🤖 Why AI won't take your job. (Maybe.)
Also: 5 Quick Questions for … scholar Samuel Gregg on America as a 'commercial republic'
➡ Reminder: I will be writing much less frequently and much shorter in November — and November only. So for this month, I have paused payment from paid subscribers.
Also, I’m making all new content free without a paywall. In December, however, everything will be back to normal: typically three meaty essays and two enlightening Q&As a week, along with a pro-progress podcast several times a month (including transcript). And, of course, a weekly recap over the weekends.
In This Issue
The Essay: Why AI won't take your job. (Maybe.)
5QQ: 5 Quick Questions for … scholar Samuel Gregg on America as a 'commercial republic'
Micro Reads: Elon Musk and Twitter, US productivity growth, nuclear energy
Why AI won't take your job. (Maybe.)
My sense of things is that a) even though unemployment was low before the pandemic and is low today … and b) even though the advances in autonomous driving technology that drove much of the pre-pandemic freakout about automation seem to have stalled … c) people still think of AI as a big jobs killer more than productivity enhancer that could complement work tasks and create new ones. As is too typical of our society, we have jumped ahead to the potential downsides of a technological advance even while that tech is still pretty embryonic.
Which brings us to taxicab drivers. In the new NBER working paper “AI, Skill, and Productivity: The Case of Taxi Drivers” by Kyogo Kanazawa, Daiji Kawaguchi, Hitoshi Shigeoka, and Yasutora Watanabe, the researchers look at how AI affects worker productivity and what that means for job displacement. They choose taxi drivers because their work activities are easy to measure, and what they do is pretty much the same everywhere. Indeed, KKSW find that “over one-half of drivers’ working time is devoted to searching for customers, excluding breaks.” So improving the efficiency of that task might be something AI could help with and make a big productivity difference.
The researchers studied taxi drivers in Yokohama, a city of nearly 4 million near Tokyo. As of December 2019, the city had nearly 9,000 registered tax drivers, with online ride-hailing firms still not permitted. To gather the data, technology company AI Navi provided roughly 500 taxi drivers its route-suggesting technology, developed with machine learning, to maximize the probability that a taxi would find customers, given the location of the taxi. The findings from this month-long experiment:
We find that AI improves drivers’ productivity by shortening the cruising time, and such gain is accrued only to low-skilled drivers, narrowing the productivity gap between high-and low-skilled drivers by 14%. The result indicates that AI's impact on human labor is more nuanced and complex than a job displacement story, which was the primary focus of existing studies.
OK, what does that mean? Basically, the navigational software program helped low-skill drivers but didn't have any effect on high-skill drivers. (Skill was determined by looking at driver productivity in the period before the experiment.) So in this case at least, technology substituted for worker skill. The reason this is notable is because previous studies have shown how AI technologies can harm high-skill workers. For example: “The Impact of Artificial Intelligence on the Labor Market” by Michael Webb of Stanford University in 2020:
The results leave little room for doubt that artificial intelligence is likely to affect very different kinds of occupations, and so different kinds of workers, than software and robots. Whereas low-skill occupations are most exposed to robots, and middle-skill occupations are most exposed to software, it is high-skill occupations that are most exposed to artificial intelligence. Moreover, artificial intelligence is much more likely to affect highly-educated and older workers than these previous technologies.
We should be careful in drawing sweeping generalizations about the impact of different and evolving technologies on all sorts of different jobs. Some technologies will replace, some will complement, and some will create.
💡 5 Quick Questions for … scholar Samuel Gregg on America as a 'commercial republic'
In contrast to its cozier European counterpart, American-style capitalism is generally known for its deference to the free function of the market and skepticism about government intervention. Of course, the United States is by no means a purely free-market nation. Americans accept the need for some government involvement in the economy, with progressives typically favoring more involvement than the status quo while conservatives seek to pare back the state’s role. That paradigm has broken down in recent years, however, with the populist turn of the Republican Party. In 2019, for example, prominent conservative pundit Tucker Carlson lent his support to Democratic presidential candidate Elizabeth Warren’s economic plan.
Writing in response to that Republican shift, Samuel Gregg finds America at a sort of crossroads, faced with a choice between state capitalism — “an economy in which the government, often with the aid of experts and technocrats and sometimes in partnership with different interest groups, engages in extensive interventions into the economy from the top down” — and a broadly free-market economy. And making the case for the latter means updating the old arguments to go beyond “line go up.” Gregg:
My thesis is that making the case for free markets in twenty-first-century America must involve rooting such an economy in what some of its most influential Founders thought should be America’s political destiny: that is, a modern commercial republic.
