Russ Roberts responded via Twitter regarding my recent post title Russ Roberts’ Bitter Pill. Much respect to Roberts because he could have just ignored it altogether, especially if he thought I was way off the mark. His response caused me to revisit my post and view it with fresh eyes.
The $10 miracle pill in Roberts’ example was simply the object he used to illuminate how innovation and globalization naturally displaces certain classes of labor. Fair enough. But I liked using the miracle pill example for my own purposes because it was a perfect metaphor for what many economists and pro-Capitalists think of innovation and globalization: that the benefits outweigh the costs. You could phrase this an entirely different way:
The ends justify the means.
Here’s the thing about the miracle pill of Roberts’ example: it would likely be devastating to the world. What would be the effects of 7 billion people suddenly in perfect health, each living an average of 40-60 years longer than they do now? By definition, we would not become wealthier, we would all become much poorer as a result of the increased demands on resources. This is on top of the displacement of the millions of people in the medical field. The problem with innovation many times is unintended consequences. Indeed, if a pill actually existed that could provide perfect health and 120 years of life, it would probably never see the light of day.
As for how the world deals with the displacement of workers via innovation and globalization? That begs the question:
What is the purpose of our economy?
Is it to bring the most benefit to the most people? And, if that is indeed the case, is our current economic system the one best suited for that? Has innovation or better knowledge made it possible to improve that process?
How do we create an environment that allows full labor mobility? What do we need to do that would allow those displaced by innovation (or the market system in general) to continue to provide for themselves in a dignified manner?
My answer was to shift the power from banks to create money to the individual and tie the process directly to their productivity. If people are directly responsible for creating money, then business and governments are motivated to utilize them as the first source of capital. In a world where everyone produces money through their efforts, wealth is created directly as a result of human productivity. Rather than displacing workers, innovation would then be utilized to sate the far greater demand that would exist under those circumstances.
The same could not be stated in a world of Capitalism and the miracle pill. There is evidence that the displacement of workers by innovation and capital is accelerating and the quality of jobs being created is declining. Some economists are now arguing the merits of Universal Basic Income (UBI) versus a Universal Job Guarantee (UJG). The problem of human displacement in the process of productivity is shaping up to be one of the main challenges of this century.
My argument against Roberts’ piece was unsound and I myself committed a straw man fallacy. I have no problem admitting when I’m wrong. However, the challenges faced by the world remain the same. How do we create a world that can provide for all?
We are reaching the limits of Capitalism. Debt has far exceeded its ability to be effectively serviced. People are being displaced by capital and innovation at an accelerating pace. The environmental impact is on the verge of catastrophe. Discontent is simmering worldwide and has started to boil over in many places where populism and intolerance are on the rise. “Motivated self-interest” is unlikely to correct these problems and will likely make them much worse.
We are reaching the end of Capitalism as an effective economic system. UBI and UJG will not solve these issues because neither solves the asymmetric relationship regarding bargaining power between the individual with either business enterprise or the state. To correctly address this imbalance, the individual must be truly empowered.
My solution is for each person to have the ability create their own money through their own productive effort.
What is yours?