[p2p-research] Beyond Julian Simon; a meta failure of free markets as labor value declines

[Paul D. Fernhout]

Summary:

What if Julian Simon's idea of the human imagination as the ultimate 
resource gets applied directly to reducing the cost (and value) of most 
human labor, instead of just to reducing the cost of goods? Like through 
robotics and better design? And what if the human imagination gets applied 
to reducing the cost (and value) of imagination itself through AI? What are 
the consequences for an economy built around an ideology of scarcity, where 
the only right to consume comes for the value of most people's labor?

======

Nathan has been working on this page:
  http://p2pfoundation.net/Free_Markets_and_Free_Use_Commons

Nathan is focusing there in part no the declining value of most labor in the 
face of automation, a trend I agree with overall.

And in discussing it with him, here is an emergent idea from our interactions.

Part of this declining labor value trend (for most forms of labor) given 
increasing automation and better designs is also Julian Simon's point on 
free markets and resources taken "meta" to apply to labor. :-)

Julian Simon wrote about the human imagination as "The Ultimate Resource":
   http://www.juliansimon.com/writings/Ultimate_Resource/

I tend to agree with as a good big picture view (subject to some issues like 
biodiversity or systemic risk). He argues that the human imagination can 
invent new ways to make resources in ever better (cheaper) ways, for 
example, aluminum used to be more expensive than platinum a couple hundred 
years ago, but now aluminum is so cheap we throw it away.

James P. Hogan makes similar points in the sci-fi novel "Voyage From 
Yesteryear", focusing there on energy and automation getting cheap.

In general, this is a good point about declining cost made by economic 
conservatives and propertarian libertarians. Although they translate "human 
imagination" to mean "the free market". The two are not necessarily the 
same, like if we used email and mailing lists to coordinate production 
instead of fiat ration unit Kanban dollars to coordinate production. :-) Or 
if we had a cybernetic control system like "The Venus Project" envisioned. 
Or any other control system, like Cybersin or better central planning, or 
whatever.

Anyway, as far as market coordinated production goes, Julian Simon suggests 
that rising prices produce innovation to bring the prices back down. So, 
ideally, a rising price is a signal to innovate by investing in production 
in some area. Even just the suggestion that prices might rise may spur 
innovation, as people look for profitable investments based on predicting 
future trends (an additional complexity to analyzing markets).

Generally, the prices go lower than they were before they rose (or 
threatened to rise), because people come up with new ideas, new approaches, 
and new efficiencies. If the "free market" has any magic to improve human 
life, that is it.

There are lots of ways we can list that markets break down, :-)
   http://slashdot.org/comments.pl?sid=1417557&cid=29866841
but when they work, that's mostly why they work. Rising prices make it 
profitable to direct resources to innovation to produce more for less.

Julian Simon applies this idea to commodities and manufactured products, and 
it seems all well and good. For example, say, oil gets expensive (either 
harder to find, or regulation and taxes makes people have to pay for the 
pollution oil causes or for the military to defend it per barrel, probably 
US$500 or so per barrel true costs instead of US$70). So, through the magic 
of the market directing resources to innovators in energy, we eventually get 
cheap power from solar panels or windmills, which don't pollute and don't 
require vast armies to defend like oil pipelines. So, the price of energy 
goes down. Even the price of oil may go down (ignoring pollution and defense 
taxes), because suddenly nobody even wants it anymore (smelly, dirty, 
polluting, dangerous, old-fashioned, etc.). One can see the same thing 
literally with "Peak Whale Oil", given how important whale oil used to be to 
our economy before people got oil out of the ground.

Now, there are lots of times this does not happen. Right now, we don't have 
a US$500 a barrel tax on oil for the cost for defense or pollution.
   http://www.energyandcapital.com/articles/oil-gas-crude/461
And there can be various other reasons those with a lot of capital may 
invest it in dysfunctional ways that make sense to themselves but harm 
society (arms races, for example, or creating intellectual monopolies or 
cartels, etc.).

