Economists preach the gospel of "creative destruction," whereby new industries -- and jobs -- replace the old ones. But has creative destruction become too destructive?
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in terms of home, entertainment. In the late nineteenth entry into the twentieth century, the piano was the focus its Richard Liebermann, I'm professor history. It acquired community college and director of the laborious Wagner Parliament was prosperity. Is people got more disposable income? They spend it on like pianos, and that's James Baron, a New York Times writer, Baron in Liebermann, have both written books about the Steinway piano company in part of it was pianos were aspirational and the United States was an aspiration, or country and aspiration of a piano was toward culture. It small mom and pop store industry, there were hundreds of piano makers and Steinway came to New York because they were hundreds of these people being in the piano
in the nineteenth century must have been a lot like being in the software business in the nineteen nineties or the dotcom business. A few years later, Emberon puts the peak of piano, making at nineteen o five when they made four hundred thousand pianos, but the party couldn't last at the beginning of the twentieth century piano makers were being assaulted. Almost four outside the phonograph, the record tat created by the great with it that was invented by Edison in eighteen, seventy seven, but it isn't Until nineteen fifteen really starts to compete with the piano and Edison's phonograph meant you could have music without tired. Lessons or our tedious practice love you to the realms of music. I can call you to join is the reason music, which
boy had to be generated by members of the family or friends, could now come in to your home We could get cancer have to take nobody's nineteen fourteen piano sales totalled fifty six million dollars. That was more than double. The sales of phonographs now eighteen, nineteen just five years later, sales of record players hit a hundred and the eight million dollars radio soon, eclipse that by world war, one pianos were no longer an essential element of every living room, but one thousand nine hundred and thirty three two slash three of american homes had at least one radio. The depression was
art on piano companies, Steinway tried to make gliders during world war two they became a defence sub contractor, but then after the war. They couldn't news the wood that they stay had on hand because they are for too long in their lumberyard, so they ended up making caskets talk about a dying industry, Ghana, companies are making about thirty thousand acoustic. the animals a year. Now they made three two thousand and twenty Sir TE that's about eight percent what they made their peak in nineteen o five, such terrible news, isn't it at least for all the people involved in the piano industry short term, but wait a minute? What about all the people involved in the other industries? It helped replaced the panel, the musical recording and broadcasting industries and all the composers and performers and rangers who now had more reach because of the recording and broadcasting industries say nothing of it.
you be in film and internet industries. It would follow, according to the Bureau of Labour statistics, more than two hundred thousand Americans today, Workin radio and tv broadcasting, another four hundred thousand motion, picture and sound recording and more than a hundred thousand in electronic equipment, repair and maintenance. what about all the people who consume that radio and tv in film aren't they better off too, and when the plan was the woman attainments, I'm sure there, let's see as technologies and tastes change. One kind of industry disappears replaced by other kinds of industries, maybe with more jobs, but maybe with fewer jobs. Were machines are doing the work. The people used to sound, like anything we're going through in this century, welcomed to capitalism, people and especially the component of capitalism. Lotta people don't like to think about
creative destruction? How does that make you feel or yeah we're very pessimistic, so says one economist, but here's another. I mean an optimistic for his and on the third hand, I am smarter than all of you. I'm happy from the w, and my see this is free economics, radio, the pot calves that explores the hidden side of everything. Here's your host Stephen governor There is a question I bet you ve heard a lot lately, as technology continues to get better, especially robotic technology. What kind of jobs will be left for? The some of us many mistakes daughter, no he's not a robot
A labour economists at MIT, not quite a robot, at least- and I work a lot on School demands and changes in the rocket set effect. The demand for skilled workers. How do you technology treat as well over today's conversation, David order is our man is first point: is that the rampant automation, we are seeing in the labour markets today. Isn't it So the history of automation includes you know the substitution of peace, a burden for human labour. He wouldn't be so called machines, but at some level they are, and then the tractor for the horse and play oh and then, of course, electrification and internal combustion engines and telecommunications. It used to be at the turn of the twentyth century that forty percent of U S, employment was in farming is now the case it under two percent. Unemployment is in farming. And we have a lot more food than we used to, but I'm getting off track nodded. I love your off track. This is good, keep guy so use.
be having by strong back and good muscles, and good endurance was pretty central to a lot of jobs, it still central to some jobs nowadays, but not very many, and that's because we have substitute is so much mechanical horse power for human fiscal exertions. and we have also done the same thing in many there are more skilled activities, so that's good for a lot of people and not good for lotta people- where do you start to China, pull apart those two ropes and I then back into a knot of some kind sure, that's a very good question. That is the case that you can have a sector, an industry that become so productive, that it shrinks, right so or least in terms of employment. So agriculture is that sector, so that case were sector becomes so product. did actually needs fewer workers, but you could look at many other sectors where productivity has risen. Unemployment has risen so one example be medicine right. Seventy five years ago, most of what doctors could do was harm you now.
