Of horses and men

As a teenager I read Kurt Vonnegut's novel Player Piano. It's stuck in my economist's mind ever since. It describes life in the near-future when technology and machines have destroyed the demand for nearly all human labour, except for the labour of a small, highly-educated minority. The vast majority of the population would be unemployed, but for government make-work projects.

The book was published in 1952, so Vonnegut's near-future is our recent past. It didn't happen. But could it happen?

You can try to answer that question by playing with production functions; seeing if a change in technology might shift the production function upwards and yet lower the marginal product of labour, and hence the demand for labour, recognising that the supply of capital goods is endogenous, and will itself respond to the improvement in technology, and that might have an indirect effect on the marginal product of labour, in an intertemporal general equilibrium model....

Or you can think about horses.

When horse-power became cheaper than human-power, horse labour replaced human labour. When steam-power in turn became cheaper than horse-power, horses in turn became replaced. The demand for horse labour rose, then fell. If the population of horses had kept growing at the same rate as the population of humans, most horses now would be redundant, with just a small elite minority of horses employed in very special jobs. Improving technology did in fact drastically reduce the demand for horse labour. If Kurt Vonnegut's novel had been about horses, it would have been a historical novel, not science fiction.

It happened to horses; why couldn't it happen to humans?

It's true that humans own the means of production (including their own labour, and horses' labour), and horses don't. That's important, because humans will therefore (at least in aggregate) reap the increased income from any increased output, even if human labour no longer has value. But for a human who owns only his own labour, that is little consolation.

New technology destroyed the demand for the labour of horses. There is nothing that makes it impossible for new technology to destroy the demand for the labour of humans. It hasn't happened yet, but it might. What's surprising, or what ought to surprise us, is that it hasn't happened yet.

You can use horses to pull things, but not a lot else. When the demand for horses was at its height, it was mostly a demand for horses to pull things. You can use humans to pull things too, and you would use whichever is cheaper: horses or humans. But humans can do a lot of other things too. When horses destroyed the demand for human tractors, humans switched to other jobs. When steam and diesel tractors destroyed the demand for horse tractors, horses became redundant. They couldn't switch to other jobs. Horses are just too specialised.

The only reason I can think of why Kurt Vonnegut's novel never came true, why human labour didn't go the same way as horse labour, is this: humans are a lot more versatile than horses.

Will human versatility always be enough to dodge and weave around all possible changes in technology, forever? I doubt it. Forever is a long time.

Comments

[Contemplationist]

Nick

Isn't it likely the case that when we are even close to approaching such a limit in the horizon, there will be enough wealth and capital (think of very cheap robots producing things with very low marginal costs) to effectively let larger parts of the labor force just watch tv and let their government provided robot helpers do everything?

I have actually been fascinated with exactly the question you raise. But I tried to approach it from a different angle. I know this might sound stupid, but I asked: What does the ULTIMATE goal/END of economic growth look like? TO answer that, I harked back to basic econ 101 - Existence of scarcity - limited resources, unlimited wants. So essentially the THEORETICAL end of economic growth will be when people can simply think of things they want (material ones at least) and be able to get it with minimal effort. Until then, there will be labor to do, no?

[Aloa5]

It happened to horses; why couldn't it happen to humans?

That´s easy. Humans are. You can reduce the amount of horses if you don´t need them.
But: what would they do if we could not reduce them?
The essence of what you asked/wrote would be: they would do absolutely nothing.

This is wrong (obvious, not?).

So - the correct question would not be if we will work. The correct question ist: what will we work or what will we call "work".

So - have a look at the developement of the sectors wich are around medicine/health car, nurture and what we are doing with or better in our spare time. The amount of people working there is rising.

And notive another fact. If we are working we have a "positiv output" (spending more time for other people then we get (working) "time" from them back). In the time we do not work the saldo is negative (not from + to zero but to - ). So - although the process could be going on anyway - it is going on very, very, (very) slowly.

Just a statistic from Germany. People working in and for medicine/health care and BIP compared from 1960 to 2002. It´s just a jump from 3% to 12% for employment and for BIP (and we could really do a lot better).

What was the question?
Oh...
It happened to horses; why couldn't it happen to humans?

