Low productivity is the least of our problems. Why would we want to produce more output, when there is no one able to consume it, is beyond me. If we take care of our stagnating aggregate incomes and put more real purchasing power in the consumers’ wallets, productivity will take care of itself. However, it is a fact that the 200-year old Industrial Revolution-time model of income generation and distribution has broken down due to the spread of globalization and the rise of sophisticated technology which displaces even cognitive and non-routine human jobs. The problem is that we keep wanting to fix it instead of coming up with a new model which fits better our economic realities.
- Low wages are not a result of low productivity. It is the other way around.
- If full employment comes at the cost of lower wages, purchasing power may not rise and aggregate demand may not rise->output stagnates.
- Stagnating numerator (output) and a rising denominator (employment)-> decreasing productivity.
- Work dynamics have changed dramatically. The 200-yr old distribution model of Work=Job=Income is broken.
- Machines are cheaper, more efficient and smarter than humans in increasingly more industry sectors.
- The rate of growth of human cognitive skills (education and training) is unlikely to keep pace with the rate of growth of machine learning.
- IBM Watson reads 1m books per second (now probably even more): 100k of human evolution is now ‘equal’ to 7 minutes of machine learning.
- New ‘job’ creation in the digital era will happen but is unlikely to keep pace with the destruction of old jobs.
- We will always want to work but do we need a job? If we create AGI but insist on people having a job for survival, we would have totally failed.