They have lots of ways to do good there, much more productive. In terms of improving your health, that also true, apparently with lawyers or with people in marketing or in an education. Well, maybe there has been much productivity, growth and education. I should I should watch myself there, but the point being the there are many sectors of the economy where, as we get better at them in a play, is go down, but the quantity ended rise is even more, and so that creates net employment growth. But then there are many other examples where you have an indirect employment effects. So, for example, when the automobile industry really grew rapidly, it eventually made course drawn transportation, obsolete, none sherry courses were no longer competitive. Now people often like to say, oh well as all the people who lasting blacksmiths in stable boy, equestrians and carriage drivers. Well, they were more than made up for by employment, the automobile industry that
extremely unlikely to be true, astrogas horse taking care of horses, so labour intensive. However, the birth, the automobile industry also gave rise. To an industry constructing roads. It also gave rise to the motel and travel industry. It also gave rise as to the fast food industry, and so even though in fact, net employment in personal transportation declined with the advent of the automobile. It gave rise to bunch of new things that warrant really on anyone's list that we could do now that we have this additional leisure additional wealth, an additional flexibility that came from not having to spend so much of our time on transportation.
Ok, so order is telling essentially the same story here as the meltdown of the piano industry, but while some new text These may indeed create employment, other technologies, specially automation and globalization. Don't necessarily do the same. Do they get a computer. It does your calculations now one view person, these employees, a calculator or you get a good friend loader and all of a sudden. You don't need people digging ditches, because you can do a missionary, and so they assumed it. You know one and improvements in productivity leads to a decline in employment, but that's incorrect in general, not always incorrect, but in general incorrect for two reasons. One is because it augments people so the who are left over are able to accomplish more in a given about time, meaning there more productive. So raises earnings generally to a first rate, in addition,
It lowers the prices of those goods and services that you can demand much more of them there. Many things that we do that we know if we didn't, we wouldn't travel so far. If air travel in transportation travel, weren't, so cheap right, so there's an output effect, and then a third component is that there is often these complementarity with other sectors or other types of activities. In a once. We have sufficient well insufficient leisure, we get a tourism industry or we have a huge video gaming industry or we have no an enormous people devoted to you know fine, cooking and entertainment. All as a result of ours were rising productivity, which gives rise to rising wealth. So the interactions by which technological changes lead to changes in employment, are really rich and complex, and not simply a matter of you know the machine Does the job? Therefore, the worker doesn't do the job. Therefore, there are fewer workers needed, are so rising productivity,
rising prosperity, rising standard of living, but This is where a lot of people get off the bus stare aiding median wages in the? U S, social, even though this process cause rising wages, rising productivity in general, not everyone's a winner, I'm. So if your directly subs, you didn't, there's no sense in which technology can complement you. Certainly that's not a good thing for you right, so think of the famous example. The letter it's her nineteenth century? Are weavers in Britain and they righted over the introduction of the power frame, which is basically a power bloom and they perceived This would reduce their earnings because it would also allow unskilled workers to do the work that skilled workers used to do and chances are they were right, but I think it be used for this point to turn specifically to the sort of information age and think about that, because that so that people are concerned about. So you know when my
Listen. I started work on this question quite a while ago about how does computerization change labour markets? It seemed like a very diffuse question, and so we tried to set up in a very concrete way and said: okay. Well, what exactly are the things that computers substitute and one of the things they complement, and what does that mean for what workers will do the first thing to understand about computers. Is they are symbolic: processors that follow codified, sequences of instructions, programmes or rules, and so the things that are most susceptible to compute zation or to automation, with computers are things where we had exe was the procedures for accomplishing them right there. What my colleagues, I often call routine tasks and only routine descent, the mundane I mean routine in the sense of being caught a viable, and so you know it was. You know the things that were first, automated with computers were things. I will first military applications like encryption and then banking and census, taking an insurance, and then things like
we're processing and office clerical operations, but when you didn't see computers doing I, and still don't in fact or tacit demand, flexibility and don't follow. Well understood procedure, so I dont know how to tell someone how you write a persuasive essay or come up with a great new hypothesis or develop and exciting product that no one has seen before. We don't have a cookbook for doing that. What computers have been very, very good at it? substituting or what we ve been very good at doing with computers is substituting them for routine codified tat. So the task done by workers on production lines. The task done by clerical workers. The task done by librarians. The task done by a kind of Para professionals like legal assistance to you'll, go into the stacks where you, and so we see a big decline clerk or her. We see a decline in production workers.