Answer: because we are humans and not horses. :-)

Regards
ALOA

[Luis Enrique]

Iain M Bank's Culture novels also portray a future in which human labour in production is completely redundant. In this imagined future, humans spend their time administering human affairs (there are still committees), enjoying leisure, and doing things like pottery or running restaurants, because they find it enjoyable to do so.

[Robert]

Check out this blog: http://econfuture.wordpress.com...you'll find a detailed discussion of the economic impact of accelerating job automation technology.

Also, there is a new book, THE LIGHTS IN THE TUNNEL: Automation, Accelerating Technology and the Economy of the Future, http://www.thelightinthetunnel.com. You can find it on Amazon.

[Just visiting from macleans]

Implicit in your observations and commentary is that you are drawing your box around the developed western world.

If you were to narrow it considerably it to say NASA, then Vonnegut's novel applies.

If you were to include 1/2 the world's pop. that lives on less than $2.50 per day, many would wonder "what the hell is a horse"?

Interesting stat:

According to the 2006 report, there are 58,372,106 horses in the world. The United States, by far, reports the highest total number of horses with an approximate 9,500,000.

http://www.horsetalk.co.nz/archives/2007/09/105.shtml

[Frances Woolley]

Great post Nick. As Aloa points out, it's all socially constructed, innit? We call the things that give meaning to our lives work, even if in the cosmic scheme of things they're pretty useless. And JVFM, yes, you could argue Vonnegut's novel is happening now.

Even in the developed world, what would a vast majority of the population be? O.k., pretty much everyone under 16 and over 65 is out of the labour force, and a good chunk of 16 to 25 year olds as well. Is people employed/people living more or less than 50%?

I'll see if I can find the book, but it sounds a bit like World of Tomorrow in Disneyland - very dated, by which I mean it sounds as if it was written at a time when people actually believed in government job creation. Why would governments care enough to create make-work projects? Why not let the masses enjoy the fate of the masses throughout history - scraping by at a Malthusian level of subsistence?

B.t.w., the micro textbook answer is 'economists assume non-satiation, more is preferred to less, so no matter how great technology gets, there will always be something people want.' And this is your point about human versatility - even with no manufacturing jobs around, people find job-like things to do e.g. dog walking services, creating jewelry or fashion items, holistic therapy and counseling services...

[reason]

I like Luis Enrique's answer (as I often do). But the trouble with occupying your time with such things is - who pays for it?

[reason]

Frances
"Why would governments care enough to create make-work projects? "

ummm - because it is a democratically elected government?

[reason]

Contemplationist - what will power the Robots, and if we can have unlimited things - what will we do with the waste? There are more costs than human labour.

[Barry]

Also, the fruits of massive improvements in productivity are not evenly distributed; for example in the USA for the past 30 years, the per-capita income has been rising mainly for the top 10%, and much less for those in the bottom 90%. In the classic view (e.g., Mack Reynolds) there was massive redistribution; the majority of people were not needed for labor, but were paid enough to subsist quite comfortably.

[KRZ]

Hey Nick,

I think you've just given a very lucid description of Marx's political economy. I've actually used the horse example myself when trying to explain the Marxist idea of capitalism producing an incredibly wealthy society where most people lived in grinding poverty.

Of course, it hasn't happened, and there's good reasons to think that it shouldn't, but that doesn't mean it couldn't happen.

[Frances Woolley]

Reason - historically speaking, mass democracy is pretty unusual - wouldn't you expect democracy to be one of the first casualties of massive wealth inequality? (Krugman's recent columns on the state of US democracy make for depressing reading). This is precisely what I mean about Vonnegut's 1952 world view...

[Nick Rowe]

This is in response to many of the comments above:

There's a difference between general satiation, and a low value of the marginal product of labour. But the two are related.

The value of the marginal product of horses' labour fell to zero (or below the subsistence wage of horses) about 100 years ago in developed countries, so the horse population declined. But humans were not generally satiated. We were just satiated at the margin with the things *horses* could produce. The Marginal Utility of the Marginal Product of horses dropped to zero at the existing quantity of horses.

If everybody is satiated in everything, that's not a problem. Nobody would want to work, at the margin, (unless they find meaning and fulfillment in work, which is a problem, for those of us with an instrumentalist outlook on life aka protestant ethic?).

