In a 1930 essay called “Economic Possibilities for Our Grandchildren,” the economist John Maynard Keynes wrote that “assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years.”
If productivity continued to increase by just a few percent every year (which it has, and much more), then through the miracle of compound interest we could be eight times better off in 2030 than we were in 1930. And, with that much wealth, we would finally be able to satisfy everyone’s basic needs. We might still want more, but what Keynes called the “economic problem” would be be solved. For the first time in human history, our problem would be not how to provide for ourselves, but what to do with all our free time.
Krugman argues that we may be seeing what economists call “capital-biased technological change.” As machines become more productive, the people who own them may be keeping a larger share of the profits. At a recent talk, according to Owen Zidar, Summers asked us to imagine what the world would look like if machines could make or do anything. In this world, robot butlers could free us from work by providing us with the necessities of life. The problem is that in this world the profits of robot labor would go only to the people who own the robots
[E]conomic inequality is increasing just as we are finally beginning to have enough to provide for all of our citizens. The same technology that makes us rich as a society gives the people who control it the power to take home a larger and larger share of our income.
This is not the world Keynes imagined. We are richer today than any society before in human history. But if innovation slows and inequality continues to grow, the economic problem will remain as bad for most of us as ever.
Friday, December 21, 2012