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What happens if robots take all the jobs?

The theme of this year's World Economic Forum (WEF) meeting in Davos, Switzerland, can be summarized as the impact of the fourth industrial revolution on jobs, inequality and the quality of life.

How will digital revolution change our lives? Will robots take most of the good jobs? Are we headed for a future where a few people -- those who are fortunate enough to own the robots and other technology needed to produce goods and services -- receive most of the income, and those who don't struggle to find work that pays enough to feed their families?

This isn't the first time fears have arisen that technology would displace workers and create social upheaval. They were similarly expressed during the Industrial Revolution (e.g. see Arguments For and Against the Use of Machines). No doubt, some workers paid a large price as nations industrialized, something we should try to avoid through social insurance that protects workers who are unemployed through no fault of their own. But in the long-run, it created better jobs and a much better standard of living.

Will this time be different? Do we only need to worry about the short-run adjustment costs for displaced workers as the economy transitions through another revolution, or will there be long-run consequence as well?

Presently, some evidence shows that middle-class jobs are disappearing due to technology, with displaced workers moving either up the job ladder if they're lucky, but more likely having to settle for worse jobs. Is this a short-run transitional problem or a permanent, long-run trend that will only get worse?

The answer is we don't know for sure. The consequences of machines endowed with artificial intelligence are hard to predict, but it's not hard to imagine a future where humans aren't needed for many of the jobs they do now. But it's also possible to imagine a future where humans still have plenty to do.

In either case, to me the question comes down to two things: Will we be able to produce enough goods and services to raise everyone's standard of living significantly? If so, how should the goods and services be distributed?

On the question of production, I'm an optimist. I believe the digital revolution will enhance productive capacity significantly. Although productivity growth has slowed in recent years, according to the official numbers, many benefits of digital technology don't show up in official numbers (e.g., how do you value the benefits of a free app for your phone, which has no market price to use in the evaluation?). With time, we'll see the benefits.

Thus, I see the distribution of goods and services as the more pressing problem (a concern that's growing today as inequality continues to widen). Imagine a world where robots produce everything, or at least most things. In this world, 20 percent of the people own the robots, so they own all of the output the robots produce.

In such a world, how will the people without robots get goods and services? They could, as a group, produce goods and services for themselves the "old-fashioned" way: grow their own food, produce their own clothing and so on with their labor instead of with robots. Some might even earn enough to buy their own robots. But such a highly unequal, two-tier society would be hard to sustain.

If such a society comes to pass, we will have to think long and hard about the distribution of goods and services. One idea is to establish a universal basic income, an amount that every person receives whether they own robots or not.

That will require redistribution of income from the haves to the have nots and a change in our ideas about one of the basics of capitalism: the idea that the ownership of capital entitles the owner to all of the income that capital produces (net of the taxes it takes to sustain the society that allows such businesses to operate and flourish).

And that won't be easy. Those who benefit greatly from the ownership of the means of production will use the wealth they accumulate to try to influence the political process away from such change. But if robots do take over, and if inequality continues to rise because of it, the time will come when people demand change.

Looking at the candidates for the upcoming presidential election and the populist sentiment behind contenders on both the Republican and Democratic sides, perhaps that time has already come.

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