TCS Daily

Robot Economics

By James D. Miller - August 19, 2003 12:00 AM

Will robots steal all our jobs? Although today's robots may lack the intelligence God gave ants, robots of the future might perform many "human" tasks. Economics shows, however, that humans needn't fret over robot-induced redundancies.


For millennia most humans have worked in food acquisition. When mechanized agriculture destroyed most of these jobs, however, we didn't become obsolete. Rather, modern agriculture freed humans to power the industrial and informational revolutions. Human labor is our most precious resource, so when technology eliminates the need for a job it benefits the economy by liberating people to engage in new wealth-creating tasks.


Robots can't steal all jobs, but to prove this I must, alas, behave like an economist and develop a simple model. Let's assume that our economy produces only two goods: wine and cake. Each human makes one of these goods and trades it for the other.


If wines cost $5 a bottle and cakes costs $5 each then the real cost of a bottle of wine is one cake. Indeed, the surprising key to alleviating robot fears lies in forgetting about money and thinking of prices in such relative terms.


Now, assume that in our simple wine/cake world robots begin large-scale manufacturing. They could easily change the relative prices of wine and cake. Perhaps if they just made cake, cake would become cheap and so you could buy 1000 cakes for just one bottle of wine. In such a cheap cake world, humans could profitably make wine. Alternatively, robots might just produce oceans of wine and therefore make cake relatively more valuable than wine, creating incentives for humans to bake cakes. It must always be profitable, however, for humans to make at least one of these goods.


The only circumstance in which humans wouldn't want to make cake would be if cake bought little wine. But if a cake is worth an extremely small amount of wine, a bottle of wine must be worth many cakes. Conversely, humans would not want to make wine only if wine was worth little relative to cake. But when a bottle of wine is worth a tiny amount of cake, trading one full-size cake should get you many bottles of wine. Consequently, the less profitable robots make it for humans to manufacture one good, the more profitable it becomes for us to make the other.


Just as two people both can't be shorter than each other, two goods can't both cost less than one another. Therefore, regardless of what robots make in our cake/wine world, it will always be profitable for humans to make at least one good. Even if robots made huge amounts of both cake and wine, these goods would still have some relative prices in which one of the products was necessarily worth at least one of the other.


Such logic holds in a multi-good world. Generally, when you work you produce one good and use it to trade for others. If robots cheaply manufacture one product they make this product less valuable and less worth manufacturing. But by making product X less dear, robots necessarily make products Y and Z more precious since making a Y or Z would now allow you to trade for more X. Consequently, when you consider relative prices you see that robots can't destroy all jobs. So whenever you are warned about technology eliminating some category of jobs, remember that this elimination is simultaneously making other jobs more profitable.


Of course in the short run robots could harm some workers by making their goods cheaply and thereby forcing these laborers to retool. Capitalism, however, pairs job destruction with job creation so in the long run most of us should welcome the rise of the robots.


James D. Miller writes The Game Theorist column for TCS and is the author of Game Theory at Work.


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