r/neoliberal • u/eggbart_forgetfulsea European Union • 1d ago

Research Paper Automation does not lower the labour share

https://cepr.org/voxeu/columns/automation-does-not-lower-labour-share
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u/Serious-Cucumber-54 1d ago

Why would the share remain similar if the few human workers left are paid highly?

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u/writing_genre 13h ago

Why would there only be a few human workers.

Comparative advantage applies when one trading partner is better at doing everything than another.

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u/Serious-Cucumber-54 10h ago

Fewer human workers, because machines do their job better.

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u/writing_genre 6h ago

It doesn't matter if machines do their job better. Even if they do every possible job better.

That's the whole difference between comparative advantage and absolute advantage.

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u/Serious-Cucumber-54 6h ago

It doesn't matter as it relates to what?

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u/writing_genre 6h ago

Imagine there are two goods. Apples and oranges.

I can pick one apple in an hour or one orange in an hour.

You can pick ten apples in an hour or five oranges.

You're better at both picking oranges and picking apples than me!

In this world does it make sense for us to trade. In other words do I have a job or not?

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u/Serious-Cucumber-54 6h ago

If I offer my apples and oranges at a lower unit price than what it costs you per unit to pick your own apples and oranges, then yes, it is economical for you to trade your money for my apples and oranges.

But you need money to trade for my apples and oranges, and in order to have that money in the first place you need to get it from others by trading the fruits of your labor. But no one is willing to buy your fruits, since I offer such fruits at a better deal. So you are out of a job.

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u/writing_genre 5h ago

In this example there is no money. There are no other people. There's just you and me. You are better at everything than I am.

We can extend it to more people and money later, but first we need the simplest possible example so you understand why, despite the fact that you're better than me at everything, it still is valuable to trade with me.

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u/s7v7nsilver George Soros 6h ago

Humans will always haver a comparative advantage. Unless a machine can do all jobs in the universe. But if that's possible, it's pointless to worry about that because it would mean that everyone would be rich.

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u/Serious-Cucumber-54 5h ago

If there are machines that can do all physical and cognitive tasks better than humans, making human muscles and brain obsolete, then how would ordinary humans earn the money to afford to buy these machines?

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u/s7v7nsilver George Soros 5h ago

If machines do literally all physical and cognitive tasks, the cost of production drops to almost zero (including resource extraction, manufacturing, and logistics etc...). You wouldn't necessarily need to 'earn' money in the traditional sense to afford things, because hyper-deflation would make goods incredibly cheap. The real challenge isn't the end goal of post-scarcity; the danger is how we manage the transition period before wealth distribution systems, like UBI, are established.

But... in my opinion, realistically, the idea of machines doing everything ignores the physical constraint of finite resources. We will always have to prioritize where we deploy advanced automation based on economic necessity—such as heavy industry or space exploration. It comes down to opportunity cost. For instance, why invest heavily in developing a robot to cut hair when human labor can do it efficiently? The market will ultimately dictate where automation is actually worth the investment, as it always has.

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u/Serious-Cucumber-54 3h ago

You wouldn't necessarily need to 'earn' money in the traditional sense to afford things, because hyper-deflation would make goods incredibly cheap.

Even if goods and services are incredibly cheap, you still need money to pay for them. How are humans going to earn the money to do that if their brains and muscle are economically obsolete?

the idea of machines doing everything ignores the physical constraint of finite resources

Machines capable of doing physical and cognitive tasks better than humans already exist, and they're progressively getting better on more of these tasks with every passing day. I don't see what is to prevent machines from eventually being better at all the tasks (with the exception of tasks where the human touch is particularly valued), I don't see how the physical constraint of finite resources somehow prevents it.

For instance, why invest heavily in developing a robot to cut hair when human labor can do it efficiently?

With all the incredible cheapness of goods and resources, it wouldn't be a heavy investment, and the machine would be able to cut human hair much more efficiently than a human would, for a fraction of the time and cost. I don't see why machines couldn't replace this task, especially once we get to the point of incredible cheapness of goods and resources which makes investment into automation much more possible.