Saturday, February 18, 2017

What if Governments Owned the Robots?

What if wealth creation depended even more on robots than is already the case? More specifically, some have asked in recent years: who "should own" the robots? Yet something about shared ownership of robots misses the mark, in terms of monetary flows and in some instances, a possible lack thereof. Hence one important question in this context is, to what outcome does the automation process contribute, in the first place? Is that outcome a direct representation of wealth, or a further derivative of wealth? If the answer is the latter, robots and their associated automation may not contribute to output in ways that are (also) available for redistribution.

Some of the "dark matter" of these system outcomes could affect investment patterns as well. Timothy Taylor noted in a recent post that "80% of gross investment now goes to replace old capital, rather than add to the capital stock." What else is at stake besides the reduced costs of automation? To what extent is dark matter caught up in human investment? Meanwhile, the human capital deemed most "important", is sometimes more costly than the capital investment long associated with firm activity.

A post from Tyler Cowen prompted me to consider the robots ownership discussion. He asked, what is government in a world where robots do the work? After all, government (at least beyond the military hardware involved) is mostly the paid labour of humans who generate time based product. One MR commenter also asked: why not an option where everyone owns robots? Perhaps the relevant equivalent here, however, is simply ownership in stock of companies where automation does lead to verifiable gains in output and wealth creation.

In spite of any further elements one might attribute to robots, basically they're little more than automation processes which follow the traditional productivity path of the Solow Residual. Thus far, this has been the path used by institutions in both primary and secondary market activity. Nevertheless, robots can contribute to tradable sector output and definable wealth, while the same is not necessarily true for non tradable sector output in a secondary market position.

The dependent position of the latter, also means automation accrues to reduced budget costs that are not necessarily associated with wealth creation. Unfortunately, the automation that reduces costs, does not have to be associated with either increased or definable output. And the difference matters, if society attempts to utilize robots as a potential source of redistribution. Indeed, much of the capacity which made it possible to do so, may already have been tapped via the use of robots and automation which contributed to tradable sector wealth in the twentieth century.

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