The real danger arises if those who only own their own labour are not satiated, but others are.

Or, more generally, if there are two groups of people. The A's are satiated at the margin with all the goods that the B's can produce (with their labour or other means of production). But the B's are not satiated with the goods that the A's can produce (with their labour or other means of production). Because then the B's incomes drop to zero, but they are not satiated.

JVFM: "Implicit in your observations and commentary is that you are drawing your box around the developed western world." I thought I was drawing it a little wider (or deeper) than that. I had in mind the western world yes, but back to the time before it was developed, until today. The very poor part of the world today looks a lot like the West did before horses, when human tractors were cheaper than horse tractors (or oxen).

[Just visiting from macleans]

Here's something to contemplate. From the list of automotive superlatives:

Petrol/Gasoline engine (forced-induction) - 1187 horsepower SSC Ultimate Aero TT

That's a lot of avoided (wasted) non-renewable horses.

Can one person's satiated activity become another's unsatiated? Again, depends upon where the box is drawn. Just a rhetorical q. No reply warranted.

[Style]

I must be missing something - this sounds like the lump of labour fallacy to me. Instead of replacing people with horses in your thought experiment, why not replace robots with Mexicans or immigrants?

[Rogue]

Nick, it wouldn't be at all impossible for those in group B of your example, who remain unsatiated, but could never be part of group A (because A is satiated already as it is) to form their own underground alternate economy?

Like, they in B could work for each other, in exchange for what others in B group can give. Barter, or trade in marginal value products, but ones that earn enough to give some modicum of life support? I'm thinking,for example, if the horses could just have learned to trade with each other, without care for human products which they couldn't afford, maybe they could have thrived?

[pointbite]

To the extent technology is used to produce more of what we want, who cares? If the work day was reduced from 8 hours to 4 hours but you had the same amount of stuff, would you complain? It's definitely deflationary in the traditional sense, meaning prices will plummet, but that's a good thing.

My biggest concern would be the instinct to tax this immensely profitable new technology to provide make-work for those displaced, eliminating many of the benefits by failing to let prices fall and the economy restructure. If prices were allowed to fall, as long as dollars continue to circulate the dollars no longer spent on these "almost free" goods will be spent elsewhere, creating different kinds of jobs. Rich people don't eat their money for fun. Human demand is limitless, I sincerely doubt we will ever reach a point where all humans have all the material goods they desire, we would need 1000 planets. The market can distribute cheap goods or the government can distribute poverty.

Or we could use the extra time to cure cancer.

[Lord]

Without a demand for human labor, we would need another means of distribution. Given how unhappy redistribution makes the wealthy, or at least wannabees, and how plutocratic government is, patrons and clients, bread and circuses, interrupted by an occasional revolution.

I am reminded of Forbidden Planet where you could have everything you could imagine but the subconscious got the better of it.

[Doc Merlin]

Your basic mistake Nick is that you assume that humans have to actually do something to make wealth. As humans do less and less directly, machines do more and more, we need to do less and less directly.

If it ever did reach that point Nick where we don't need to do anything, it would be a lot different than you suggested. If there was no need for human labor, then robots could make robots for "unemployed" humans to own.

Think about it for a moment, everyone stops being "laborers" and becomes "capitalists" (in the marxist sense).

[Nick Rowe]

Style: it's not the "Lump of Labour Fallacy". (By that I understand the false argument that if output per worker rises, you need fewer workers, so employment must fall). Aggregate output increased considerably over the last 100 years, while the demand for horse labour fell. *Average* horse productivity (GDP divided by number of horses employed) increased massively, but *marginal* productivity of horses fell. That's what happened over the last 100 years. Would it be theoretically impossible for a blogger writing 100 years in the future to say exactly the same thing as I have just said, only substituting "human" for "horse"? I don't think so.

Rogue: yes it is possible for that to happen in some circumstances, but not in all. It depends on the prices of the other factors of production. For example, if production by the B's also requires land, and the A's own all the land, and the marginal utility to the A's of the marginal product of the goods that the B's can produce on A's land is zero, then the A's would not employ the B's at any positive wage, and the B's could not pay the A's enough to rent the land from the A's. So the B's are screwed.

