Friday, November 06, 2009

Automation, unemployment and the market economy

Could Advancing Job Automation Technology Cause Structural Unemployment?:
[A] very large percentage of jobs are, on some level, essentially routine and repetitive in nature. ...[A]s both hardware and software continue to advance, a large fraction of these job types are ultimately going to be susceptible to machine or software automation. ...

It seems to me that, as automation penetrates nearly everywhere, there must come a "tipping point," beyond which the overall economy is simply not labor intensive enough to continue absorbing workers who lose their jobs due to automation (or globalization). Beyond this point, businesses will be able to ramp up production primarily by employing machines and software--and structural unemployment then becomes inevitable.

If we reach that point, then I think we also have a serious problem with consumer demand. If automation is relentless, then the basic mechanism that gets purchasing power into the hands of consumers begins to break down. As a thought experiment, imagine a fully automated economy. Virtually no one would have a job (or an income); machines would do everything. So where would consumption come from? If we're still considering a market (rather than a planned) economy, why would production continue if there weren't any viable consumers to purchase the output? Long before we reached that extreme point of full automation, it seems pretty clear that mass-market business models would become unsustainable.

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