Skynet and Sneezy Pandas: The Economics of Automation

This video by internet stick-figure legend CPG Grey is very cool and interesting, I recommend you watch it. If for whatever reason you can’t, here’s a very sketchy summary:

The machines are coming for your job. We already have technology that makes it cheaper and more efficient for machines to do many of the manual labour jobs that employ large numbers of people in the economy. Tech that supplants people in white-collar, professional and creative industries is in various stages of development and all of this technology is only going to get faster and cheaper.

In Grey’s words, automation –  this tool for producing abundance with very little effort – will render the majority of humans unemployable. Obviously, this will create a huge problem unless we’re prepared for it, which we’re not.

I want to think about that problem a bit, because seems pretty clear that at core it’s a problem of distribution. After all, there’s still going to be abundance; indeed more abundant abundance than we’ve ever had.  The tricky thing is working out who gets how much of it.

At the moment, if you live in some kind of market economy (and if you’re reading this on the internet you almost certainly do), then your share of the world’s pile of saleable stuff is, at least in theory, determined by the value or ‘price’ of your contribution to that pile*, which is how much you get paid. Obviously, in a world where most people’s contribution to that pile is zero, this model won’t work anymore, but the pile will still be there. So what will we do?

Obviously, I have no idea, futurology being a mug’s game at the best of times, but just for fun, here are three scenarios:


Maybe your first response to being told ‘in the future no one will be able to work for a living’ is to say ‘woo hoo! In the future, no one will have to work for a living!’ After all, if machines can take care of all the food production and the house-building and the accounting and even the medical research, doesn’t that free us up to spend our time doing… whatever the hell we want?

This might sound utopian, but it’s really just an extension of a trend that started with cave painting and ran straight through to lolcats. The more technology frees us up from making things we actually need to keep ourselves breathing, the more we can spend our precious seconds on this earth engaged in more satisfying, creative pursuits like playing an instrument, making sneezy panda videos, or writing Sherlock fan fiction.

Grey actually tackles this in his video, but points out that because success in the entertainment industry is based on getting others’ attention, you can’t have an economy where everyone makes a living in the arts. Of course, here in Pandatopia it doesn’t matter if only your five best friends read your Sherlock fan fic because no-one’s making a living. The machines are making our living for us.

There remains the prospect of the machines also writing better Sherlock-Moriarty slash than us and out-competing us that way, and that’s certainly possible, but then again when it comes to recreational activities people are weird. In a lot of ways we aren’t interested in ‘the best’.  We impose all kinds of restrictions on ourselves. Just look at sports. Usain Bolt would run way faster if he juiced up on every steroid under the sun, but we don’t let him.  We aren’t interested in how fast a man can run, we’re interested in how fast a man can run without artificial help.  It’s not too hard to imagine a culture where people only want to read stories, or listen to music that they can verify only come from a human source.

Still, there are at least two problems with a plausible Pandatopia. First – scarcity. Any 101 economics textbook will tell you that there are three inputs to production: capital (technology), labour and raw materials. Automation may be able to make lots of the first and render the second redundant, but it can’t produce unlimited coltan or clean water or stop climate change chewing up the atmosphere. If we keep breeding sooner or later we’ll hit a scarcity constraint.

The second, and bigger problem with Pandatopia is how do we get there? It’s hard to imagine a transition path to this new world from the market economy we have now. After all, in lots of ways, we already have abundance, but we’re terrible at portioning it out, hence the infamous rising rates of obesity and planned obsolescence in developed economies, while in other countries vast resource deprivation and malnutrition prevails. Even inside the developed economies, the amount wasted by the rich could easily improve the living standards of the poor. This cheery thought leads us to scenario 2:


This is the path that feels most likely in the short to medium term, if only because it requires the least change.  More and more people drop out of the workforce, and their economic power dwindles to zero. The world’s pile of saleable stuff gets more and more concentrated in the hands of the remaining workers, and increasingly, the owners of the machines who are doing the work.

This is kind of the tone that Grey’s video takes, and it seems pretty plausible, after all income inequality in developed countries is on the up anyway, but it isn’t sustainable. For one thing, there remains the question of what the new plutocrats will do with all their shiny abundant new stuff: there are only so many cheeseburgers one person can eat and so many cars they can drive after all. (They might just give the surplus away, which in a world of plenty puts us in a weird version of Pandatopia, where everyone has everything they need but only a tiny handful of people control what gets made. Perhaps we’ll call this ‘Commandatopia’.)

More pressingly, though without a reasonably well paid mass population, it’s hard to see where the demand driving the production of all this stuff would come from. Capitalism needs consumers.  The more you think about it, the more it seems that the automation Grey’s talking about has to break our current economic model somehow.

(There is a very scary possible dynamic equilibrium here: where economic power’s concentrated with the owners of the machines for long enough that most people to drop out of the economy, at which point the machines’ owners just stop making so much food and clothing, because the market’s telling them there’s no demand for it, and lots of people freeze and starve. But that would require the machine’s owners to act a lot like machines themselves, which leads us onto…


So obviously, if we’re building machines to do the work in the economy, and machines to make the decisions that direct capital in that economy (see: stock market algorithms), and if we say, as Grey does, that the human brain is really just a very complicated machine in the first place, then sooner or later we have to ask: “what happens when the machines are in charge?”

What happens when the intelligence directing the tools that are creating the abundance isn’t human any more, but artificial? Would our new machine overlords feed and clothe us? Would they exterminate us? Would they simply ignore and work around us? We can’t say without knowing what a machine intelligence like this would want, and we simply don’t know.

Of course, if the human brain is just a machine then we do have one model for a world economy governed by machine intelligence: our economy.  AIs could wind up thinking just like humans, and that just raises the question all over again.

*There are a whole mountain of caveats to this, including social security, people who make their living from renting out capital, inheritance etc but still, mostly…

4 thoughts on “Skynet and Sneezy Pandas: The Economics of Automation

  1. Great article – the talk these days is all about automation taking our jobs (which it will – my business is part and parcel of that), but what I feel is lacking is a real conversation towards what will replace our current economic system. That’s the fascinating question: what comes next?

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