Paul Krugman Rediscovers Karl Marx

[The Real]

I wonder what took him so long...

Rise of the Robots - NYTimes.com

Catherine Rampell and Nick Wingfield write about the growing evidence for “reshoring” of manufacturing to the United States. They cite several reasons: rising wages in Asia; lower energy costs here; higher transportation costs. In a followup piece, however, Rampell cites another factor: robots.


The most valuable part of each computer, a motherboard loaded with microprocessors and memory, is already largely made with robots, according to my colleague Quentin Hardy. People do things like fitting in batteries and snapping on screens.

As more robots are built, largely by other robots, “assembly can be done here as well as anywhere else,” said Rob Enderle, an analyst based in San Jose, Calif., who has been following the computer electronics industry for a quarter-century. “That will replace most of the workers, though you will need a few people to manage the robots.”

Robots mean that labor costs don’t matter much, so you might as well locate in advanced countries with large markets and good infrastructure (which may soon not include us, but that’s another issue). On the other hand, it’s not good news for workers!

This is an old concern in economics; it’s “capital-biased technological change”, which tends to shift the distribution of income away from workers to the owners of capital.

Twenty years ago, when I was writing about globalization and inequality, capital bias didn’t look like a big issue; the major changes in income distribution had been among workers (when you include hedge fund managers and CEOs among the workers), rather than between labor and capital. So the academic literature focused almost exclusively on “skill bias”, supposedly explaining the rising college premium.

But the college premium hasn’t risen for a while. What has happened, on the other hand, is a notable shift in income away from labor:

If this is the wave of the future, it makes nonsense of just about all the conventional wisdom on reducing inequality. Better education won’t do much to reduce inequality if the big rewards simply go to those with the most assets. Creating an “opportunity society”, or whatever it is the likes of Paul Ryan etc. are selling this week, won’t do much if the most important asset you can have in life is, well, lots of assets inherited from your parents. And so on.

I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism — which shouldn’t be a reason to ignore facts, but too often is. And it has really uncomfortable implications.

But I think we’d better start paying attention to those implications.

 

[The Real]

And a 2nd article. Damn, he almost sounds like he's having a Marxist awakening:

Human Versus Physical Capital - NYTimes.com

One more entry in the robots and all that discussion, just to stress how much recent trends require a new storyline.

Our discourse on inequality has been dominated for decades by issues of education and talent — and for what were good reasons at the time. There was a big increase in the college premium in the 1980s and to some extent in the 1990s — but since then, not so much. From EPI:

Meanwhile, the people at BLS have sent me an update of their labor share calculations:

So the story has totally shifted; if you want to understand what’s happening to income distribution in the 21st century economy, you need to stop talking so much about skills, and start talking much more about profits and who owns the capital. Mea culpa: I myself didn’t grasp this until recently. But it’s really crucial.

 

[TrueEpic08]

Twenty years ago, when I was writing about globalization and inequality, capital bias didn’t look like a big issue; the major changes in income distribution had been among workers (when you include hedge fund managers and CEOs among the workers), rather than between labor and capital. So the academic literature focused almost exclusively on “skill bias”, supposedly explaining the rising college premium.

So the story has totally shifted; if you want to understand what’s happening to income distribution in the 21st century economy, you need to stop talking so much about skills, and start talking much more about profits and who owns the capital. Mea culpa: I myself didn’t grasp this until recently. But it’s really crucial.

You know, orthodox economics is quite pathetic sometimes...especially when it comes to how they recognize the caesura in their own thoughts.

Also, with the way that he words it, it's obvious that:

1. He doesn't read much literature outside of economic orthodoxy, as this has been researched on near-constantly there (no surprise). Hell, even a blatantly capitalist blog such as Naked Capitalism could have revealed this to you.

2. He'll hold on to this just enough to see it through to either the current status quo or the new status quo, where attempts will be made to forget this.

 

[zerozero]

developed countries are screwed. I don't really see an "out" for late stage capitalist economies. they need to find a way to sufficiently employ the large middle class sector but there's no work left for those people... just elite capital owners and wage slaves

 

[zerozero]

not to mention developed countries barely have any youth population, and the young they do have are jobless and rioting