Why Automation Will Make Many of Us Poorer

You have surely noticed the self service checkouts in supermarkets, where there used to be five humans serving us we now have to make do with ten machines. While this might be the most apparent recent development with regards to automation, it is not the only. Google’s self-driving cars have driven over 1.7million miles in California with eleven minor accidents, none of which were the fault of the cars. Clearly they are here to stay. Why employ a lorry driver when you can have one that does not sleep, crash, quit or belong to a trade union? What about white collar workers? Surely lawyers are safe from automation? It is not common knowledge that the majority of a lawyers time is spent trying to find discrepancies in mounds of paperwork; a task that a computer could perform to a far higher standard. What about doctors? A bot called “Watson” already has a better diagnosis record than regular doctors; being able to stay up to date with thousands of patients around the world and instantly read the latest medical papers. It may not be as trusted as a human but it is no less accurate. In the medium-long term very few jobs are safe.

It is worth noting that automation will have a negligible impact on the developing world in the short term, the greater cost of capital relative to workers acts as a disincentive for companies to invest in new technology. This bias towards labour intensive industry is shown by the dominance that the developed world still retains over sectors such as pharmaceuticals and automobiles.

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Capital in the Twenty-First Century and Its Critique.

A nation’s income comes from two sources; capital – that is, rent, interest and dividends – and wages from labour. Through the 20th century it was believed that the split between these was constant, at around 70% going to labour. This split is determined by multiplying the stock of capital (relative to total income) by the average rate of return on capital. Therefore, the nature of the correlation between these two measures will determine how much income goes to each capital and labour.

The correlation is certainly negative – as capital accumulates its marginal productivity falls. The first acre of land will increase a farmers output greatly, however by the 100th acre he will struggle to cover all the land – any extra acres will provide less yield. This idea is transferable to most forms of capital, provided the quantity of labour is fixed.

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