Theoretically, it's like the redundant horses putting themselves out to pasture. The horses don't own any pasture, and if the horses don't produce anything of value, at the margin, nobody will let the horses have any pasture.

Doc: "Your basic mistake Nick is that you assume that humans have to actually do something to make wealth."

Nope. I am assuming just the opposite: that at the margin human labour does not create wealth. There is no shortage of wealth being created, but the value marginal product of land and machines is high, and the value marginal product of labour is zero. So if wages and rents reflect value marginal products, no wealth goes to labour. Again, that's what happened to horses (except for horses, the population is endogenous, so the population declined until the value marginal product of horses was once again at subsistence level.

If everyone owns capital, no problem at all. We can all be rich and lazy (or spend 6 days a week fox hunting, like the English landed gentry). But for someone born without capital (or land), and no inheritance, it's a big problem.

[Rogue]

Nick, the land rent problem of the B's are solved by congregating in squatter colonies where they don't pay rent. Think District 9. This is already happening in many Third World countries, and is the only thing preventing violent revolution from erupting, that's why governments don't do anything about them. If this happens in developed countries, large undeveloped, unoccupied swathes of land can naturally morph into districts.

[Nick Rowe]

Rogue: yes, I think something like that would happen. In fact, I think it sort of did happen, in the past. I'm thinking of the Highland clearances, and crofters. Similar in Ireland too, I think. But scratching out a subsistence living, because nobody wanted their marginal product.

[westslope]

Nick: Your theory is fine. But in the real world, where rents persist for any length of time, workers acquire some of that rent, and continue to earn them on the margin.

I found your comment about English gentry and fox-hunting interesting. Many ordinary working class folks spend much of the year angling and hunting across Canada. Licenses are cheap; access is unrestricted. Over-subscription is common but the informed know where to go. Fly fishing or bow-hunting grants from EI sometimes help.

But I doubt the leisure life is coming. Increased technological sophistication means greater productivity of capital--machines and human--so one would expect more labour inputs, not less.

Unless of course, you are implicitly assuming a model with satiation effects.

[Frances Woolley]

Nick, what did Vonnegut figure women would be doing in this ultra-mechanized world? Presumably the government make-work projects allowed men to continue to support a family (wouldn't have been make-work projects for women in 1952).

But in a harsher future with no make-work projects, wouldn't it be better to be the 10th wife of class A capitalist (or golfer) than the 1st wife of a B?

And what does this do for social organization?

[Doc Merlin]

"If everyone owns capital, no problem at all. We can all be rich and lazy (or spend 6 days a week fox hunting, like the English landed gentry). But for someone born without capital (or land), and no inheritance, it's a big problem."

My point is that this is very easy to repair that problem in a world where there are no human costs. If robots can do everything without human input they can make more robots without any real human input, its very easy for charity organizations to make starter kits of robot-building robots for people.

[Nick Rowe]

Frances: As far as I remember (and this is from nearly 40 years ago) the only women in Player Piano were wives of the elite (it's a very 50's book). The wife of the hero faked a pregnancy to get him to marry her. That's all I can remember about women in the book.

But yes, there's a whole gender/sex sub-theme (or two) here. I wondered about exploring it a little, but decided against. I'm not competent to do it. I left the title as "Of horses and *men*" (Steinbeck reference, of course) but changed "man" to "human" in the post.

1. There's a sense in which it really might be men's less-skilled labour that is being displaced, more than women's.

2. The implications of that for female sex-selection of alpha male vs beta provider for marriage or sex etc., explored at great length and some confusion in the "Roissysphere". For example:

May offend, perhaps not safe for work:
http://theobsidianfiles.wordpress.com/

Will certainly offend, definitely not safe for work:
http://roissy.wordpress.com/

The Obsidian argues that this is already happening among US blacks (he is one), with the disappearance of manufacturing jobs for men. They are the "canary in the coal mine".

[Nick Rowe]

Doc: "If robots can do everything without human input they can make more robots without any real human input, its very easy for charity organizations to make starter kits of robot-building robots for people."

Agreed. In a rich society, it is easy to prevent absolute poverty. But would the rich do it by giving the poor self-replicating robots? Or would they just give the poor the consumption goods made by the robots owned by the rich?

