On Polanyi’s Paradox, Computers and Jobs; Whole Grains are Good for your Heart!

From: aditya rana
Date: Sat, Feb 28, 2015 at 1:59 PM
Subject: On Polanyi’s Paradox, Computers and Jobs; Whole Grains are Good for your Heart!

Hi!,

There have been numerous reports about the pervasive role of technology in replacing human jobs, and it being the key reason behind the sluggish labour market in recent years. This is one of the most pressing issues which the world faces in the coming years and decades, and the MIT economist David Autor presented a fascinating paper on the subject at last year’s Jackson Hole summit for central bankers (http://www.kc.frb.org/publicat/sympos/2014/2014093014.pdf) . He provides a more optimistic, somewhat counterintuitive and nuanced analysis of the issue and I provide below a summary of the key points:

-The philosopher Michael Polanyi’s observation in 1966 known as Polanyi’s paradox – “we know more than we can tell”, i.e. our tacit knowledge of the world exceeds our explicit understanding of it – is key to grasping the evolution of computerization so far and going forward.

-The share of information technology investment in private non-residential investment has risen from 8% to 30% during the period from 1950 until 2012, most of it occurring after 1990. For a single category of capital investment to account for one in three business investment dollars is unprecedented in history.

-So will computers eventually replace most human jobs? Unlikely, as computers are mainly performing tasks which follow explicit codifiable procedures (i.e. multiplication) as they are vastly superior to human labour in speed, quality, accuracy and cost efficiency. What is proving difficult to automate are tasks which demand flexibility, judgment and common sense (i.e. developing a hypothesis or organising a closet)– skills which we understand only tacitly.

-The central idea here is to understand the interplay between computers and humans – with computers replacing humans in routine codifiable tasks while amplifying the comparative advantage of humans in supplying problem solving skills, adaptability and creativity.

-The rising labour market polarization in the developed world – meaning the simultaneous growth of high-education, high wage and low-education and low wage jobs is a manifestation Polanyi’s paradox.

-As computers have substituted routine tasks following a dramatic drop in computing costs (1.7 trillion-fold), they have been unable to substitute two specific categories of tasks: 1) the “abstract” ones characterized by problem-solving capabilities, intuition , creativity and persuasion requiring a high level of education and analytical skills, and, 2) the “manual” ones identified with situational adaptability, visual and language recognition, and in-person interactions generally not requiring formal education or extensive training.

-The jobs requiring abstract skills have tended to exist in professional, managerial and technical occupations while those requiring manual skills exist in service and labourer occupations. This has come at the expense of middle-wage, middle-education jobs – i.e. “job polarization”.

-However, job polarization has not necessarily resulted in “wage polarization” – while abstract task-intensive jobs have benefited from strong complementarities with computerization leading to higher output as well as increasing demand for their services (i.e. medicine, finance, law, engineering, research and design). This combined with the relatively slower pace of increase in college educated workers has over time led to higher wages. On the other end of the spectrum, the manual task (and middle-skill) jobs have seen declining wage growth primarily due to higher growth of labour supply, as middle-skilled workers have downgraded.

-However, since 2000, the growth rate of abstract task-intensive workers has slowed down. While one explanation could be that this is due to computerization, it is unlikely as this phenomenon has occurred alongside a drop in corporate investment in technology bringing it down to a level of 3.5% of GDP, a level last seen in 1995 prior to ounset of the “dot com” era.

-There have been two possible explanations for this: a) new technology demand for such skills peaks during the adoption period and declines thereafter, and, b) the gains from the computer revolution have been largely realized and are now petering out. There is a third more likely possibility – since investment in technology dropped sharply after 2000, but surged in the 5 prior years – this could have been simply a result of the bursting of the “tech bubble”. Highly skilled jobs have shown a recovery since 2007 pointing to optimism about the future, though middle-wage jobs continue to contract and lower-wage jobs show rapid expansion.

-So what are we likely to see going forward? Will “robot overlords” soon take all our jobs and reverse Polanyi’s paradox as activities considered off-limits for computers until quite recently are now subject to computerization – such as driving vehicles, reviewing legal documents and agricultural field labour?

