Tuesday, December 11, 2012

Krugman Promoting Zombie Horror, Not SF Futures

Paul Krugman has been writing about robots lately. He explicitly cites J. R. Hicks' incoherent and mistaken 1932 book, The Theory of Wages. This is a classic statement of the neoclassical theory of factor substitution, of the choice of technique in allocating scarce factors among alternative uses.

If I want to analyze the adoption of new technology, I turn to:

  • David Ricardo's chapter, "On Machinery", in the third edition of his book.
  • The Von Neumann model of growth, which can be read as a model in which robots produce robots.
  • The Harrod-Domar model of the warranted and natural rate of growth, along with the definition of Harrod-neutral and biased technological change.
  • Joan Robinson's models of metallic ages.
  • Kaldor's growth models of various vintages and his definition of the technical progress function.

I am in agreement with Krugman on the importance of Hicks' book in the development of the neoclassical canon. And I recognize the existence of a problem in empirically distinguishing between the choice of technique and the adoption of new technology in Kaldor's model(s) of economic growth.

Update: Matias Verengo has two posts on this topic.


LK said...

Do you think mass automation on a much larger scale will create structural unemployment and aggregate demand problems in the future?

Anonymous said...

Interesting question,Lord Keynes.At least some think so even Keynsians,and from a philosophical,the question must be raised:Is fulltime,many time alienated work,diserable?This is one thought provoking but intersting read from André Gorz on the issue:
Critique of Economic Reason:Andre Gorz
Andre Gorz
1.1. The Ideology of Work http://www.antenna.nl/~waterman/gorz.html

Robert Vienneau said...

Some lessons I take from the cited work: no market mechanism exists to simultaneously ensure accumulation will lead to both the economy operating at normal capacity and the labor force being fully employed.

Nevertheless, I would think that a structure of accumulation in which the natural rate of growth persistently falls below the actual rate would generate political and social forces that would change the structure. I hoped that the recent global financial disaster would have led to a different structure, including a better distribution of income, addressing the global problems that I see evident since the end of the Bretton Woods' system. But I do not see much evidence of that.

In this environment, I can see increasing mechanization and automation accompanying a continued extreme maldistribution of income in the developed countries and, thus, persistent aggregate demand problems. The mechanisms are more a matter of bargaining power and politics.

I'd like to agree with Krugman politically, but his pointing to neoclassical models shows his captivity to zombie ideas. (Ideas of skill-biased technical change never made any sense in the 1980s, either.) His pointing to models of monopoly power and previous articles on the political influences on the distribution of income might be cause for hope.

Robert Vienneau said...

" the natural rate of growth persistently falls below the actual rate" should be "the actual rate of growth persistently falls below the natural rate of growth".

And I should have linked here.