Book Review: Race Against The Machines

Are we on the verge of totally new social and economic paradigm brought about by the increasing power of computation in our machines?

“The root of our problems is not that we’re in a Great Recession, or a Great Stagnation, but rather that we are in the early throes of a Great Restructuring.”

So say Erik Brynjolfsson and Andrew McAfee, in their new book, Race Against The Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy.  We suppose it would be obvious to state that in the Western world, there is at present a major economic crisis that affects the livelihood of all in those countries.  As to why this is happening, that is a less obvious answer.  According to the authors, there are three main schools of thought which would explain our economic woes.

The Cyclical Explanation

Paul Krugman

This view has been the common explanation which has explained economic slumps in the past.  This view states that the economy is simply not growing fast enough to put people back to work.  Of course if one really thinks about it, this is not really an explanation, since it begs the question as to why the economy is not growing fast enough.  This positions’s champion is Paul Krugman.  In an article published in the New York Times, on September 26, 2010, titled, Structure of Excuses, he gives his reasons.  We do not know if Krugman was referring to modern computational power as the “structural” problems he speaks about in the article, but it sounds similar.  Krugman calls structural unemployment a “fake problem.”  This structural problem espouses that Americans do not have the skills required for the jobs that are available to them.  What Krugman is debunks is the idea that there is a growing job market that requires special new skills.  He cites a report stating that there is no growth in any market, structural or not.  Another report cited by Krugman states this,

The predominant, and in our view correct, narrative to describe this situation
has been that the bursting of the housing bubble and the resulting loss of wealth led to sharp cutbacks in
consumer spending. The loss of consumers, along with financial market chaos brought on by the bubble’s burst, also led
to a collapse in business investment. As consumer spending and business investment dried up, severe job loss followed.
Further, even after economic output stopped contracting (in roughly the middle of 2009), its subsequent growth has not
been nearly rapid enough to create the jobs needed to even keep pace with normal population growth, let alone to put
the backlog of workers who lost their jobs during the collapse back to work.

This view sounds very much like the typical explanation given in major media outlets.  The last mentioned report also goes on to question the high growth of certain types of jobs.  Speaking of the this structural view the report states, 

This implies that unemployment difficulties reside in the workers who are unemployed: they either are located in the wrong place or do not have the required skills for the currently available jobs. If this is so, then macroeconomic tools such as fiscal policy (spending or tax cuts) or monetary policy can not address our unemployment or long-term unemployment situation. Surprisingly, perhaps amazingly, there is no systematic empirical evidence for such assertions.

The Stagnation Explanation

Tyler Cowen

This view is championed by Tyler Cowen‘s book, The Great Staganation.  Cowen states,

…the American economy has enjoyed lots of low-hanging fruit since at least the seventeenth century, whether it be free land, lots of immigrant labor, or powerful new technologies. Yet during the last forty years, that low-hanging fruit started disappearing, and we started pretending it was still there. We have failed to recognize that we are at a technological plateau and the trees are more bare than we would like to think.

We provide here a visual explanation by Cowen of this position.  If you cannot see the embedded video, here is the link:

We found it fascinating that Cowen in the middle of defending his point of view makes the following statement,

There is a second major difference between the internet and the previous arrival of low-hanging fruit, and it has to do with employment. The major internet companies perform a lot of their miracles by information technology and not so much by human hands.

Cowen seems not to see the great import of this statement.  To our astonishment, he repeats his point but via a different route,

A recent study found that the iPod—a nearly ubiquitous device—has created 13,920 jobs in the United States, including engineering and retail. That’s a pretty small number.

This new age, by his own admission is one where machines are taking the place of people in the job market.  He mentions this at several more places in the chapter but does not seem to grasp the implications of his observation.   Cowen seems to contradict himself at this point when he points out that,

At the same time that a lot of people are out of work, some of the cutting-edge companies can’t find and hire the people they need. We’re facing a fundamental skills mismatch, and the U.S. labor market is increasingly divided into a group that can keep up with technical work and a group that can’t.

This kind of argument would seem to be more in line with what Krugman calls the structural problem discussed earlier.  What Cowen does not answer is, if there is no innovative growth in American industry, then how is it possible that they are growing and cannot find the employees they need?  To us it seems, he cannot have it both ways.  We should note that Brynjolfsson and McAfee have also noted this inconsistency in Cowen’s argument.

End Of Work Argument

Jeremy Rifkin

The main thrust of Brynjolfsson and McAfee’s book is to pursue this last thesis –our traditional definition of work in society may be coming to an end.  The authors do not mean by this that innovation will end.  This argument is not new with the authors.  They give credit to Jeremy Rifkin, who in 1995 wrote a book titled, The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-Market Era.  Rifkin is quoted by the authors of this book,

In the years ahead,” Rifkin wrote, “more sophisticated software technologies are going to bring civilization ever closer to a near-workerless world. … Today, all … sectors of the economy … are experiencing technological displacement, forcing millions onto the unemployment roles.” Coping with this displacement, he wrote, was “likely to be the single most pressing social issue of the coming century.

Rifkin has pursued this idea with a further book titled, The Third Industrial Revolution: How Lateral Power is Transforming Energy, the Economy, and the World.

We include a short video that will adequately explain Rifkin’s position.  If you cannot see the embedded video, here is the link:

So do the authors have an idea of how things will turn out?  Yes they take a position.  They are defending the third position.  But they are not total pessimists.

…we agree with the end-of-work crowd that computerization is bringing deep changes, but we’re not as pessimistic as they are. We don’t believe in the coming obsolescence of all human workers. In fact, some human skills are more valuable than ever, even in an age of incredibly powerful and capable digital technologies. But other skills have become worthless, and people who hold the wrong ones now find that they have little to offer employers. They’re losing the race against the machine, a fact reflected in today’s employment statistics.

We heartily recommend this well reasoned and well documented book for your purchase.  It deals with issues that are vital to the future of the human race. 

This article was originally posted at the PlusUltraTech blog.

8 Responses

  1. That Guy says:

    “The End of Work” or less dramatically, reduction in human employment, does not have to be a negative outcome. The natural result should be reduced working hours and more free time. There are perverse incentives created by the government that prevent this outcome and force the all-or-nothing result that can leave so many people totally without work. The insurance situation, mandated benefits and other interferences in the labour market prevent the dissemination of less work to more people.

    I, for one, would like to live in a world where machines handle primary production, supervisory activities requiring human intervention are less common, prices have declined due to a lower contribution of labour costs and everyone is able to attain a good quality of life with less work. Do we live to work, or do we work to live? Productivity isn’t everything, in fact it’s not much of anything unless people are able to enjoy its fruits. The real goal of human endeavour is the creation of an environment conducive to human flourishing in happiness and freedom. If machines can make that process more efficient in terms of the work obligations placed on people, then it will allow us to spend less time working and more time enjoying our lives.

    • Tony says:

      I agree with this. As human employment needs go down the ideal would be an increase in free time. The problem always is in the economic details. As working hours decrease, we either need to see a proportional decrease in cost of living or increase in wage/hours worked, and that’s going to be the biggest hurdle as right now neither of those is happening.

  2. If we focus just on what is happening in the EU and U.S., then nation-state caused stagnation is at the root of the problem. One also would have to ignore the billions of people who have found employment around the world in developing nations ‘because’ of mechanization.

    Anyway, the argument sounds is an old one, which is just neo-Luddite fear-mongering.

    • Yes, everything is the fault of the state.

      • That’s going way, way over the top. The truth is, only ‘almost’ everything is the fault of the state. Negative thinking about the future, and failure to understand what is slowing everything down, are also part of the problem.

        Putting up bureaucratic barriers that prevent health-technologies from being allowed to reach the marketplace in the quickest manner possible for the largest amount of people to get access to them is a good example.

        There are truly valid needs we have for governments. The military, a powerful one, is one the few valid functions of the state, because if the state knows how to do anything well, it is how to kill people and break things when those things, a seldom as can be if possible, need to be done. WWII, for example. We can be thankful they gave us ARPANET, NASA’s amazing accomplishments, DARPA many great works, and others.

        I’m just wondering if the world’s nations started looking at death and disease as the true natural enemies of people, and put a decent portion of our military funding into fighting those, as well as creating AGI on an accelerated path, if we would actually be able to ‘all’ be able to live healthier, longer lives, perhaps until the point at which the Singularity can be achieved, and then see us all evolve.

        We shouldn’t fear machines, but move humanity further and faster in developing them, and I think redirecting military and large amounts of money spent on social-welfare systems to do so wouldn’t be unfair, but only if it were to be completely seriously worked on.

        I want health-technologies to reach the people far more quickly, but that is only because I am a Transhumanist, and I want AGI to be developed as soon as possible, but that is only because I am a Singularitarian.

        I think we can make those things happen, and clearing away government barriers, and exposing the duplicitous who would slow or stop these efforts, aren’t just important, they are essential.

        Those are noble goals for all Transhumanists and Singularitarians, and I would expect that to be clear to everyone who puts themselves in or or both of those categories, wouldn’t you agree?

  3. In Race Against the Machine, it is refreshing that Brynjolfsson and McAfee have taken a fresh view on subject of technological unemployment. Their analysis is accurate, and these factors will begin to play out at an accelerating rate. In China already they are witnessing job loss due to automation and robotic systems.

    A few years ago, Marshal Brain was ridiculed when he broached this topic at the Singularity Summit, now that serious scholarship is involved, some solutions might come forth. If even a partial consensus opinion could be formed around their conclusions, then steps could be taken to alleviate the issue. The last two chapters in Race Against the Machine are a great starting point to this new area to study.

    The authors 19 steps are also worthy of greater analysis and exploration.

  4. star0 says:

    The following piece by Joseph Stiglitz (Nobel Prize in Economics and former Chief Economist of the World Bank) is relevant to the article:

    His explanation for the cause of the Great Depression sounds like “structural unemployment” to me. Here is a piece in The Economist about Stiglitz’s piece that calls it “structural unemployment”:

    Assuming Stiglitz is right, the problem seems to me to be our economic system, not technology.

  5. Interesting review of an interesting book.

    It must be difficult to write about the current employment crisis (or, indeed, any crisis). Naturally, we tend to interpret events from our own perspective. If developments seem to benefit our own sort of person, then the future appears dark in the short run and bright in the long. if they do not, however, then the future is uniformly horrible.

    The question, of course, is whether we know who the developments in question will really benefit…

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