Dear
Larry,
Very
respectfully, I offer the courteous rebuttal to your current posting on
supply economics.
Year
to date, tech stocks are up 20%. This is relevant to supply policy since
technology has become the economic equivalent of a coronavirus vaccine. New machine tools allow people to work from home, order curbside pick up,
take orders and deliver goods without direct human contact, and do practically
everything much faster, safer and at lower cost than high-touch methods (who
waits in line at the bank anymore except me? I have the place to myself).
As technology finds its way deeper into finance, manufacturing, leisure, construction, healthcare, agriculture, services and even sports (the nerdy world gamers convention draws a live audience about the size of the Super Bowl), fewer people will drive higher productivity and lower cost. It’s not an entirely rosy picture, especially for those left out, and there will be many, but supply may expand before we solve Covid. Supply side policy looks different than in 1990, when we equated productivity with employment.
As technology finds its way deeper into finance, manufacturing, leisure, construction, healthcare, agriculture, services and even sports (the nerdy world gamers convention draws a live audience about the size of the Super Bowl), fewer people will drive higher productivity and lower cost. It’s not an entirely rosy picture, especially for those left out, and there will be many, but supply may expand before we solve Covid. Supply side policy looks different than in 1990, when we equated productivity with employment.
A
thought experiment asks whether a progressively taxed tycoon with wealth equal
to total US GDP could ethically support the livelihoods of all Americans while
employing his/her legal business practices, including technology, to the
exclusion of human labor. This person’s taxes are adequate to sustain all
US citizens at their current wage.
While not a perfect analogy, our current federal payments to businesses and individuals as relief from an infectious pandemic provide a glimpse of what such a scenario might look like, without incurring Treasury debt. Is this case example morally defensible? If so, one could argue that productivity (imagined as supply) is an end justified by its means. Only technology provides a plausible proof of this theoretical construct. We already see this trend emerging in the form of three McDonald’s menu/payment kiosks replacing 5-6 human order-takers in activist minimum wage locales.Automation tracks wage acceleration fairly closely.
In conclusion, I believe very little attention needs to be paid to supply-side policies as these are already being efficiently addressed by the free market, largely in the form of advanced technologies capable of increasing productivity during and after periods of decimated labor due to pandemics.
*Bruce Gingles resides in Bloomington, Indiana
While not a perfect analogy, our current federal payments to businesses and individuals as relief from an infectious pandemic provide a glimpse of what such a scenario might look like, without incurring Treasury debt. Is this case example morally defensible? If so, one could argue that productivity (imagined as supply) is an end justified by its means. Only technology provides a plausible proof of this theoretical construct. We already see this trend emerging in the form of three McDonald’s menu/payment kiosks replacing 5-6 human order-takers in activist minimum wage locales.Automation tracks wage acceleration fairly closely.
In conclusion, I believe very little attention needs to be paid to supply-side policies as these are already being efficiently addressed by the free market, largely in the form of advanced technologies capable of increasing productivity during and after periods of decimated labor due to pandemics.
AI as I have preached is slowly taking over the white collar human work force because it is, although just a tool, much more efficient. The physical labor service and repair industry also benefits more so at the management level. However, products and services currently offered are being enhanced by AI. Yes there are many new jobs being created by AI and they require significantly more training or education. Where is this trend going? It is the supply but not a human workforce. Who manages it? The richest people in the world own AI companies. Look at SpaceX. Mine the planets for resources? Expensive but just a sideline to electric vehicles, charging stations, tracking satellites. Less people needed? How long in the future and what is the curve look like....or maybe(just another conspiracy) a way for COVID to reduce the population and how we get together?
ReplyDeleteThanks Hoot. My point and Bruce's comment had to do with Covid and the nation's supply of output. You seem to be glued on employment effects which we both acknowledge. I am just glad no one prevented the tractor's widespread adoption because people had questions about employment of Ag workers in the future. AI is not the sole province of a few rich people -- it is playing out everywhere, as Bruce says, in large companies and small. Institutions will have to change to accommodate this shift. They always have. No reason why they shouldn't now -- unless social policy can somehow induce people not to make switches. Maybe we need to change our social policies?
DeleteDear LSD. Me thinks the last sentence in your email, “Get the health situation under control. Then, maybe the economy will come back,” gets to the solidarity of the solution without gett’n wrapped ‘round the X-Y-Z axel (no tires or chains, please . . .) ‘n makes it easy as A-B-C.
ReplyDeleteThe health situation wuz the predicate for the supply contraction—workers couldn’t work, services/products couldn’t be supplied, ‘n wages stopped. The demand stuff wuz intended not so much to jump start supply but to keep workers “whole” until the health situation abates and supply resources resume: It had nothing to do with jump-start’n demand ‘cuz there wuz no supply to meet demand . . . the proverbial stalemate. So I’m not entirely on board with your view that a chain replacement was used to fix a flat tire.
Me thinks you and Gingles are playing the same tune but using different instruments. Should his instrument—technology—eventually find a cure for the health situation your instrument—supply-side—will be heard playing a merry tune. Technology (X) fixes health problem (Y) fixes supply (Z) . . . as easy as A-B-C.
Dear Tuna,
DeleteAs usual you bring up good points but I can't agree with your distinction of the policy was to make people whole as apposed to stimulating demand. It amounts to the same thing.
what does "whole" mean if not giving them something to help them buy a standard of living. And there is plenty for them buy so long as they didn't want to go into a store. Amazon certainly did well to make people "whole" as they ordered food, TVs or whatever. As for Gingles, he had major differences with me. I was suggesting policy might bring back supply. He is insisting that we don't need any new policies. The market would handle it.
