Tuesday, February 16, 2016

The Law of Diminishing Returns

No, this is NOT about the Terminator but rather about Bill Joy's Why The Future Doesn't Need Us meeting the Law of Diminishing Returns whereby bots, tech and AI are not the saviors of the economy and the world but rather the terminators if the Arstechinca article rings true. 

There is no denying the impact of the information technology revolution on our economy. From the time that personal computers started infiltrating the workplace, there have been impressive gains in productivity. At the same time, there's been an uncoupling of the traditional link between productivity and employment; unlike in years past, the benefits have not been felt by many—or even most—in society. That was the central message from Moshe Vardi's talk.

A professor of computational engineering at Rice University, Vardi said that technology has been destroying jobs since the industrial revolution—one only needs to look at the role of horses in transportation as an example. But in the past, those jobs have been taken by machines designed to do a specific thing, like weaving cotton. Now, Vardi argued, we're facing the possibility of machines that may be better than humans at nearly everything.

Vardi raised the concerning possibility that an over-reliance on automation and AI could have the same effect on our economy as the Roman dependence on slaves. "Can our economic system deal with labor participation rates below 25 percent? Below 50 percent?" he asked. The solution in ancient Rome, he pointed out, was bread and circuses or life as a legionary.

What's interesting about this notion of tech not being the end all is the take The Economist has regarding the same subject with emphasis given to how The Law of Diminishing Returns applies.

IF THERE IS a technological revolution in progress, rich economies could be forgiven for wishing it would go away. Workers in America, Europe and Japan have been through a difficult few decades. In the 1970s the blistering growth after the second world war vanished in both Europe and America. In the early 1990s Japan joined the slump, entering a prolonged period of economic stagnation. Brief spells of faster growth in intervening years quickly petered out. The rich world is still trying to shake off the effects of the 2008 financial crisis. And now the digital economy, far from pushing up wages across the board in response to higher productivity, is keeping them flat for the mass of workers while extravagantly rewarding the most talented ones.

Between 1991 and 2012 the average annual increase in real wages in Britain was 1.5% and in America 1%, according to the Organisation for Economic Co-operation and Development, a club of mostly rich countries. That was less than the rate of economic growth over the period and far less than in earlier decades. Other countries fared even worse. Real wage growth in Germany from 1992 to 2012 was just 0.6%; Italy and Japan saw hardly any increase at all. And, critically, those averages conceal plenty of variation. Real pay for most workers remained flat or even fell, whereas for the highest earners it soared.

Where this leads, no one knows as AI, combined with robotics and nanotech, as Joy and others have noted with great eloquence, are open ended creations, fraught with uncertainty in terms of how these technologies will interact with man, something sanguine researchers like Ray Kurzweil seem to not fully understand. As often stated in BRT, there's a cost to everything thanks to the two laws of thermodynamics,  irrefutable facts we ignore at our peril.

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