The Root of Borscht

Andrei Vazhnov's blog

The Hundred Year Prophecy


“I draw the conclusion that … the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not-if we look into the future-the permanent problem of the human race.”

— John Maynard Keynes, 1930



Contents:
The Fractal Snowflake of Technological Leverage
The Great Hope Of The 20th Century
The Magical Machine Has Already Been Invented
Vision 2030: Keynes or Fourastié?

Knowing of my interest in automated manufacturing, a friend sent me this video of a professor who is developing a 3D printer that will be able to print entire houses. It is an inspiring presentation since one day this technology will solve the housing problem that is very real and urgent for more than a billion people who live in squalid conditions deprived of even basic necessities. Furthermore, construction work is a leading cause of grave job-related injuries, and thus the house-printing machine will have an additional benefit of eliminating these types of accidents.

Nevertheless, towards the end of the video, the professor acknowledges that the construction industry is a principal source of employment all over the world, and that it will be necessary to find alternatives for the people displaced by this technology. What are the possible options? It is not entirely clear. At one point, he says that perhaps some of those who used to work in construction industry will now work in designing the houses, but that is a bit like saying that musicians displaced by the invention of sound recording should dedicate themselves to producing and selling records. Without a doubt, it will absorb some of the newly benched workforce, but the market needs many fewer recording artists than live musicians. In the old days, if you wanted to listen to music at home, you had to hire someone to play it for you. But nowadays why would one hire a local musician when they can have the best in the world reproduced by a machine? And, as logic would have it, the vast majority of musician jobs went away for good when the recording technology became commonplace.

Thinking about all this made me recall that over the last year, almost every time I talked to people about the promise of 3D printers and precision robotics, someone would inevitably ask, “And when all of this really comes to pass, when 3D printers and robots will be able to make practically anything, what will happen to the 30%-50% of the population that is now employed in assembly lines and other types of manufacture?” I usually give a standard response that goes something like this, “200 years ago more than 80% of the population worked in agriculture, but nowadays nobody really misses the manual agricultural work; we will always find new types of work to do.” — and thus far it’s been undoubtedly true — it’s a lot more fun to be a lawyer, an engineer, an accountant, a programmer than to harvest potatoes by hand. But is there a limit to this process of inventing new things to do when our machines liberate us from the work of our ancestors?



The Snowflake of Technological Leverage

In the year 1930, the noted economist John Maynard Keynes wrote an eloquent essay on this subject called “The Economic Possibilities For Our Grandchildren.” In it, Keynes predicts that in 100 years, humanity will fully solve its “economic problem” (i.e. having to expend effort in order to produce goods and services), but he also warns that no country is ready for this new world and that we will face a series of grave crises before the society will adjust to the new reality. Technology will bring us paradise, but the path towards will not be easy.

The fundamental issue is that we are living in a world where the technology can multiply the effort of a person or an organization by 1000x or 1000000x and we are already beginning to observe tremendous bifurcation between those who are inside the centers of creativity and technology that enjoy this leverage and those who are outside. This pattern replays itself on multiple scales — not just between countries, but also between regions of a country, and even between neighborhoods of the same city.

To take just one example, here is an article in the Atlantic that talks about how technology centers such as Palo Alto and Redmond are living through some of their best years while rust belt cities like Detroit are going through some of the toughest times in their modern history. Most of the industrial jobs that disappeared in the Great Recession never returned; nor will they since structurally the economy does not need this type of manufacturing labor. To recover economically, many cities are betting on technology as a cure of the unemployment ills, but very few have been able to replicate the success of Silicon Valley on a scale that makes a difference, and even when they do, the city effectively splits in two — those within the new economy and those without — the same problem repeated in miniature like another snowflake of a Mandelbrot set.

The Keynes’ essay is rather long, so as a brief synopsis of his argument I would use the following analogy: Let’s say we live in a world of a 100 people of which a third work in agriculture, a third builds houses, and the remaining third makes clothing. Thus all the basic needs are satisfied and the world goes on like this for thousands of years. Then a smart guy, say John Smith, invents an awesome machine that does all the agricultural work automatically. The machine only needs one operator, so John produces the food for 99 people. For a brief time, 32 people are now unemployed, but thankfully another smart guy invents a new product, a bicycle, and now the unemployed little by little retrain and begin to produce these new items. In this analogy, Keynes agrees that human beings will always invent new needs to replace the things already automated, but his argument is that technology is automating things more rapidly than the speed with which we are able to invent new tasks.