But in general, it is the promise of markets to improve material production 
over time, and they have delivered some on that (even as its not clear how 
alternatives like in Chile and Cybersyn might have worked had they not been 
suppressed).
   http://en.wikipedia.org/wiki/Project_Cybersyn

But then, even when markets work, as suggested in "The Triple Revolution 
memorandum", there just the assumption that everyone will be have enough 
money somehow to purchase enough to live on, somehow.

Now, how are most people supposed to get this money? In our society, based 
around a scarcity assumption, the only "legitimate" way to get money is to 
earn it by labor. I know in practice much wealth is inherited, stolen, 
earned as interest on capital (in theory "earned" by the hard work of 
investors, but in practice delegated to managers or earned as interest on 
treasury debt), or granted by government fiat through monopolies. But in 
general, "earning" is supposed to be the "right" way (literally politically 
"right" wing, too :-), even if there may be problems in practice with that 
ideology:
   http://www.conceptualguerilla.com/?q=node/402
   http://www.conceptualguerilla.com/?q=node/47
   http://www.conceptualguerilla.com/?q=node/16

Much of the current economic system is built around the idea that the only 
right to consume comes from "labor" and related earning. This is part of the 
Protestant Work ethic. Even if we may be moving beyond it:
   http://www.whywork.org/rethinking/whywork/abolition.html

Vast amounts of moralizing in our society go on about the value of "work". 
And I won't disagree that "hard fun" can be wonderful.
  http://www.papert.org/articles/HardFun.html

Here is an example of an essay I half-agree with:
   "Rifenbary: Spoiling children won't serve them well"
http://www.saratogian.com/articles/2009/10/26/life/doc4ae5b18fbe96f700820386.txt
"A sense of entitlement diminishes one’s desire to put forth effort to 
achieve, because effort is not needed if one is already expecting what they 
have not earned. Does anyone reading this genuinely believe they are owed, 
and if so, by whom?"

I only half-agree, because it confuses a *focus* on materialism (which I 
agree is problematical for children) with a need to *earn* material rewards 
(which I suggest alternatively is problematical for our society and long 
term intrinsic motivation).
   "Studies Find Reward Often No Motivator: Creativity and intrinsic 
interest diminish if task is done for gain"
   http://www.gnu.org/philosophy/motivation.html

So, there is truth there in exhorting people to "earn" their way, but only 
partial truth, and some misleading bits. (Probably this essay I'm writing 
has the same problem in its own way. :-)

But even in the 1960s it was seen that idea of an income-through-jobs link 
as giving a right to consume was breaking down:
"The Triple Revolution memorandum"
http://educationanddemocracy.org/FSCfiles/C_CC2a_TripleRevolution.htm
Even if for various reasons, the trends outlined there have taken longer to 
develop than they expected, and we have also been lucky so far we've avoided 
global nuclear and biological warfare.

Essentially, the authors of that "Triple Revolution" memorandum argued back 
then than every human does have a basic human right to a claim on part of 
the natural and industrial commons of this planet. So, a basic income in 
that sense can be called a human right, even the right of children to toys. 
:-) But, that does not mean materialism will bring most people happiness, 
even as material prosperity up to a point is a very good thing and does 
bring more happiness. Up to a point. Humans are ultimately social creatures 
who evolved outdoors in small communities. The further we get from that, the 
unhappier we tend to be. Various surveys and studies show that money does 
buy happiness in the USA, up to about the median income or about US$50,000 a 
year or so. But after that, a focus on materialism and increasing wealth can 
even bring negative returns on happiness compared to things like exploring 
spirituality, helping others, enjoying nature, building families, connecting 
with neighbors, and so on. Or in general, happiness for most people comes 
mostly from *activities* like caring for people, the universe, and ideas, 
rather than *having* lots of stuff,. Still, this can be true even if having 
stuff can be fun up to a point, and stuff may be needed for some activities 
(and maybe lots of stuff for activities like space flight), and of course we 
all need some stuff to live in an industrial society where we can't hunt and 
gather anymore, and some people really do enjoy running stuff museums. :-) 
So, "stuff" is important, but happiness has most of its roots elsewhere.

