Q1. What happens if they built robots that could do my job as well as I could, and those robots got cheaper and cheaper over time? My wages would have to fall so I could compete with the robots, and I would be worse off.
Q2. What happens if they built robots that could do everyone's job as well as they could, and those robots got cheaper and cheaper over time? Everyone's wages would have to fall so they could compete with the robots, and everyone would be worse off.
Q1 is a partial equilibrium question and answer.
Q2 is a general equilibrium question and answer.
If you say "Therefore" between my Q1 and Q2, you are committing a Fallacy of Composition. The Fallacy of Composition is when you assume that what is true for each of the parts must be true of the whole. (The classic example is "If any individual stands up at the theatre that individual can see the stage better; therefore if every individual stands up every individual can see the stage better.")
The very fact that we bother to put names on some logical fallacies seems to suggest that people have a tendency to commit those fallacies. I don't think there's a name for the following logical fallacy: "1+1=2; therefore Mazdas are better than Hondas". We don't have a name for that particular logical fallacy because even the most crazed Mazda fanboy is unlikely to argue like that. Named fallacies are named fallacies because they are not just fallacies; they are seductive fallacies that we really want to commit.
It is very easy to understand that if I stand up I can see the stage better. It is less easy, but still easy to understand, that if I stand up I will make some other people see the stage worse. It is much harder to figure out whether the losses to some other people's vision are bigger or smaller than the gains to my vision. It depends. On a lot of things. And adding up those gains and losses when each individual stands up in turn is extremely hard. Instead we have to jump to the general equilibrium experiment, where everyone stands up at once. And even then we need to make some assumptions about the distributions of people's heights, and the locations of seats in the theatre, to figure out who can see better or worse when everyone stands up.
Trying to add up all the partial equilibrium effects in the case of robots is almost impossibly hard. Let's see. If a robot could replace me, and my wages fell, what would that do to the cost of a university education? And how would that affect prices and other people's wages? And how would the Bank of Canada react if it pushed down prices across the economy? And what about investment in robots, and the jobs created there? What would I do instead? And what would happen to profits of robot manufacturers? And the owners of robots?
There is no way that anyone, economist or not, could trace through all the effects of cheap robots competing to do my job. And there is absolutely no way whatsoever that anyone could do that for my job, and then repeat it for all the jobs in the economy, and then add up all the effects.
But that's what we so often try to do. And we fail miserably.
Instead we should build a general equilibrium model, like I did in my last post.
My model's answer might be right, or it might be wrong. But at least it doesn't commit the fallacy of composition. You can check the assumptions, check the conclusions, and you can check that things add up.
It was a very simple model (rather, three simple models, so I could explore the effects of different assumptions). But some of the results were surprising. Surprising even to me, the builder of those models. What is true of the whole is sometimes very different from what is true of the parts.
And to figure out what some of those results were I had to do some math. Yep, even a mathophobe like me, who likes to try to figure things out intuitively. And when I got some of the math wrong, commenter Kathleen could see it was wrong and told me it was wrong, so I fixed it.
That's why we do, and sometimes need to do, general equilibrium models.
PS. When I say "general equilibrium models" I mean as opposed to partial equilibrium. For example, MMT economists are equally general equilibrium in this sense when they insist that stuff must add up across sectors.
PPS. And I want to give kudos to those (mostly non-economist) commenters who made a serious effort to really figure out what was going on in my models.