The first batch of reviews for Robert Gordon’s new book The rise and fall of American Growth: the US standard of living since the civil war, are feeding through the blogosphere. Here, for example is Diane Coyle’s take. She’s mostly appreciative of the work but not entirely convinced Gordon’s central thesis that innovation today is slower and less important than it was in the 20th century has been entirely proven.
She is more sympathetic, however, about the issue of headwinds slowing down whatever innovation-driven growth there might otherwise be.
We haven’t read the book ourselves yet, but reading Coyle’s review it’s clear Gordon uses the book to expand in more detail on some of the ideas presented in his October 2015 paper Secular Stagnation on the Supply Side: U.S. Productivity Growth in the Long Run. That paper, itself, expands on his core thesis that the days of miracle growth are long gone and that slower growth lies ahead. Read more
So the robots are coming for our jobs.
But what’s a government to do to fend off such an economic threat to its populace? Read more
To nick an opening from Climateer… at some point the labour-capital pendulum may not swing back.
Not sure we’re there yet but an automated restaurant in San Francisco is surely a signpost on the road to some sort of hell, albeit potentially just one made up of shoddy dining experiences.
Hell is… soylent served to you by an automaton in a room of people pretending they’re having a good time.
Anyway. That aside, we may as well keep an eye on that pendulum. Read more
What is imagination? How does it work? And what role does it play in consciousness?
Cognitive scientists have long hypothesised that imagination equals a “mental workspace” within which information can be processed across specialised subdomains. In other words, it’s a place where the brain can simulate the physical world around it and manipulate that simulation according to new variables to anticipate future scenarios. What’s always been a mystery, however, is how the mind knows what rules to use when manipulating that simulation.
Don’t worry. FT Alphaville isn’t turning into a bad science blog (Pluto fraud excluded). We raise the query mainly because of the current hubbub surrounding artificial intelligence systems and existential risk. On which note, do see John Gapper’s latest on killer robots and our own post from Wednesday. Read more
Climate campaigners have popularised the notion that fossil fuel assets might one day become “stranded” because, if global warming is to stay within the internationally agreed two degree Celsius limit, they can’t realistically be burned.
It’s a view that has gained a lot of traction with investment managers leading to growing debates about strategies to de-risk portfolios by way of active engagement at the shareholder level or outright divestment. Read more
Here’s a story that you may have heard.
Median wages and living standards are stagnant, and by some measures they have worsened, having decoupled from productivity growth for several decades. Read more
The chart comes via this recent note from the Dallas Fed, and the theme will be familiar to those who have read the earlier work of Frank Levy, Richard Murname, and David Autor.
Although the share of routine jobs in the labour force has been declining since the 1970s, the dramatic permanent losses started after the recession of the early 1990s. A similar trend can be observed in the manufacturing sector, which obviously would have hosted many of these jobs. Read more
It’s day two of the London TfL strike, which calls for another installment in the robot vs jobs debate. This time we present the findings of Daron Acemoglu, of MIT, in a new working paper which explores technological capital biases and why it is that the benefits of technological innovation don’t always flow neutrally across the economy.
Acemoglu’s paper expands on the seminal work of Atkinson and Stiglitz on technological change in 1969, and uses a neat North/South analogy to explain the why these biases develop in the first place (our emphasis): Read more
On a morning which saw London grind to a halt because of a two-day strike by Transport for London workers protesting the closure of ticket offices (that is, due to automation)…
FT Alphaville was invited to participate in a panel debate about the implications of technological progress on jobs and labour, organised and hosted by the think-tank Resolution Foundation.
(Though to be fair, the tube strike didn’t seem to impact attendance and almost all of us arrived on time.)
Chairing the event was Channel 4 News’ Faisal Islam. Joining yours truly among the panelists was economist and author Diane Coyle, of Enlightenment Economics, Alan Manning, Professor of Economics at LSE and Michael Osborne, machine learning expert and associate professor at Oxford University. Read more
How to tell that serious investors are yet to take the Morgan Stanley robot car wonderland seriously? Insurance companies still have value.
The point is this: where we’re going we’ll still need roads, but there won’t be (much) call for car insurance.
Moreover, insurers are going to be the agents of their own demise. They have no choice, the logic of robots is just too compelling, and the process has already begun. Read more
We commented yesterday on a column by Martin Wolf that considers how the economy will change as robots become ever more intelligent. The rise of the machines will indeed present society with multifaceted challenges; super-rich robot owners, however, are unlikely to represent one of them.
The fear of exploding inequality from robots is widespread. Wolf writes: Read more
FT Alphaville tasted the future of financial innovation this week, or at least the parts of it pitching for business at the Finnovate conference in London’s Billingsgate market.
It had the buzzy feel of a corporate hospitality tent at a music festival — ties off, iPads out, lets do business in close proximity to what the kids are up to. In this case though the stage was given over to seven minute presentations for aps, websites and, er, innovation platforms. Read more
Bank of America Merrill Lynch strategist Michael Hartnet favours themes this year.
Theme number one: it doesn’t feel pity, or remorse, or fear. And it absolutely will not stop.
