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Let them make cake

30 October 2014 By Edward Hadas

The “konditorei” in Sankt Florian, Austria offers fine pastries and wonderful hot chocolate. It was the perfect location to interrupt a holiday for a bit of work. Over a slice of strudel, I spent a few minutes last week contemplating my colleague Andy Mukherjee’s well argued article about the danger robots pose for the modern economy. Looking around the bakery-cafe, I saw why Andy should be proven wrong.

He is worried about the ability of highly efficient robots to destroy many jobs very quickly. In Andy’s dark vision, the machines will save massive quantities of labour time and economies could suffer permanent damage: lower wage income and higher unemployment will lead to lower demand.

Such a dystopia can be avoided. Robots can improve the economy, as long as inefficiency is made welcome.

The konditorei helps explain what needs to be done. The establishment practically reeks of inefficiency, despite using high tech equipment. Baking in small batches is always relatively costly and labour is wasted when packages are wrapped by hand. Much could be done to push customers through more quickly. A fast food restaurant, where everything is optimised for speed and every cost is carefully scrutinised, could offer more cakes with fewer workers and lower prices. It would be far more efficient by any monetary measure.

Such measures, though, do not capture what really matters, the economic good. They miss the human value provided by fine food served carefully in a warm ambiance. This small family-operated shop offers an attention to detail and a personal relationship between staff and customers which no supermarket or chain restaurant can match. Economists may see sub-optimal resource use, but sociologists should recognise excellence and a support of the community’s common good.

The provision of speciality Austrian baked goods is not an isolated example of the benefits of inefficiency. In many service industries, consumers feel that lower productivity sometimes provides more satisfaction.

Take medical care and education. Some sorts of efficiency are welcome: just as a better oven thermometer helps produce finer cakes, improvements in antibiotics and lesson plans allow better care and learning for less effort. However, personal relationships are vital in care and teaching. Patients and students want house calls, longer appointments and more individual instruction.

Increases in the efficiency of production, from Jethro Tull’s 1701 seed drill to the robots coming in 2015, do not only create more things for less effort. They also free up the time that was once needed for labour. The greater use of robots will add a lot more time, much of it in the hands of skilled and educated displaced workers.

What will they do with this freedom? Most likely, some of them will find new jobs in industries which strive for efficiency. However, there should also be enough time to dedicate to activities economists typically disdain as inefficient but that people actually covet. Running fancy bakeries and providing more personal care fit in. So do travel, study, friendship, courtship, home baking and leisurely cake-eating. Think of it as the strudel benefit.

Ideally, governments and economists would be able to explain what is going on sufficiently well for people to relax about finding more things to manufacture with more efficiency. But Andy is right to focus on the dystopia that will occur if governments can’t explain the strudel benefit adequately.

As he says, “it has taken revolutions, political agitation and an ever-expanding sense of moral outrage” to make sure that the gains from increased production efficiency are well shared throughout the economy. If robots destroy jobs very quickly, more of this political and ethical fervour will be required to compensate.

Recent history is not encouraging. For the last few decades, unemployment and underemployment rates have often been uncomfortably high in most developed countries, while employed people often complain that they work much harder than they would like. Politicians and other policymakers can do better. The first step is to recognise that while the destruction of labour from robots is inevitable, the creation of new arrangements for work and leisure requires sustained conscious effort.

The techniques that have worked in the past are still effective. The list includes higher and more equal wages, shorter working hours, ambitious investments in infrastructure and culture, and government-sponsored plans to provide goods and services to people who might not otherwise be able to pay for them. Since productivity in the relevant parts of the economy is higher now than ever before, employers and governments can afford to be more generous.

The process will be much easier if everyone accepts that some sorts of economic inefficiency are good. The many economists who believe in the cult of efficiency will find that idea hard to swallow. They might want to head out to Linz for some of that strudel. Can I suggest a topping of handmade whipped cream?


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