Technological change and fatalism

“Don’t blame robots for low wages,” writes Paul Krugman. “Automation just isn’t a big part of the story of what happened to American workers over the past 40 years,” he continues. “We do have a big problem — but it has very little to do with technology, and a lot to do with politics and power.”

This is misleading, which is a real shame because Krugman’s ultimate point is incredibly important.

His argument is roughly:

  1. Technological disruption is not new.
  2. This particular wave of technological change is not particularly rapid or unprecedented.
  3. Therefore, technology cannot explain stagnant wages and rising inequality; something else must be causing it.
  4. That something else is politics and power.
  5. We shouldn’t fall for the fatalistic narrative that technology necessitates stagnant wages and rising inequality.

I want to sign on to where he ends up (#5) but not the way he gets there.

Do stagnant wages really have “very little to do with technology”? As I’ve already said, I don’t think technological change necessarily leads to stagnant wages — though it has happened before.

However, I think a more straightforward reading of Krugman’s claim would start with a counterfactual. Holding power and politics constant, what effect has information technology had on wages?

There is abundant evidence that information technology has contributed to stagnant wages and rising inequality, by changing the skills that are demanded and polarizing the labor market. This is occurring across advanced economies. Within the policy variation we observe in OECD countries, at least, it seems that some increase in inequality is the norm.

It therefore seems much more reasonable to conclude that stagnant wages and rising inequality have quite a bit to do with technology. Of course, they also have quite a bit to do with politics and power. The latter likely helps explain why these phenomena have been particularly pronounced in the U.S., and why the U.S. has seen such a staggering increase in the incomes of its top 1%.

I’ve written about this all before, and that was also in response to weirdly overstated claims by Krugman. My assumption is that this is well-intentioned, that he hopes to shift the U.S. policy debate away from fatalism toward action, and that he thinks implicating politics over more impersonal forces like technology will help.

Maybe he’s right.

I certainly don’t think we should be at all fatalistic about inequality, and I certainly agree that politics and power are a major contributor. I’ve emphasized this in my writing and my editing. But technology clearly is a big part of the inequality story, as are education and skills. I suspect that brushing them aside will make solving our problems harder, not easier.

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