Roger Bootle
Work, Wealth and Welfare in the Robot Age
Get ready for the AI revolution.
Artificial intelligence is without a doubt the subject of the most buzz and speculation among contemporary technological advancements. According to AI supporters such as futurist Ray Kurzweil, smart computers will outperform human brains by 2025 and surpass all human brains combined by 2050. Kurzweil refers to this point as the singularity, and it appears that it will only be a matter of a few years until machines entirely replace humans, taking over even the most difficult tasks and jobs.
It's no surprise that the advancement of robotics and artificial intelligence is causing great concern among corporations, individuals, and governments! According to a 2015 Chapman University survey, Americans are more concerned about robots replacing them than they are about death.
But how likely is the dismal image of the AI revolution? Will AI truly mean the end of all work, and even humanity? In this review, we'll look at some of our most pressing issues, hopes, and fears about the age of AI from a practical standpoint. Given the history and macroeconomics of technological advancement, you will gain a better understanding of the impact AI is likely to have on your life.
In the book overview, you will learn:
Which jobs are robots most likely to replace?
What new industries and investment possibilities may emerge?
Education is the most crucial aspect of preparing for the robotic era.
1. The development of robotics and AI will result in a fourth industrial revolution akin to the ones we've seen before.
How do we forecast the future of the global economy? In order to comprehend the present and guess what will come next, we might look to the past for answers.
For economists, the Industrial Revolution is the most important historical trend to analyze. But, according to American economist Robert Gordon, there have been three independent industrial revolutions. The first was the process of technological innovation and social and political upheaval that began in Great Britain in the late eighteenth century with the advent of steam engines and railways.
The second phase began at the end of the nineteenth century with the invention of electricity, combustion engines, and telephones. The third one occurred in the 1960s, with the introduction of the computer. And today, with the technical developments of robots and artificial intelligence, we are poised to enter the fourth industrial revolution.
However, AI and robotics have been so overhyped that it is easy to believe that they will usher in a far more profound alteration of the world than "just" another industrial revolution. It is true that robotics and AI have advanced significantly in recent years, particularly in terms of processing capacity, algorithmic decision-making, and text and picture recognition. In 2016, for example, Google's DeepMind AI defeated the incumbent human champion at Go, a complex Chinese board game.
However, this area has experienced restricted growth. For example, Google recently attempted to train AI to recognize photographs of cats on YouTube with significantly less success, requiring the capacity of 16,000 computers to identify a single one. There are still many skills that robots and AI struggle to master, such as creative thinking, emotional intelligence, and manual dexterity, for which no obvious solution exists. So, despite what AI enthusiasts claim, there is little reason to expect that robots will replace people in any but a limited number of vocations in the near future.
So, what can we expect from the fourth industrial revolution of robotics and artificial intelligence? Even though earlier revolutions did not immediately enhance workers' living conditions, their pay and quality of life gradually improved. In the year 2000, the worldwide per capita GDP was more than thirty times higher than in 1800. Similarly, we can view the AI revolution as a process rather than a single, dramatic event. However, following the same pattern will increase productivity and economic growth, benefiting everyone in the long run.
2. Machines will replace some "robotic" human occupations, but new ones will emerge to take their place.
The robots are about to take our jobs! That is one of the biggest concerns about the rise of AI, yet it is mostly incorrect. According to the McKinsey Institute, just 14% of jobs in wealthy nations are "highly automatable," with only 5% being "entirely automatable." This does not lend credence to nightmarish predictions of widespread unemployment. However, it is possible that robots will replace 375 to 700 million jobs by 2030.
Cashiers, supermarket baggers, check-in assistants, and other repetitive, low-skilled occupations are among those most likely to disappear. AI can currently handle regular legal work, bookkeeping, analysis, and rudimentary translations.
However, such a shift does not always have a negative economic impact. New employment emerges when machines replace some. Agriculture provided 40% of all employment in the United States throughout the 1900s. Today, it barely accounts for 2%, yet overall employment has not decreased.
By 2026, the US is expected to produce 12.4 million new jobs, with the creation, production, and maintenance of robots directly contributing to these employment opportunities. Creating, producing, and maintaining robots will directly account for some of these new employment opportunities. Others will be the indirect result of the AI revolution. For example, the expansion of robots may free up people to focus on more "human" roles, such as giving clients personalized guidance and advice.
In many cases, robots and artificial intelligence fail to live up to their hype. For example, the replacement of drivers with self-driving cars is moving more slowly than anticipated. For technical and regulatory considerations, none of the current models are entirely autonomous. Even when automobiles steer themselves, drivers must remain vigilant and prepared to intervene. Fully self-driving vehicles can only go on very specific routes, such as between airport terminals.
Humans are simply superior to machines in creative fields such as art, design, and journalism, but they also excel in tasks requiring adaptability and manual dexterity, such as plumbing, gardening, and electrical work. A robot may be able to create your car, but if it breaks down, you will still need to see a human expert.
