Average is Over, Robots, and the Minimum Income

Watson_Jeopardy

I recently read Tyler Cowen’s latest book Average is Over, and I’d recommend it to anyone thinking about technology and the future of the economy. It’s a highly readable vision of what the coming age of ubiquitous intelligent machines will mean for workers and the economy. Here’s a bit from Chapter 1 that captures Cowen’s thinking:

Workers more and more will come to be classified into two categories. The key questions will be: Are you good at working with intelligent machines or not? Are your skills a complement to the skills of the computer, or is the computer doing better without you? … If you and your skills are a complement to the computer, your wage and labor market prospects are likely to be cheery. If your skills do not complement the computer, you may want to address that mismatch. Ever more people are starting to fall on one side of the divide or the other. That’s why average is over.

To be clear: the book is not about whether this is a good or bad thing, or whether its results will be positive or negative. But his articulation of what the world will look like is bleak:

We will move from a society based on the pretense that everyone is given an okay standard of living to a society in which people are expected to fend for themselves much more than they do now. I imagine a world where, say, 10 to 15 percent of the citizenry is extremely wealthy and has fantastically comfortable and stimulating lives, the equivalent of current-day millionaires albeit with better health care.

Much of the rest of the country will have stagnant or maybe even falling wages in dollar terms, but a lot more opportunities for cheap fun and also cheap education. Many of these people will live quite well, and those will be the people who have the discipline to benefit from all the free or near-free services modern technology has made available. Others will fall by the wayside.

(You can read more about what Cowen thinks this will do to U.S. politics in this excerpt at Politico.)

If we accept for the moment that Cowen’s vision of how machine intelligence will transform the economy is basically right, how might we avoid this sad state of political and distributional affairs?

Enter the minimum income. As The New York Times recently explained:

Every month, every Swiss person would receive a check from the government, no matter how rich or poor, how hardworking or lazy, how old or young. Poverty would disappear. Economists, needless to say, are sharply divided on what would reappear in its place — and whether such a basic-income scheme might have some appeal for other, less socialist countries too.

(You can read Cowen on some of the shortcomings here.)

I see a few reasons why a guaranteed minimum income would fit nicely with the future Cowen describes.

1. Supplement the incomes of those unable to compete in the labor force. This is obvious. But the guaranteed minimum income strikes me as a way to maintain the notion of a guaranteed standard of living for all. Moreover, as intelligent machines put pressure on the labor market, tying that standard to work — as we do through the minimum wage — may make less sense.

2. Incentives to work would matter less than they do today. As the Times notes, one of the biggest concerns around a minimum income is that it would serve as a disincentive to work. But that should matter much less in the world Cowen envisions, where unskilled labor is largely displaced by machines. In that world, the fact that some citizens opt not to work would matter less to GDP. Moreover, it would be unlikely to impact the motivations of higher skilled workers, who would set out to earn far more than the guaranteed income provides.* This logic applies both to citizens working despite the option of a guaranteed minimum income and to the disincentive of higher marginal tax rates on the wealthy to support such a program. Don’t buy this? It would be even more true given #3.

3. Increased cultural emphasis on self-motivation will already be necessary. The world Cowen describes prizes self-motivation above almost everything else. If you’re motivated, you’ll take advantage of cheap education to work your way into the most productive echelons of the labor market. In such a world, a cultural focus on increasing self-motivation would be extremely helpful. Moreover, such a cultural emphasis would serve to bolster my arguments in #2, undercutting the argument that a guaranteed minimum income disincentivizes work. In other words, we would accept that financial incentives to avoid work existed, but overcome them in part by becoming a society obsessed with promoting curiosity-based learning and a quest for mastery or “flow.”

4. Some slack in the economy will be necessary to promote art and entrepreneurship. In this hyper-efficient, ultra-competitive world, the creation of a strong safety net would arguably be even more necessary to promote things like entrepreneurship and the arts. Entrepreneurship is mentioned as an argument for the guaranteed minimum income in the Times piece and I think it is a strong argument in two senses. First, a stronger safety net helps to de-risk entrepreneurship; if you forgo a higher income to found a startup and then fail, you’ll at least fall back on some level of comfort. Second, a minimum income would help to subsidize entrepreneurs’ incubation period, as already happens through “entrepreneur-in-residence” programs. If entrepreneurs can eat and live somewhat comfortably while working on their idea (but before it is at the point of making revenue or being attractive to investors), they’ll be more likely to take the plunge.

As for the arts, the tight labor market envisioned in Cowen’s book would put even more negative pressure on the wages of artists. Huge swaths of those without the skills to succeed in complementing machines would seek to become musicians, actors, painters, etc. bidding down wages for those industries. A minimum income would make it possible for artists to do their work.

For all these reasons, I see a guaranteed minimum income as a natural fit with the world Cowen describes. To be clear, I’m not saying I think we’ll necessarily get that world, or that a minimum income is actually a good idea. But as we ponder a world of machine intelligence and a bifurcated labor market, it’s something to at least consider.

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*Even today, I would argue that the most productive workers are largely not motivated by money. Rather, they’re motivated by status, curiosity, and a sense of mastery. To the extent that money is a motivator, it’s largely as a substitute for status.