I can imagine the rich saying: "Look, the reason the poor are poor is that they are too impatient/improvident to save, so don't own capital/robots like we do. If we give them robots, they won't wait until the robots can create more robots. They will just have the robots make consumption goods. Or even eat the robots! And then we will have to give them more charity tomorrow. So let's keep the robots ourselves, and just give the poor food."

[Nick Rowe]

Continued: the rate of interest (using robots as numeraire) would be determined by the rate at which robots can replicate themselves. Anyone who had lower time-preference than this technologically-determined rate of interest would accumulate robots; and those with higher time preference would deccumulate robots. Wealth and income would equal the number of robots owned, an the annual output of those robots.

[Jon]

Great post. I should read that book. Why haven't humans become redundant? The service economy. It's hard to imagine that changing in our lifetimes.

I wonder though if you don't have something cute in mind. Like it's impossible for everyone in the aggregate to shed labor. I wonder if there isn't an equilibrium where the elite would demand always enough for their robot construction services to hold the cost of robot labor too high to eliminate human labor. Or alternatively can this happen whilst democracy endures.

[Nick Rowe]

Thanks Jon! It's harder to mechanise the service sector than the goods-producing sector. But will that always be the case?

It's not easy thinking through the general equilibrium model to see how robots would affect the consumption real wage of humans. I think it depends very much on whether there's a third factor of production, like land, or skilled labour. That's why I switched to thinking about horses. But I think if land were free, the real wages of horses would not have dropped, so the horse population would not have dropped. The excess horses would just put themselves out to pasture. (Though the need for increasingly expensive human labour also played a role in falling demand for horses, since horses are more labour intensive than diesel tractors.

[Rob]

"the "Roissysphere""

So I made the mistake of following those links... a true Ayn Rand-meets-Tucker Max nightmare. Libertarians are pretty much defined as "guys that never get laid and blame their overbearing mothers, while seeking refuge in a John Galt/Alpha Male fiction". Taking a libertarian's advice on having "game" is about the same as getting advice on "women" from a thrice-divorced alcoholic at a bar. I don't doubt that they've thought about the issue a lot, but something tells me their approach is off...

[Nick Rowe]

Rob: yep. I did warn you! Alias Clio (not likely to offend, safe for work, very different, Ottawa, Catholic, female, historian, and one of his better commenters) http://aliasclio.wordpress.com/ once described reading Roissy as like watching a car wreck! But there *may* be some very ugly and depressing truths to be found.

Excellent survey of the genre (safe): http://www.weeklystandard.com/articles/new-dating-game

But I have wandered off-topic.

[uBig fatPig]

"
Just visiting from macleans | February 12, 2010 at 07:35 AM

Great post Nick. As Aloa points out, it's all socially constructed, innit? We call the things that give meaning to our lives work, even if in the cosmic scheme of things they're pretty useless. And JVFM, yes, you could argue Vonnegut's novel is happening now.

Even in the developed world, what would a vast majority of the population be? O.k., pretty much everyone under 16 and over 65 is out of the labour force, and a good chunk of 16 to 25 year olds as well. Is people employed/people living more or less than 50%?
"

At the bottom of DeLong's Page you will see that it was 64% but now suddenly dropped to 58% and falling :

http://delong.typepad.com/

Is this now the moment of human obsolescence foreseen by the late great Vonnegut?

"Of horses and men"
~~Nick Rowe~

Or did both Steinbeck and Rowe pick a looser out of the starting gate? Should we pick mice, horses, or swine? In Cairo the Coptic pig-keepers are responsible for the Muslim's garbage disposal. The pig disposes of the rotting garbage after-which the Coptic eats the pig.

With excessive input from manufacturing sector but with disposal becoming more inadequate each year should we now select the pig for our Orwellian Analogy? When you pick pig population, expanding ad infinitum you will then find that Peak Pig does not occur so clearly as Peak Pony. Peak Pork is not so cut and dried -- not so cut and fried.

"I love you too, Anita"

[himaginary]

Some foods for thoughts...:

Speaking of "Player Piano", Krugman once wrote about it.

And he wrote blogpost titled "Will technology make workers obsolete?" last August.

And I think Keynes' this essay is also related to this topic.