To get a better sense of these two visions of capitalism and how to sell markets in a time of economic nationalism and populism, I chatted with the author. Check out his answers below!
Gregg is a Distinguished Fellow in Political Economy and Senior Research Faculty at the American Institute for Economic Research. He’s also an affiliate scholar at the Acton Institute. His newest book is The Next American Economy: Nation, State, and Markets in an Uncertain World.
1/ How does your conception of an American commercial republic differ from the populist/nationalist economic patriotism vision being put forward by politicians such as Marco Rubio and Elizabeth Warren?
The idea of the American commercial republic is something deeply rooted in the American Founding, and it's a vision of America in which commerce — trade, exchange, free enterprise, entrepreneurship — are really the lifeblood of the country. And also how people think about themselves and think about their fellow Americans and what their country is supposed to be. All of that is wrapped in what you might call republican virtues, the types of virtues that people like Jefferson, Washington, and other Founders thought were essential for a commercial republic. That also implied some pretty strong limitations on state power. … Economic nationalists on the left and the right are quite eager to try to use the state to produce different outcomes than would be produced by the free flow of commerce. You don't find that in the idea of a commercial republic. The state has a role. It's things like property rights, rule of law, national defense, all these very important things, but it's strictly limited.
2/ Why do you think the broad pro-market consensus on the right has eroded? In 2015, you had some Republicans saying they were “Uber Republicans.” They loved the disruptive force of Uber on the taxi cab market. We've gone from that to something very different.
I think there are a number of reasons. One is that there’s a long debate in the United States over the role of the state in the economy. It's not just a 20th century phenomena. If you go back to the 19th century, there were enormous arguments about tariffs that were only second in intensity, politically speaking, to the issue of slavery. … I think the second reason is that the financial crisis, the Great Recession, and these cataclysmic events shook a lot of people's faith in markets. … The narrative that won was that this was somehow a deep fault in market capitalism. That’s the narrative that one. I think it's a false one, but it nonetheless won.
And I think many people on the Republican side, on the conservative side, decided that they needed to adapt the message. … You can even go back further, you could even say that this has been underneath the surface of the right for some time. Think about the 1992 presidential election. We had Pat Buchanan arguing things about trade that were clearly against what had become the consensus, certainly on the right and even to a certain extent on the left. And it was very popular.
3/ You write about the need to persuade Americans that markets aren't just about economic growth. What else are they about?
Markets of course depend upon different types of virtues: commercial virtues, the types of virtues that you find explained in Adam Smith's work, The Moral Theory of Moral Sentiments, as well as The Wealth of Nations. If you look at the case for markets that was developed during the Scottish Enlightenment, which of course was immensely influential upon the Founding and the American Experiment in ordered liberty, there was only this sense that commercial society, as they called it, required certain types of values. It was not just a project in terms of making us all wealthier and getting us all out of poverty, it was also a type of civilizational enterprise. If you read the works of, for example, [George] Washington, when he talks about this, he clearly has a type of civilization or agenda that goes along with the development of commercial society. You can hear echoes of that in some of the works, for example, of F.A. Hayek and his Constitution of Liberty.
I think that this is very important if we're going to be explaining the case for markets today, because I think if your primary argument for markets is they're more efficient, they produce more stuff for more people, that's fine. But it's inadequate because we're not just material beings. We have other needs, we have other aspirations, and there are all sorts of different moral and spiritual values that are important to people, particularly Americans. And those advocating markets need to recognize that and build that into their argument. The model here, I think in many respects, is someone who used to work at the American Enterprise Institute for a long time, Michael Novak. He talked about this a lot in his book, The Spirit of Democratic Capitalism. If you read that, it's not just a theological argument. He's arguing for a commercial society that he thinks is integral to who we are as Americans. And if free marketers can link their argument to markets back to this sense of who we are as a people, I think that's a much more winning proposition.
4/ What is the vision of who we are that is presented by market capitalism versus the vision of who we are as presented by “state capitalism”?
