Comment author:timtyler
13 July 2010 06:26:56AM
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3 points
[-]
Regarding the second point, here is my 2p on "The Lights in the Tunnel":
"The Lights in the Tunnel" is a whole book about a topic I am interested in: the effects of automation. However, there is a serious flaw that pervades the book's whole analysis:
Martin argues that the economy will crash - as machines take the jobs of consumers, they no longer have any money to spend on things - and cash flows spiral downwards.
Martin says: "Another way of expressing this is to say that although machines may take over people’s jobs, the machines - unless we are really going to jump into the stuff of science fiction - do not participate in the market as consumers" - page 24.
However, machines still participate in the market indirectly - via people. Humans buy fuel, spare parts, add-ons and "consumables" for their machines. Machines still "consume" - even if they don't have bank accounts and can't go to the shops. The resulting effect on the economy is much the same as if the machines were themselves consumers.
This seemingly-simple point destroys much of the book's DOOM-mongering analysis. There are some other good things in the book - but IMO, the author damages the reader's view of his competence by making this kind of mistake.
Comment author:mford
14 July 2010 10:49:59AM
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7 points
[-]
Hi,
This is Martin Ford, the author of The Lights in the Tunnel. I just wanted to respond to your comment here:
If the average consumer is unemployed and has no income, he is obviously not going to be purchasing stuff for his machines. In fact, ownership of the machines will concentrate into a shrinking elite as machines take the jobs of average people.
Remember that the focus here is on what we might call "end consumption." If you consider GDP, consumer spending is about 70% of that. It is important to note that that is only END consumption by PEOPLE.
When General Motors purchases steel for its cars that is not consumption and is NOT added to GDP. The value of the steel gets accounted for ONLY when someone buys a car. The same argument applies to this idea of machines using resources. If the machines are used in production--and if they replace human workers--then what the machines "consume" is not END consumption and does not drive the economy. It is intermediate consumption. A PERSON still has to purchase the end product. Machines cannot do this. If too few people have the ability to purchase END products, the mass market economy will collapse.
Everything produced by the human economy is ultimately consumed by individual human beings. This applies even to government spending since the services provided by government are consumed by people. The only other factor is business investment, and that occurs in response to anticipated future consumer spending--businesses will invest only if they anticipate future demand.
Anywone who is interested can read the book for free in PDF at http://www.thelightsinthetunnel.com. If you prefer to buy the book at Amazon, I would like that even bettter.. ;-)
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Regarding the second point, here is my 2p on "The Lights in the Tunnel":
"The Lights in the Tunnel" is a whole book about a topic I am interested in: the effects of automation. However, there is a serious flaw that pervades the book's whole analysis:
Martin argues that the economy will crash - as machines take the jobs of consumers, they no longer have any money to spend on things - and cash flows spiral downwards.
Martin says: "Another way of expressing this is to say that although machines may take over people’s jobs, the machines - unless we are really going to jump into the stuff of science fiction - do not participate in the market as consumers" - page 24.
However, machines still participate in the market indirectly - via people. Humans buy fuel, spare parts, add-ons and "consumables" for their machines. Machines still "consume" - even if they don't have bank accounts and can't go to the shops. The resulting effect on the economy is much the same as if the machines were themselves consumers.
This seemingly-simple point destroys much of the book's DOOM-mongering analysis. There are some other good things in the book - but IMO, the author damages the reader's view of his competence by making this kind of mistake.
Hi,
This is Martin Ford, the author of The Lights in the Tunnel. I just wanted to respond to your comment here:
If the average consumer is unemployed and has no income, he is obviously not going to be purchasing stuff for his machines. In fact, ownership of the machines will concentrate into a shrinking elite as machines take the jobs of average people.
Remember that the focus here is on what we might call "end consumption." If you consider GDP, consumer spending is about 70% of that. It is important to note that that is only END consumption by PEOPLE.
When General Motors purchases steel for its cars that is not consumption and is NOT added to GDP. The value of the steel gets accounted for ONLY when someone buys a car. The same argument applies to this idea of machines using resources. If the machines are used in production--and if they replace human workers--then what the machines "consume" is not END consumption and does not drive the economy. It is intermediate consumption. A PERSON still has to purchase the end product. Machines cannot do this. If too few people have the ability to purchase END products, the mass market economy will collapse.
Everything produced by the human economy is ultimately consumed by individual human beings. This applies even to government spending since the services provided by government are consumed by people. The only other factor is business investment, and that occurs in response to anticipated future consumer spending--businesses will invest only if they anticipate future demand.
Anywone who is interested can read the book for free in PDF at http://www.thelightsinthetunnel.com. If you prefer to buy the book at Amazon, I would like that even bettter.. ;-)