The Technology Trap: a review

The historian Suetonius wrote that, when approached by a man offering a cheap technology for transporting heavy columns to Rome the emperor Vespasian refused to use the device for fear it would displace workers. “How will it be possible for me to feed the populace?” he asked. The fear that new technology will destroy jobs is, therefore, an ancient one.

This is the theme of Carl Benedikt Frey’s The Technology Trap. Although Dr Frey is best known for his work with Michael Osborne predicting (pdf) that new technologies threaten millions of jobs, his book is not an exercise in futurology. Most of it is a fascinating history of technical change.

There are, he says – echoing Acemoglu and Restrepo - two main types of technical change. Some enable workers to do more, making them more productive and creating new work. Others, though, simply replace labour. Frey argues that much of pre-industrial technical change was labour-replacing, and was often suppressed by states fearful of the unrest that would cause: Elizabeth I refused a patent for William Lee’s knitting machine in 1589 on these grounds. And, he argues, the early decades of the industrial revolution was also an era of labour-replacing techniques – hence the “Engels pause”, years of stagnant wages. A big reason for the industrial revolution, Frey shows, is that the British state shifted from supressing technical change to using coercion to enable such change: many Luddites were hanged. Frey nicely rebuts the silly just-so stories of some right-libertarians who tend to see capitalism as natural.

It was only later in the industrial revolution that technical change actually created jobs, and goodish ones even for unskilled work. In the long sweep of history, however, this sort of change – and the improved living conditions for the masses it brought – was unusual. This fits with Walter Scheidel’s work from a very different perspective, which has argued that periods of increased equality are historically very rare.

From this perspective, the labour-replacing changes that Frey fears will come from AI and robotics are in a sense a reversion to the historic norm. As futurology one might quibble with that; people are bad at predicting technical change. But turn the question around: how likely is it that new technologies will provide good jobs for unskilled men of the sort we saw in the first half of the 20^th century?

So, where might we argue with Frey’s analysis? I agree with John Thornhill that his policy suggestions (around helping workers adapt (via education, changes in zoning laws and suchlike) are weak, but this is common in many books analysing our new times.

Instead, I suspect Diane Coyle is right to argue that Frey treats technical change as exogenous when in fact it isn’t. For example, the distinction between labour-replacing and labour-enabling technical change, whilst insightful, distracts us from another type – the sort that enables capitalist exploitation such as the power-biased technical change discussed by Skott and Guy. We should ask: if we have greater worker ownership, what sort of technical change would we see? Mightn’t it be more labour-enabling?

In not seeing such change an endogenous, Frey under-estimates our current paradox – that (to paraphrase Solow) robots are everywhere except in the data. The key facts of recent years are that unemployment is at a 45-year low; that business investment has flatlined for years; and that productivity is stagnating. The data suggest that people are stealing robots’ jobs, not vice versa.

Frey is right to say that such stagnation is common in the early years of new technologies. But I suspect this isn’t the only explanation.   It’s also the case that there are big barriers to robotization such as: firms’ fears that new technologies will be out-competed by future cheaper tech; that firms with intangible assets struggle to raise finance for lack of collateral; that low wages and a quiescent workforce mean there’s little need to invest in labour-saving techniques; or that the tech crash and financial crisis have near-permanently depressed animal spirits.

Frey’s work, however, poses two deep issues which we should all think about. One is: are sensible economists right to want supply-side policies that boost productivity? If we get these, mightn’t we open the Pandora’s box that Frey fears, of significant labour-displacing investment? Is good macro policy aimed at maintaining full employment really sufficient safeguard here?

The other is that technology changes culture. The jobs at threat from AI are, mostly, those that require us to follow algorithms: robots do that better than us. Humans’ comparative advantage lies instead in creativity and soft skills. Should we do more to foster these, by changing educational priorities? How would culture, society and humans change if much of what we now think of as skilled professional work is instead done by machines?

Comments

[Dave Timoney]

One factor that led to the state's change in attitude towards labour displacement between Elizabeth I and the early 19th century was the development of empire. This provided an alternative outlet for immiserated workers beyond riot, as well as a convenient oubliette for labour "agitators" such as the Tolpuddle Martyrs.

The parallel with today is the global dispersal of production, which has allowed cheap labour in developing nations to exert downward pressure on wages in developed ones. As wages for that labour in turn start to rise, there is a shift towards investment in increased productivity (e.g. a third of all industrial robots have been deployed in China). Stagnation in the UK is likely to continue until global wages are roughly equalised (allowing for transportation costs etc) at which point productivity will become the focus here once more.

In other words, the problem is not so much one of the differential impact of new technology as the way that the labour market has been constructed politically, which is also a direct parallel with the state's activism in the late-18th and early-19th centuries. I've not read Frey's book, but I'd be curious to know whether he cites Karl Polanyi at all.

[chris]

He doesn't mention Polanyi.

[Staberinde]

Thanks for this, Chris.

It's one of the great challenges of our age.

I'm imagining a 2x2 chart where the axes are:
- new jobs vs. less work
- hoarded vs. dispersed

This gives us four possible futures:

1. New jobs distributed among the many: New Renaissance
2. New jobs, hoarded: Techno-Feudalism
3. Less work, distributed among the many: a Gig Darwinism
4. Less work, hoarded: Mad Max

If you like that, then the discussion then revolves around agency.

Whether or not automation leads to new jobs or less work isn't up to us or governments. Businesses and economies can't isolate themselves from competitors and counterparts who are radically more advanced or cheaper. So once the genie is out of the bottle, you have to deal with it.

All we can do is decide whether to hoard or distribute what opportunities there are. So our ideal world is the New Renaissance, but if the reality of automation leads to less work we can at least avoid Mad Max by choosing a Gig Darwinism and trying to make the best of it. A shitty order that's preferable to savage chaos.

Clearly, the likes of Bezos and Zuckerberg will argue for New Renaissance with the understanding that they will be techno-feudalistic princes if governments neglect to intervene.

The broader point is that only one scenario out of the four is progressive. Which is why we should be worried about the deterministic power of technology (not in the sense that it leads to one inevitable destination, but that it determines the possible choices).

The interesting thought is whether Gig Darwinism might be as bad as it sounds if, indeed, automation makes everything ridiculously cheap. Maybe we only need to whittle three artisinal spoons a year to live like kings?

[Blissex]

As usual, no mention of "fuel"/"food". which is really what supported both labor-replacing and labor-enabling. At least there is a mention that politics (as in state policies) mattered a great deal, but not as to the division of the windfall from the discovery of the most fertile fields in history.
But more of the usual celebration of the technologies as a way oit celebrate the aynrandian style heroes of wealth creation that invented or invested in those technologies, the usual old framing.

[Blissex]

«If we get these, mightn’t we open the Pandora’s box that Frey fears, of significant labour-displacing investment?»

That is a purely political choice: suppose that "bioengineered macaques" were able to do all the jobs that 80% of human beings do, while being faster and consuming less food, why shouldn't the owners of the "bioengineed macaques" reap all the benefits and stop employing that 80% of human beings? The same goes for robots that can do the same jobs as 80% of human beings, and were to cost less to build and feed. After all in the 19th we reached "peak horse", and as cars and trucks replaced them, they are now owned just by a few rich people as hobbies. We haven't shared the productivity benefits of oil powered cars and trucks with the horses...