Wednesday, July 23, 2014

Critique of Brynjolfsson and McAfee's The Second Machine Age

In January Erik Brynjolfsson and Andrew McAfee published The Second Machine Age as a follow up to their first book Race Against the Machine.  Both are excellent (though they say essentially the same thing, so if you read The Second Machine Age there is no need to read Race Against the Machine).  Since those books have been published there has been a growing discussion of how new AI technologies will effect employment, and what we should do about it.  While I think the books do a great job of laying out the problem, and have promoted more discussion about these important issues, I was struck by how inadequate their policy recommendations seem to be.

The Problem

The books do a great job of illustrating how machines are rapidly encroaching on cognitive labor.  Whereas the first machine age was characterized by machines replacing human (and other animal) physical labor, the second machine age, which we are experiencing right now, is characterized by machines replacing human cognitive labor.  They give many examples (self driving cars, etc.) that really drive the point home.

If we understand human work to be composed of essentially two parts, physical work and cognitive work, then we should expect the consequences of the second machine age to be radically different from the consequences of the first.  As machines replaced physical labor, the human workforce merely moved to jobs that were inseparable from cognition and thus beyond the capacity of machines.  The type of jobs changed, but over the long term, the number of jobs was still adequate.  As machines replace cognitive labor, however, there is no other type of job for the human workforce to move to.  Machines won't replace all cognitive jobs at once, since their cognitive abilities will ramp up over time.  However, as machines become more and more cognitively capable they will squeeze humans into a smaller and smaller niche of remaining jobs.

Eventually, if machines become as cognitively capable as humans, there will be no work left which cannot be done more cost effectively by a machine.  But even before that point, unless we find some remedy, there will be massive unemployment as machines replace humans faster than we can reallocate humans to the types of cognitive jobs which machines have not yet mastered.  So what do we do about this?

Policy Recommendations of The Second Machine Age

The policy recommendations of The Second Machine Age boil down to a focus on education (MOOCs, Kahn Academy, etc., and higher salaries for teachers), entreprenuerism (immigration reform and cutting red tape), public science funding, and public infrastructure updates. Brynjolfsson and McAfee propose paying for these initiatives with taxes on activities with negative externalities and on economic rents.

Importantly, they reject any fundamental adjustments to capitalism:
We are also skeptical of efforts to come up with fundamental alternatives to capitalism. By ‘capitalism’ here, we mean a decentralized economic system of production and exchange in which most of the means of production are in private hands (as opposed to belonging to the government), where most exchange is voluntary (no one can force you to sign a contract against your will), and where most goods have prices that vary based on relative supply and demand instead of being fixed by a central authority. All of these features exist in most economies around the world today. Many are even in place in today’s China, which is still officially communist. 
These features are so widespread because they work so well. Capitalism allocates resources, generates innovation, rewards effort, and builds affluence with high efficiency, and these are extraordinarily important things to do well in a society. As a system capitalism is not perfect, but it’s far better than the alternatives. Winston Churchill said that, “Democracy is the worst form of government except for all those others that have been tried.” We believe the same about capitalism.
They also recommend against reconsideration of the basic income ("Will we need to revisit the idea of a basic income in the decades to come? Maybe, but it’s not our first choice.") because work is beneficial to human happiness. Instead they advocate a negative income tax that augments the incomes of the working poor. Presumably, the notion is that computers will not be ready to take over all human labor even in the "long run", so better to keep humans working alongside of computers for the foreseeable future (and they give a bunch of current examples of humans working with machines out-competing either working alone).

Finally they list some "Wild Ideas" that they don't endorse, but seem worth further consideration: public mutual funds providing inalienable income to citizens (maybe not that different from a basic income), incentives to develop human augmenting rather than human replacing tech, setting aside certain categories of work for humans, using vouchers to create a minimum standard of living and a more massive public infrastructure campaign.

Inadequacy of Their Policy Recommendations

Brynjolfsson and McAfee do a great job in the first two thirds of the book, but when it comes to policy recommendation, they seem to miss their own point. While their policy recommendations are not terrible general recommendations for economic prosperity, they are potentially terrible distractions when discussed in the context of machines rapidly replacing humans throughout every sector of our economy.

The important point, which they make so well, is that whereas the first machine age was about machines replacing human physical labor, the second machine age is about machines replacing human cognitive labor. Replacing physical labor simply meant that human labor had to be reallocated to cognitive labor, but as machines replace human cognitive labor there is nothing to reallocate them to, except on a temporary basis to whatever particular types of cognitive labor that machines have yet to master.

Improved education, entreprenuerism, public science funding, and public infrastructure are great general recommendations.  They are particularly good recommendations for the first machine age where the challenge was smoothly reallocating human labor to a different category of work.  But how do they address the particular problems of the second machine age where the set of cognitive tasks where humans still have a comparative advantage is constantly dwindling?  Where we can only guess at what major employment sector will evaporate over the space of just a few years (e.g. driving)?  And where, ultimately, there is no reason to expect there to be any tasks where humans have a comparative advantage?

Not only are their policy recommendations utterly inadequate to address the problems they set forth, but then they prematurely limit the discussion of policies that might actually address the problems to only those that do not "fundamentally" adjust capitalism.

Huh?!?  Machines are rapidly replacing all human labor, but lets not change our economic system? Hasn't our economic system been, at heart, a means for allocating, organizing, augmenting and incentivizing human labor?  How can it be that human labor will be rapidly disappearing, squeezed into a smaller and smaller niche by machines, and yet no big changes to our economic system are called for?

Particularly, at the point where machines have replaced virtually all human labor, will it still make sense to vest control over most of earth's productive capital with an elite capitalist class?  What important contribution will capitalists be making when they are already employing machines to make the important decisions about how to most effectively allocate, preserve and expand their productive capital?  At that point can't we just get rid of the capitalists and have a democratically controlled government give direction to the machines?

And if that is our ultimate destination, shouldn't the policies we adopt now be aimed at smoothing our transition to that destination, and ensuring that we can successfully navigate there at all?  (If so, it would seem the most important thing we can be doing right now is strengthening and safeguarding our democracy, perhaps by addressing economic inequality much more forcefully.)

But, Brynjolfsson and McAfee do not answer any of these questions in their books.  They simply say, in effect, "lets not have any big changes to our economic system, even though we are facing the elimination of HUMAN LABOR... surely that doesn't merit a rethinking of the system."

Since the rest of their The Second Machine Age is quite excellent, I am curious about their answer to this critique.  Perhaps they see the transition as taking centuries rather than decades.  In that case it might be more important to focus on maximizing human productivity, leaving less pressing questions regarding how to transform our economy for later generations.  Or, perhaps they do not anticipate that machines will replace humans, but that humans and machines will ultimately merge.  In that case, the issue of machines replacing humans may not be relevant in the long run.  Or, perhaps they think that advances in AI will hit a wall or plateau.  In that case the primary concern is just making reallocating humans to whatever jobs will long remain out of reach of machines.

 Who knows.  They don't say.