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- [Alex] Tyler, a lot of people
seem to be worried

that the robots are coming:
Siri, Cortana,

artificial intelligence, Watson.

They're going to take our jobs.

So, do you think robots,
are they going to take our jobs,

and if they did,
would that be a bad thing?

- [Tyler] I've written on this topic
and let me tell you,

I'm worried
for at least three reasons.

First, machines are encroaching
on human intelligence

much more than ever before.

It's not just brute physical labor.

So machines now
can do medical diagnosis

or legal research
or even write articles

of journalism. Second...

- We've heard
all these stories before

as early as 1753...

- That was brute physical labor...

- People were smashing
the machines.

- ...and people took jobs
with more intelligence.

Now, the intelligence
is being competed away

and what have we got left,
our beauty and charm?

It's not going to get us that far,
but second reason.

You look at the data,
labor force participation

in the United States
has been going down for decades.

So, we see it in the data
this is an actual problem.

Third issue: Today,
we have more welfare

and transfer payments
than ever before.

So labor reallocates
much more slowly.

What we see is a lot of people
lose their jobs

and they simply stay out of work.

- Labor force participation,
you say it's down,

it's down mildly for some men,
it's huge uply for women.

Women have entered the labor force
in incredible numbers.

So, I don't see this
as a big trend caused by robots.

I see this as societal change.

- There's a big one-time increase 
of women in the labor force

due to the birth control pill
and women's liberation,

but even since then women
have been slightly cutting back

their participation
in the workforce.

You look at elderly people
who used to work all the time.

Now they collect a kind
of guaranteed annual income.

Those jobs are done by machines.

This is not
an apocalyptic scenario,

but it's a slow, trickling away 
of a lot of the jobs

which make our lives meaningful.

- Every time we see unemployment
goes up, we hear these fears.

We just had the Great Recession,
and so people are all concerned

about these fears.

During the Great Depression,
unemployment went up.

Even people like Einstein said,
"Oh, it's technology.

Technology is taking our jobs."

And yet, what we actually know
is that the problems

of the Great Depression
had a lot more to do

with monetary policy
than they did with technology,

and I think the same thing 
is going to be true today.

- Today really is different.

- So, Tyler, are you worried
about the Terminator scenario,

that not only are the robots
going to take our jobs,

they're also going
to take our lives?

- No. The cash registers
are not going to be telling us

what to do, but they're getting
more impressive very rapidly.

So, computers can beat us at chess,
now they can beat us

at the game of Go, and next in line
are the professions of law,

medicine, and, dare I say it,
academic teaching.

- That's not even
necessarily a problem.

I think people have the wrong idea.

They see that smart people
have higher wages,

and they think “Oh, computers
are getting smarter

and they're getting more prevalent,
therefore, the computers

are going to take all the wages."

But in fact, what economics says
is not that smart people

have high wages.

Economics says that wages
are determined

by supply and demand.

And everything we know
about computers

is that the supply is huge.

That's pushing down prices.
That's making software cheaper.

So, we could easily
have a situation

where the really smart computer
tells the maybe-not-so-smart human

what to do, and the human earns
all of the wages.

- Again, let's look at the data.

What we see
over the last 20 to 30 years

in most Western countries
is a higher share

of the income going to capital
and a lower share going to labor.

Right? So, there is a problem.
Wages have been stagnating.

You have prime age working males
out of the labor force

at higher rates
than in a long time.

When you look
at what's actually happening,

it seems the net effect
is fewer people working...

- You can talk
about the great stagnation

all you want, but look...

- It's called talking
about the data all I want.

- Okay. Let's talk more
about the numbers.

- The numbers.

- Why, if capital becoming
so much more important,

why aren't interest rates going up?

People should be demanding
lots of capital, but in fact,

what we see around the world
is a savings glut.

Capital seems to be everywhere.

- Here's a simple way
of thinking about it.

It's really smart labor
and smart capital

versus passive labor
and passive capital.

So both smart labor
and smart capital,

they're earning much more --
look at Apple.

It's an incredibly
profitable company,

even though
other places have copied

their smartphones, right?

Now, smart labor and smart capital,
how much of the world is that?

Ten percent, maybe, at most.
So, yes. There are huge gains.

They're being captured
in a pretty concentrated fashion,

and still, a lot of people
ought to be worried.

- I don't see that the gains
are being captured at all.

Sure, Apple has made
a lot of profit,

but if you look at cell phones,

some five or six billion people
today have a smartphone.

That's incredible.

