My milk is not delivered by horse. Homes on my block do not share the same phone number. I have more than four TV channels available to me.
When a new technology such as artificial intelligence becomes relevant, many are afraid that the new technology will mean the loss of jobs. It is true that jobs will be lost in some sectors, or transitioned as kind economists like to say, but the overall economy has a robust history of new technology providing more jobs with better productivity.
A much-used anecdote frequently attributed to Nobel Prize winning conservative economist Milton Friedman (and others) goes something like this:
While traveling to an Asian country in the 1960s, he visited a worksite where a new canal was being built. He was shocked to see that, instead of modern tractors and earth movers, the workers had shovels. He asked why there were so few machines. The government bureaucrat explained: “You don’t understand. This is a jobs program.” To which Milton replied: “Oh, I thought you were trying to build a canal. If it’s jobs you want, then you should give these workers spoons, not shovels.”
Any new technology, even a shovel, will affect the number of jobs in an economy. However, economic history tells us that new technology is a net positive. Fear was common in the equine industry when the internal combustion engine in automobiles became prevalent; many jobs were lost, including the delivery of milk. However, the advent of the automobile created an incredible number of jobs not just in the automobile industry but also in related businesses such as the production of oil, gas stations, the travel industry, and others. The economy was significantly better off with automobiles and trucks, and the jobs created far exceeded those of a horse-driven transportation system just a few years earlier.
Similarly, the invention of the microprocessor drove us from an industrial economy to what is now commonly referred to as the information economy. Companies like IBM, Microsoft, and Apple successfully commercialized this invention resulting in millions of new jobs that did not exist just years before. Word processing was to be the death of secretaries, but the more important and expansive role of executive assistant is now an important part of business today.
Communications has been completely transformed. I grew up with party phones where neighbors shared a single telephone number. Privacy was minimal; all the homes knew who you were talking to and could listen in. Also, we had four TV channels, three national networks and one local channel. Remote controls were science fiction. Email now allows us to transmit incredible amounts of data in a very short period of time; what used to take months now takes seconds.
Smart phones did lead to a quiet loss of an untold number of jobs The printing and distribution of The Yellow Pages, which was an annual staple of American life, is gone. Printed maps are rarely used. The camera and film industries have changed. Calculators are on phones. News is now routinely read on phones. Of course, the legendary phone operator has sadly moved on.
Some jobs were lost but far more jobs were added as consumers and businesses embraced this new technology. It has been an incredible boon to the economy, particularly the labor market. The communications transformation has dramatically improved economies and the number of jobs around the world.
There is a paradigm for property or land regarding highest and best use. The definition of highest and best use for property involves being legally permissible, physically possible, financially feasible, and maximally productive. We should look at labor in a similar vein. These same definitions apply. We do not want adults shoveling ditches with spoons. Technology moves us past such poor use of labor.
A few decades ago, a non-high school graduate could find a job at a factory and live a decent life. Today, a high school graduate with no other skills will lead a tough, low-income life. With the onset of artificial intelligence, we need to prepare the upcoming workforce to maximize the use of their labor. Politicians will try to hold on to aging industries to satisfy favored constituents, slowing down inevitable progress, but private industry and the government overall must advance our workforce readiness.
Do not fear artificial intelligence. It is coming and will make our lives better. Many companies have already made significant investments in AI and the potential for a higher quality of life, exemplified by medical breakthroughs, is enormous. Patience may be necessary but AI will be a net positive for our economy. We should embrace it.
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