CAMBRIDGE –
Since the dawn of the industrial age, a recurrent fear has been that
technological change will spawn mass unemployment. Neoclassical economists
predicted that this would not happen, because people would find other jobs,
albeit possibly after a long period of painful adjustment. By and large, that
prediction has proven to be correct.
Two hundred years of breathtaking innovation since the dawn of the
industrial age have produced rising living standards for ordinary people in
much of the world, with no sharply rising trend for unemployment. Yes, there
have been many problems, notably bouts of staggering inequality and
increasingly horrific wars. On balance, however, throughout much of the world,
people live longer, work much fewer hours, and lead generally healthier lives.
But there is no denying that
technological change nowadays has accelerated, potentially leading to deeper
and more profound dislocations. In a much-cited 1983 article, the great
economist Wassily Leontief worried that the pace of modern technological change
is so rapid that many workers, unable to adjust, will simply become obsolete,
like horses after the rise of the automobile. Are millions of workers headed
for the glue factory?
As Asian wages rise, factory managers
are already looking for opportunities to replace employees with robots, even in
China. As the
advent of cheap smartphones fuels a boom in Internet access, online purchases
will eliminate a vast number of retail jobs. Back-of-the-envelope calculations
suggest that, worldwide, technological change could easily lead to the loss of
5-10 million jobs each year. Fortunately, until now, market economies have
proved stunningly flexible in absorbing the impact of these changes.
A peculiar but perhaps instructive
example comes from the world of professional chess. Back in the 1970’s and
1980’s, many feared that players would become obsolete if and when computers
could play chess better than humans. Finally, in 1997, the IBM computer Deep
Blue defeated world chess champion Gary Kasparov in a short match. Soon,
potential chess sponsors began to balk at paying millions of dollars to host
championship matches between humans. Isn’t the computer world champion, they
asked?
Today, the top few players still earn
a very good living, but less than at the peak. Meanwhile, in real
(inflation-adjusted) terms, second-tier players earn much less money from
tournaments and exhibitions than they did in the 1970’s.
Nevertheless, a curious thing has
happened: far more people make a living as professional chess players today
than ever before. Thanks partly to the availability of computer programs and
online matches, there has been a mini-boom in chess interest among young people
in many countries.
Many parents see chess as an
attractive alternative to mindless video games. A few countries, such as Armenia
and Moldova,
have actually legislated the teaching of chess in schools. As a result,
thousands of players nowadays earn surprisingly good incomes teaching chess to
children, whereas in the days before Deep Blue, only a few hundred players
could truly make a living as professionals.
In many US
cities, for example, good chess teachers earn upwards of $100-$150 per hour.
Yesterday’s unemployed chess bum can bring in a six-figure income if he or she
is willing to take on enough work. In fact, this is one example where
technology might actually have contributed to equalizing incomes. Second-tier
chess players who are good teachers often earn as much as top tournament
players – or more.
Of course, the factors governing the
market for chess incomes are complex, and I have vastly over-simplified the
situation. But the basic point is that the market has a way of transforming
jobs and opportunities in ways that no one can predict.
Technological change is not all
upside, and transitions can be painful. An unemployed autoworker in Detroit
may be fully capable of retraining to become a hospital technician. Yet, after
years of taking pride in his work, he could be very reluctant to make the
switch.
I know a chess grandmaster who, 20
years ago, prided himself on his success at winning money in tournaments. He vowed
that he would never end up teaching children “how horsey moves” (the reference
is to the knight, also called the horse). But now he does exactly that, earning
more from teaching “how horsey moves” than he ever did as a competitive chess
player. Still, it beats being sent to the knacker.
Of course, this time technological
change could be different, and one should be careful in extrapolating the
experience of the last two centuries to the next two. For one thing, mankind
will be confronted with more complex economic and moral questions as technology
accelerates. Still, even as technological change accelerates, nothing suggests
a massive upward shift in unemployment over the next few decades.
Of course, some increase in
unemployment as a result of more rapid technological change is certainly
likely, especially in places like Europe, where a
plethora of rigidities inhibit smooth adjustment. For now, however, the high
unemployment of the past several years should be mainly attributed to the
financial crisis, and should ultimately retreat toward historical benchmark
levels. Humans are not horsies.