REAL LIFE ECONOMICS is an unabashedly smart, fact-driven podcast, dedicated to stimulating thought on economic issues. Each episode will feature an important economic concept or policy, like "free trade" or "tax reform," that the hosts will break into smaller, more relatable concepts, with an eye towards explaining how the "theories" behind the issues play out in "real life." Unlike other media, however, REAL LIFE ECONOMICS won't tell you what to think about a given issue, but will instead, give you a framework to think critically about economic policy and the messages that politicians, for example, would have you believe.
This episode of Real Life Economics focuses on automation and the impacts to job availability and wages. To properly understand automation, one must understand factors of production: Labor, Land, Capital and Entrepreneurship, or as we translate them: Materials, Machines, Management and Workers, and how these feed into the economy. Armed with that basic knowledge, we wade into the deep end of a long conversation that has been going on since the 1800’s about what impact technology and innovation has on workers. Thanks to Moravec’s Paradox, where robots find difficult things easy and easy things difficult, robots tend to displace higher skilled workers, forcing them to seek lower paid work and suppressing wage earning power and feeding inequality. At the more extreme end, some economists lay out a case where automation results in such extreme inequality that a tiny group of capital owners can command an army of working poor. However, in an interview with Dr. Indranil Ghosh, CEO of Tiger Hill Capital and author of the forthcoming book, “Seven Principals of Prosperity,” Dr. Ghosh explains that up until now, technology has amplified humans by more efficiently carrying out tasks that humans can do. He argues that we have to turn that relationship on it’s head and orient ourselves as a society such that humans amplify technology by focusing on skills sets that computers, robots and artificial intelligence are less able to carry out. But, he warns that the march of progress means that we humans, must dedicate ourselves to life long learning to stay in the game. He also examines tax policy and how it creates an incentive to invest in robots and machinery through deductions while penalizes investments in labor by creating additional burden through benefits costs. Solid food for thought as we think about what is really feeding the inequality problem in the US and how to fix that problem.