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Notes -
A PMC Revolt Will Hold Us Back From The Glorious Automated Future
I've heard a few variants on this. When Tyler Cowen was on Dwarkesh, he said that people will be the bottleneck to automation. His prediction seemed part mechanistic, but part hearkening to the Luddites, that automatable members of the PMC will band together to do whatever it takes to save their weak, deplorable skins. Pass destructive policies, regulations, restrictions, maybe even try to physically break the machines. A minor variant on the Woke Capitalist Wrecker, if you will; the PMC wrecker.
Some might be concerned that these sorts of predictions are a bit vague. What will they actually do? What will it look like? How could we watch events unfold and categorize what is happening? Of course, as the old joke says, fascism comes with smiley faces and McDonald's, so it's unlikely that their activities will be immediately apparent on just a surface glance. Thus, I will turn to the impetus for this post and submit that one need look no further than current events.
This morning at the gym, I listened to Phil Magness, an economic historian who specializes in tariffs, on Reason's Just Asking Questions Podcast. Then, when I got home, I read Alex Tabarrok's latest on Marginal Revolution. They both pointed out something that I had not realized. America still manufactures a lot of value. More value than ever before in history. In real terms. So why all the hullabaloo about manufacturing? Jobs. And why are jobs somehow impacted? It can't be that China has stolen all of the manufacturing value add from us; we've already established, from the data, that we're doing more of that than ever before.1 Nah... it's automation. We're manufacturing gobs more value with fewer human laborers.2
This is the backlash to automation. This is the "wrecker class" implementing destructive policies in response to being automated away. This is just what it looks like. It doesn't say it on the tin. The talk is always about jobs, but the blame is misplaced for why they're going away. It's automation. It can cause people to reach for whatever tool can possibly cause shortages and contract the economy, just hoping that doing so somehow reverses the impacts of automation. Nevermind that the intermediate steps are "cause shortages" and "contract the economy".
If you're worried about how the PMC will eventually sabotage the progress of automation or just want to find a way to model how humans might be a bottleneck on the way to a glorious automated future, one might need look no further than current events.
1 - Perhaps one wants to just compare total manufacturing value add. China does have approximately double of that than the US does. China also has approximately four times the population of the US.
2 - It also does not seem to be purely a population growth phenomenon.
I have a counterpoint to the ‘this will crash the economy’ thesis- the longshoreman’s union, you know, the one we were discussing a few months back, those guys have successfully prevented port automation in the US. This is a drag on productivity but it’s basically fine.
Now the people who will be impacted by AI are mostly female, so there will be less, uh, deals with the mafia involved. But they won’t need to; western governments would rather see the Great Depression 2.0 than see the female LFPR decline. There’ll be regulatory barriers, dumb ones sure, but people will still get up and go to work and do… well probably nothing useful, but something.
I think the distinction I would make is between the means being used to prevent automation and the result of preventing automation. That is, for the longshoreman, the means they used to prevent automation was to threaten to shut down some amount of port traffic (I don't actually know how much; I assume a good chunk of it). This would be pretty damaging to the economy. Whereas, as you say, once they've come to a deal that prevents some amount of automation, the result looks more like a drag on productivity. In their case, it would say that their drag on productivity is mostly confined to just their little corner of the economy. Other countries' ports will continue to become more and more efficient than ours. This may impact the trade flowing through them to some extent, but it probably kinda just shows up as a sort of a ransom that has to be paid, which ultimately is not that huge; there's just not that many of them that need paid off in the end.
Tariffs are actually probably a bit of a lesser threat to the economy. I used the strong wording, but I recall that back during Trump I, I had a comment in the old place quoting Krugman making an estimate that a Trumpian trade war might 'only' cost about 3% of GDP.1 IIRC, Krugman was doing a back-of-the-envelope that assumed that Trump would follow some academic paper for "optimal tariffs", and my guess is that what Trump II has now actually done is, uh, probably not that. Of course, in the limit, as tariffs go to the moon, trade grinds to a halt almost entirely, and it sort of more closely resembles longshoremen shutting down the ports.
Now, what's the ransom that has to be paid in order to actually stop automation in manufacturing? My answer would be, "???". Unlike ports, which are very concentrated in space, amenable to discrete deals that stop specific automation from occurring, and not subject to much competition, manufacturing is everywhere and subject to intense competition. Tariffs don't actually have a mechanism to stop automation in all these places. It's just paying a temporary ransom to some existing manufacturers, who might use part of that ransom to keep a few marginal employees around a little bit longer. They're still going to adopt more automation; if they don't, their competitors will (foreign and domestic). Even if tariffs magically stopped all domestic manufacturing automation, the drag on productivity growth will gradually make foreign manufacturers more and more competitive over time, and uh, I guess we'll have to raise even higher tariffs?! The only real limit in sight would be once they're high enough that they've basically killed all US imports. Yes, a nice ransom to some domestic manufacturers, but if all that automation keeps chugging along overseas, that basically plays out as US GDP numbers dragging and dragging and dragging, while foreigner GDPs moon.
Tariffs probably won't actually wreck the economy in one fell swoop, but they won't fundamentally affect the process of automation in manufacturing, either. They'll just cause some folks to get a little ransom and long-term terrible growth. Even the difference between 1-2% GDP growth each year is getting close to a 2x difference over 50 years.
1 - I absolutely know that Krugman is a partisan hack. His article was actually trying to downplay how bad it would be, so I thought on balance it was reasonable to use him as an OOM estimate, given the context; it really did not feel like he was trying to super inflate the estimate, even though that what I would have otherwise expected from him. I recall it well, because I compared that to the estimates of the 'cost' of climate change in terms of GDP (as well as a few other things), and it was hilarious how little of a thing climate change was.
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