In light of the recent rise in the pension age to 70, it seems fitting to consider what future we are actually heading towards. Is it one in which we live longer and therefore work longer to sustain ourselves? Or will robots take charge of all menial societal functions leaving us to simply consider our thoughts to our heart’s content? This idea poses two questions; firstly, are we on track to develop robots in the next few decades? And, secondly, if we do and can develop all seeing all doing robots, what does that leave for the rest of us to do? This article will primarily consider the former.
Pop culture has certainly had a go at answering the question of robot advancement. Wall-E for instance depicts a world where not only have humans rendered the planet uninhabitable, they’re hedonistic, obese and disconnected. iRobot goes so far as to suggest that the robots may try and take over. Either of these futures supports the idea that robots will become both highly functional and ubiquitous, but clearly we’re not there yet. So how is technology advancing and how does this influence the economy?
The issue of technological growth is significant to the economy due to the influence it has on productivity and therefore economic growth. Early neo-classical economists such as Malthus neglected to consider the impact of technology on growth. In an early and particularly dismal analysis of the future of society ‘An Essay on the Principle of Population’ Malthus outlines the stagnation of the economy at some future GDP level; he posits that due to effect of population growth and diminishing marginal productivity, famine and death will cause society to reach a long-run sustainable point of stagnation.
With hindsight, the key factor this model fails to acknowledge is the impact on technology in being able to shift the production function, which allows GDP growth to exceed population growth – providing for a constantly shifting long-term point.
More recently, the Solow-Swan model more accurately captures the influence of technology in that it considers ‘total factor productivity’ and therefore allows for innovation. Either way, both of these economic models point towards the significance of technological innovation on long-run economic growth – and since technological innovation is linked to highly functional robots, we can consider these two ideas together as we consider our movement towards the iRobot universe.
So what’s the diagnosis on technological growth? Over the past 100 years we have not been short on technological innovation; the car, the toilet, the air conditioner and the internet have all come about just to name a few, and with this century of innovation has come many periods of strong economic growth. Unfortunately, however, more recently there is an emerging school of economic thought that suggests this innovation is coming to an end, forecasting dire consequences for our economy. To explain, first consider the following question.
“If you were forced to (a) would you give up all technology that was invented in the last 10 years – no Facebook, no smartphones – but keep everything else the same or (b) keep all recent technology but give up running water and indoor toilets?”
This is a question posed by Economist Robert Gordon who has been one of the pioneers of ‘The Great Stagnation’ school of economic thought. Along with fellow economist Tyler Cowen, the school endeavours to point out the stark lack of revolutionary innovation in the 21st century. In particular, the economists posit that technological innovation exhibits diminishing returns – technological innovation today does not have the same impact on growth today as it did last century and will continue to decline. Consequently its ability to influence growth will decline and we will gradually experience economic stagnation reminiscent of Malthus’ earlier predictions (if not quite so dramatic).
This economic outlook does not bode well for the future. In an economy with very cool robots but little economic growth issues of high unemployment, inequality and stagnant living standards will be at the forefront of society; placing pressure on policy makers and governments to investigate different means of wealth distribution. In that case our economy will continue on its current trajectory; slowing growth and increasing discontent with economic policies.
So perhaps iRobot alludes somewhat to a future that is unattainable.
On the other hand, innovation is inherently difficult to predict – almost by definition innovation and its impacts cannot be forecast accurately.
The issue of innovation is challenging; we are unable to predict future innovation because it isn’t directly informed by past innovation and exists almost exclusively behind closed doors. What is clear, however, is that technological advancement in the future, whether or not it lets me live out my robotic dream, will have a significant influence on the state of our economy. The exact nature of this effect will be examined further in my next piece.