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Now we've learned the capitalist's answer to automation, what could be a democratic state's answer to it?

  • automation means, same or more work can be done in less time
  • state is faced with more unemployment

Police departments could hire more police. Hospitals could hire more nurses.

Currently, state already does not have enough money to do that, though the demand is quite high (nurses required by the aging population; more police required to face crimes of some unemployed).

Automation leads to higher wages which leads to more consumption of other things.

Yes, but for those limited number of people who retain their jobs replacing other jobs. So globally it is not clear to where more tax money should come from. On the contrary, more people available will push down the low wage market.

So possibly the state will have to deal with mass unemployment and low wages. Also, seizing industry because very little number of workers will produce everything so prices will decline and as well tax related to consumption. Sales volumes drop as well so also capitalists will pay less into the system.

What's the solution for the most of the population (being neither highly intellectual employees nor entrepreneurs)?

UPD the question is not duplicate because it searches for a state's answer unlike a capitalist's answer.

J. Doe
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    This is not how macro economics works. Societies adapt and economies change. Also you seem to be making the assumption that any particular economy must be currency based which is not true. Currency exists to deal with scarcity. As societies progress we have more and more sector economies that become post-scarcity (healthcare, internet, water, food, housing, etc.), and other new ones (with scarcity) that arise. Automation is, in general, a positive thing as it will allow people to focus on evermore complex intellectual tasks. – armatita Aug 16 '18 at 10:17
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    In what sense do you expect a "state's" answer to meaningfully deviate from a "capitalist's" answer? Do you have a particular state in mind? Most states in the modern world are at least somewhat capitalist, and much of the deviation towards a more socialist structure is arguably the result of technology making that both easier to achieve and the most obvious vector for creating new jobs (what's better than employing people to help some people? employing a lot of people to help everyone!). – zibadawa timmy Aug 16 '18 at 11:16
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    @armatita Post-scarcity healthcare? Your not-an-American is showing! – zibadawa timmy Aug 16 '18 at 11:20
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    @zibadawatimmy democratic state shoud take care of the whole population i.e. also the minimal wage should support affordable life quality. And if there is not enough money state can't hire people for social things. I.e. state's answer focuses on people well being and capitalis's answer focuses on securing profitability maximization. – J. Doe Aug 16 '18 at 11:24
  • @J.Doe I don't see much reason that a state (perhaps we're imagining China or Russia?) wouldn't monetize the same vectors that capitalism would (increased leisure and service economies), it would just do them in a...not necessarily capitalist way? If nothing else its hand would be forced by powerful capitalist economies already drifting that way, unless some other force has crushed them (as the other Q&A indicates it seems unlikely that automation is any threat to capitalism). – zibadawa timmy Aug 16 '18 at 11:31
  • @zibadawatimmy Indeed I'm not. And I know it might sound counter-intuitive but, in general, the US healthcare has been driving towards post-scarcity. Even though it's not free, more and more people have access to it (even if poor). My point is that it might not be post-scarcity but it's certainly more than in the 80s, and in the 80s more than in the 50s. BTW even countries with universal healthcare have costs. Last time I went to a physician I paid 12 euro. So not, strictly speaking, post-scarcity (and by post-scarcity I'm referring to the actual economy concept, not the literal meaning). – armatita Aug 16 '18 at 11:52
  • "Now we've learned the capitalist's answer to automation," No haven't learned anything from there other than the fact that politics SE is often an opinion-fest contest. No one speaks for capitalism but everyone likes to guess the future. – the gods from engineering Aug 16 '18 at 14:49
  • FYI: https://economics.stackexchange.com/questions/24162/has-any-research-found-that-automation-will-decrease-inequality – the gods from engineering Aug 17 '18 at 01:07
  • @Fizz - thanks! Therefore https://economics.stackexchange.com/questions/24153/evidence-of-abundance-and-post-scarcity – J. Doe Aug 17 '18 at 04:57

2 Answers2

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Generally discussed approaches I'm aware of:

  • Automation tax. You replace income taxes on workers with taxes on automation, based on how many workers you let go thanks to automation.

  • Value-Added tax or other consumption taxes.

    The cost of producing a good falls due to automation. Thus, it would be possible to raise it's sale cost via VAT.

  • Data tax.

    A LOT of the growth isn't just in automation, it's in data (whatever buzzword you want to use, AI, Big Data, Data Science).

    Problem (as stated) is that basically companies take valuable personal data about individuals, extract value from it, but do not adequately compensate individuals for it.

    The proposal would require adequately compensating individuals.

  • As the linked answer noted, re-training.

    Yes you can't re-train a truck driver to write programs (sometimes. Though given some "programmers" I had to deal with over my career both at work and answering questions on StackOverflow ... I'm somewhat skeptical even of that claim).

    But you can assuredly re-train a truck driver for some other service job. For example, construction.

  • Somewhat linked to the previous point, rebalancing the economy.

    Most of the costs in the country like USA are high costs of housing and medicine.

    If you throw more people and resources (and get governments to eff off where they prevent supply growth to placate entrenched interests), you can solve both problems in one throw of stone:

    1. You increase supply (by providing more housing, more services) thus making those two costly things much cheaper, thus making overall cost of living take a drastic dive.

    2. The work needed to increase that supply will require employing more people in those sectors. Construction. Medicine. Services in general.

      You can't automate a nurse. Or a home attendant for all those baby boomers. Or a plumber.

Most of the citations are various episodes of Freakonomics and various economics blogs I read over the years.

user4012
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  • can be Freakonomics named a primary source be taken seriously? i.e. it not a study but just a book. – J. Doe Aug 16 '18 at 11:54
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    @J.Doe - every podcast they have, they pretty reliably reference indicating what source the info is from. – user4012 Aug 16 '18 at 12:27
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    @J.Doe - additionally, for this specific question, just how much reference do you need for "someone proposed this method"? – user4012 Aug 16 '18 at 12:28
  • I consider "someone" should be a scientist doing some empiric studies, which could be found on Google Scholar for example. – J. Doe Aug 16 '18 at 12:35
  • @J.Doe - there are no scientists studying something as vague and ephemeral as "state's answer" as far as I'm aware. There are some economists doing vague projections that are likely wrong. – user4012 Aug 16 '18 at 13:05
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Automation tends to make workers more productive but the creative destruction of technological advances leaves people with useless skills.

One good solution is smart redistribution policies like the earned income tax credit in the United States. The Center on Budget and Policy Priorities describes the program: "A worker’s EITC grows with each additional dollar of earnings until reaching the maximum value. This creates an incentive for people to leave welfare for work and for low-wage workers to increase their work hours." These kinds of programs help people displaced reenter the workforce and find places where they can productively contribute to society and support themselves. Because these programs incentivize work rather than disincentivizeing it or making it harder to find, they're a relatively safe way to redistribute the gains of automation from taxpayers to people pushed into new, lower paying jobs without creating a culture of dependency.

Whether automation taxes are a useful tool is debated. Bill Gates supports a tax on "robots," but this economist article argues:

A robot is a capital investment, like a blast furnace or a computer. Economists typically advise against taxing such things, which allow an economy to produce more. Taxation that deters investment is thought to make people poorer without raising much money.

Taxes which focus on automation itself are distortionary. They destroy wealth in a way unrelated to their goal. The article describes an answer to automation in:

Waves of automation might necessitate sharing the wealth of superstar firms: through distributed share-ownership when they are public, or by taxing their profits when they are not.

Tax successful firms and redistribute their profits or help common people to own a share in those firms. This doesn't distort the economy away from automation, it just helps people get a share of the benefits.

lazarusL
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