A smartphone is more powerful
than a Cray-2 supercomputer

of the 1990s.

So, if anything, what we're seeing
is that this technology

is incredibly widespread
and easily available and cheap,

and the gains are going to people,
not to the robots.

- Smartphones, they're great.
I have one, too.

But when you measure gains
in real wages, and you add in

and count the value of smartphones,
real wages are barely up

for decades.

That's part of the problem,
and part of the culprit

is machines' automation,
information technology,

and also, in some cases,
trade with other nations.

- I think we all agree that capital 
can substitute for labor,

but there's a substitution effect
and there's an income effect.

So, for example,
Jim Beschen has shown --

look at the ATM machines.

You would've thought
that the ATM machines

would've unemployed
all of the bank tellers.

But in fact, that didn't happen.
Well, why not?

Well, at any individual bank,
an ATM machine substituted

for a bank teller,
but that made it cheaper

to produce more bank branches,
and with more branches,

there was actually hiring
of more bank tellers.

- But the last few years,
bank teller employment

finally has gone down, and banks
are closing their branches.

The branch I used to go to
on a Saturday, it's shuttered.

Why? It's machines.

- Look, it's not just
about bank tellers.

That's just an example.

The bigger point
is that these technologies

make us rich,
and when people get rich,

they spend more,
and when they spend more,

you get entirely new jobs.

Look, the jobs of today
were unheard of even 10 years ago.

Think about all of the people
writing apps for those smartphones

that we have.

Those jobs were unheard of before.

There'll be new jobs in the future

that you and I can't even
imagine today.

- People, people, people.
You talk about people.

It will make some people rich.
It will make smart people rich.

It will make owners
of intellectual property rich.

It will help people
in poorer countries

catch up to wealthier countries.

And all that's fine,
but most middle class Americans

are not seeing real wage gains.

- So, Tyler, I'm shocked.

What should we do then,
or should we smash the robots?

I don't see you smashing
your smartphone.

- We don't have
to smash the robots.

There's probably no solution.

What we need to do
is learn how to adapt.

Here's a way to think about it.

The Industrial Revolution,
we had manufacturing

replace agriculture
starting in the middle

of the 18th century.

The amazing thing is, today,
we're still subsidizing farmers.

Think how long that process
of adjustment took.

So, what we're going to see

is another equally traumatic
process of adjustment.

We need to hold on
and be ready for it

and understand what's coming
rather than deny it.

- If anything, the shift
from agriculture

to manufacturing shows precisely

how beneficial
these disruptions can be.

Yes, there were disruptions,
but people got new jobs,

they got higher paying jobs,
they got better jobs.

We saw, again, in the shift
from manufacturing to services,

people got new jobs,
they got better jobs.

After all, we look back today,
and we think,

"Oh, how great it was
to be an auto worker

on the assembly line.

Ten hours a day with dirt
and oil and hard work.

And how terrible it is
to be an office worker?”

No, it's actually much nicer
to be an office worker today.

And the future,
I think we'll see better jobs

and we'll see nicer jobs
and higher paying jobs, as well.

- You say the jobs
will make "us" rich,

but that “us”,
it’s a tricky concept.

I would say jobs
will make rich people

who are really good at working
with information technology.

And that's actually
a pretty demanding

cognitive requirement.

You need a lot of education.

You also need to be able
to retrain yourself,

because the technology
changes quickly.

That's not most people.

For most people,
information technology means

that labor competes
against other labor

and other parts of the world
more than ever before.

And those others out there,
they're not so much better off.

- Look, we agree education
is important

and retraining is important,
but don't forget

that these technologies
also help people

to do precisely that.

Online education makes education
more productive.

And who knows
what we're going to see

in the future
with genetic engineering,

smart drugs,
biological enhancements.

We're already tied
to our cell phones.

We're practically cyborgs already.

I don't see why we can't even extend
that even further.

- Dreams, dreams, dreams.

Someday, perhaps,
but look at education.

High school graduation rates
in this country,

they're pretty flat.

Test scores, they're pretty flat,
maybe they're up a bit.

It's hardly an impressive
performance.

What I see is that working
with smart machines

is so hard that most people
don't really even try to do it.

They sit back,
they earn what they can.

That's it, and there's a lot
of stagnation in the economy.

- [Narrator] What do you think?

If you'd like to hear more
from Tyler, click to find out

how economics can help you
find a good job in a market

filled with computers and robots.

Or, if you'd like to see
previous episodes of Econ Duel,

check out our playlist.

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