Dear declining, maybe in UK, lower level management positions, closer all kind of information, processing, tacit, been codified and David working caused by the share of jobs. Of those different types who took that routine, abstracted mundane jobs, routine are the ones that are most easily substituted for bike, pewter yeah sure, so the kind of broad middle swaths of production, operative, clerical, administrative support and sales have declined, offer my head about fifty five percent of employment about forty five percent of employment over the last twenty years. So sizeable. But not you know it's not going zero, and that is no most jobs. Aren't one of the other right and, if you're still secretaries today so clerk workers in they do actually much more complex jobs and clerical workers did thirty years ago, and what has grown since he shares have to add two hundred percent
On the one hand, are the great jobs, the professional technical managerial jobs, it involve. You know, abject reasoning, creativity, you just come generalise problem, solving and cognitive flexibility, and you know I am fortunate, have one such one of those jobs, your fortune have another one and the very reward and is also indoor work without heavy lifting, so that's all good stuff and on the low end and the low in we see a very rapid growth and employment in mostly person service, occupations, food service, housekeeping Jenna, Toil work, flight, attendants, security guards, truck drivers and like the- U Ps driver, for example, and even personal services like manicurist, hair care, celebrity dogwalkers, you know, and basic vehicle are doing largely tasks that are extremely difficult to automate because they require that flexibility that environmental adaptation and so on, but they dont require high levels of education.
So you can see the causes of our collective anxiety right. Yes, there's can viewing demand for high end abstract, creative rewarding jobs? Just great that's kind of work you do, but is a hollowing out the middle range jobs and on the low end, yes, lotta demand for personal service jobs, don't pay very well which are increasingly susceptible automation, all of which has led some people to think this. This latest round of creative destruction, led by the computer, not like earlier rounds of creative destruction, arguing that the destructive component has become much much larger, because Amazon destroyed five hundred borders stores works
that's coming up after the break. We also take a quick look at robots. Yes, that's what I am talking about Jews me we'll take a look at robot and whether they will, as some people seem to think, take over completely whenever you're coming up with new doomsday scenarios. Ricky part negatively, is always like wait. How do we actually give the robot control of our new your weapons in a way that does not people from W and Y see, this is for economics, radio, here's your host Stephen Governor,
David order? Is a labour economist at MIT he's generally optimistic about the future of employment in America? Even though computers, automation have destroyed a lot of middle income jobs and even though job growth tends to be strongest among the poorest paying jobs, and now tell me what turned you into an optimist you do, I guess No, if I know the answer that question, I would say that I go through the exercise. Sometimes I imagine myself, you know with the invention, the automobile, or imagine myself at the time of electrification when replaced the steam engine with motors, and I could have convinced self at that time that while they're just isn't going to be nothing new work to replace all the stuff. It's gonna be automated because we're getting so productive so fast and I know
I foreseen. You know how big a deal medicine would be, or software business services and transportation and tourism right. I couldn't have invasion that so I could mislead commit myself at that time that we're gonna, rather jobs and other basic, wouldn't be enough for people do and that's what Keynes believed not in a negative sense, but he thought Turkey will be working fifteen hours a week and we would have tons and tons of leisure. But what has happened time after time is productivity has given rise to greater wealth and greater consumption. A greater variety of goods and services that people want to consume, and so people seem to keep finding ways to occupied themselves and make use of the resources in the leisure and the creativity, so I guess I don't think we're about to run out of ideas. This time, David order is only one economies with one view. Others are not