-There are two possible ways this could happen: 1) automated systems lack flexibility and are brittle, but by controlling the environment they can eliminate some of the non-routine work – Google cars work because of controlling the environment by constructing smooth paved roads with detailed maps – but still require human control to handle unexpected events, and, 2) by “machine learning”, where statistical techniques and inductive reasoning is utilized to supply best guess answers to tasks which are not codifiable. However, the results here are inconsistent – they can be accurate at times, usually so-so and sometimes off the charts – i.e. “getting it right” on average but missing many of the most important exceptions.

Conclusions:

-Human history is replete with examples of thinkers overestimating the potential of new technologies to replace human labour – the green revolution displacing human farming, the industrial revolution displacing skilled artisan labour with unskilled factory labour, the auto industry displacing blacksmiths, stable hands etc..

-However, the short-term job losses were eventually more than offset by subsequent employment gains, in the new technologies as well as other unanticipated areas. Agricultural employment dropped from 41% in 1900 to 2% by 2000, but a host of new (and unimaginable) industries like health care, finance, information technology, consumer electronics, hospitality, leisure and entertainment eventually employed more people than agriculture.

-While it is relatively straightforward to assume that computers will continue to substitute more human jobs, it is more challenging to identify the complementarities. However, three things we can be confident about:

-1) Technological advances have significantly increased the demand for skilled labour for many decades and will continue to do so – i.e. demand for analytical skills, written communications and specific technical knowledge. Therefore, human capital investment must form the basis for any long-term strategy for producing complementary skills to technology.

2) Job polarization is unlikely to continue indefinitely. While many middle-skilled jobs will be replaced by technology, many middle-skilled jobs require a mixture of tasks from across the skill spectrum which cannot be readily unbundled. For example, medical support occupations (radiologists, nurse technicians etc.) are a rapidly growing category of middle skilled jobs with relatively high wages, typically requiring 2-years of post-secondary vocational training. Technology is also likely to make formerly high-end technical jobs more accessible to workers with middle skills.

3) While much has been made of the attributing the tepid labour market of the past decade to computerization, it is hard to perceive the channel through which this drastic fall in demand for labour has transpired. It is also inconsistent with the fact that this has coincided with the rapid drop in computer investment. In addition, this period has also seen the rapid growth in the developing world, raising global prosperity and reducing world inequality.

-It is feasible that this slowdown in U.S. labour growth since 2000 can be explained by two factors: a) bursting of the “dot com” bubble, followed by the collapse of the housing market and the financial crisis which curtailed investment and innovation, and, b) rapid globalization and, in particular, the spectacular rise of China as the major manufacturing exporter since its accession to WTO in 2001, which negatively impacted employment in the import-competing industries in The U.S.. Globalization, like technological change, does not necessarily have a positive impact in the short-term (and should be positive in the longer-term) and the adjustment process (like with technology) can be slow, costly and disruptive.

-A brilliant piece of research which makes a persuasive case for the long-term positive impact of technology on jobs, highlighting the complementary nature of technological and human skills. It is important to continue investing in the human skills which are going to matter even more going forward – such as analytical, written and verbal communication, specific technical knowledge, inter-personal , and problem solving to name just a few!

-As the economist and blogger Mark thomas put it down recently: “I’ve been arguing for a long time that in coming decades the major question will be about distribution, not production. I’m not very worried about stagnation, etc. — we’ll have plenty of stuff to go around. I’m worried about, to quote the title of a political science textbook I used many, many, many years ago as an undergraduate, "who gets the cookies?" not how many cookies we’re able to produce So I agree with Autor on this point: Mr. Autor … added, “If we automate all the jobs, we’ll be rich—which means we’ll have a distribution problem, not an income problem.””.

Whole Grains Protect Against Heart Disease:

The evidence of the health benefits of eating fibre, nutrient and energy rich whole grains continues to mount!

PRCM: March 1, 2015.

http://www.ajconline.org/article/S0002-9149(14)02278-4/abstract

-Adding more whole grains to your diet may protect against heart disease, according to a meta-analysis published in the American Journal of Cardiology. Researchers summarized results from 18 studies that included 400,492 total participants, of which 14,427 had diagnosed coronary heart disease. Those who consumed the most whole grains experienced a lower risk for heart disease when compared to those who consumed the least. The study adds to prior research showing that fibre-rich grains provide many health benefits.

Here’s to continuing with making whole grains a core base of your diet and investing in technology complimentary skills!

Wishing my readers a Happy and Prosperous Year of the Sheep (much prefer that to Goat – apparently it’s a question of interpreting the Chinese characters!).

Regards,

Aditya

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: