In a recent post on the Rise of Robots, Krugman argues that growing capital-biased technical change undermines the need for better education:
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.
I’m far from convinced by his argument on the role education can and should play. Larry Summers has a thought experiment that is helpful for thinking about these issues:
Suppose that a new technology called “the Doer” will be created tomorrow. Doers can do anything flawlessly. They can build a house, give a massage, or make a guitar. What would the world of Doers look like?
1) Cheaper, high quality goods would proliferate.
2) The price of raw materials would increase as raw inputs for doers would become more scarce and thus more valuable.
3) People who can think of new things for Doers to do or of new ways for Doers to do things will make a lot of money.
4) For everyone else, the value of working for an hour will be nearly zero (since Doers can do everything already, no extra value is created). Therefore, hourly wages will go to zero.
Number 3 is why I don’t think Krugman is quite right. Education can help workers develop, enhance, and optimize what doers can do. For example, knowing statistics will likely become more valuable since helping businesses make sense and use of reams of data will be increasingly hard and time-consuming without a statistics background. Similarly, coming up with new things for doers to do will be even better rewarded as the global customer pool expands. Helping doers do things better and coming up with new things for doers to do amplifies rather than undermines the need to provide high quality and broadly available education.
owenzidar 
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That’s fine. But you also need to contend w/ the fact that the college premium hasn’t risen in nearly two decades (http://www.clevelandfed.org/research/commentary/2012/2012-10.cfm). If the Summers thought experiment were true, then the wages of the doers should be pulling away from the wages of everyone else.
Oh, you live in such an sweet innocent world. The world of Doers would settle out into a much less palatable form than you lay out. Rather, the result would be a small number of people in the upper class, controlling the economy, served and protected by a shell of Doers and a very small middle class of professionals and a somewhat larger class of human servants, and surrounded by a wilderness of billions of supernumerary people “not wanted on the ark” and subject to having any of their possessions and territories taken away at any time, for reason or whim.
When people were freed from the drudgery of coal-shoveling, clothes washing, bread making, plowing with horses and water carrying, they didn’t receive the full value of the supplanted effort — they went from the drudgery of digging to the drudgery of scrambling after part time work. A world of drone servants won’t make the poor wealthy, but rather remove them from the equation of a stratified economy altogether.
I think you’re missing point on why we automate in the first place; that is to get rid of human input. Krugman’s point was that education will be important to run and maintain the robots, for those lucky enough to still have a job, but robots only need a few people to run them.
There’s no reason for education to be broadly shared if 90% of people, by design, will have no labor value. You’ll never get full employment, even if everyone is a statistician.
Ex: Small breweries in the US make about 5% of the beer, but employ more than 90% of the workers in the beer industry. Small breweries have little/no automation, and industrial breweries are almost entirely automated.
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If a doer can do anything, then it can improve its knowledge. It may not be scientient but it has a lot of AI. We’re talking iRobot here. In that kind of world, only true creativity, the kind that goes beyond basic intelligence, has any value to the world. At that point, how many humans can really provide anything of value? I would guess only the extraordinary (3 sigma and beyond) humans. How many of us replying to this posting are in that category? Not me, not my wife, not my son, probably not anyone in my family. People need average things to do. Most of us cannot do extraordinary things. So if society progresses technologically toward this end, most of us will not be able to contribute to the world in a capitalist based economy.
Point no. 3 is why Mr. Zidar is wrong. He thinks that the majority of us can be like him. We can not. We are average, not PhD material. And it is the PhD’s who be the only valuable people left. And the level of education needed to earn a PhD in the future will have to rise dramatically if the PhD is to retain its value. Only true creativity will have value. The Mozarts, the Einsteins, the Ghandis will have value, but few others.
Could it be that technological progress eventually renders capitalism either useless or totalitarian?
OMG! Technological progress –> very few people in this world.
-Wayne
Not sure about number 3. If it’s easy to copy the new things for Doers to do or new ways for Doers to do things then the people who first figure them out may not make much money.
#3 appears to be flawed, because if people can buy Doers that can do anything, then other people who think of new things for Doers to do, won’t make much money at all, because all the rest of the people could soon learn to Doer it, themselves. You therefore need intellectual rights over the new application of a Doer, and enough money to sue everybody else, and good luck with that.
The “doer” scenario is realistic for our not too distant future The “doer” being robotics. But Owen’s #3 defense doesn’t work for me, because a “doer” can do that too.
The political outcome of the “doer” (robotic) future is still to be foreseen. If robotics take over the productivity basis for the American (World?) system, what do we do regarding the basic average wherewithal (daily wage) for the common citizen? We can’t all be at the top elite class of professionals (which will probably be robots soon enough anyway!).
The (U.S.) Earned Income Tax Credit already provides some compensation to those that can’t (or won’t [not intending to be judgmental]) earn enough income to support a livelihood for self and family. This allows our system to support those that don’t keep up with the overall level of societal economic functioning.
I support this early effort to adjust our economy and look forward to a day perhaps when every citizen can say that they have the necessary wherewithal to live and prosper simply as a result of their citizenship (Star Trek world for the skeptical). The product of our “jointly owned system of an economy” generating the funds to ensure this security. It’s only on top of this that I expect, indeed insist, that those citizens then dedicate themselves to service in the community, whether that be dedicating themselves to a life of scientific inquiry, security service, or volunteerism at the local hospice or elementary school. Perhaps this is what an automated production economy can bring us.
@Tom What you wrote about “wherewithal to live and prosper simply as a result of their citizenship” relates to the idea of a “basic income” such as at the BIEN site. See also Marshall Brain’s sci-fi story about the future of robotics and technology called “Manna”.
As I suggest on my own site, I feel we will eventually see some mix of a basic income for our exchange economy, a stronger gift economy like GNU/Linux & Wikipedia & Thingiverse, a better planned part of the economy by democratic participation through the internet, and improved ability for self-reliance by 3D printing & cheap solar cells or LENR & cheap “Doer-like” personal robotics like for gardening. The balance of those four types of transactions may be determined mostly by culture more than anything, since you could build a society almost entirely just around any single one of them. Whether people inventing new things for “Doers” to do will make a lot of money depends on how much the exchange economy remains something significant in the future, as opposed to say people sharing such new ideas freely through the gift economy like through free software for robots.
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