An example from:
“CARING: a sermon by The Reverend Diana Jordan Allende; Auburn Unitarian 
Universalist Fellowship“:
http://www.auuf.net/about-auuf/sermons/71-caring-sermon
"Here’s what Mayeroff says of caring as a way of life: “In the context of a 
person’s life, caring has a way ordering other values and activities around 
it. When this ordering is comprehensive, because of the inclusiveness of 
one’s carings, there is a basic stability in one’s life; one is ‘in-place’ 
in the world, instead of being out of place. Through caring for certain 
others, by serving them through caring, a person lives the meaning of his or 
her own life. In the sense in which a person can ever be said to be at home 
in the world, he or she is at home not through dominating, or explaining, or 
appreciating, but through caring and being cared for.”"

Still, as above, we all need some stuff to survive in our industrial 
society, given the lands have all been enclosed and we can't hunt and gather 
anymore, and, frankly, most of us would not want to. So, the way society is 
now, unless we are good at nomadics and other alternative lifestyle 
approaches, we need money to buy stuff. And that money, for most of us, 
comes for trading our labor at jobs for money.

But, what if this Julian Simon "ultimate resource" innovation trend gets 
applied to reduce the price (and value) of labor? If labor is seen as too 
expensive, then there will be innovation to reduce the need for labor. It 
costs approaching a million dollars a year to keep a US soldier supplied in 
the field, so the military is one of the biggest forces right now in looking 
at ways to automate general purpose labor (driving cars robotically, 
operating ships robotically, flying planes robotically, doing medicine 
robotically, removing casualties robotically, etc. as I linked to in 
previous posts). Nathan uses the example in his essay linked at the start of 
the aging population in Japan threatening to drive up labor costs, and so 
spurring innovation in robots. So, our society is making ever better robots 
to do activities more cheaply and is making better designs for things so 
they need less labor to make.

But, there will likely be overshoot in that Julian Simon sense, and by the 
time the innovators are done, robotic labor and better designs will make 
many activities so cheap to do, that our society won't need much labor at 
all. But, we still have as many people around, all needing jobs to survive, 
so the cost of labor crashes. It may crash way below what it even takes to 
live, because some would-be laborers have some savings, and so can work for 
less than what it takes to live. And so, even if most people want to "earn" 
money, they can't. That is the dystopia of Marshall Brain's Manna Terrafoam 
world:
  http://www.marshallbrain.com/manna1.htm

We already see this around the globe historically. People in so called 
economically developing nations could not find good paying jobs because the 
country was flooded with imported high quality goods produced cheaply abroad 
using more efficient production techniques. It has been almost impossible 
for such countries to "develop" economically according to mainstream advice, 
because there is almost nothing that such countries can "compete" on 
producing with the USA or Germany or other industrialized powers. There are 
some things, especially raw materials, but not many.

So, maybe this analysis suggest a fundamental flaw in Julian Simon's 
argument, at a "meta" level? Basically, as long as we are using imagination 
to make resources cheap, things get better for everyone who has a job, which 
meant most people in the USA, at least up until about 1970s.
   http://www.capitalismhitsthefan.com/

But, as soon as we are using imagination to make labor cheap, then many 
people starve.

Naturally, the two are intertwined (since producing most goods takes labor), 
but there can still be a matter of emphasis.

I'd suggest many things have not been automated precisely because our 
society has resisted it because it has no solution under free market 
capitalism for the break down of an income-through-jobs link. Thus, we still 
see people working in the VW Transparent factory,
   http://www.youtube.com/watch?v=nd5WGLWNllA
even though probably a lot more could be automated or redesigned for robotic 
assembly, if people really wanted to.

