Tuesday, February 21, 2017

Harvard Educated Economist Clueless About the Fundamentals of Economics (Robot Edition)

Jeffrey Sachs attended Harvard College, where he received his bachelor of arts summa cum laude in 1976. He went on to receive his MA and Ph.D. in economics from Harvard.

He now teaches at Columbia University.

Despite his educational pedigree, the man is clueless when it comes to fundamentals of economics.

In a short youtube, he blurts out more economic fallacies than John Maynard Keynes was able to make in an entire book.

Sachs appears to understand that robots make the economy more productive but he doesn't seem to understand that this results in more product* available for all, including the masses. He babbles on about the mythical "problem of inequality." If the product tide is rising for everyone, who cares if it rises a bit more for those who are responsible for the tide to be increasing in the first place?

Sachs somehow doesn't get this. In the video, he states that "income is shifting from workers to capital (he means capitalists)." But it is not a shift in absolute income, everyone's income (that is, access to more product) occurs, though proportionality it could very well be a greater gain for the capitalists who have created the product increase by investing in robots. This is not a shift in a static amount of income, it is an increase income for all.

But because Sachs doesn't get that it is a gain for all, he proposes all kinds of government interventions that fix a problem of shifting income that doesn't exist---and in the process advocates policies that create a less incentivized economy that will produce less product.

He states in the video that we need an economy that "shares benefits." By this, he means taking income from those who have expanded the array of products through capital investment and giving some of that income to those who have not made such investments. He specifically suggests that the young should be given such a payout. He proposes that:
Every young person is given a certain amount of basically financial assets or capital.  It's like saying everyone can have at least one robot so that as the robots get better and better in the future everyone is sharing in the benefits of an expanding economy.
Again, who says that everyone isn't gaining product in an economy that experiences broad-based gains in robotic productivity? But, further, who says everyone has equally ability in the handling of capital or robot investment? This is an absurd notion. In a free market, capital tends to move toward those who are most capable of employing it efficiently. To take capital away from efficient allocators and spread it around to everyone in an economy is the equivalent of taking medical equipment and spreading a little bit around to everyone in the economy for "medical equipment equality": "Hey you, here's a CAT scan machine, and you, kid, here's a LGO-Fistula Proctology Probe." This is insanity.

Robots don't cause a "distribution problem." If robots only made products for the rich then the masses would still have their old jobs before robots were introduced. But this isn't the case. Robots also make products for the mass market creating more product for all including the masses, which would benefit those who shift to new jobs because of the robots---and there are always jobs, see: Forget Robots, I Need a ManServant.

There is no need for crazed micro-management of the robot world by the robot-looking Jeffrey Sachs. His policies, if enacted, would only make the economy less productive. His view needs to be replaced with a robot that says, "Leave it to the free market."


* I am using the term product to mean both product and service for brevity's sake.


  1. Does inflationary monetary policy kill the economic gains that spill to the masses - especially when it comes to human labor replacement? On a gold standard, I would agree 100% that the productivity gains of the robot worker would benefit all of society. Robot labor is absolutely deflationary, but if deflation is outlawed then how do human laborers share productivity gains? Real prices for some robot made consumer goods may fall, but housing, food, utilities, government-run industries will continue to be impacted by inflation.

    I think the productivity gains from technological advances in labor (hat tip to monetary stimulus) can be net negative for most humans in the inflationary fiat money system. Most people spend most of their money on housing, food and healthcare. The few percent savings on robot-produced trinkets does not offset these cost increases. The mass man would be better off working the job and paying a bit more for the consumer goods (because most of his income is paying for something else). More intervention (welfare) is not a good answer. Sound money and free markets would be great, but fat chance.

    1. I guess it's not impossible that increased abundance would result in less abundance for a majority of the population, but it seems like the default assumption is that it would result in more. After all, there's now more stuff to go around. And the historical record bears this out. As mean income/wealth has increased, so too has the income/wealth of the bottom x%, almost always.

  2. Automation to this degree threatens to destroy Keynesian economics. As a result they need to make sure the robots are blamed and not their meddling.

  3. Government economists: solving problems that don't exist in ways they don't understand.

    1. ... resulting in unimaginable waste and micromanagement of citizens' lives, as well as creating new problems which then seem to require even more government intervention.

  4. The Left sees robots as the path to equal outcomes for all. Note his use of the word "fairness."