Hat tips to Noah Smith and James Hamilton for highlighting two papers on the possible causes behind the declining share of income that has flowed to labour in recent decades, and especially since the turn of the century:
Chart via Hamilton. Read more
What’s the value of a good idea these days?
We ask because Institutional Investor has dedicated several pages to considering the imminent death of human insight in finance, as the machines
squish take over. (H/T to Climateer.)
In this bold future, even your spell checker will be offering stock tips: Read more
Last week, after excerpting a passage by Robert C Allen that dated the start of the Industrial Revolution to 1760, I floated a question about the history of economic thought:
If you had asked economists in 1759 whether such a fundamental shift was ever likely to happen, would they have thought the possibility ludicrous? Would they have argued that in the 12,000 years since the dawn of agriculture, humanity had yet to escape the Malthusian Trap — and therefore why believe that such an escape was even possible? Read more
The graph represents three decades of US middle class employment shrinking as a share of the employed labour force, with the occupations along the graph’s X-axis proceeding left to right from the least- to the highest-paid. The top four occupations and three of the bottom four have increased their share of employment, at the relative expense of the middle three.
It comes via this Third Way paper by Frank Levy of MIT and Richard Murnane of Harvard, which includes an extended section regarding the trends (emphasis ours): Read more
Paul Krugman is getting serious about the effects of technology and robots on the economy. He’s made noises about this theme before, but this time he’s taking things a bit further by offering a potential solution to the more sour consequences of the new industrial revolution.
If the fight is between capital and labour, and capital is winning, it seems subsidies in the form of some basic type of income may be called upon. Read more
Many factors affect the development of the economy, notably among them a nation’s economic and political institutions, but over long periods probably the most important factor is the pace of scientific and technological progress.
That’s Ben Bernanke addressing a graduating class at Bard College at Simon’s Rock, Massachusetts, on Saturday. He goes on to say that not everyone believes this advancement is going to continue at such a great pace.
Yes, he is talking about Robert Gordon and Tyler Cowen, and their arguments that much of the low-hanging fruit has been plucked and we face a lower-growth future, as evidenced by the incremental advancements of recent years. Read more
ROBOTS! AUTOMATONS! CYBORGS! ARTIFICIAL INTELLIGENCE! ARGHH!!!
Last weekend I attended Robots on Tour, a robotics, humanoids and cyborg exhibition put together by the Zurich-based Artificial Intelligence Laboratory at the University of Zurich. Read more
Love him or loathe him, Robert Skidelsky’s prose always makes for a good read.
His latest offering comes by way of Project Syndicate and relates to the issue of robots and the rise of automation. To what degree are we really approaching a leisure society and how best to respond to the changes afoot? Read more
Above is a chart from CreditSights of employment changes by sector since the start of the last recession. Education and health jobs account for roughly 15 per cent of the working labour force, and their number has grown by nearly 11 per cent. Only mining has posted a higher growth rate (17 per cent), but obviously off a much smaller base. Read more
Welcome to FT Alphaville’s extraordinarily infrequent podcast… (click through for the podcast link).
It seems more top-tier economists are coming around to the idea that robots and technology could be having a greater influence on the economy (and this crisis in particular) than previously appreciated. Paul Krugman being the latest.
But first a quick backgrounder on the debate so far (as tracked by us). Read more
Here’s a tip — if you’re naming a memorable event, try not to put the day of the week in it. It’s awkward when it comes to anniversaries. Let us nonetheless take a moment to pause and reflect, with Deutsche Bank’s Jim Reid:
25 years ago today the financial world went into paralysis as Black Monday struck stock markets around the globe. For context the DOW dropped 22.61% that day (the biggest % down day in history) or 508 points to 1738.74. I wish I’d have invested my paper-round money in the market at the close. Instead I was saving up for a new shiny Walkman
The latest HSBC/Markit Economics flash PMI for China paints a slightly odd picture.
Okay, so overall it’s positive – the index is 49.5 for July compared to 48.2 in June. The best number in five months, although it’s also the ninth month of below-trend growth. Read more
This is the third installment in FT Alphaville’s “Beyond Scarcity” series, a somewhat radical look at the impact of technological progress and efficiency on the volume of goods and services being produced by the system, asking whether “abundance” could now be a key determinant of deflationary forces in the western world.
On top of this, we have considered the role played by “artificial scarcity”, whether imposed wittingly or unwittingly by industry participants as a counterweight to such deflation, and to what degree such measures could now be running into scalability issues. In short, whether there is a limit to how much artificial scarcity private organisations can impose to counteract deflationary forces of abundance, without experiencing diminishing returns. Read more
You hardcore financial types might have missed the below FT story, given it was in the Film & Television section of Friday’s paper and concerned a Hollywood starlet.
But wait! It’s financially relevant. We promise: Read more
A possible culprit has been found for Wednesday’s sharp movement in cable — which saw the GBP/USD exchange rate drop to 1.5181 and recover in the space of a few minutes. A(nother) tradebot. To be specific, says FT Alphaville, some market participants are blaming an algorithm gone wild at a Dutch bank. Read more
The Chicago Mercantile Exchange has published its account of what happened on May 6, the day of the Flash Crash, FT Alphaville writes. And yes, it does read a bit like the script to a Crime Scene Investigation episode — busting trades and all that. Read more