[Nick Rowe]

Himaginary: good finds!

[Sandwichman]

"The vast majority of the population would be unemployed, but for government make-work projects."

The vast majority of the population today IS employed in government make-work projects.

[Sandwichman]

Style: "this sounds like the lump of labour fallacy to me."

It's the lump alright, but there's not a fallacy in a carload. The fallacy claim is based on an assumption of full employment. "Assuming there is full employment, those who think there is "only so much work to go 'round" commit a fallacy." Sure. And assuming wishes are horses (speaking of horses), beggars DO indeed ride.

The fly in the ointment is uncertainty and what Keynes called "liquidity preference". As long as people desire to hold money as a hedge against the proverbial rainy day, there will be involuntary unemployment -- sometimes in great gobs, such as now.

The limit on employment is thus not the hypothetically infinite amount of work to be done but the fact that doing that work for wages depends on the propensity of people to spend or _productively_ invest money rather than hoard it. And a cautionary note, "investing" in real estate or innovative financial instruments is at root a form of hoarding.

[cushion]

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[travis]

Oh Nick,

The internet, the moon and they still can not get CNC machines to tie a knot. It is not versatility it is dexterity. I hope you know enough to get every button on your coat resewed by a human.

[Plan B Economics]

Interesting post. The cheaper alternative will always be used. In fact, this is not new.

- The peasant class has always been used as a cheap form of labor.
- Slaves were used as even cheaper forms of labor until the mid 1800s.
- The industrial revolution added efficiencies that made many humans redundant.
- Globalization has made domestic (Western) manufacturing wages uncompetitive.

Here's an interesting/related post on Capitalism and Slavery: http://www.planbeconomics.com/2010/02/05/capitalism-slavery/

[Alex Plante]

- Humans can learn sophisticated skills that horses cannot.
- If repressed, humans can also fight back.

[Yvan St-Pierre]

Not sure how this A's versus B's thing can really make sense, other than as an abstract possibility. Either A's really don't need anyone's work (including with respect to B's potential revolts, i.e. for either security or entertainment reasons), such that B's just get extinct within a few weeks, and everyone left is an A. Or else A's do need the B's somehow and have to provide them with something they can make a deal with, thus vitiating the original premise of the argument, no? I must be missing something here. Who is having this moral conundrum anyway, in the universe that is so described?

[Nick Rowe]

Sandwichman: In rejecting the Lump of Labour Fallacy I am not assuming "full-employment". At most I am assuming that output is *proportional* to Aggregate Supply, so that the unemployment rate is independent of LRAS. Historically, over the sort of time periods that are relevant here, that assumption works MUCH better than the Lump of Labour Fallacy assumption that output is independent of LRAS. Output has expanded by orders of magnitude over the last couple of centuries, but the unemployment rate has changed little. If the Lump of Labour Fallacy were correct, we should now expect to see unemployment well in excess of 90%.

Travis: but agricultural binders and balers have been making mechanical knots for over a century. But yes, why is it I always end up re-sowing the damned buttons on my clothes?

Yvan: When the demand for horses declined, so that the rental rate on horses declined below the cost of the horse's subsistence, people stopped breeding horses, and the horse population declined. In olden days that sometimes happened to humans too. At current wage levels, there is possibly (I don't know) little relation between population growth rates and wages. It would take a very big drop in demand for labour to push wages down below biological subsistence. What would be the political response to such an event at some future time? Anyone's guess is as good as mine.

[Sandwichman]

"If the Lump of Labour Fallacy were correct..."

You misunderstand. The lump of labour is an attributed belief. It could only be a fallacy if someone actually believed it. So I'm not accusing you of the fallacy. Only of saying the thing that people commonly get accused of a lump of labour fallacy for saying.

It's probably too convoluted to straighten out in the comments. See my ROSE article, "Why Economists Dislike a Lump of Labor."

[Yvan St-Pierre]

Nick,

Maybe I assumed too quickly that the logical endpoint of this evolution was the matter of interest, rather than the actual process to get there. Still, I'm honestly trying my best to understand what is at stake here.

I suppose this is essentially a problem from a B's perspective, that is for someone who's been incapable to acquire enough of this hyper-productive capital that makes human effort useless (apart, I suppose, for devising ways to keep control of as much capital as possible, which is not trivial - the basic hobbesian problem remains, doesn't it).

