A few weblog posts in the last few days have my formally-uneducated mind spinning. First, there was a point-counterpoint between Dan James of CEOBlues.com and Peter Rukavina of Reinvented.net on the nature of government spending and waste. Then, a post my Matt Linderman at Signal vs. Noise on the growth of the average work week in America.
These ideas helped to coalesce a question that has been bouncing around in my head, in one form or another, for years: Is efficiency a good thing?
Take the example of a small fictional nation-state that is run by a staff of 1,000. Maybe 100 of these staff are accountants who manage taxes and the financial affairs of the state. Then one day someone invents a computer that allows one accountant to do the work of 10. You cut your accounting department down from 100 to 10 and the work still gets done.
Is this a good thing? First, ninety people have lost their jobs. This is not good. Some may become successful entrepreneurs while others may go hungry.
However, you can now reduce taxes with the money saved on staffing costs. With their extra cash from the lower taxes, the happy people of our little nation-state will go to the movies and get those neon under-lights for their hot-rods. This means the movie house and neon hot-rod joint will hire more staff. Will they hire enough to counter the job cuts that started it all?
This starts to lean towards the question of which is better: big government or small government. However, I don’t want to become ensnared in politics, as my question (hopefully) goes beyond the public sector.
Take the accounting-software layoff example above and transpose it to a private corporation. Obviously, efficiency is a good for the closed system of one company. Fewer accountants means more money left over for shareholders. However, I want to know how a change like this affects the larger system, the economy and society as a whole.
What does it mean when we invent a robot that can mow our lawns for us? We all have a few extra minutes to spare each week (how does free time affect the economy?). Lawn care businesses go under. A robot-mower industry is born. What is the net outcome of all of these changes to the system? Is there a net gain to the economy?
What happens if you extrapolate this scenario even further? Assuming it is possible (a questionable assumption, admittedly), imagine a world in which all or most work is done by robots. What does this mean for the economy? Do we continue inventing new services and products to entertain ourselves and get rich? Cory Doctorow’s novel, Down and Out in the Magic Kingdom (free download) takes place in a future in which there is no scarcity, and access to inevitably scarce goods (art, landmarks, etc.) is managed by a reputation economy.
I’m sure this question has been asked (and answered) before. Perhaps anyone with Economics 101 could answer it. Can anyone shed any light on the subject?
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Several of my co-workers and I recently went on an