Lights Out In The Tunnel

In his new book, “The Lights in the Tunnel,” Martin Ford postulates an interesting (if not novel) thought experiment: what if the Luddites were right?

I have to start by confessing: I have yet to read the book.  I have only read this review of the book.  And looking at my schedule, I may not have time to read the book.  So my comments are not directed at the book, but at the synopsis presented by the reviewer.

The premise (according to the review) is that “the Luddite Fallacy will only remain a fallacy so long as human capability exceeds technological capability” and according to the analysis of his book, once that tipping point is reached, people will be unable to find work, and without jobs or purchasing power, the economic system will collapse.

On the surface, it makes sense.  Only large corporations will be able to invest sufficient resources to fully automate hospitals with robot doctors, produce food entirely without human intervention, or run governments with robot bureaucrats.  Over time, the means of production will be controlled by a small number of people who will aggregate weath, but with no jobs, there will be nobody to purchase products.

Here’s where this thesis falls apart: in a world where all work can be best performed by machines, the cost of a product is, essentially, the cost of the energy used to power the robots that provide the service.

If energy continues to be increasingly scarce, then the cost to automate becomes high relative to the cost of human labor.  For example, people will always be cheaper than machines if oil is the only way we produce electricity and costs $500 a barrel.  So the economics remain much the same as they are now – people will be used where they are cheaper, and robots will be used where they are cheaper – and the economy will move along.

So the premise – that the Luddite tipping-point is reached once machines achieve the technical capability of humans – is incorrect.  For the tipping point to be reached, two things have to hold true:

1. Machines’ technical capability must exceed human capability (Ford’s premise), and

2. The cost to power the machines is low relative to the cost to “power” a human

But, if condition 2 hold true, then Ford’s thesis falls apart again.  Here’s how:

Let’s postulate a world in which energy is so abundant it’s practically free, perhaps by having robots that operate on internal micro nuclear reactors or robotically-built multimillion-acre solar and wind farms.  In this world, the cost to produce something by robots is, basically, free.  After all, the cost of the raw materials in your cars is negligible.  It’s the cost of transforming iron and sand and oil into steel, glass, and rubber that costs money.  And the cost to transform something (raw iron to steel) is equal to the labor cost (the workers) plus the energy cost (the energy used to fire the smelters).  In an all-automated world, the “labor” cost equals the energy cost. If energy is practically free, then the products will be practically free, too.

Viewed in this way, it’s much more a Utopian fantasy than a Luddite nightmare.