I also suppose that this is a problem if and only if (1) there is a politically (or morally, depending on one's views) significant number of B's, and (2) existing property rules are forever binding. Yet if these 2 conditions hold, nothing can happen, other than some form or other of mutually beneficial arrangement. Otherwise, once you can tweak the property and transfer rules, whether you interpret such tweaking as a product of A's altruism or B's power struggling, then how could this situation ever arise? Is this not how institutions evolve? That is, if you don't have condition (2), how can you ever get to realizing condition (1)?

I think you're possibly trying to make 2 different points: (a) that a situation where human effort will not be worth paying for anymore is plausible, and (b)that this could have some deeply problematic consequences, politically. I have no problem with point (a), except for attending somehow to the distribution rules (unless you assume identical political preferences among A's). Point (b) is more of a problem to me, because I simply do not see how this could not be predictable, in due time, within public discussions, such that institutional adaptations would be made to ensure that B's remain a politically marginal phenomenon.

Ok then. Just call me an optimist.

[Phillip Huggan]

Industry and economics serves human prosperity. If rich people or robot armies start serving something else you replace the industrial or economic actors, not the goal of human prosperity. I've no idea what to do if the robots can prosper as well...but we don't have to worry about that tack while our Canadian economy maxes financial services and tar extraction.

[Nick Rowe]

Sandwichman: OK, I did misunderstand you. But I am assuming away the monetary problems you refer to here: "The limit on employment is thus not the hypothetically infinite amount of work to be done but the fact that doing that work for wages depends on the propensity of people to spend or _productively_ invest money rather than hoard it."

Those are real short-run problems, but I don't see them as long run problems, and I'm thinking very long run here.

"And a cautionary note, "investing" in real estate or innovative financial instruments is at root a form of hoarding."
I really enjoy debating this question, but I had better not start here, especially since I have already debated it too much in past posts.

Yvan: I was just thinking about point a. I don't have much to say about b, but my hunch is that it's as much an existential question as a political one. "What is my purpose in life?"

[Sandwichman]

Nick,

The long run problem can be framed as "are humans really a lot more versatile than horses?"

The new economics foundation in the U.K. released a report Saturday titled "21 Hours" that's gotten a lot of play in the British press. There's an especially interesting "Have Your Say" collection on the BBC of 1448 comments in response to the BBC story on the debate. Most of the comments are vehemently hostile toward the general idea, the authors and the think tank. It's clear that the scoffers have not read the report and have jumped to their conclusions on the basis of their preconceptions and the extremely superficial BBC summary.

So the question remains are humans really more versatile than horses? Apparently not.

[travis]

nick wrote:

"When the demand for horses declined, so that the rental rate on horses declined below the cost of the horse's subsistence, people stopped breeding horses, and the horse population declined. In olden days that sometimes happened to humans too. At current wage levels, there is possibly (I don't know) little relation between population growth rates and wages. It would take a very big drop in demand for labour to push wages down below biological subsistence. What would be the political response to such an event at some future time? Anyone's guess is as good as mine."

Hey Malthus it is the inverse. When wages get pushed below subsistence the birth rate increases. Think insurance and then it makes sense.

On the buttons. Because machines do not tie true knots at that scale. Apparently their is a fishing knot tying machine on the market. My guess is it works one out of four times. The rest is a fish tale.

[Alex]

I haven't read all the comments, but my thoughts are... As human labour is replaced by mechanical labour...

In the short run: If work is something we have to do but we don't want to do, then there will be less of that. But work also includes stuff that we need to do AND want to do. Then there is entertainment, stuff we want to do, but - arguably - don't NEED to do. There will be more of this stuff.

In the long run: we all die. What happens first, no more humans, or obsolescence of human labour? Can the latter happen before the former? How does that look?

Humans will never go like horses, because we are subjective, self centered, and on top of the pyramid. We unite in struggle, and in lack of a common enemy we compete for wealth and influence. We will always find something to pursue, and entertainment will continue to evolve. I think the obsolescence of human labour is better described as a surplus. Like an agro surplus, it will only lead to more art and specialization.

[Too Much Fed]

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