Q. Are the current high levels of unemployment being caused by advances in Artificial Intelligence automating away human jobs?

A. Conventional economic theory says this shouldn't happen. Suppose it costs 2 units of labor to produce a hot dog and 1 unit of labor to produce a bun, and that 30 units of labor are producing 10 hot dogs in 10 buns. If automation makes it possible to produce a hot dog using 1 unit of labor instead, conventional economics says that some people should shift from making hot dogs to buns, and the new equilibrium should be 15 hot dogs in 15 buns. On standard economic theory, improved productivity - including from automating away some jobs - should produce increased standards of living, not long-term unemployment.

Q. Sounds like a lovely theory. As the proverb goes, the tragedy of science is a beautiful theory slain by an ugly fact. Experiment trumps theory and in reality, unemployment is rising.

A. Sure. Except that the happy equilibrium with 15 hot dogs in buns, is exactly what happened over the last four centuries where we went from 95% of the population being farmers to 2% of the population being farmers (in agriculturally self-sufficient developed countries). We don't live in a world where 93% of the people are unemployed because 93% of the jobs went away. The first thought of automation removing a job, and thus the economy having one fewer job, has not been the way the world has worked since the Industrial Revolution. The parable of the hot dog in the bun is how economies really, actually worked in real life for centuries. Automation followed by re-employment went on for literally centuries in exactly the way that the standard lovely economic model said it should. The idea that there's a limited amount of work which is destroyed by automation is known in economics as the "lump of labour fallacy".

Q. But now people aren't being reemployed. The jobs that went away in the Great Recession aren't coming back, even as the stock market and corporate profits rise again.

A. Yes. And that's a new problem. We didn't get that when the Model T automobile mechanized the entire horse-and-buggy industry out of existence. The difficulty with supposing that automation is producing unemployment is that automation isn't ne...

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