Dear LSD. Shure, folkz can be “whole” and maintain their standard of living via Amazon and not hav’n to visit bricks ‘n mortar. But unless they are able to pay mortgage/rent, utility, health premiums, out-of-pocket health expenses for doc visits/medications, car payments, and other non-(essential?) consumables they likely wouldn’t be able to enjoy watch’n reruns of Beaver, Gilligan, Lucy, Ozzie, etc. on their new Amazon-bought TVs. And if they can’t pay for the aforementioned obligations/expenses they likely wouldn’t be able to return to jobs to produce the goods/services to meet demand. Me thinks “whole” is more aimed/intended at keeping folkz ready and positioned to return to meeting demand rather than consuming non-essential consumables. They won’t be able to meet that demand if they’re not able to maintain housing, health, warmth, and transportation.
DeleteB. Gingles’ technology portends a new “industrial” revolution long-term but can’t do much short-term to maintain the current workforce’s needz for housing, health, warmth, and transportation to enshure their ability to return to employment.
Thanks Tuna. I guess we can agree to disagree. I sincerely doubt that when it comes to goals, those wackos in Washington care more about people being whole and more about getting kudos for saving the economic with yet another tidal wave of stimulus. Of course it really doesn't matter because the primary goal is for them to get reelected. The issue about supply is more about what will generate more supply and less about workforce's needs. You are correct to point out the difference between short and long run.
DeleteMy reply above is poorly phrased. I meant to say those wackos care less about making people whole and more about getting credit for creating a wave of stimulus. It doesn't really matter which, however, since it is all about reelection.
DeleteThis comment is from Bruce Gingles.
ReplyDeleteThe economic slowdown caused by Covid is a symptom, not the disease. We have plenty of supply. Is anyone who is not living in Russia, Venezuela or Cuba waiting in line to buy toilet paper or Clorox wipes today? Or any other product? What essential or discretionary products/services are not available, minus the dentist? Plenty of gasoline, groceries are open, restaurants are operating as are plumbers, lawyers, stockbrokers and farmers. Our economy is not tanking because schools are closed. It’s summer. Ironically, the one commodity which remains in short supply is housing. Why? It is the only major industry that still relies heavily on skilled labor. Up until people started coughing, America’s unemployment rate was down to around 3.5%, or roughly full employment. The problem is that wages are not rising. That’s because the aggregate value of labor is shrinking faster than new jeans in the dryer. Ask any lawyer how they feel about Legal Zoom or any realtor about Zillow or Trulia. Most professors and university presidents have an opinion about remote learning. Trends reducing labor’s value have been evident well before corona and the pandemic has only incentivized an even faster conversion to higher production with fewer workers.
Love the reference to Legal Zoom and Zillow/Trulia. A good realtor friend has been complaining for the last couple years about how Zillow/Trulia is slowly and methodically taking away his business while extracting very big rents on the way to destruction. So--enter Covid-19. His business comes to a complete ( and he is sure) totally destructive stop. Then he decides to turn all his technology on in a gamble to just keep good client contact. Bottom line: He has not had a single human being darken his door since 3/13/20. He has not met with a client face to face since the same week. Using Zillow/Trulia, FB and Twitter, coupled with iPads equipped with face time, and an electronic contracting and closing process, he just announced the "best 2nd quarter in the companies history"--and he was, and is, the most successful broker in our area. Needs fewer people, doesn't have to staff open houses. has a "by appointment only " business. He now gets to spend a lot of extra time on his boat and with his family. Not a bad story.
ReplyDeleteThanks Ed. Clearly an interesting live case for the importance of technology. Thanks for sharing. The trouble comes in your last two sentences. Some people will note that the result is that rich people benefit and staff pay the price. One can not get away from distribution of income and capital/labor substitutions. Some will see this as a tragedy. I see it as an opportunity for a country to do two things. First find a way to allow the substitutions. Second, find a way to resolve those harmed through training, education, job placement, etc. If society gains from the technology then it should have something to use to improve the lives of those harmed by it.
DeleteI completely agree with your final sentiments. In fact, the "rich" in this case will most definitely benefit. I believe that whenever the dust settles ( assuming it does) that one of the employment measurables will be that many companies are using this situation to both downsize and to painlessly get rid of their bottom performers as well as those with the least skills package to move in whatever the new direction for the enterprise is. While it may well be a prudent business decision to be more selective in the rehiring process, there will be some number of folks who thought they were being furloughed for the duration who will never get rehired. I guess I would prefer some moneys to be spent in retraining, in fixing America's infrastructure, and in preparing folks for whatever the new way of doing business will be in this country. Guess maybe that makes me a non-supporter of spending tax dollars on a "National Garden of Hero's"
ReplyDeleteThanks Ed. Sometimes there is no happy solution. When the tractor was invented it changed the lives of many people. It takes time for a society to adjust to such large changes. I do not doubt that Covid will cause large and slow adjustments. Policies that freeze people where they are won't help. Policies designed to help the transition are what is needed. No easy way out.
DeleteThe hardest part is retraining. Folks who never read shall have the hardest time focusing on a new skill. My Navy experience is that teams encourage eveyone to work and learn for advancement. Mineworker to coding has been more difficult. Colleges must shift focus...
ReplyDeleteThanks Bill. I am not sure that colleges need to shift. They are not very good at that. Too much inertia. Community colleges were born to do that kind of thing as are technical schools. Society needs to reveal priorities for more young people -- and older too -- taking that track. More people need to be advised to move in that direction.
Delete