Some key quotes from Keynes:

We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come–namely, technological unemployment. This means unemployment due to our discovery of means of economizing the use of labor outrunning the pace at which we can find new uses for labor.

The prevailing world depression, the enormous anomaly of unemployment in a world full of wants, the disastrous mistakes we have made, blind us to what is going on under the surface to the true interpretation of the trend of things.

Now for my conclusion, which you will find, I think, to become more and more startling to the imagination the longer you think about it. I draw the conclusion that … the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not-if we look into the future-the permanent problem of the human race.

Why, you may ask, is this so startling? It is startling because-if, instead of looking into the future, we look into the past-we find that the economic problem, the struggle for subsistence, always has been hitherto the primary, most pressing problem of the human race-not only of the human race, but of the whole of the biological kingdom from the beginnings of life in its most primitive forms.

Thus we have been expressly evolved by nature-with all our impulses and deepest instincts-for the purpose of solving the economic problem. If the economic problem is solved, mankind will be deprived of its traditional purpose.

Yet there is no country and no people, I think, who can look forward to the age of leisure and of abundance without a dread. For we have been trained too long to strive and not to enjoy.



The Great Hope of the 20th Century


Keynes wrote these big words in 1930 and in the next few decades ended up looking a bit ridiculous — just another hidebound Luddite fearful of progress — because after World War II, the years 1950-1990 brought the growth in employment never before seen. The process which created all these jobs that seemingly put paid to Keynes’ prediction was described by Jean Fourastié in his 1950 book called “The Great Hope of the Twentieth Century” in which Fourastié suggested that every civilization goes through a progression of three stages: Primary, in which the society is mainly engaged in natural resource extraction and agriculture; then Secondary, principally based on manufacturing and machinery; finally, when the machines automate all the manufacturing and extractive processes (including the production of machines), the civilization enters the Tertiatiary stage — dominated by services. Fourastié observed that this last transition is transcendental because in the service economy, you do not have enormous economies of scale that characterized the age of the machines — you cannot replaced the work of a doctor, a lawyer, or an accountant with a machine that can do work of hundreds as used to happen habitually when excavators, tractors, and cranes were replacing the manual workers of yesteryear. According to Fourastrié, the demand for services is practically unbounded and the availability of stable, good jobs is the Great Hope that would replace the turmoil and dislocation that convulsed the world in the first half of the 20th century. The now common term “Service Economy” and “Tertiary Sector” entered our vocabulary with the work of Fourastié.

Nowadays, about 70%-80% of the population is working in the service sector, and, just as Fourastié predicted, this new economy has brought us many professions that give us a better quality of life and a much higher level of self-realization compared to those we lost due to automation of assembly lines (here is a good reminder of what 1930s jobs were like).

By force of chance, the same year that Fourastié published his hypothesis, British mathematician Alan Turing published the seminal paper “Computing Machinery and Intelligence” in which he had laid down the foundation for the development of intelligent machines. In that paper, Turing wrote a sentence which, with time, may come to fulfill the vision of Keynes: In conclusion to the paper Turing states, “We may hope that eventually machines will able to compete with men in all purely intellectual fields.”

From today’s vantage point, we know that Turing was right and that the machines help us a great deal with all manner of intellectual work and improve our lives tremendously — I once asked an accountant what his life was like before Excel and I can’t even explain the expression of disgust on his face. However, recently the process has sped up so much that software is conquering even the highly compensated professions such as law, accounting, finance and many others. As the MIT economist David Autor explains, (Armies of Lawyers Replaced by Cheaper Software) the economy is becoming “hollowed out” because the jobs most affected are not the blue collar like plumbers, nor those of the highest level, such as CEOs, but instead the wide swath of white collar jobs in the middle of the compensation scale. The central pillar of Foursastié’s hypothesis was that service sector jobs were immune to technological leverage. Turing and the rise of computer science have changed that; it just took a while to notice.



The Magical Machine has Already Been Invented

Is this software invasion of white collar professions the first glimpse of Keynes’ prediction coming true? If he is right, the “economic problem” and the concomitant need for labor will disappear around the year 2030. In terms of age, we’re just about the grandchildren of Keynes and fairly soon we’ll get a chance to find out in person whether his crystal ball was any good. In the meantime, it’s worthwhile to see how we’re doing.


