The Luddite Fallacy Fallacy

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.

 

  1. Stephen
    August 21st, 2012 at 13:19 | #1

    I think you have hit on an important and often overlooked point: that the plutocracies at their highest levels do in fact have a eugenecist outlook that aims at eliminating what one of their number termed “useless eaters.” This reality is so obscene that few people can stand to face it squarely, and that constitutes its greatest protection from interference.

  2. August 21st, 2012 at 17:44 | #2

    I don’t think I understand this:

    > By definition, 50% of people have an IQ below 100…The original Luddites weren’t hitting that cognitive limit.

    Weren’t there 50% of people hitting that limit in the past as well? Or is the 100 specified as an average at some specific point in time (say 1950).

  3. Tim P.
    August 21st, 2012 at 17:56 | #3

    I believe he’s saying that the skills one needed to be successful in previous eras were not as dependent on IQ.

    My question: okay, we expand the EITC, but if this picture is correct (and I think it is), how do we handle those who can’t find work at all? Change the definition of the workweek as in France to encourage hiring? What do you think the psychological effects would be on folks if we explicitly acknowledged that they had little or nothing worthwhile to contribute? Related: what do you make of the idea that social security and medicare have become so entrenched in our society because they are benefits shared by all? Because I see a recipe for resentment in such EITC scheme. Why not a basic income guarantee?

  4. Olav Martin Kvern
    August 21st, 2012 at 21:20 | #4

    Agreed, as far as the argument goes–that is, if IQ is considered the sole determining factor.

    But it’s not. I’d say that an idiot starting at the right end of the *wealth* curve has a pretty good chance of doing well, but that a genius starting at the low end of the wealth curve will have a harder time of it. I’ve met plenty of stupid, idle wealthy people, and plenty of brilliant, hard working poor people.

    You already know what I think: rather than arguing against automation because it’ll lead to unemployment, we should be automating more and more and putting an end to human drudgery. At the same time, we must decouple subsistence from employment–because, pretty soon, we’ll *all* be out of work (as most jobs are currently constituted). Guaranteed subsistence income is pretty much the only way we’ll survive. You know I’m not saying that work will or should go away–I have enormous amounts of work I want to do that I’m currently prevented from doing because of the need to earn a living.

    Luddites generally misidentify the problem: Our problem is one of social and economic relations between people, not a problem of technology. Trying to change the technology, in isolation, isn’t going to work. We have invented the tools to make life better; now let’s come up with a society to match.

    I also think you’re using a very limited definition of innovation–if innovation = invention, then you’re right. But I think there’s been plenty of innovation in putting inventions to use in the course of your lifetime. In the U.S., the automobile wouldn’t have been nearly as important without the development of the interstate highway system; the transistor wouldn’t have meant as much without the computer; and so on. And the farms and–especially–the crops of the early 20th century (okay, so I’m stretching “lifetime” a little) wouldn’t come close to feeding everyone. Advances in agriculture, transportation, communication, medicine, materials science, electronics, etc., have been huge, even in the absence of fundamental new inventions. That still fits my definition of “innovation.”

    Thanks,

    Ole

  5. August 22nd, 2012 at 08:07 | #5

    Agree, Ole. It’s a cultural and institutional issue, i.e., structure of rules. The model of capitalism beginning with the Classical economists was based on the agricultural-late feudal (manorial) model, and owners of capital were viewed as the new “land lords,” factories as the new manor, and laborers as the new tenants-serfs.

    The Classical economists were very concerned that the old system of rents would become the new system of rents, which it did in ways they could not conceive at the time since finance capital was just developing. This was also the time that the absolute power of governments was breaking down and the Classical economists were heralding an age in which economies would no longer be controlled by the command system stemming from the court and enforced by the military. Moreover, technology was passing out the hands of the military, where until then virtually all engineers other than builders (masons) were employed.

    Neoclassical economists essentially tried to formalize the intuitive system of the Classicals in terms of economic “laws of motion” that Smith had elaborated narratively. Deeper formalism was subsequently elaborated but the basic assumptions and worldview on which they were based remains pretty much intact down to the present in orthodoxy. Marx, Keynes, Kalecki, Schumpeter, and then the Posts Keynesians showed the deficiencies of the Neoclassical approach, but beginning with Friedman’s monetarism as a replacement for the “failure” of Keynesianism, the Neoclassical view holds sway, minus the Classical concern with rent.

    Models constructed on the foundation of these assumptions can never be representational since the assumptions are unrealistic. They are based on a worldview that stems from 18th and 19th c. physics and ignores the work done since in the natural, life and social sciences.

    The world has moved on but mainstream economists have not and neither have policymakers. The worldview of the public is generally way behind that of the cutting edge, and the public’s world view is based on naive common sense and convention. In addition, there is also “the Protestant ethic” to deal with, as Weber observed.

