YOU’D sit up and pay attention when four economics Nobel laureates gather to speak about the biggest change today – the advent of technology.
The distinguished speakers, who were recently in town at the invitation of Swiss bank UBS, are optimistic about technology’s impact on economies and believe that the human working population can respond positively to disruption. Roger Myerson believes that some dour predictions over technology are unrealistic. “Theoretically, there certainly is the possibility that somebody could invent a machine that makes all human input obsolete, except for the people who make the machines. Ownership of those machines could be concentrated in a small subset of humanity and we would be insanely productive.
“That’s a possibility one could imagine, but we wouldn’t stand for it. Humans will adapt, the machines will be designed to work with us, and human machine systems will become increasingly capable. I think this is more likely than having machines that totally displace you.”
In reaching a similar conclusion, Michael Spence considered the impact of driverless cars on the job market, and noted that the chances of such technology wiping out millions of jobs are remote – it took about five years for image recognition capabilities to allow such innovation.
“China is stripping millions of jobs out of the earlier-stage export sectors and redeploying those into startups and service industries. It looks scary because of the numbers, but the economies that are going to fail to do this are the ones that have built-in rigidities, either by policy, culture or everything else.
“I believe that artificial intelligence in the form that we understand it now is going to be a tool at your disposal. It will make you more powerful. You’ll be able to ask the system, ‘you can do pattern recognition faster than I am, so tell me what do you see is going on in the markets now?’
“When we did empirical work before, we used to spend hours just digging up data. Now we spend much less time on that because it’s accessible, and more on analysing and trying to understand it.”
Robert Merton also noted that new rules of engagement can apply to new job structures brought on by technology. “I don’t think it’s a science problem to fix many of the things. Our firemen are pretty important, and I think it’s fair to say that the pay structure is you work for 20 years, and then you’re done. And we pay them a lot of money,” he said.
“Suppose we had tasks that are inherently very rigid and specialised, but they need to be done. So we pick some of you and say, ‘You’re going to be trained to do something specialised. Now I’ve got to be honest with you. Because of technological change here, there’s not a lot of flexibility. There’s a good chance that at some point you’re going to be obsolete.’
“But we all know how to write a contract. We could write a contract that says, ‘Should this event occur or should you get laid off for some reason, we can solve it.’ These are not set by the laws of nature. We create them. We have pretty good brains, we are actually good at changing rules and creating new contracts to solve problems, and we’ve been doing it consistently.”
Professor Myerson also turned the clock back to centuries ago, with history showing that jobs have always been disrupted due to better technology. What counts more, is the question of safety nets. “It’s entirely possible to accept that the pace of job destruction by new technologies is accelerating. I’m not sure if it’s faster or slower – but I do know that from the beginning of modern economic growth, say the industrial revolution in England or Scotland in the 1700s, the story has always been the disruption of jobs.
“We should recognise from the beginning of economic growth in the history of the past seven centuries, that every country has had to have social safety nets and public education programmes. This is to ensure that even as people suffer losses – when they thought the career they were going to pursue for a lifetime had vanished – they’re not faced with starvation, they have time to regroup, and their children will have opportunities to get the skills for the next generation.”
REDESIGNING PENSION SYSTEMS
With the changing demographics, Professor Spence said policymakers are left with little choice but to redesign pension systems. “My sense is that the story Americans are told is that we have a more flexible economy that’s less protective than the Europeans have, and they’re less flexible and hence the growth rates and productivity levels are very different.
“Look at the Nordic countries, they’re open economies, they’re highly flexible, they’re highly specialised and have highly developed social security systems. Those of us who are flexible may be able to improve our social security safety net and retraining capabilities, without diminishing dramatically our dynamism.”
Given the changes brought about by machines, the debate over universal basic income remains open, said Peter Diamond. “Experimentation is to me one of the keys to getting good policies. The kind of analytic mindset rather than ‘ideologically this is the answer’ is the key to going forward here. It ought to be a hot topic, but I think it’s premature to be thinking we know enough to either figure out how to design it or that we’ll do what we want.”
Still, the long-term benefits of technology are worthwhile. Professor Merton pointed out that technology will enhance globalisation and allow product design to be universally applicable.
“You know gravity in Singapore is 9.8m/s2. It’s the same everywhere else. That’s a fixed set of things. Whereas institutions and cultures are not. It just means you have to be very clever. You know some countries like green cars and some like red cars. If you build the universal car, then paint it,” he said.
“I watched Neil Armstrong walk on the moon – at least on television. That was 1969, almost half a century ago. Then I tell you that all these people walking with their watches and certainly their iPhones probably have more computing power than the thing that flew and landed on the moon.
“So I gave you two pieces of information: The landing on the moon in ’69 and today, 50 years later, we have such incredible computing power. I think you’d have people think that we’d all go back and forth to the moon for the weekend, or to Mars or space stations. We’re not.”
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