U.S. income inequality worst since 1928

[Sheilbh]

Let's not go on attacking the Luddites all the time

I don't get the obsession with automation. It's come up here a few times and is often mentioned on many blogs, especially by American lefties. It's something - like anti-free trade sentiment - that, from my view, seems peculiarly American.

[Admiral Yi]

Isn't that a rather ridiculous and extreme position?

No.

The idea is not that computers and automation are bad, they are very good, but life is not super simple back and white.  There are some consequences to it that do have some problematic impacts that need to be addressed, not just destroy all computers luddite like.

Computers and automation have generated a return on investment, multiplying wealth.  They have replaced human labor in a number of industries.  In a hypothetical world in which computerization/automation had never occurred, labor's share of GDP vis a vis capital would be higher.  But our real incomes would not.

[MadImmortalMan]

What I'm wondering is where is the growth? It used to be that high income inequality was correlated with economic growth. Why don't we have 1928's GDP growth rate of 7% or whatever it was?

[The Brain]

Obama.

[Admiral Yi]

What I'm wondering is where is the growth?

Presumably overseas, where capital is most scarce and therefore recieves the highest returns.

[Jacob]

Let's not go on attacking the Luddites all the time

I don't get the obsession with automation. It's come up here a few times and is often mentioned on many blogs, especially by American lefties. It's something - like anti-free trade sentiment - that, from my view, seems peculiarly American.

It's a convenient simple scapegoat for growing income inequality. It seems it's not just American leftists who reason that way; Yi seems to consider it the primary cause as well.

[Valmy]

It's a convenient simple scapegoat for growing income inequality. It seems it's not just American leftists who reason that way; Yi seems to consider it the primary cause as well.

It may simply be a correlation and not a causation

But when we see tellers being replaced at banks, servers being replaced at restaurants, workers being replaced at factories, and so forth....we wonder.  I mean ultimately it is good we utilize the latest technologies but surely there are some social consequences no?

[Sheilbh]

I don't really get the link to income inequality though.

[Admiral Yi]

I don't really get the link to income inequality though.

Return on investment, winner take all markets, and replacement of semi-skilled labor.

[The Minsky Moment]

Let's not go on attacking the Luddites all the time

I don't get the obsession with automation.

I don't either.  The evidence of the connection between automation and income inequality or labor share is less than overwhelming.  In particular there is a lack of evidence for increased levels of capital intensivity or substitution of capital for labor, which is what we would expect to see in a machine-replaces-man scenario.

[The Minsky Moment]

What I'm wondering is where is the growth?

Presumably overseas, where capital is most scarce and therefore recieves the highest returns.

?
Certainly not in East Asia where capital is very far from scarce.

[Admiral Yi]

?
Certainly not in East Asia where capital is very far from scarce.

Capital that is free to seek a return is arguably very scarce in China.

[Sheilbh]

Return on investment, winner take all markets, and replacement of semi-skilled labor.

Okay. But this is all very Garrett Fitzgerald, that's fine in practice but does it work in theory. Automations been going on for a century at least. I'm not sure that peaks and troughs of income inequality map terribly well with it.

I also don't get how this is causing problems in the US now, as opposed to a few decades ago. Surely increasing automation is a problem for countries that do the cheap manufacturing - like China and Thailand - not ones that are heavily automated, but already high-skill manufacturing like the remaining factories in the US, UK and Germany.

Automation's important in changes to the labour market but I think it's probably the least important of it, feminism and globalisation. I also don't quite see the link between it and income inequality.

[The Minsky Moment]

But when we see tellers being replaced at banks

Did the mass roll out of ATMs result in a decrease or increase in the number of people employed by banks?

[Capetan Mihali]

But when we see tellers being replaced at banks

Did the mass roll out of ATMs result in a decrease or increase in the number of people employed by banks?

It did.