As a result, in many cases, machines will simply supplement human labor, increasing productivity. For example, many doctors are already employing surgical robots to assist them with complex procedures.
Another popular myth is that robots "work for free." However, robots and artificial intelligence (AI) are extremely expensive to design, develop, and maintain, and they are constantly at risk of becoming obsolete. The average industrial robot costs roughly $100,000 to purchase and up to four times that much to maintain over its lifetime. This means that, for certain businesses, human labor may simply be the cheapest alternative.
3. As productivity rises, workers will be able to prioritize more leisure time over more labor.
According to Deloitte's Shift Index, 80 percent of employees despise their work. However, the average adult nowadays spends the most of their life in a full-time job, working between 30 and 40 hours each week. Many office professionals, lawyers, and bankers do considerably more than that. Why do we work so hard if we despise our jobs?
The solution is not as simple. A job is more than simply a source of income for many people; it provides them with meaning and purpose. While working can be stressful, being unemployed can be even more so. Furthermore, society values economic success and recognizes people's competitive nature. And when inequality grows, people on the bottom end of the economic spectrum must work harder to make ends meet.
But the AI revolution may eventually allow us to work less, and there is a compelling rationale for doing so. According to studies, countries that work a lot, such as South Korea, have consistently lower levels of happiness than those that work less, such as Denmark. Nations in the latter group have a greater number of volunteers.
Benjamin Franklin, an American founding father, was among the first to advise that in the near future, people should not be required to labor more than four hours per week. Since then, people have stated the end of work several times, but nothing has happened.
However, if robots and AI become more prevalent in the workplace, people may be able to focus on more meaningful aspects of their professions and work less overall. The increase in productivity, GDP, and material riches that machines may offer means that an increasing number of people will be able to prioritize more leisure time above more employment. This could result in shorter workdays, shorter workweeks, longer vacations, or earlier retirement.
In certain regions, the transformation is already underway. The IG Metall, the national German metalworkers' union, has succeeded in cutting the workweek to 28 hours for around 900,000 employees.
It's also a matter of choice and preference as to whether people will work more or less in the emerging economy. These, in turn, depend on broader social and cultural variables. A society that prioritizes hobbies, community service, and personal growth over economic achievement would encourage people to take advantage of their newfound freedom.
4. If the cost of labor falls, economic inequality between individuals and nations will increase.
In recent years, several economists have noted a troubling trend. Income disparity in Western nations has increased since the 1960s. Back then, the GDP of people in the lowest quintile of the income spectrum increased by 5.5 percent per year, while the highest quintile's GDP increased by only 2 percent. However, in 2014, the yearly growth rate of the GDP was 53% for those at the top and only 14% for those at the bottom. The gap between the affluent and the poor is growing at an alarming rate.
Will this trend continue in the AI economy?
Introducing robotics and AI into the economy may have comparable repercussions to China's rise a few decades ago. As China opened up, it brought cheaper labor into the global workforce. This put downward pressure on salaries in the West, resulting in reduced demand, cheaper prices, and exceptionally low loan rates. Lax financial regulation aided this trend, culminating in the 2007 Global Financial Crisis.
Robots and artificial intelligence (AI) could lower wages in a similar way. Income inequality would expand as employees earned less and companies earned more.
How successfully a country uses and regulates technology determines its success in the new economy. China, like the United States and the United Kingdom, is one of the largest investors in AI technologies. However, developing African nations may progressively fall behind as they cannot afford the initial expenditure to purchase or develop new technology.
However, such rises in inequality are not inevitable. It's possible that as AI increases productivity, the cost of human labor may rise, raising overall living standards. Some economists also believe that while any technological advance first raises inequality, it eventually decreases. Finally, the productivity gains from new technology will benefit all economic participants. Furthermore, government rules and regulations will have a vital influence. If wisely built, they have the ability to mitigate the negative effects of the AI revolution while increasing its potential for constructive social change.
5. Governments must develop clear laws and regulations to combat inequality and foster a sustainable AI economy.
After discussing the hazards and benefits of the AI revolution, we must now address the critical issue of legislation and regulation. Should governments encourage the spread of AI, or should they discourage it?
The answer is neither. Many believe that the AI revolution will be less harmful to the economy than anticipated. As a result, there is no need to impede research and investment in the field unless it serves a plainly malicious objective, such as the creation of autonomous weaponry. Governments should also avoid imposing a "robot tax," which means charging firms an additional fee for incorporating new robot and AI technology into their production processes.
There is, however, no compelling rationale to accelerate the AI revolution through subsidies and tax advantages. At the moment, we simply cannot adequately forecast the impacts of these new technologies in order to make any significant political decisions concerning them.
This does not imply that politicians and policymakers should do nothing. In fact, a coherent legal-ethical framework will promote the long-term evolution of the AI economy while protecting individuals and societies. What happens, for example, when an artificial intelligence, such as a self-driving automobile, causes an accident? Should we blame the owner of the car or the manufacturer? Ahead-of-time resolution of liability issues is necessary for the widespread adoption of new technologies.