The failure of the car companies in Detroit, with union jobs protected in 
the company, while other competitors automated and redesigned to cut costs, 
is part of this trend. The very concept of a labor union fighting for 
worker's own private welfare state and private equity, including resisting 
automation, without doing much to help our entire society work better in the 
face of automation, is, sadly, part of this problem and increasingly 
obsolete (and reflected thus in politics in the USA). If factories don't 
need labor, and most "work" is better done by machines, then what's a labor 
union going to do for you? Nothing.

Still, further, then one can think about what happens when Artificial 
Intelligence itself is applied to reducing the cost (and value) of being 
imaginative? That then starts to lead to issues of "the singularity".

Now, if demand was *infinite*, even the remaining human labor might still be 
needed. But if demand is *finite* in total, or at least demand rises more 
slowly that production, then you get widespread unemployment. Even 
eventually of imaginative people.

In the past when this happened, rising expectations (bigger houses, more 
cars, more travel, etc.) kept people working. And also more war, schooling, 
and prisons sopped up a lot of the excess.

The question is, at what point does all this break down? When the wars get 
out of control, or the schooling produces more Columbines, or the prisons 
spawn more and more social dysfunction, or families and neighborhoods 
collapse from focusing on material goods instead of time together, and so 
on? And then, the machinery of abundance consumes itself like a burning 
building?

Hopefully, we will transition to an economic model and related ideology more 
appropriate to an age of abundance rather than burn things down instead by 
ironically using abundance to create the scarcity that current ideology 
assumes and needs to function.

So, the declining value of labor in the face of automation is part of what 
Nathan's presentation linked above is about. So thanks for getting us 
thinking about that. :-) Nathan's right that "labor value" is a key insight, 
or maybe *the* key insight in understanding the 21st century changes we are 
seeing (like the riots by youth in Greece last year).

See also, for fun, but also more related than not: :-)
   http://www.google.com/#hl=en&q=hexapodia+the+key+insight

Of course, one can than ask "labor value to whom"? Clearly, people's labor 
may still have a lot of value to themselves. People can try to use their own 
labor to eek out a subsistence living (or even an amazing living with 3D 
printers they get from friends that can print solar panels and machines to 
produce more 3D toner). They can try to carve a niche for themselves in some 
other way. People are inherently worth something to themselves and friends 
and family and neighbors, even when industry has no use for them. Childcare 
can take about as much human labor as is available to do it well. But, if 
all the land is enclosed, then, where is there for people to be of value to 
themselves and others in their social network? That's the problem depicted 
in Manna. Still, there are the oceans and space. But it is tough to live 
there still, unless we have more innovation in a Bucky Fuller or Jacque 
Fresco way.

I think there are solutions even without leaving dry land, we just need to 
get people talking about them and why some solutions to the decline of most 
labor value (a basic income, a gift economy, subsistence with style via 3D 
printing, local exchange, rethinking work as play, etc.) are better than 
some other solutions (like more war, schooling, and prison), as I mentioned 
here:
http://www.beyondajoblessrecovery.org/2009/10/03/why-limited-demand-means-joblessness/

I guess what bothers me about this is that IMHO this is the sort of issues 
economists and politicians should be talking about if they are showing 
leadership. And some did, in the 1960s and 1970s. How can we get more of 
them talking and thinking about these issues again?

How can we get people with resources to look at a video like this and really 
think about it?
"High-Speed Robot Hand Demonstrates Dexterity and Skillful Manipulation"
http://www.hizook.com/blog/2009/08/03/high-speed-robot-hand-demonstrates-dexterity-and-skillful-manipulation

Or, how can we get people like at Willow Garage (an open source robotics 
company) to spend some of their time and money talking about social 
transformation to a post-scarcity society? I BCC'd them, just for fun. :-)
   http://www.willowgarage.com/

--Paul Fernhout
http://www.pdfernhout.net/
http://www.beyondajoblessrecovery.org