    So we are poised on the cusp of major change economically due to the fruits of science, engineering, scaled-up technology, and constant innovation over several hundred years. The social, political, and economic models are therefore obsolete but there is tremendous resistance to replacing them due to the collective level of consciousness and the vested interests committed to preserving and extending the status quo. As a result we live in a world of plenty and think we are poor. This scarcity thinking has led to galloping rent-seeking.

    Where is this all going. I think that there are several factors in play. One is the realization of global warming is beginning to dawn and along with it the realization that the rules of the game have to change if humanity is to survive more or less intact. A second is that communications technology is raising the collective level of global consciousness incredibly quickly. A third is demographics and generational change. So big changes are coming and hopefully, this change will bring a new economic paradigm that moves humanity beyond the 18th and 19th c., where it is now stuck.

  6. Sandwichman
    August 22nd, 2012 at 19:59 | #6

    @Ole: “Luddites generally misidentify the problem…”

    This is the official cover story, based not on what Luddites believed but on what their opponents claimed they believed. Although the Luddites broke machinery, their anger was directed at the social and economic relations. But just like Occupy Wall Street today, their actions were “interpreted” by establishment pundits with an ax to grind. When you actually go back and read primary documents, you find all sorts of disclaimers about not being against machines per se but against the use of machines to oppress and exploit people.

  7. Olav Martin Kvern
    August 22nd, 2012 at 21:17 | #7

    @Sandwichman: That’s why I used the word “generally.” I do know that Luddites had plenty of stuff to say about economic relations, and I don’t accept the narrative of the “victors” as the truth.

    The point was that many of them were truly focused on changing technology, rather than on changing their economic relations with their bosses. It’s as if many of them decided that the social order was unchangeable. My argument is that the social and economic order might be more easily changed than we think. I hope.

    Thanks,

    Ole

  8. August 23rd, 2012 at 06:11 | #8

    @Tim P. So the argument is that the IQ threshold to be productive has steadily increased? It was 70 before and is 100 now? I don’t think I buy that argument. Have we seen that much IQ drift since 2008? The first-order predictor of whether a robot will take your job is how algorithmic your job can be.

    For example, it may require somewhat high IQ to operate a scannig machine and interpret the results, but maybe a sufficiently trained machine learning program can do the job just as well. I think IQ focus is misleading at best, totally wrong at worst.

  9. August 23rd, 2012 at 09:00 | #9

    @Tim P. and Maris, I think the short-term stuff is waves, not tides. This is a (very) long-term change, over decades and centuries.

    @Ole and Sandwichman: very much what you said. I push EITC because it will be a long time before we can convince the world that mere existence is sufficient to justify a claim on our collective prosperity, or that we’d all be more prosperous if it were so.

  10. August 23rd, 2012 at 18:37 | #10

    > I’d say that an idiot starting at the right end of the *wealth* curve has a pretty good chance of doing well, but that a genius starting at the low end of the wealth curve will have a harder time of it. I’ve met plenty of stupid, idle wealthy people, and plenty of brilliant, hard working poor people.

    And so you want to take away from the people who start out on the right end? That sounds like pure envy to me. The common case is that these people are wealthy because someone in the past scrimped and saved and deferred consumption.

    If poor, smart, hard-working people do that today, they too can get ahead (or at least set things up so their kids will be better off). Growing up in a not too well-off neighborhood, I saw these people get ahead much faster than mere welfare recipients.

  11. Olav Martin Kvern
    August 23rd, 2012 at 22:16 | #11

    @marris, re: “And so you want to take away from the people who start out on the right end? That sounds like pure envy to me.”

    Can we please put the envy canard to rest, once and for all? It gets deployed whenever someone mentions that it might be better if things were just a little more fair, the playing field just a little more level, or that merit might be better defined through actions and ability rather than birth. It’s not about envy. When Mitt Romney says it, I can only assume it’s because he is so lacking in human empathy, in anything like a basic sense of justice, that that is the only way he is capable of understanding it.

    Steve’s point in the post is that many people are at their cognitive limits dealing with their day to day lives–and that many are not succeeding. The number of people in that position will only grow, as technology and automation do away with traditional jobs. Most jobs right now are already obsolete, and could be replaced with software and hardware automation–including most “professional” occupations. How do we, as a society, deal with a large number of citizens incapable of earning a living? *That* is actually interesting.

    To think about it, though, we need to get rid of a bunch of non-functional ways of thinking about jobs, work, wealth, and individual worth.

    Thanks,

    Ole

  1. August 23rd, 2012 at 07:05 | #1
  2. August 30th, 2012 at 04:19 | #2