The Truth About Automation, Jobs And Prosperity
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Since the early days of the Industrial Age, there have been competing visions about the effects of technology. Mary Shelley’s Frankenstein monster has been the model for technology gone awry while, ironically, Karl Marx’s vision of techno-utopianism has been adopted by avid capitalists and Silicon Valley libertarians.
At the heart of the debate lies automation. When we use machines to perform tasks formerly done by humans we unlock multiple effects. The most obvious, of course, is that somebody is out of a job, less obvious are how technology affects productivity and creates new industries, which we hope will create more and better jobs.
Yet there’s no guarantee that technology will raise all boats. Markets are complex ecosystems and things can’t always be broken down into simple, linear relationships. What we can do, however, is get a better understanding of how automation affects our society. Only then can we build a consensus about what we want outcomes to look like and work toward them.
How Automation Affects The Economy
In 1900, 30 million people in the United States worked on farms, but by 1990 that number had fallen to under 3 million even as the population more than tripled. So, in a manner of speaking, 90% of American agriculture workers lost their jobs, mostly due to automation. Still, the twentieth century is seen as an era of unprecedented prosperity.
The idea that putting farmers out of work can potentially be a good thing is nothing if not counterintuitive. To get a handle on how that can happen, we need to look at three separate forces automation unlocks: A displacement effect, a productivity effect and a reinstatement effect, each of which can affect the economy in myriad ways.
To understand how these effects help shape an innovation economy, let’s look at those farmers again. During the late 19th and early 20th century agriculture was transformed from being largely driven by a combination of animal power and back-breaking human labor to a heavily mechanized industry. For example, it’s been estimated that in 1940 alone, tractors saved 1.7 billion hours of human labor.
Obviously, technology displaced a lot of people who had been working on farms. However…
