Paul Krugman recently posted a couple of pieces on technology and inequality. Those two pieces are valuable in themselves and I recommend them to my readers. (See here and here)
Unbeknown to me, both pieces were part of a larger debate, of which I became aware thanks to Ramanan. At one hand, Izabella Kaminska (FTAlphaville) and a group support a "technological unemployment" thesis, with clear Marxian overtones (apparently, perceived by Krugman). At the other hand, Tim Worstall (Forbes) and others oppose this. Kaminska herself offers a brief background here.
Frankly, I haven't got a clear picture on the whole debate. Therefore, I will abstain from general comments. I will, however, comment specifically on today's Worstall post, "That Robot Economy and the Rentier Class". (See here)
Worstall summarizes Kaminska's party's view thus:
"The argument is that as robots become capable of doing everything then there will be two very stark classes. The ones who own all the robots and thus get all the money and then the rest of us who live on whatever scraps anyone bothers to tax out of the robot owners".I am in no position to comment on the fairness of Worstall's summary; so, I'll take his word for it.
After that summary, Worstall goes on to argue that machine-produced goods would become cheaper faster than workers would lose income. So, for instance, if cars are entirely made by machines, their prices would fall faster than car-buyers' income. In other words, real wages, measured in cars, rise.
The first point to make is that that is an assumption which Worstall did not argue. Here, I'll make mine his words: "I'm afraid I just don't see it".
The second point is that Worstall inadvertently stumbled upon a proof, by reductio ad absurdum, of the proposition "labour is the source of all value" (proof sketched by Ernest Mandel in 1967 in his "An Introduction to Marxist Economic Theory").
Let's assume the negation of the proposition (i.e. "is not the case that labour is the source of all value"). Knowing of this, capitalists everywhere invest in machines and sack all their staff.
Now, machines make everything: cars, washing machines, iPods, clothes, medicines, sausages; they write news stories (see here) and even books, diagnose and treat diseases, work the land; run movie-theatres, shoot the movies, compose their sound track, write their script and act; they make and pilot commercial planes; run radio and TV stations; cook, clean and look after babies at home, and have sex for money, in the streets; teach at schools and universities, keep law and order and break them, as required; sweep the streets and help in shops, and design other machines.
In a society where no one works, because machines do all the work (as said literally by Worstall himself in his summary), no one earns wages. Leaving aside "whatever scraps anyone bothers to tax out of the robot owners", if such scraps were forthcoming, no one has incomes.
Now, if no one has incomes, then no one can spend, no matter how cheap the cars, the washing machines, iPods, clothes, medicines, sausages, movie tickets, doctors' fees.
If these things cannot be purchased in the market, because would-be buyers have no income, they have no market price. Their market price is not defined.
Is not that those things are not useful. There is no a priori reason to doubt machines can make quality, useful stuff: stuff with "value in use" (as Adam Smith used to say); or with "use value", as Marxists say.
Is not that those things lack "utility", as I suppose Worstall would say.
Is that would-be purchasers lack the wherewithal to pay for them. Their market price is undefined, and so is their "value in exchange" or their "exchange value". Whatever utility they might have, it's irrelevant, without the income to pay for the goodies.
So, we find a paradox here: in their effort to reduce costs, capitalists (intent on profiting from their "entrepreneurship") end up unable to sell their much cheaper and more abundant produce, let alone to make a profit or even recoup their investment.
We must conclude that the proposition "is not the case that labour is the source of all value" is false. That is, whether readers like it or not, the proposition "labour is the source of all value" must be true.
To put things differently, it is the labour exerted to produce things, for which workers are paid, that allows workers to earn an income, income they use to buy those things they produced. This is what confers "value in exchange"/"exchange value" to the commodities.
And although Worstall stumbles quite badly with other things (among them, his highly idiosincratic definition of communism), I'll let them pass. With this is enough:
"For here’s a little known point that I like to make. We don’t actually care about jobs: don’t care if no one at all has one. We also don’t care about incomes: it’s not a problem if everyone has very low incomes. What we actually care about is that everyone has the opportunity to consume".