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The Luddite Fallacy Fallacy

August 21st, 2012 11 comments

I’ve spent a lot of time considering (here, here, here, and here) the notions of technological unemployment and the Luddite Fallacy: the idea that technologically driven productivity — machines — will replace, are replacing, human labor. I’d like to revisit that here.

My basic conclusion: the Luddites were obviously wrong at the time. But they’re right now — at least in the U.S. Even a stopped clock is right eventually.

I think the Luddite Fallacy argument ignores two things:

1. The limits to human capabilities. By definition, 50% of people have an IQ below 100. I don’t think anyone who’s reading (or writing) these words can begin to imagine how hard it would be to make a go of it in modern America with an IQ of 90 — to build a prosperous and secure life, raise a stable, happy family, or ensure that you can be self-sufficient in your waning years. Even getting through high school would be really hard.

The original Luddites weren’t hitting that cognitive limit — not even close. Today, tens of millions of people are slamming right into it (over time, hundreds of millions). Increasingly, only those at the right end of the bell curve are able to claim a decent (or any) share of the American pie. As the American economy is constituted (in its global context), diligence and hard work are not sufficient to give you that claim.

2. The declining marginal utility of innovation and consumption. As I pointed out in a post a while back:

Pretty much every important invention of the modern world — trains, planes, automobiles, air conditioning, antibiotics, painkillers, telephones, radio/television, computers — had already been invented and was in at-least-fairly widespread use when I was growing up in the sixties. The only thing since then has been the internet.

Post-’70 it’s just been distribution, improvements (i.e. cell phones over land lines), and price reductions — important stuff, no doubt, but compared to the germ theory of disease or the electric motor? (Arguably even the internet is just a distribution thing.)

The innovations that the Luddites were facing all delivered massive increases in human utility (via increasingly inexpensive and higher-quality goods and services). So while the losses to particular groups — and their required readjustments — were painful (sometimes horribly so), in the big picture they were overwhelmed by the overall increase in utility.

You just can’t say the same thing about Twitter, or inexpensive heated car seats. The human essentials that early innovations delivered (food, clothing, shelter, medicine, transportation, communication) were massively more valuable than the improvements we’ve seen in my lifetime.

Yes, the utility pie is still getting larger (far more slowly than it was in the past), but the slice that machines can’t provide — especially at the margin — is getting smaller, faster.

Combine these two realities to perceive a world in which:

1. A great (and increasing) proportion of human utility is, can be, delivered by machines.

2. Humans who do not (don’t have the wherewithal to) control those machines can only compete among each other to deliver an ever-decreasing slice of lower-utility goods and services. And they are compensated — given a slice of the pie — based on the steadily smaller amount of utility they can deliver. Left to itself, the market will provide many with a sub-subsistence level of compensation.

In the great log-rolling exercise that is our economy, an increasing number of people over the decades are falling off the log, and finding it hard or impossible to climb back on. Many — millions — are drowning.

And that magical log — which miraculously grows as more people climb on and have the sustenance to run faster — is not growing as fast.

Have I mentioned the Earned Income Tax Credit lately?

Cross-posted at Angry Bear.

 

Laffer: Laughable As Always

August 19th, 2012 2 comments

R Davis spends a whole lot of words (and numbers) explaining why Arthur Laffer’s latest WSJ editorial is false and ridiculous, but those who think about data — at all — really only need to read one line. Laffer’s key error — which a high-school statistics student could spot — is to:

compare growth in GDP rates with government spending as a percent of GDP. He is testing for a relationship between two variables but expressing one of them (spending) in terms of the other (GDP).

So when Estonia or Ireland’s GDP drops, its government spending/GDP increases.

This is obvious proof that higher government spending causes lower GDP.

It’s hard to imagine that a well-educated person could not be aware of how specious this argument is. But I’m guessing that he really and truly does not realize it.

Cross-posted at Angry Bear.

No, Conservatives Aren’t Happier — Any More

August 19th, 2012 2 comments

My small effort to ameliorate the disparity in Andrew Gelman’s headline:

1.5 million people were told that extreme conservatives are happier than political moderates. Approximately .0001 million Americans learned that the opposite is true.

Andrew is commenting on Jay Livingston’s great takedown of David Arthur Brooks’ recent column asking “Who is happier about life — liberals or conservatives?”

First, the latest data from the go-to source — the General Social Survey (GSS) — courtesy of Livingston:

extreme conservatives are nearly three times as likely as others to be “not too happy.”

(Andrew helps us by calculating a measure of the statistical significance: very high. “…the standard error for that green bar on the right is approx sqrt(0.3*0.7/80)=0.05.)

This hasn’t been true until recently. Here’s the cumulative measure since ’72 (essentially averaging all the surveys over all those years):

Extreme conservatives have lost their happiness advantage, and their unhappiness has skyrocketed. (Brooks is citing a 2006 Pew study (PDF) showing higher “very happy” numbers among Republicans.)

What’s changed? Maybe the demographic tidal wave is hitting the beach. (Don’t believe me? Ask Pat Buchanan.) And the self-described “extreme conservatives” — who are at least 89% white (more) — with their backs against the seawall, really, really don’t like it. I mean goddamitalltohell, there’s a black man in the oval office!

I can’t leave without including Livingston’s comments on Brooks’ slimily implicit and unsubstantiated accusation of confirmation bias among social scientists.

“…there is an entire academic literature in the social sciences dedicated to showing conservatives as naturally authoritarian, dogmatic, intolerant of ambiguity, fearful of threat and loss, low in self-esteem and uncomfortable with complex modes of thinking.”

(Note that Brooks is careful not to say that the research actually shows this, though it does.  Instead, the research – most of it by those unhappy liberals – is “dedicated to showing” conservatives in a bad light. Sort of like the research “dedicated to showing” that planet Earth is getting warmer – another liberal conspiracy.)

Cross-posted at Angry Bear.