First posted February 19, 2017.
Partly because of Eddington's Arrow of Time, at least in the mundane
everyday experience, we only have one economic history dataset to work
with. Because of this I used to argue with people who said this time
will be like the last time but found that approach neither satisfying
nor enlightening. I don't argue anymore, I just observe, like a kid
watching a bug and wonder where the almost metaphysical certitude would
be coming from, because, truth be told, nobody knows how this all works
out.
Which I think is the point of this mini-essay.
From Tyler Cowen at BloombergView
“Why should it be different this time?” That’s the most common response I hear when I raise concerns about automation and the future of jobs, and it’s a pretty simple rejoinder. The Western world managed the shift out of agricultural jobs into industry, and continued to see economic growth. So will not the jobs being displaced now by automation and artificial intelligence lead to new jobs elsewhere in a broadly similar and beneficial manner? Will not the former truck drivers, displaced by self-driving vehicles, find work caring for the elderly or maybe fixing or programming the new modes of transport?
As economics, that may well be correct, but as history it’s missing some central problems. The shift out of agricultural jobs, while eventually a boon for virtually all of humanity, brought significant problems along the way. This time probably won’t be different, and that’s exactly why we should be concerned.
Consider, for instance, the history of wages during the Industrial Revolution. Estimates vary, but it is common to treat the Industrial Revolution as starting around 1760, at least in Britain. If we consider estimates for private per capita consumption, from 1760 to 1831, that variable rose only by about 22 percent. That’s not much for a 71-year period. A lot of new wealth was being created, but economic turmoil and adjustment costs and war kept down the returns to labor. (If you’re wondering, “Don’t fight a major war” is the big policy lesson from this period, but also note that the setting for labor market adjustments is never ideal.)
By the estimates of Gregory Clark, economic historian at the University of California at Davis, English real wages may have fallen about 10 percent from 1770 to 1810, a 40-year period. Clark also estimates that it took 60 to 70 years of transition, after the onset of industrialization, for English workers to see sustained real wage gains at all....MORE
Again, we only have one dataset. We can say that U.S. stocks have returned 'X' over 'Y' time period, and for long periods we've been able to extrapolate those variables, but no one knows what tomorrow brings.
