Robin Hanson’s Reply to the Luddites

Update: I am an idiot. (You could have found that out by asking my daughters.) Curt Gardner is nice enough to point out in the comments that “the book you link to is not Robin Hansen’s, but that of his GMU colleague Tyler Cowen.” I do get the two confused at times, this being a fine example. Having framed this post by characterizing myself, I’ll leave it at that.

Robin Hanson was nice enough to drop off a drive-by comment in response to a recent post of mine (responding to a presentation of his), a post that espoused my Luddite Fantasy. His comment:

No we haven’t reached a flat plateau yet.  Only a small fraction of world income now goes to machines, and a flat part could easily trigger a faster growth mode.  No, redistribution is not required to maintain demand, and utility functions do not “flat-line.”

My initial response to this (rather curt and dismissive) reply was fairly natural — irritation. But I tried to think about it in the best light, assuming we were hearing from a busy person who didn’t have time to respond in detail to an admitted amateur — much less provide an education in basic economics to one who clearly (at least to Robin) had not acquired that education on his own.

But still, being from Missouri I was less than convinced by the unsupported denialism. So I went looking through Robin’s work [see update at top of this post] to see if he anywhere provides empirical support for his assertions. (Including — without success — in his book, which is a paean to [his own self-described] “autistic cognitive style.” Yes, I bought it in hardcover, read it, and re-read sections.)

His second comment on the post (replying to my queries) pointed toward some evidence, though without actually providing it:

“Less than 10%” [of world income now goes to {owners of} machines].

I didn’t find any support in his work, but this is not an implausible number. In the U.S., only 15% of personal income is “receipts on assets,” and over the last 80 years it’s varied between 5 and 20%. (There was a long, steady rise from ’44 to the mid ’80s, after which it declined some then stayed relatively flat.) I do really wonder how his number is, or can be, calculated, however. For instance, workers presumably reap some of the benefits of machines in the workers’ wages. How can this all be split out? (cf. multifactor productivity.) Where does his number come from?

In any case, while Robin seems to think this is a silver-bullet argument, it’s really something of an aside. His charts that we were talking about weren’t describing machines’ share of income, but the growth in machines’ abilities and the utility (to humans) of their output relative to humans’ abilities. They may be tightly related, but the relationship — especially as it interacts with aggregate demand and the macroeconomy — is far from clear.

Perhaps Robin thinks that standard economic theory explains all that, and it need not be discussed.

Robin did touch on this area in a post that I read quite carefully when it came out a while back, responding to a fellow Luddite’s self-published book and accompanying blog. One key paragraph from Robin’s post:

Ford’s mass-market theory of production is nothing like standard economic theory. Sure high income inequality might be ethically bad, and threaten political instability, but it does not at all threaten economic collapse – producers can focus on giving the rich what they want, and innovation and growth is just as feasible for elite products as for mass products.

Okay, here he explicitly invokes “standard economic theory,” and he (perhaps understandably) does not feel the need to explain it — or question it. But the whole point of my assertions was that these beliefs merit serious questioning, in particular the assertion that “producers can focus on giving the rich what they want, and innovation and growth is just as feasible for elite products as for mass products.”

Because–and this is the central point that Robin rather mysteriously does not reply to — the cognitive ratcheting of knowledge societies seems to be putting an increasing number of people below the cognitive waterline where they can be productive contributors to, consumers of, and participants in, the economy. He seems remarkably (almost autistically) blind to the situation that so many find themselves in — those who (unlike Robin) are not blessed with an “autistic cognitive style.”

To address two more of Robin’s assertions:

No, redistribution is not required to maintain demand

My gentle readers will forgive me, I hope, if I repeat a question I’ve asked before: Why is it that every large, thriving, prosperous country — with no exceptions — engages in massive doses of redistribution? If libertarian principles are so efficient, why hasn’t a single country emerged that operates according to those principles, and surged ahead of all the rest? Could libertarianism be a utopian fantasy? We know how those have turned out over the centuries…

utility functions do not “flat-line.”

This seems to be asserting that a second or third Lamborghini has the same utility-per-dollar ratio as providing a comfortable home for one’s family. Is he just quibbling over the “flat-line” wording, when he knows that “flatter” is what’s being discussed? Is he tossing aside any insights at all from happiness research, and in fact from “standard economic theory”? His six words, while giving some impression of heat, shed little light.

Finally, I would ask Robin if he has a better explanation for this rather profound and accelerating trend. Based on everything I’ve been able to find, standard economic theory is at a loss to explain it.

After lengthy consideration, the impression I receive from Robin’s hands-over-ears, eyes-closed, humming-loudly reply is perhaps best encapsulated in two words: Undergoing Bias.