my name is John Carlos, I'm retired, professor of economics, from the University of Munich. Carlos has written a paper called, has creative destruction become more destructive? The phrase creative destruction is a mantra of most economists and most people who support free markets was coined by the Austrian born economists, Joseph Schumpeter and when she pay there was writing. He was obviously looking back to the industrial revolution of the eighteenth century and to the second industrial revolution of the late nineteenth century, and he was looking at the terrific innovations that came out of those parry it's the steam engines, the railroads these the old meals, the town. Phone radio- I don't have to tell you
All the major innovations as combo sees it, and I should say, is just about every economists sees it. These innovations were on balance good for the economy and for jobs. It is true that the incandescent lamp distraught the kerosene, Lamb manufacturing, that's clear, but kerosene lie. Manufacturing, wasn't a big operation. It was you know a small scale operation using low capital, so the destructive component was in Seoul large, and the people who were employed in that sector could find jobs easily in the other sectors of the economy, because the new The streets were labour in time, serve, and they then require skills that you learn on the job, so it was,
clear that the destructive component of these major innovations were relatively small. You see. And that's no longer the case, which is to say that perhaps creed of destruction has become too destructive. What that means is that the people who are displaced by the new technologies are not able to find jobs the ideal sector, come those points out. This is not all the fault of technology globalization. Obviously, that have played a big role. Is the fact that our educational system is not up to the task, but the nature of the destruction he says is different. Now the substitution used to produce not only more productivity but also more jobs, kerosene lamps for in
Doesnt bulbs is not doing that. I am arguing. The destructive component has become much much larger, because Amazon destroyed hundred borders stores, for example, self moment destroyed called bag which, at its peak employed forty five thousand people These were mostly middle class jobs you see, all of which leaves I'm commerce feeling very pessimistic. It would be nice if we could under stand that innovation is not the answer. Innovation is not going to give us Nirvana or a just society or a good economy. The only thing we should do is to rethink our ideological and cultural assumptions, so
that innovation doesn't have such a terrific connotation in our culture. One reason to be pessimistic about the labour future for thinking that this time, it's really different is because of the intensity of the autumn. It's happening, including robot, Zation robots, don't just automate. They also respond. They learn, which means they have the capacity to ultimately replace us. I think the robots in Fifty years are really going to be completely, unlike you know, and beyond imagine but Randal Monroe. I do the web Comic Ex Casey D and also the an answer blog and book. What, if serious, scientific answers to absurd hypothetical questions? Are here's an absurd hypothetical question? What happens if the robots take over there's a power than
between humans and robots Monroe, I should say, worked for a while in a NASA lab building robots whenever you're coming up with these doomsday scenarios, the trick partner actively, as always like wait. How do we actually give the robot control over nuclear weapons in a way that does not free people. You know right. We can't even get people to accept a pilot. This airplane, yeah, and even if we are willing to accept that, we wouldn T accept the plane telling the passengers where they're gonna be going. You know the passengers are only interacting with the plane because they have power over it in that their buying tickets and entrusting some organization so Lake, even the plane is being piloted by a robot, it's a robot that is in some kind of power structure where the humans are controlling it, ultimately, because other as no one would be supporting it, and so like we. I think that it's just gonna be really hard for us to build robot.
have a leg up on us in paranoia. Just because Monroe is not paranoid about robots taking over the world doesn't mean that he thinks utilization has reached anything resembling its peak. I wrote a comic about this, where someone was looking at all the different things that computers were better and said well at least humans are better at well at coming up with reassuring platitudes about things that humans are better Then, at the end of the panel I had someone writing a programme to generate reassuring platitudes faster than a human. That would not be too hard David order. Member he's the optimistic economist. He points out that automation and mobilization typically happens at a pace that allows economies to adapt and that peace matters a lot. So, for example, if you tomorrow morning opened up your web browser went to Amazon, and there you saw Amazon was offering you the basic spot, four thousand,
This is a robot. They could take your kids to school and clean your house and cook all your food and do landscaping we want to Amazon? Prime significant shipping you'd have in forty eight hours right, thou be great. That would be great for you great. For me, it would be terrible for the millions of people who work doing housekeeping is right, on the other hand, if it was announced that would be available fifty years from now that would be needed problematic, as of course we would educate ourselves are such that we would have other jobs in mind. Rather, that type of work are. Let's imagine whether it's because of leisure glut in the future, or that we woke up with me, no forty percent climate due to all kinds of factors. What do you do then? And what do you think of the notion that was proposed a long time ago? Some people are talking about a little bit now again of a guaranteed minimum income coming from the government and if that's even a little bit of a good idea, how do you do it in a way that doesn't disincentive eyes people from working
That's the real challenge, though, so at a kind of moral level. I think it's a good idea. I think people have a guaranteed minimum income from being born. Twelve society, you have access to education, health care, safety. You know food. I do think there is a concern about incentives. There are places where there is a sufficient kind of backroom levels a lot of people don't feel they really need to work in Saudi Arabia would be a country that suffers a bit from this. So I think it will be a challenge- people, don't function well without the structure of work I mean people? Lose jobs is not just that you're losing income they're, losing identity you're losing and organizing principle for their way of living, but that could be kind of a psychological tradition as much as anything else. You think I mean especially in America, where we have this kind of old, calvinist, tradition of working hard and keeping our noses queens. Couldn't you imagine you know
for generations from now where the notion of working for not only for living but for purpose and lay seems extremely antiquated. Ah no, I can't henchmen, maybe a failure. My amendment, I think people in organizing purpose civilized. It doesn't have to be paid employment, but the need something I think I am eliminating an obvious. It has nothing to do with my economics training programmes that only from a guy they need some, directive in life imbued your life was some meaning and purpose, and I dont think pure just pleasure can be that it's gotta be thing that requires more ambition, but you'll at least acknowledge that your view may be informed by the fact that you are a professor viii. Said MIT you're, not the taper. Guy wants to sit around doing pottering yoga all day, but there might be people, that's correct, that's correct! I would fall to pieces.
You know, I tell my kids ass. He looked everything in life require striving. There's only two things that you can sort of. Fine enjoyable immediately Reverend, that's television, insects. Everything else requires learning. skills, mastering them in its hearted first and rewarding later. So I a future of television and sex for all of us, the Higgs ahead, so essentially or system income distribution, primarily based on the scarcity of labour rights, the most valuable asset you own he's your human capital, which you expect to be selling to the market for thirty years, or so the revive Europe for you, no one to three to five million dollars over the course of your working career. Maybe more
and if all of a sudden there was a machine that could do exactly what you did at some level. We be wealthier, because now we could do for a thousand hours. We have had to pay Stephen Governor lots more to do over many years, so in some sense were wealthier. However, you seem dabbler would not have scarce labour anymore. It wouldn't be clear what skills would you sell to the market? I think people who are in general people who can communicate can tell a story, can analyze and articulate those are fundamental skills, much more fundamental, then Java, programming or added opera such and such a welder, and they are able in almost every to me, so I dont mean journalism- is safe per se or podcasting is safe per se, but I think a person who can use the skill set. The you're using you know, has re future man back so that the chances that I personally will be
placed by let's say a robotic entity who can do whatever it is? I do you, you say those odds are pre damp, small, extremely slimmer, would not be so sure about that jazz. that you? Yes, it is. It is, jasmine or maybe that should be. It is me Jasmine. I or me Tell me once I will never forget a David Otter says, there's no way or replace me believe him peril command. You can't make a podcast bet. You can't even read that is for next week's episode coming up next, we can free economics, radio thinking, small, to make a big difference in your life, and instead eighty and overtime I realized I was slipping into one in the Uk- is referred to as middle class drink? Shall I go ahead and read the programme credits is well Stephen. Are you still there
Stephen, have you gone home already? Lazy humans, ok, Are we go free economics radio was produced by w and wise these studios and dominant productions? These episode was produced by Gregor Zalewski. special help from me Jasmine and the folks. A cap stroll coup control me, the free economics, radio. staff also includes Shelly Louvieres Christopher Worth Merit Jacob Stephanie TAN lies. The Lambert, Allison Hockenberry Emma Morgenstern, Perry, Huggins. I am here. Is you can subscribe to freak makes radio on Itunes sticker or where you get your ipod cast. You should also check out archive at free economics. Dot com, where you three more download every episode we ve ever made our red the transcripts and find links the underlying research? You can also find us on twitter face
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Transcript generated on 2021-01-23.