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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Thanks to Pennsylvania, lottery, scratch, ass, pennsylvanians or scratching their way to fine and with new? every month big top rises and second chance, drawings, excitements, always in order so try, Pennsylvania, lottery, scratch, offer your ticket to fund and get yours. Did I keep on scratch? It must be eighteen or older. Please pay responsibly benefits older pennsylvanians every day, if you like to listen to for economic radio without ads the police. Do that is sticker premium five dollars a month, and you can get a free month trial by going to stick your premium dot com and use a promo code freak. You also get access to all our bonus. Episodes and you'll be supporting our show to that sticker premium, dot, com, promo code, freak thing 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 the Guardia 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 of both written books about the Steinway Piano Company part of it was pianos, were aspirational and the union. 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 there 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, Jim Baron 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, three piano makers were being assaulted, almost from all sides, the phonograph, the record created by the greens, with it then did by Edison in eighteen, seventy seven, but it isn't until nineteen fifteen. That really starts to compete with Pollyanna and Edison's phonograph meant you could music without tiresome lessons or hours, tedious practice. I can tell you that the rail I can call music which up until now.
boy had to be generated by members of the family or friends. Could now come in to your home. We could get cancer music have to take in nineteen fourteen piano sales totalled fifty six million dollars. That was me, more than double the sales of phonographs. Now nineteen, just five years later, sales of record players hit hundred and fifty eight million dollars radio soon eclipse that by world war, one pianos were no longer an essential element of every living room by nineteen. Thirty, three two thirds of american homes had at least one radio. The depression was hard on piano.
Companies Steinway trying to make gliders during world war. Two, they became a defence sub contractor, but then, after the war they couldn't news Would that they still had on hand because 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 pianos a year. Now they made three two thousand and twenty certain 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, shorts, terrible news, but wait a minute. What about all the people involved in the other industries that helped replaced the piano, 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 to say nothing of it?
be in film and internet industries. That would follow, according to the Bureau of Labour statistics, more than two hundred thousand Americans today, Workin radio and tv broadcasting, another three hundred thousand motion picture and sound recording nearly a hundred thousand end quote 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 Canada was the home entertainments 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, that alot of people don't like to think about creative destruction.
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 from the w, and my see this is free, Alex Radio, the pot cats that explores the hidden side of everything. Here's your house 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 rest of us many myths, David order, no
he's not a robot imo labour economists at MIT, not quite a robot at Least- and I work a lot on school demands and changes in lay rockets that affect the demand for skilled workers. How do with technology and will treat as well over today's conversation. David order is our man is first point: is that the rampant automation foreseen 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 the machines, but at some level they are, and then the tractor for portion plough and then of course electrification. Anne 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 at under two percent. Unemployment is in farming,
and we have a lot more food than we used to, but I'm getting off track. Now that I love you off, tracks is good, keep guy so used to be having a strong back and good muscles, and good endurance was pretty central to a lot of jobs. It 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 a lot of people weird you start to China, pull apart those two ropes and tie them back into a knot of some kind, a sure, that's vaguer, question: it is the case that you can have as sector an industry that becomes so productive that it shrinks right so early terms of employment, so agriculture is that sector, so that case were sector becomes so productive She needs fewer workers, but you could look
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, are much more productive in terms of improving your health that also true, apparently with lawyers or with people and marketing. Or even an education. Well, maybe there has been much productivity growth in education. I should I should watch myself there, but the point being that there are many, sectors of the economy where, as we get better at them, in prices go down, but the queen we demanded 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 portion drawn transportation obsolete Necessary courses were no longer competitive. Now people off, like to say, oh well, as all the people who lasting blacksmiths in stable,
boys and equestrians and carriage drivers. Well, they were more than made up for by employment. The automobile industry Extremely unlikely to be true actually does, of course taken care of horses, so labour intensive. However, the birth, the automobile industry also gave rise Do an industry constructing roads. It also gave rise to the motel and travel industry. It also gave rise to the fast food industry. 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 technologies may indeed create employee other technologies, especially automation and globalization, don't necessarily do this. Do they get a computer? It does your calculations now, one for your person is employed as a calculator or you get a good front in 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 people who are left over are able to accomplish more in a given amount of time, meaning there more productive so It raises earnings generally to a first rate, in addition
it lowers the prices of those goods and services. Are 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 and 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 number people devoted to you know fine, cooking and entertainment. As a result of ours were rising productivity, which gives rise to rising wealth. So the interactions by which the logical changes lead to changes in employment are really rich and complex, and it's 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 right
productivity, rising prosperity, rising standard of living, but this is where a lot of people get off the bus stagnating median wages in the? U S, social, even though this process cost rising wages, rising productivity in general, not everyone's a winner, I'm. So if your directly substituted in there is no sense in which the technology can compliment you, certainly that's not a good thing for you right so think the famous example, the Luddites were nineteenth century are weavers in Britain and they righted over the The introduction of the power frame, which is basically a powered bloom, and they perceived that this would reduce 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 would be useful. This point to turn. Specifically,
He too is a sort of information age and think about that, because that so many people are concerned about. So you know when my Listen! I started working 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 is 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 computerization or to automation with computers are things where we had exposed procedures for accomplishing them right there. What my colleagues, I often call routine tasks and only routine sense.
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 incenses taking an insurance, and then things like word, processing and office clerical operations, but we didn't see, computers doing alive and still don't in fact are tasks that 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 excite 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 caught a final task. 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, you'll go into the stacks where you, and so we see a big decline. Clark workers, we see a dip Klein production workers, we see a declining, maybe in you'll, have lower level management positions, closer, all kind of information, processing, taciturn, codified and David Working tools, but the share of jobs of those different types who took that route in abstracted, mundane jobs, routine are the ones that are most easily substituted for by computer, yeah. Sure so the kind of broad middle swaths of production, operative, clerical, administrative support and sales have decline. 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 to zero and ask, as you know, most jobs aren't all one or the other right, and if you know 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 grown oxen
He shares have to add two hundred percent. On the one hand, are the great jobs, their professional technical managerial jobs that involve. You know, abstract reasoning, creativity, you just come generalise problem solving and cognitive flexibility, annual, I am fortunate- have one of such one of those jobs. Your fortune have another one and the view rewarding and is also indoor work without heavy lifting, so that's all good stuff and on the low end on the lower. We see a very rapid growth and employment in mostly per Service occupations, foods this house keeping janitorial work flight attendants security guards, try, drivers and like the? U Ps driver, for example, and even other personal services like manicurist air care celebrity dogwalkers, you know, and basic vehicle are doing largely tasks that are extremely difficult to automate because they require that flexible. The environmental adaptation and so on, but they dont require high levels of education.
So you can see the causes of our collective anxiety, rape. Yes, there's can viewing demand for high end abstract, creative rewarding jobs. Just great that's kind of work to do, but is a hollowing out The middle range jobs in on the low end? Yes, a lot of demand for personal service jobs that don't pay very well Witcher, increasingly susceptible automation, all of which has led some people to think that 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 hundred borders stores, for example,
it's coming up after the break. We also take a quick look at robots, yes That's what I am talking about gives me take a look at rob. And whether they will, as some people seem to think, take over completely whenever you're coming up with new doomsday scenarios? The you partner, actively, as always like wait. How do we actually give the robot control of our We are weapons in a way that does not people. Thanks to Pennsylvania, lottery, scratch ass, pennsylvanians or scratching their way to fine and with New every month- big top rises and second chance, drawings, excitements, always in order so try, Pennsylvania, lottery, scratch offer your ticket to fund and get yours. Did I keep on scratch? It must be eighteen or older. Please pay responsibly benefits older pennsylvanians every day,
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hi I'm guilty and Jacobs, and I'm Deanna reasonable. We ve got a new path task called. If that worry politically talk to scientists, engineers NASA folks, just a punch of really smart curious people about cool stuff Julian. I think most people know you from your work on love and community, and most people would know you as friends, EC scientist Casey Heinz on Anti I ass, so we were both But what most people don't know is that we're both really curious and passion about stem, if we have a more the first outlook and how we look at science and engineering and technology and map. Then what This is possible. I gotta go When I get to speak to these people, get a chance tat back into my curiosity excitement. You know that I have a kid about all these topics so come on this journey with
as we learn from some of the poorest smartest people in their fields. If, then, is out now just search, if slash than to find the show that, if slash then no spaces, listen in stature Apple, the serious Ex m F or wherever you get your PA casts from W and Y see. This is for economics, radio, here's, your host, Stephen Governor, David order is a labour economists at MIT he's generally optimistic about the future of employment in Amerika, Computers and 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. Ah you do. I guess,
I don't know if I know the answer that question, I would say that I go to the exercise. Sometimes I, imagine myself, you know with invention the automobile. Or imagine myself at the time of electrification when replaced the steam engine with motors, and I could have convince myself at that time that, while they're just I'm going to be enough new work to replace all the stuff? It's gonna be automated because we're getting so productive so fast, and I know I have foreseen. You know how big a deal Edison would be, or software business services and transportation and tourism right. I couldn't vision that so I could easily have chemist myself at that time. we're gonna, rather jobs and other basic wouldn't be enough for people do in 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 occupy themselves and make use of the resources in the leisure and the creativity. So I guess I don't think world to run out of ideas this time, David order is only one comes with one view. Others are not is up in 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 the steam engines, the railroads, the steel meals, the telephone radio. I don't have to tell you All the major innovations as combo sees it and they should say, is just about. Every economists sees it. These innovations were on balance good for the economy but 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 wasn't so large and the people who were employed in that sector could find jobs easily the other sectors of the economy, because the new industries were lay intensive and they Baden require skills that can learn on the job, so it was clear that the destructive Poland to these major innovations were relatively small. You see. And that's no longer the case, which is to say that perhaps creative 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 we have to
a half million people working less full time today, Ban were, working in two thousand and seven two and a half I am people less the media and household income. Today, as five- thousand dollars less than it was in two thousand and seven five thousand dollars less and is still less than it was a ninety. Ninety eight, the median household income, is down in real terms Come those points out. This is not all the fault of technology.
Illustration, 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 they used to produce not only more productivity but also more jobs, kerosene lamps for in Doesn't bulbs is not doing that. I am arguing. The destructive component has become much much larger, because Amazon destroyed hundred borders stores, for example, the self who moment destroyed Kodak, which, at its peak employed, forty five thousand people- These were mostly middle class jobs. You see apples employing forty seven thousand people, and that is an iconic company today and it's not to be a job creator and the next.
Foreseeable future phase. employee, seven thousand people, that's it all of which leaves Carlos feeling very pessimistic, and it would be nice if we could I understand 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 bad 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 really different is because of the intensity of the adaptation that's happening, including robot, is asian robots, don't just automate. They also respond. They learn, which means they have the capacity to ultimately replaces, I think, robots in fifty years are really going to be completely. Unlike you know, and beyond Imagine but Randal Monroe. I do the web comic Ecstacy D and also the question 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
between humans and robots Monroe, I should say, worked for a while in a NASA lab building robots whenever you coming up with these doomsday scenarios that you partner actively. As always like wait. How do we actually give the robot control of our nuclear weapon? in a way that does not free to people. You know right. We can't even get people to accept a pilot. This airplane right, 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 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 if 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 ultimately because otherwise 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, computerization is reached anything resembling its peak. I wrote a comic about this, where someone was looking all the different things that computers were better out and said at least humans are better at well at coming up with reassuring platitudes about things that humans are better and 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 robotic zation typically happen at a pace. that allows economies to adapt and the peace matters a lot 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.
Ours is a robot. They could take your kids to school and clean your house and cook all your food and do landscaping. It was the one Amazon prime significant shipping you'd have in forty eight hours right. That would 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 me. the problematic as, of course we 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 unemployment. 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 talk about a little bit now again of a guaranteed minimum. come 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 yeah? 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 I think there is a concern about incentives. There are places where there is sufficient kind of background level of wealth that a lot of people, don't you'll, 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 war, I mean when people lose, jobs is not just that are losing income, they're losing Ident it are losing and organizing principle for their way of living, but that could be kind of a psychological tradition as much as anything else Don't 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 four generations from now where the notion of working for not only for living but for purpose in life seems extremely antiquated. Ah, no, I can help it may be a failure. My amendment, I think, people need in organizing purpose to analyze. It doesn't have to be paid employment, but they need something You think I'm totally opinionated an obvious. It had nothing to do with my economics train who sat under my God. They need some. An objective in life. The abuser life for some meaning and purpose, and I dont think pure just pleasure- can be that it's gotta be something that requires more ambition, but you'll at least acknowledge that your view may be informed by the fact that you are a professor beacon it's at 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,
and you know I tell my kids ass. He looked everything in life require striving. There's only two things that you kids or define enjoyable immediately. Forever and that's television insects. Everything else requires learning skills mastering them in its hearted first and rewarding later. So, a future of television and sex for all of us, the Higgs equally. So essentially are Coming from distribution is primarily based on the scarcity of labour right, the most able ass it. You own he's your human capital, which you expect to be selling to the market for thirty years or so, and 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 other. We be wealthier because now we could do for a thousand hours, but we have had to pay Stephen Governor lots more to do over many years, so in some sense were wealthier. are you seemed Abner 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. Your using you know has re future. Man said 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, damn small, extremely slimmer. All I would be so sure about that Jasmines? Are you Yes, it is, it is not. Jasmine or maybe, should be. It is me Jasmine. I or me tell me once I will never forget a David order, says there's no way or replace me believe him, own peril command. You can't make up gasped bet you can't even read the teeth Next week's episode step aside hey podcast listeners on the next free now makes radio in the late Nineteen is that in these two state of California passed legislation that would require new houses to be way more energy efficient. California, earlier commission projected at the time the homes bill
after the standards were enacted, would use eighty percent, less energy, so did new homes in California really use eighty percent less energy. Do you? I'd be asking this question. If the ends there were yes, dad next time on free economics, radio, shall I go ahead and read the programme credits as well. Stephen. Are you still there, Stephen, have you gone home already humans. Ok, Here we go free economics. Radio is produced by W N Y, see indemnity productions, our staff and clear David, Herman Gregg, rest, ASCII, Caroline English, Susie Lichtenberg and Chris Bannon, with help from Christopher Worth Daniel De La Marin Jacob and me jasmine thanks to their folks, a cap straw. Me to participate. If you want more
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Transcript generated on 2021-03-11.