2016 Presidential Economic Report: Robotics is like the steam engine revolution

For the first time, robots were the subject of the annual Economic Report of the President, a hefty 435-page report from the president and his Council of Economic Advisers to Congress released in February 2016. It showed how robots are becoming increasingly important in the world’s economic policies. Overall, the report found that, despite concerns about the risk of job losses, robots could significantly boost productivity and labor force growth, accounting for 10 percent of GDP growth and 16 percent of labor productivity growth.

—President Obama, Economic Report of the President 2016

While the report touts startups as an engine of economic growth, it also notes that this is declining as venture capital rates have fallen and the number of new companies has decreased over the past 40 years. After discussing metrics for entrepreneurship and innovation, the report goes on to delve into two categories of technology that will shape the future - robotics and internet communications.

The report includes a chapter that provides an in-depth assessment of the impact of these two new technologies and considers the challenges associated with them. While both technologies clearly have the potential to have an unparalleled impact on society as a whole, robots are still primarily seen as a labor issue.

“More specifically, in the area of ​​robotics, this section explores concerns that increasing automation in the workplace threatens to displace traditional labor. It is important to keep in mind that despite rapid growth, robots do not appear to be poised to impact every sector of the economy or to displace the human workforce. Nevertheless, robots are likely to have significant implications for businesses and, more broadly, for productivity.” — Page 236

Robots are as important to the American economy as the advent of the steam engine.

Between 1993 and 2007, robots contributed 0.37% to the country’s annual GDP growth, or one-tenth of GDP growth during that period (Graetz and Michaels 2015). The same study also estimated that robots contributed 0.36% to the growth of labor productivity, or about 16% of the growth of the labor force during that period. This effect is on the same order of magnitude as the impact of the steam engine on labor productivity.

Estimated annual global supply of industrial robots from 2004 to 2014

Since then, the number of robots has doubled, according to the International Federation of Robotics (IFR), an estimate that is conservative because growing robot sales in non-traditional industries are difficult to calculate.

After a relatively flat period, the number of patents in the robotics category has doubled in the past five years. Currently, there is little sign of a monopoly in robotics patents, which is positive news for companies, meaning that healthy competition leads to more innovation and lower costs. Lower costs will allow more downstream companies to obtain robots, further driving productivity growth. If you look at this phenomenon with caution, intellectual property rights may become a source of concern.

On labor issues, the report provides an excellent summary of recent research in the field, with generally positive findings. However, many of the cited studies do not distinguish between robotics, automation, and computerization. Because the decline in manufacturing jobs has historically led to a severe decline in the employment rate for men aged 25 to 54, society’s fear of job loss is understandable. However, confusing computerization, automation, and robots can skew or inaccurate numbers and underestimate the vulnerability of jobs.

Probability distribution of median hourly wages after automation

Historically, as waves of technological innovation replaced human workers, productivity increased, wealth grew, and more jobs emerged. Most economists agree that robots are increasing productivity, so the question is where the increase in wealth and jobs will occur.

Will robots assist human workers, or will they replace them? If the latter, will human workers have enough bargaining power to share in the benefits of increased productivity?

"One of the few studies in this area finds that an increase in robot density in an industry is associated with higher wages within the industry, suggesting that robots are supplementing human workers. However, higher wages may be due in part to robots replacing less skilled workers in the industry, which could bias estimates of wage growth." - Page 242

Previous waves of automation have shown a pattern of additional job creation: entirely new jobs emerge to support and maintain the new technology. The transition from horses to vehicles saw the decline of old occupations such as stable boys and farriers, and the rise of new occupations such as gas station attendants and auto mechanics. Keynes coined the term “technological unemployment” in 1930 to describe this period of change as society struggled to shift the workforce to the newly created positions.

If automation redistributes occupations, there is no consensus on which jobs will disappear. Autor and Dorn believe it will be middle-skilled occupations, such as librarians and assembly line workers. They also believe that the labor market has become increasingly polarized, with both ends moving away from middle-skilled occupations, and that higher-skilled jobs are less likely to be automated because they require problem-solving, intuition, and creativity. However, this view is threatened by AI - which is again confusing robots with AI, automation, and computerization.

“Frey and Osborne argue that big data and machine learning will make it possible to automate many tasks that were previously difficult to automate.” — Page 243

Perhaps there’s an easier way to look at the overarching question: You can search for research papers supporting various viewpoints about the future of work, the future of robots, and the future of automation.

The White House report describes some new and proposed future policies, including business tax reform, increased support for manufacturing, robotics, scientific research and development, a higher minimum wage, skills retraining initiatives, and continued support for entrepreneurship.

"The latest National Innovation Strategy (Strategy for American Innovation), released in October 2015, details three key investment areas that are considered to be the government's focus to ensure that the United States maintains its innovation advantage in the coming decades: 1) Continue to invest in federal research and development and other basic modules for the private sector (translator's note: the corresponding name of the "public sector" refers to individuals, families and private enterprises and institutions, from Baidu Encyclopedia) to make scientific and technological breakthroughs; 2) Strengthen the federal government's efforts in national priority areas such as precision medicine and advanced manufacturing; 3) Enhance the federal government's innovation capabilities." - Page 254

The President's economic report envisions a scenario in the coming decades: a renaissance in U.S. manufacturing with robots, and a shift in robotics to services and commerce to address issues such as agriculture and an aging population, supporting continued development of American society. There will be stresses, but there will also be many gains, including continued innovation and economic growth.

Source: medium

By Andra Keay

Compiled by: New Intelligence - Wang Wanting and Li Hongfei