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Tuesday, February 05, 2013 4:31 PM


Making the Case for 100% Automation with Zero% Efficiency


In regards to robots taking the place of humans, I can make a case that in some easily-defined setups, that 100% automation combined with 0% efficiency would be the best possible outcome.

Care to take a stab at that seemingly-impossible concept before reading further?

The idea stems from my post Robot Wars in China; Burger Flipping Robots Serve 360 Gourmet Burgers an Hour, where I concluded "If a job is repetitive and programmable, a robot is out to get it. That even includes minimum wage jobs in manufacturing and in food service."

In response to the above, reader Craig wrote ...

To the extent that's true, it's also true that tens of millions of white-collar government bureaucrats and bureaucrats in the private sector who administer and oversee government regulations and tax codes will NOT be automated. The economic and social implications are tremendous.  They create no wealth, and many keep wealth from being created.
Curious Setup

Craig is essentially correct. However, the solution is certainly not to automate the tasks as Craig seems to imply, but rather to kill the idiotic regulations (and I am sure Craig would agree).

Nonetheless, let's ponder the automation aspect.

Specifically, please consider economically destructive ideas such as price controls in Argentina or massive taxes coupled with incomprehensible tax rules in Italy.

Let's further assume that price controls in Argentina and tax collection in Italy could suddenly be automated with 100% enforcement at zero percent cost. Would you do it?

On the plus side, you would get rid of a bunch of bureaucrats, many of them taking bribes to look the other way when the time comes.

On the minus side, if those tasks could be fully automated with high levels of compliance, then Italy would collapse under tax burdens, and black markets would take over the economy in Argentina as shortages of goods at official prices skyrocketed. 

Indeed, many regulations are so bad that the combination of inefficient bureaucrats, bribery, and evasion is a better choice than automation (assuming of course, that automation would actually work as bureaucrats intended).

In such instances, full automation with zero percent efficiency and zero cost would be perfect. In the real world, zero percent efficiency out of a government implementation is certainly conceivable. Unfortunately, zero cost isn't.

However, if costs are low enough, and efficiency low enough, then automation would be a better choice than the status quo.

Addendum:

Here is an email from reader Micael that describes the problem nicely.
The big problem with unemployment is all the regulations in the labor market preventing the market to quickly adapt to changes.

Examples

  1. Welfare systems encourage the unemployed to stay unemployed instead of taking a minimum wage job
  2. Welfare systems tend to keep people employed in dying segments of job markets
  3. Wage regulations
  4. Labor union induced regulations
  5. School systems not geared toward market demands 
  6. Wages are generally stiff on the downside
  7. Regulations preventing entrepreneurs from creating new jobs
  8. Tax policy is a drain on productive sectors of the economy

Government and Fed policies accelerated the flight of jobs overseas, and now accelerate (by cheap money) the use of robots. Robotic disruption would have happened anyway, but policies have accelerated the pace.

Meanwhile, efforts by the Fed to induce price inflation put a huge squeeze on fixed incomes recipients as well as the unemployed.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com


Copyright 2009 Mike Shedlock. All Rights Reserved.
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