Says Keynes:

I look forward, therefore, in days not so very remote, to the greatest change which has ever occurred in the material environment of life for human beings in the aggregate. But, of course, it will all happen gradually, not as a catastrophe. Indeed, it has already begun. The course of affairs will simply be that there will be ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed. The critical difference will be realized when this condition has become so general …

It may seem that we are quite far away from this point, but, I think there is one aspect of human life where Keynes’s vision has been fully realized — in food production. The magical machine with which one person can feed a multitude of 99 was invented a while ago: in developed countries only 1.5% of the population is employed in agriculture, and this small group not only feeds the other 98.5% but also generates a great deal of food for export. This is the reality we are living right now, and this state of things would already be a vision of paradise for most of the countless generations who’ve lived and died on our planet. Despite all this, it is estimated that more than a billion people suffer from malnutrition and millions die each year from hunger. Harvard economist Amartya Sen won a Nobel Prize for showing, among other things, that modern day famines almost never happen because of lack of food, but for failure of political and economic systems in the affected countries. Thus we have a situation where the magical machine is drowning the world in food and we have a billion that is malnourished, while at the same time, for millions of poor people in the industrialized world obesity has become a key health risk.

Taking this as a model of what might happen, it seems that Keynes was right to worry and we are quite far away from being prepared for the day when our machines will print houses, clothing, and cars. What will happen when a large percentage of the population will no longer be employable because their labor has no possible economic value? As the least bad of the possible consequences, we will experience an ever more aggravated problem with public finances as nations will face the need to not only support the retired but also those who have been left on the permanent outside.

If we pursue Keynes’ reasoning a bit further out, there will be a point where fundamental needs such as housing and clothes are produced by machines at such low cost that a basic version of these goods and services would be available for a negligible price. This is what Keynes calls a critical point where the condition of the absence of needs has become general, and the gradual transition is already on the way. It may seem far fetched that the cost of a house could one day be negligible, but yet with some products it has already happened: In many of the world’s poorest areas, like Brazilian favelas, you will see people talking on mobile phones and dressed in t-shirts and jeans. This is largely possible because machines have made these products so cheap that slightly outdated models are effectively free; often consumers even throw them away because they have no resale value. It was not always like this: just 15 years ago, mobile phones were a luxury available only to the affluent Western consumers, and if we look 200 years ago, shirts were so expensive that people used detachable collars to make them last longer. Now this item can only be found in a museum.



Vision 2030: Keynes or Fourastié?

So will Jean Fourastié’s Great Hope continue to spring in the 21st century? Will Keynes’ concerns prove to be misplaced by the next economic boom as they already were several times in the past? In the short term, I would say the answer is yes and once again the disappearing jobs will be replaced by new ones. In the long run, however, the trajectory will likely favor Keynes. The cornerstone of Fourastié’s theory is that the Service Economy is not subject to the forces of technological leverage. Alan Turing’s invention has permanently changed that assumption, and it is only a matter of time until software automation spreads to an ever broader spectrum of professions.

How will we adapt to this world? Personally, I think there will always be things to do even beyond the critical inflection point envisioned by Keynes. As he himself notes, “absolute needs of humans are finite, but positional needs are probably infinite.” When everybody has a yacht, people will want spaceships; when everyone has a spaceship, people will want private asteroids equipped with suspended low gravity mini oceans. Our creativity to invent new needs is not in doubt. It’s just that, if Keynes is right, at some point this century the invention of new needs may be one of the few jobs that our machines won’t yet be able to do.



Andrei Vazhnov
therootofborscht@gmail.com


Bibliography

1. Keynes, John Maynard 1930, “The Economic Possibilities For Our Grandchildren”

2. Fourastié, Jean 1950, “The Great Hope of the Twentieth Century”

3. Turing, Alan 1950, “Computing Machinery and Intelligence”
In this paper, Turing examines the possibility of constructing intelligent machines.

4. Russell, Bertrand 1932 “In Praise Of Idleness”
A similar essay by Russell, probably to some extent inspired by Keynes.

5. John Markoff, New York Times, Armies of Expensive Lawyers Replaced by Cheaper Software

6. Andreesen, Mark, Wall Street Journal “Why Software Is Eating The World”


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Written by Andrei Vazhnov

October 14, 2012 at 2:18 pm

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