Will robots replace human labour?

An article in the FT a few weeks ago discussed the effects the automation of industries can have on the labour market. Industrial automation is essentially the use of computers, robots or information technologies to replace human beings in handling different processes of an industry. A concern amongst many individuals is the possibility of there being no need for human labour in the near future, potentially increasing unemployment.

The article spoke about how the ADB (Asian Development Bank) claimed that the expansion of robots in various industries could potentially create more jobs for potential workers rather than take them away. This seems odd, considering these industrial robots and others forms of artificial intelligence are replacing humans in many jobs by being able to do them better.

However, it can be argued that although there have been huge developments in technology compared to 10 years ago, there is no evidence to suggest that the need for humans to manage and sustain this technology will decrease. Past trends show us that although the use of technology in industries has grown exponentially, there has still been a steady decline in unemployment since the 2008 recession.

It can’t be accurately predicted whether the automation of industries will boost or harm jobs and to what extent, but what can be studied is the impact it will have on an economy. The main desired outcome from industries when they invest in technology is growth, both in productivity and their businesses. Investments in machines, computers and robotics drive productivity growth as the quality of labour in industries increases.

Most goods that are currently manufactured require machines to be able to maintain sustainable total factory productivity (TFP). The expansion of robots within a factory essentially make the machines within production more efficient, as even if the human component remains the same, increases in efficiencies through robotics leads to an even higher TFP, which results in a higher overall output within an economy, resulting in a growth in GDP.

What this shows us is that although robots may take away low-skilled jobs, they are creating demand for high-skilled human labour to be able to supervise robots. These jobs will have higher pay which will act as an incentive for potential workers and future generations to improve their education and skill set to acquire these higher-skilled job, which in the long term will result in an improved workforce within an economy.

The Invisible Hand: Is Greed good?

The ‘Invisible Hand’ is a theory that proves how there is nothing wrong with people acting in their own self-interest. In a free market, the combined force of everyone pursuing his or her own individual interests is to the benefit of society as a whole, supplementing everyone. I was recently taught about this idea and it helps explain why free markets have been so essential to the growth of complex modern societies.

There are two aspects to the invisible hand theory: a seller/producer trying to make a profit from selling goods and a consumer looking to purchase cheaper goods. Both of these contribute to create a more efficient economy which can lead to market equilibrium in different industries.  People pursuing self-interest can contribute towards societies’ well-being even if they don’t mean to.

However, not all implications of the invisible hand are positive. A main problem that can arise from this is monopoly power. With no government regulations and price controls, firms with monopoly power can push prices above the equilibrium. As a result of this, firms can become inefficient due to a lack of competition making them potentially stagnant.

Furthermore, the invisible hand theory can be used to support selfish actions that could actually negatively affect society, which is an incorrect approach. It is important to be able to distinguish between self-interest and pure selfish greed when implementing a free market economy. Someone purely driven by greed might choose to cheat the law in an effort to benefit himself to the loss of others.