Krugman: Income moving away from labor as new technologies seem capital biased?

[koganbot]

I just posted these Krugman links on the "Persuade An Atheist" thread, where they're tangential. Krugman is quoting and floating ideas about technological advances making workers superfluous in some areas and thereby increasing income inequality. I decided this needed more attention — that is, Krugman says it needs attention ("it's important stuff"!), and presumably he's right.

http://krugman.blogs.nytimes.com/2012/12/08/rise-of-the-robots

Additional factors or explanations cited:

http://krugman.blogs.nytimes.com/2012/12/09/technology-or-monopoly-power

More detailed explanation, potential scenarios:

http://krugman.blogs.nytimes.com/2012/12/10/technology-and-wages-the-analytics-wonkish

What's happening right now is that we are seeing a significant shift of income away from labor at the same time that we're seeing new technologies that look, on a cursory overview, as if they're capital-biased.

Supporting evidence:

http://krugman.blogs.nytimes.com/2012/12/11/human-versus-physical-capital

Comments

[azacab.livejournal.com]

The slow shift to capital always scares me. Not that I'm thinking we're going to be living in the Matrix - it's just that it seems like the only solid path to a strong income in America is through (increasingly costly) education. Low-skill manufacturing jobs are never going to come back to America, at least not in the same proportion as they used to. The only hope for physical laborers is that we start producing more high-quality goods that other countries can't compete with. But in the long run, even that seems like a difficult position to maintain.

I guess the whole shift to capital/robots always irks me because, as Krugman points out, gains go to the people who hold all the capital, and workers get shafted. Best quote about it all came from my classmate; when we covered capital vs labor intensive production in class, he turned me and said "It shouldn't be robots taking our jobs, it should be robots making our stuff." I really hope technological progress will shape our world to be like that, but I'm not too confident.

[koganbot]

As I understand it, what Krugman is saying (without as much certainty as he usually demonstrates) is that:

(1) Whether shift to "robots" (shorthand for non-labor-intensive technology) is capital-biased depends on the circumstances; but that this current shift does indeed seem to be capital-biased.

(2) It's not the only reason for the shift to capital (other reasons include the consolidation of wealth and power by the wealthy).

(3) The shift to capital isn't just wiping out low-skill manufacturing jobs, it's depressing and wiping out some middle and top skill jobs as well [examples that naturally come to my mind are proofreaders and editors, though I think and hope that industries that get rid of proofing, editing, and fact-checking are harming themselves; but that's certainly a self-serving belief on my part]; therefore, education is not a sure-fire way to upward mobility or to forestall downward mobility.

(4) I don't remember if he emphasized this much (I haven't re-clicked my links; too busy today), but there's the possibility of wiping out low-skill manufacturing period, not just in the U.S.

He has a new post today with a diagram that would take me more effort to understand than I am able to put forth, but essentially he's saying, here's a simplified model for how introduction of new technology or improved technology could result in wages going down and the cost of capital going up (me, I'm not quite sure what the phrase "cost of capital" means, I'm so much not an economist).

[koganbot]

And this post too, though still mostly speculative:

Smart machines may make higher GDP possible, but also reduce the demand for people — including smart people. So we could be looking at a society that grows ever richer, but in which all the gains in wealth accrue to whoever owns the robots.