a considerable reduction in short and long term unemployment. This reduction has led to some claims of success for the Hartz reforms. Others say the actual unemployment figures are not comparable because many people work part-time or are not included in the statistics for other reasons, such as the number of children that live in Hartz IV households, which has risen to record numbers.
Cowen says some interesting things but I don’t think he makes the best case for technological unemployment; not sure what you mean by McAfee—Brynjolfsson is the lead author on Race Against the Machine, not McAfee.
As my initial comment implies, I think the last century is qualitatively different automation than before: before, the machines began handling brute force things, replacing things which offered only brute force & not intelligence like horses or watermills. But now they are slowly absorbing intelligence, and this seems to be the final province of humans. In Hanson’s terms, I think machines switched from being complements to being substitutes in some sectors a while ago.
I don’t know nearly enough about Germany to say. They seem to be in a weird position in Europe, which might explain it. I’d guess that Australia seems to owe its success to avoiding a resource curse & profiting heavily off China in extractive industries, along with restricting its supply of labor.
ZMP is ‘marginal’; if the margin changes, ZMPers may change. During booms, a lot of margins might change. And even factors like human capital can change in importance: you can hire more dishonest employees if you switch to automated cash registers which they can’t easily steal from. Or even the most dishonest evil wretch can be profitable to hire to stand on the sidewalk in a costume if you’re in the middle of a real estate bubble.
Ricardian comparative advantage isn’t magic pixie dust; it doesn’t guarantee there’s anything worth hiring him for. Another example: imagine you have this IQ 70 kid who can do laundry—I personally don’t know how to do laundry well for anything but my own clothes and would ruin someone else’s stuff, but let’s assume you spent a few weeks training this kid how to do laundry, how to read the tags, separate clothes correctly, treat lingerie differently, not to mix bleach and chlorine, properly treat the different kinds of stains etc* - what makes you trust him with your laundry? He can be impulsive, short-sighted, not understand other peoples’ emotions or responses. Well, what can he do with your laundry besides clean it that’s so bad? Here’s a random thought: he could masturbate with your underwear. Question: how much money do you think a random woman would pay to know that the guy doing her laundry is not fishing out her lady-things and masturbating with them? Ask the nearest women, if you dare, how much they would pay. Even allowing for CFAR/MIRI people almost completely lacking the purity moral axis and reasoning consequentially and being highly deviant compared to the general population, I bet the figure is non-zero...
* and until you’ve actually tried this, don’t assume I’m exaggerating here. You live in a high IQ bubble.
People had many fewer clothes in 1920, for starters: the task was intrinsically simpler. Here’s an interesting quote:
There were many more jobs suitable for the mentally handicapped, like agriculture, which was far less automated and scientific than it is now.
Certainly, but to compare with 1920, laundry got way easier with the invention of washing & drying machines (I spend more time folding my clothes and putting them away than I do ‘washing’ or ‘drying’), and we value our privacy way more than we used to, one of the luxuries of the rich. Even drycleaning is more complex than it used to be, as the process is evolved to be more environmentally friendly, among other things.
See the sibling comment’s link. I am of mixed minds about it, but I think your counter-arguments are bad. I don’t know how much of current American unemployment is due to it but if it exists, I think it’s pretty much insoluble since there are no more remaining IQ boosts left like iodine, the Flynn effect seems to be hollow gains, and so on. We’re basically stuck until some miracle happens (AI? Hsu’s embryo selection?), and so America would benefit from serious discussion of things like Basic Income and consolidating the current patch-work of welfare which encourages things like fraudulent disability.
The key Hansonian concept is that replacing humans at tasks is still complementation because different tasks are complementary to each other, a la hot dogs and buns; I should perhaps edit OP to make this clearer. It is not obvious to me that craftspeople disemployed by looms would have considered their work to be unskilled, but as that particular industry was automated, people moved to other jobs in other industries and complementarity continued to dominate. Again the question is, what’s different now? Is it that no human on the planet does any labor any more which could be called unskilled, that nobody cooks or launders or drives? Obviously not. But there are many plausible changes in regulation, taxes, phasing-out benefits, college credentialism, etc.
I’d pay $5/hour for someone to drive me almost anywhere if availability was coordinated by Uber, but not taxi prices. House cleaning and yard work is not possible for me to find at a price I’d currently pay ($150 can’t pay someone to trim your trees, at least not well). I strongly suspect that things would have appeared otherwise to me in 1870, when maids etc. were far more common. This looks to me like a barrier-to-entry, regulatory-and-tax scenario, not “Darn it we’re too rich and running out of things for labor to do!”