As AIs get more access to and use of personal data, we will require stronger privacy legislation, such as the EU General Data Protection Regulation, which will take effect in 2018. Better data protection legislation could also help to avoid AI-enabled cybercrime, terrorism, and the spread of fake news.
To address the issue of rising inequality, many on the left and right are advocating for a universal basic income. Every individual or household receives a regular fixed income with no special restrictions through a Universal Basic Income (UBI). Though a fantastic idea in theory, most concrete UBI plans are prohibitively expensive. The UBI also threatens to disincentivize labor by allowing people to meet their basic requirements without earning a salary.
However, governments can implement more modest redistribution schemes. These could include expanding and simplifying the current welfare system, enacting anti-monopoly rules, or boosting taxes on the ultra-wealthy.
As we'll see in the following blink, governments may take another key step to combat inequality and prepare people for the next AI economy.
6. We must change the educational system to equip individuals for the AI economy.
Even if you put aside the impending AI revolution for a moment, you might agree that much of our current educational system is out of date, both in terms of content and format. What we educate our children and how we teach them do not meet the needs of contemporary society. That is why, if we are to help people live good, self-determined, and productive lives in the emerging AI economy, we must fundamentally change the educational system.
What subjects should the new educational system concentrate on? For AI enthusiasts, the answer is obvious: STEM topics (Science, Technology, Engineering, and Mathematics). But it's unclear why everyone in the robot age has to understand how robots work or how to create one themselves.
In reality, as robots and AI take over more technical aspects of labor, human qualities like creativity, originality, and empathy may become increasingly crucial. A 2006 survey indicated that companies place a higher priority on cooperation and leadership abilities than technical competence. So, perhaps we should make art, literature, history, and politics the focus of the new curriculum.
Education in the AI era must also address the ethical implications of emerging technologies and teach people how to engage with them in an efficient and helpful manner. In this age of information overload, it is critical that young people learn how to balance, trust, and analyze facts.
Robotics and artificial intelligence have the potential to improve classroom efficiency. Teachers that use AI learning methods, such as interactive games and software, can minimize their enormous workload and make more time for in-depth, personal lessons with pupils. Rather than limiting education to the classroom and our early years, new technologies like Harvard's online courses and AI-powered personalized learning systems have the potential to enable lifelong learning and retraining.
If education becomes more individualized and people learn to use their skills and time in productive ways, the new system has the potential to offset rising inequality. A more flexible, modern education system that ensures that everyone develops into well-rounded individuals will benefit society as a whole.
7. The AI revolution might be a net benefit, resulting in increased productivity, a thriving economy, and a better quality of life.
In previous blinks, we discussed some of the reasons why public opinion of the AI revolution may be excessively negative. After all, it appears that the rise of robots and AI will be similar to previous technological changes. The AI revolution is unlikely to result in large job losses, but it will be excellent news for overall economic development.
As we've seen, robotics and AI will increase economic production by allowing humans to complete tasks more swiftly and efficiently. Furthermore, self-driving electric vehicles are expected to stimulate investment, ensuring high overall demand. A continuous increase in investment and demand may cause interest rates and bond yields to rise to levels comparable to those prior to the Global Financial Crisis. Human service industries, such as health care and recreation, will thrive as we want more high-quality free time. For example, we should expect an increase in the number of people offering and using personal coaching sessions to better their physical health, mental health, and relationships.
Overall, there are plenty of reasons to be positive about the AI economy.
According to physics professor Jim Al-Khalili, artificial intelligence has the potential to increase global per capita GDP by 150 percent over the next three decades. One confusing element could be that as productivity rises, people may opt to work fewer hours and have more leisure time, resulting in shorter work weeks or longer vacations. Although reducing work time may lower the increase in per capita GDP, it is expected that the increased free time will enhance the average quality of life.
As we have seen, rising economic inequality is a serious problem, but the government can take steps to prevent and mitigate the possible negative effects of the AI revolution. Furthermore, an increasing number of economists support John Meynard Keynes' view that state intervention, including increasing government spending, lowering taxes and interest rates, and even distributing money to individuals to boost their purchasing power, can reverse an economic downturn.
Governments will have more time to evaluate new initiatives as robotics and AI changes are expected to occur more gradually than predicted. Similarly, firms and individuals will be able to gradually transition to the new economy. Everyone will gain from the new AI economy thanks to wise laws, improved redistribution policies, a strong legal framework, and a revamped education system.
Final Summary
There are numerous reasons to be enthusiastic about the fourth industrial revolution, which robots and artificial intelligence will bring about. The fourth industrial revolution will create new jobs and industries while eliminating some existing ones. Overall, productivity will increase, and the economy will thrive. As people learn to work alongside machines, they will have more leisure time, which will improve our quality of life. To counteract potential increases in inequality, governments might develop strong legal frameworks, execute modest redistribution policies, and improve education.