In his Sunday New York Times op-ed ” Today’s Inequality Could Easily Become Tomorrow’s Catastrophe,” Yale economist Robert Shiller paints a dire picture of the economy as a zero–sum game where the gains of the rich come at the expense of the poor. He says:
“Economic inequality is already a concern, but it could become a nightmare in the decades ahead. … Innovations in robotics and artificial intelligence, which are already making many jobs uncompetitive, could lead us into a world in which basic work with decent pay becomes impossible to find. … Angus Deaton of Princeton, … gave a pessimistic prediction: “Those who are doing well will organize to protect what they have, including in ways that benefit them at the expense of the majority. ” … In each of four devastating famines in different parts of the world, there was enough food to keep everyone alive. The problem in each case was that… systems of privilege and entitlement permitted hoarding of food by people of status whose lives went on much as usual, except that they had to brush off starving beggars and would occasionally see dead bodies on the street.”
Shiller knows the economy is not zero–sum. Competition demands investors produce $5 to $20 of value for others for every dollar they keep for themselves. When tractors displaced subsistence farmers, the displaced farmers didn’t starve to death; they prospered. If displaced farmers couldn’t have found work that was more valuable than the now-lower cost of food, they would have remained subsistence farmers (and tractors wouldn’t have displaced them). By lowering the cost of food, tractors made it easier for displaced farmers to find relatively more valuable work. The same is true of robots today.
Perhaps innovation will allow the prosperity of the rich to grower faster than the rest of the economy. But it’s hard to imagine an economy where innovation makes “decent pay…impossible to find.