State capitalism doesn't do away with private property per se. It doesn't eliminate things like free exchange and competition or even trade. But what it involves, of course, is the massive intervention of the state in virtually every level of the economy, because there’s this conviction that people's liberty is likely to be badly used. There's a sense that markets are not to be trusted. It really goes back, in a way, to the sense that one should have confidence in enlightened administrators. So we're really talking about the Progressive Era now, and the way that they understood the role of government, not just in the economy, but in life as a whole. Ironically, I think you find that type of thinking very much articulated by some of the prominent proponents of industrial policy today. They're really looking and saying, “We can be the enlightened technocrats who can deliver a better vision for the American economy than untrammeled market forces.”
The alternative vision, which is what I'm arguing, is that if America is a commercial republic, [then] you need to put faith in people's liberty. You need to understand that government has certain roles, but they're very limited and once government goes beyond certain roles it tends to become dysfunctional. It also puts a certain degree of trust in human creativity, in the power of competition, and a certain optimistic view that if people are given sufficient liberty and the responsibility that goes along with that, you can have not just tremendous economic prosperity, but you actually make the country stronger on every type of level. So I would argue that the vision of a commercial republic, of the market economy as I present it, is essentially one of hope. It's one of optimism.
5/ Are you not concerned about income inequality, that some small percent own some large percent of the wealth?
I'm primarily concerned about the type of economic inequality that has nothing to do with markets, that has nothing to do with people exercising their liberty in the marketplace, being competitive, being entrepreneurial. I'm concerned about the type of inequality that arises when your economic prosperity and advancement depends upon who you know in the government, how close you are to government, whether you are powerful enough to be able to lobby the government to get something like a subsidy or certain types of tariff regulations put in place that protect you and work against your competitors. And that's deeply problematic because it undermines, in many respects, the most important form of equality that exists in a free society, which is the equality before the rule of law. And if you look, for example, at who are some of the wealthiest individuals and companies in the United States, you discover that many of them have very deep ties to politicians on both sides of politics. … Inequality in itself is not necessarily unjust. Not all forms of economic inequality are unjust. Some of them are, in fact, quite just in the sense that they represent just outcomes based on things like merit, willingness to work, willingness to take risks — all of which have been classic indicators that philosophers have talked about when they're talking about questions of justice.
Bonus: Your views seem pretty out of fashion right now. When might they be rediscovered and come back into fashion?
I'm reminded here that when F.A. Hayek's The Constitution of Liberty was published in 1961, a prominent reviewer described it as a dinosaur that had wandered back onto the stage somehow and didn't know that it was no longer welcome. I think it's very important — particularly at times like the present where there is such skepticism about markets, about capitalism on the left, but also on large segments of the right — that's precisely the time I think we need to have the type of intervention that my book is trying to do, which is to say it's not the 1980s anymore. That's absolutely true. But the lessons and the truths about capitalism and markets and free exchange and entrepreneurship don't change. Human nature doesn't change, [and] some of the lessons that we've learned in the past are still valid.
▶ Musk is right: we do need a digital town square - Stephen Bush, FT Opinion | Despite the often sentimentalised account of our freedoms in the past there has never been an unrestricted right of access to “town squares” — often they have been the site of excessive repression and control. But a degree of management has always been vital to their functioning. What remains unclear is whether some alchemy can be found which allows the effective running of digital town squares without destroying the ability of societies to resolve disputes peacefully. We should hope that if Musk hasn’t found a way to do that, someone else soon will.
▶ U.S. workers have gotten way less productive. No one is sure why. - Taylor Telford, The Washington Post | “No one knows or will know” what is causing the drop-off in productivity for some time, said economist Lawrence H. Summers, president emeritus of Harvard University and former treasury secretary. But it could have something to do with the fact that many employees “were working unsustainably hard” in 2020 and 2021, Summers said. Some workers are paring back their efforts. “There’s a highly empowered workforce that was engaged in a certain amount of quiet quitting,” Summers said. That’s creating “a certain amount of absenteeism on and off the job” that is probably leading to lower productivity, he said.
▶ Global leaders champion nuclear to solve energy crisis and climate change - Jeremy Beaman, Washington Examiner | In the United States, Congress has appropriated billions of dollars in subsidies over the last year for the nuclear sector, both to keep economically challenged existing reactors up and running and to help fund advanced reactor technologies. Nuclear has bipartisan support and is a major component of the Biden administration's climate change agenda. The U.S. "believes that nuclear must be a part of our long-term energy mix," Energy Secretary Jennifer Granholm, who served as president of the ministerial, said during opening remarks Wednesday. "We are committed to maintaining and modernizing our existing fleet. We are committed to developing a secure and diverse supply chain for nuclear fuel, and we're committed to growing a nuclear workforce that is skilled," she said.