Unless you want to pin unemployment on changes in people’s trustingness, there is nothing obvious about your stated fears of the IQ 70 kid which would have prohibited equal fear in 1920. More to the point, a change in this characteristic is not a change in automation. A few weeks of training may indeed be necessary—I’m sure I live in a high-IQ bubble but I try to be aware of this—but people managed to get jobs requiring a few weeks of training in 1920.
I would favor Basic Income, though I would favor zero taxes on the bottom 20% even more. But this has to do with my beliefs/model/worries about distribution of gains and negotiating power, more than a belief that unemployability due to machines outcompeting many humans at literally everything is the source of the Great Recession and possible Long Depression (though I’m not sure we can get properly stuck in a Long Depression while China, India et. al. are still growing).
Federal minimum wage has been falling relative to productivity for decades. Also, Australia has a much higher minimum wage than the US but a lower unemployment rate. They also don’t have at-will employment, implying that the risks of hiring are larger. So I’m not sure the regulations are actually the problem here (that said, I oppose many of them anyway on various grounds).
Sure, there can be more than one solution to a problem; Australia and Germany took different paths, one regularizing NGDP, one deregulating labor markets, but neither is suffering from unemployment despite robotics. Basic Income might also solve it. Getting rid of huge marginal tax rates on the poor might solve it. Or making it easier for someone to sign up with an online service that lets them offer me a ride somewhere for $5 might solve it. Since I don’t think unemployment problems are due to literal lack of labor that anyone can be paid to do, there are potentially all sorts of things that might solve it.
Am I misreading this part? As in the UK the tax-rates are done on % of your income in a certain bracket, so you pay nothing on the first £15k, then 20% on £15-30k (I forget the exact brackets) then 30% on £30-45k and 40% on everything above that.
So if you were earning £19k a year for example you would pay nothing on the first £15k, then 20% of the £4k you earned that sits in the higher bracket. So you don’t suddenly pay loads of tax as it only affects the income that sits in the taxed brackets so if you earned £35k you would pay (0*15)+(0.2*15)+(0.3*5)=4.5k in tax and so you avoid having any massive discrete leaps.
I thought that’s how all progressive taxation systems worked as otherwise people could be better off refusing to take raises etc. and I’m almost certain that isn’t the case anywhere in the world.
He’s talking about effective marginal tax rates—the USA has a lot of welfare programs with hard cutoffs, which effectively mean more gross income can lower your net income until around $20k or so.
Somewhat irrelevant, but:
I think you need to find an enterprising teenager? I currently pay a local kid $100 a month to do the overwhelming majority of my (very elderly) parent’s yardwork. He mows the lawn, does the edging, weeds the flower bed and trims back the bushes. He butchered things a few times the start, but he has gotten quite competent and I fear the day he realizes he is worth more than ~$10 an hour + a christmas bonus + free lunch served by my mother when he is working.
Of course if you have trees > 20-30 feet tall you’ll probably need a more expensive professional service.
How do you know this kid? Do you know the parents, and are you implicitly relying on that trust network?
He has been doing the work for about 3 years now, and was the third kid I tried to hire. The first two didn’t work out. My parents know him decently well now, because my Mom usually insists he come in and have lunch with them during days he is working. None of us knew him when he started.
In 1920 if that kid was caught doing something like masturbating with the laundry, and he got fired, he might starve to death. Also, even barring that, the fact that upper class people could do almost anything they want to lower class people could lead to serious sanctions (for instance, all his family could be fired as well, or he could be beaten up) that serves to deter such behavior.
You’d think that more severe punishment would have a correspondingly greater deterrent effect, but that doesn’t seem to be the case. What matters much more than the severity of the punishment is its likelihood. Sure, you might starve in the streets if you get caught jacking off in some high-born lady’s nether-garments—if you get caught. And, let’s be honest: you’re probably not going to get caught, and if you get caught, you’re probably not going to be reported to your employer.
In any case, all that talk of starvation is far-off, way in the future; the laundry is right here, and offers immediate gratification. IQ is pretty strongly correlated with the ability to delay gratification, and (though I don’t have a citation for this) people seem to care about the future a lot less when they’re horny.
Not treating starvation as important will lead to the 1920′s person repeatedly doing such things until he gets unlucky, at which point he’ll starve and he’ll have selected himself out of existence. You can’t just say that people will ignore deferred gratification under circumstances where ignoring deferred gratification will lead to not surviving—natural selection will ensure that the only ones remaining are the ones who don’t ignore it.
Furthermore, starvation isn’t such a remote threat for people who are on the edge of starvation anyway.
What evidence would get you to revise your thought that evolution via natural selection would work in such short time frames? (OK, now what about updating your evidence about starvation levels in the 1920s? Until 1929, almost no-one would have been starving, full employment was normal.)
I didn’t use the word “evolution”.
If servants who do stupid things starve, the only surviving servants will be the ones who don’t do stupid things. This does not involve evolution; the servants are not passing the information down to another generation. It does however involve natural selection.
And there’s no point in “updating evidence”, unless you have some evidence that deals specifically with the case of lower class people who work as servants and routinely piss off their employers. Whether people in general starved is irrelevant.
OK, so I’m trying to understand what evidence you need to update your belief that the economy seeks equilibrium at a point where employment is high. I’ll try to make a structural/theoretical argument against the economic theory in the mean time.
One Micro-economic assumption is that the marginal value of their work is positive, which you claim is true.
I’ll point out that coordination costs are significant, and the dynamic of creating and maintaining trust systems for small tasks is very significant—structuring monitoring so that your cost is still negligible is hard. (In the 1920s, the social enforcement mechanisms for preventing defection in contracts were stronger—local work, local families, etc.)
As direct evidence, I’ll also point out that your time to invest in employing others to do low-value tasks is limited, and I’m going to guess that despite having significant excess income compare to the US average, you employ very few people (even indirectly) in these ways, and your friends also do not do so. (Is that useful evidence?) Instead, there are tasks you simply chose to leave undone, or avoid needing. For instance, most well to do people I know buy non-iron shirts (for a large premium, $40-$50 extra) instead of having the laundromat, or other cheap labor iron their shirts (99c/shirt to clean and iron them, where I am.) The coordination issues around dropping off, picking up, and remembering the dry cleaning make it annoying, so we avoid it.
Another example; do you have a human assistant in India or China that you farm routine computer based tasks out to? (Emails, editing, managing your schedule, researching random things you saw last month, etc.) Your time is limited, so why not? I’d assume it’s trust, training time to get them up to speed on what you need, ongoing costs of coordination driving down value, (and whatever else are you thinking of.)
(Post-post edit: I realize that you are looking at computer replacement of human jobs, but I think that structural unemployment is high because there are few jobs left that it’s worth having anyone do who is not highly trained and smart, and as Gwern said, we live in a high-IQ bubble.)
I don’t know, I’m not sure I would call those “unskilled”, exactly. Indeed, these days most people achieve those for themselves, so the level of skill required to offer it as a premium, as it were, has only increased.
I suspect there may be better examples out there, though.
Do you mean zero income tax, or zero all taxes, or something inbetween?
I mean that when somebody in the bottom quintile gives me a car ride to Berkeley for $5, nothing else happens to them. They don’t pay Social Security on the $5. They don’t have their health benefits phased out. They don’t have to fill out a form. They just have an additional $5.
I know this is a completely radical concept.
Roughly half of Americans don’t owe anything to the IRS each year. Pre-recession I believe this figure was about 40%. They of course pay other taxes, such as payroll (social security, medicare, which most people consider taxes), state sales tax, property taxes, etc. It’d be nice if they at least didn’t have to file tax returns.
http://www.cbpp.org/cms/?fa=view&id=3505
The problem isn’t just all those other taxes but phasing-out of benefits—this is what leads to the calculations and observations by which somebody making $25,000/year isn’t much better off than someone getting $8,000/year.
ADDED: Also, any paperwork can easily be an extreme barrier to that IQ 70 kid that Gwern was talking about.
It’s an extreme barrier (in the sense of an ugh-field) even for smart would-be employers.
I’m kind of worried that 20 people upvoted that any paperwork is an extreme barrier to smart employers—presumably people like themselves?
What kind of opportunities have you all been passing up for want of avoiding a form?
And what kind of opportunities are present to eliminate or stream-line such (ie, turbo-tax)?
I’m not very well informed on this topic, but isn’t something like that always going to be the case in a society with a safety net? e.g., if we make sure everyone has at least $25k to live on, anyone making $8k a year isn’t going to be any worse off than someone making $25k.
Of course I’m not sure how well America’s arcane maze of benefits, tax deductions and whatnot fit into this simple abstraction.
Safety net should be a slope, not a cliff. Earning your first dollar shouldn’t mean you get $1 less in benefits—there’s actually a good argument for subsidizing the first $X of income - which is what the EITC is. Basically negative income tax.
You mean about half (actually 46%) of all American households did not pay any income tax (which is different from “not owing anything to the IRS”) in 2011.
20% of all Americans don’t pay income tax by virtue of being too young to work.
I thought they wouldn’t need to file taxes, but I just completed a “tax assistant” wizard at the IRS website, for a single, non-retirement-benefit-receiving, single individual with $20k in gross income … and I was told they’d have to file a return.
Regarding the drop of unemployment in Germany, I’ve heard it claimed that it is mainly due to changing the way the unemployment statististics are done, e.g. people who are in temporary, 1€/h jobs and still receiving benefits are counted als employed. If this point is still important, I can look for more details and translate.
EDIT: Some details are here: