Robots and Climate Change

There is something about adapting to a bad situation that makes a lot of sense.

This occurred to me when I ran across this article about robots coming to steal everyone’s job. It tells how a couple of economists are worried about the ability to adapt to the relentless march of automation. Their point is: “Too much time discussing whether robots can take your job; not enough time discussing what happens next.

A popular solution has been to “try to stall or reverse the trend of automation,” a kind of resistance movement to make it more difficult. Such measures include extra taxes on robot-produced goods or taxes on the robots themselves, which I wrote about in March of last year. Some propose new government regulations to make automation more difficult. The economists expect this approach to fail because consumers will naturally gravitate toward “cheaper goods or services” made possible by automation. (You don’t see anyone wanting to pay more for phone service to allow telephone operators to keep their jobs.)

Another proposed strategy is to “reduce the cost of human labor, by driving down wages or cutting benefits” making hiring workers preferable to buying robots. No one could seriously endorse this.

The other class of solutions they call “coping strategies.” These include teaching workers whose jobs are threatened new skills, skills less likely to be taken away by automation. Or the government could provide a guarantee to displaced workers, like a universal basic income (UBI). Both are iffy for various reasons: what skills fall into that category, how trainable are workers in mid-career, and how can any country, especially a poor one, support a UBI plan?

There is a need for more creativity around coping strategies, but at this point most of the energy goes toward ways to slow progress, a futile strategy when automation looks inevitable.

Is there a parallel here with climate change? At present all the efforts seem to be directed toward convincing everyone that climate change is real, inevitable and driven largely by human activity. There are a lot of good arguments to back this up. The intention is to promote individual and governmental action to reduce the release of greenhouse gases into the atmosphere – a stalling, not a coping, strategy.

People put their hopes on things like the Paris Agreement to make this happen and many despair at the thought of America bowing out. But how familiar are most Americans with the agreement? It is voluntary. Each country gets to pick its own goals known as its Nationally Determined Contribution (NDC).

China, for example, commits “To achieve the peaking of carbon dioxide emissions around 2030 and making best efforts to peak early.” Peaking in 2030 means continuing to increase between now and then. India is no better: “India’s INDC do not bind it to any sector specific mitigation obligation or action.” They commit to decrease “emissions intensity” by 33% to 35% in an  economy where the demand for electricity expected to increase by more than 3 times – in other words, they plan meet much more energy need slightly more efficiently. In another instance, Norway commits to “a target of an at least 40% reduction of greenhouse gas emissions by 2030 compared to 1990 levels.” They get to pick the target and the comparison and when serious development will start, but there is no penalty for missing. (See all countries here.)

Many NDC commitments, when read in detail seem timid at best. Paris doesn’t look like the real solution, just a strategy to postpone the inevitable.

Where are the people talking about dikes and levees around the major coastal cities or better drainage systems for Houston? Why is the government still subsidizing flood insurance for new construction too close to oceans, rivers and streams? So many creative possibilities, adjustments and adaptations for coping are being ignored or overlooked.

In both cases, it makes sense to think critically about how to allocate our resources, putting up roadblocks or planning ahead.

Bill Gates on Taxes

The story about Bill Gate’s comment on taxing robots was featured on several news sites.  USA Today has a short audio clip and CNBC carried the full story under the headline:  “Bill Gates: Job-stealing robots should pay income taxes.”

His reasoning, which he recently shared with the editor of Quartz, is as follows:  “If a robot comes in to do the same [job as a worker], you'd think we'd tax the robot at a similar level.”  He is actually enthusiastic about robots replacing humans in some areas so the people can be deployed into the types of roles where empathy and understanding are more important, like eldercare and teaching.  But more taxes are needed for retraining and creating the new jobs.  So, the robots should be taxed at the same level as the now redeployed humans.

The first question that comes to mind is: What exactly is a robot for tax purposes? Must it have arms and legs, like the traditional idea of a robot from science fiction, or have arms only or perhaps have a single arm like some seen in the automotive assembly plants?  He seems to mean any automated tool that can do a job (or part of a job) that a human does today – any machine that puts people out of work.  Besides the obvious ones in heavy manufacturing, this could include many other machines:  self-service checkouts at the supermarket or the library, ATM machines, conveyor belts and forklifts, automated switchboards that replaced telephone operators, elevators that haven’t required a human operator for about 40 years.  Some estimate that drones could replace $127 billion worth of labor – that’s a lot of taxes.

Ironically, the most impactful labor saving device ever has been the computer.  Computers made people more efficient, reducing the overall numbers needed to accomplish the same amount or work.  And both standard computers and all the robots mentioned above require software, which is how Bill Gates became rich enough to sit around and think up these ideas.  Should Microsoft pay taxes for all the secretarial, filing, and presentation design jobs that no longer exist?  Is he proposing this out of guilt for destroying all those jobs?

When unions bargain for higher wages should the robots be taxed at a higher rate?  When workers receive cost of living increases, do the robots pay more taxes?

Everyone should know that when an entire industry faces the same cost increase, all the companies in that industry can raise prices without fear of competition.  Back in the middle of the twentieth century when the UAW bargained a new contract with the American automakers, the prices of all their cars went up to pay for the labor cost increase across the industry.  This was announced on the news.  It was only after they faced serious competition from overseas that they were no longer able to continue this practice so openly.  Surely a robot tax would drive industry-wide price increases wherever they were levied.

In this case as in so many others, the poorest among us are the ones who would endure the brunt of this ill-advised policy.  As Forbes points out at the end of a long article explaining the faulty economics of this idea, “All taxes come out of the pocketbook of some live human being.”  It’s OK for those with deep pockets like Bill Gates, but the rest struggle with each price increase.

Basic economic understanding reminds us – as it should remind Bill Gates and all those news agencies that reported on this idea implying it should be seriously considered – economies don’t grow and increase our standards of living by shifting money around.  They grow by increasing productivity.  Taxing those mechanisms that actually contribute to those productivity increases is bad for everyone.  At least Forbes had the sense to refer to the robot tax as Gates’s “latest odd idea.”

Fox included in their report that “European Union lawmakers considered a proposal to tax robots in the past. The law was rejected.”  Sounds like a smart move.  After all, robots don't pay taxes; people pay taxes either directly from their income or indirectly in the increased prices caused by ideas like this.