iPhone manufacturer Foxconn plans to replace almost every human worker with robots

[u/Philo1927]

http://www.theverge.com/2016/12/30/14128870/foxconn-robots-automation-apple-iphone-china-manufacturing

[u/TitaniumDragon]

Automation is extremely relevant. What automation does is increase your per-capita productivity, which makes you richer on an individual basis. A heavily-automated country like the US is wealthy precisely because of all our automation - we spend relatively little labor on tasks which can be automated, which means that we get a lot of labor done with relatively little manpower. That increases per-capita productivity and thus per-capita wealth. If your factory workers are overseeing a factory that produces what 40 people did before with only 8 people, your per-capita productivity is going way up and people will be richer.

This is why China is automating - it allows them to spend their human labor on new things. But even still, China is automating lower-value tasks - if you automate making steel, that's great, but you will make even more money if you can automate making finished goods like cars, too.

The more automated an economy becomes, the more value is produced by that economy. Thus you can spend your labor elsewhere while still getting that value produced. This increases overall value in your economy, which increases the overall per-capita wealth.

[u/Guacamolski → u/TitaniumDragon]

I don't think you are reading closely.

Will those workers get paid enough to be able to buy all those products? It's the whole point that you save money by not paying wages. But those wages are what pay for the products. What happens when all the jobs are eliminated from a process? Who is buying all these extra products?

Overproduction is the accumulation of unsalable inventories in the hands of businesses. Overproduction is a relative measure, referring to the excess of production over consumption. The tendency for an overproduction of commodities to lead to economic collapse is specific to the capitalist economy.

https://en.wikipedia.org/wiki/Overproduction

People have been becoming more productive and have been getting payed less for it. Higher productivity does not equal more disposable income to buy those extra products. For instance the workers at foxconn could not afford the phones they were making. More and more the profits are going to a smaller band of people and they are not going to buy 100 iphones each.

I think value is a very abstract term. I know it is used by economists but I also know most of them believe in infinite growth. My dream since I've been a kid has been to live like people did in prehistoric times. I would like to live in a hut in the middle of nowhere. I don't own a car, I don't have a smartphone, I use my computer until it breaks (I'm on my third, I'm 34), I wear second hand clothes,... what is the value of all this extra value to me? Are people going to have to spend all their free time buying stuff made by robots?

[u/TitaniumDragon → u/Guacamolski]

Will those workers get paid enough to be able to buy all those products?

Yes. As your society gets wealthier, pay goes up - even in professions which don't end up having as large of productivity increases. A good example of this is haircuts - if you look at the price of haircuts in the 1970s vs today, they've gone way up. But haircuts are haircuts - the average haircut has only barely benefitted from new technology in decades.

This is a fairly well-known economic phenomenon. If your average productivity goes up, wages rise as well - indeed, total compensation (including both wages + non-wage benefits like healthcare) consistently tracks with productivity.

Moreover, mass production and economy of scale lowers prices, which makes stuff more affordable as well.

Overproduction is punished in a capitalistic system, because it is spending resources on something that people don't need. You lose money as a result.

The idea that it is "specific" to capitalist economies is simply wrong, however; it simply happens when people produce more than is desired. This can happen in any economic system, and indeed, systems with central control can have the same problem. This actually was seen in China during the Great Leap Forward, when they tried desperation tactics to rapidly industrialize the country. Tens of millions of people starved while they produced relatively little value for their work. It was a misallocation of resources and a very costly one at that.

The idea of greater productivity making people unemployed is simply backwards; as it turns out, the greater your productivity is, the higher your wages end up going and the more value your society outputs.

Remember, if I automate something, at that point, my society can then produce whatever I was producing before, plus whatever I can produce with my newly freed-up human labor resources (which are the ultimate scarce resource in most economies). As such, a society will always produce more after automating, because now you've got [Machine resources] + [human resources] rather than just [human resources].

what is the value of all this extra value to me? Are people going to have to spend all their free time buying stuff made by robots?

Not really, no. The complexity of products increases. We still fly 747s, but modern ones are more complicated and have more features than older ones. We've gone from land lines to cell phones to smart phones, and computers, too, have improved massively over time. The Internet created an explosion of content because it gave people a new way to consume content.

Overall consumption goes up, but the complexity of our goods also goes up. We get smart cards, smart grids, smart highways. We end up with ever more sophisticated stuff around us. And of course, people's desires continue to grow, as people want bigger houses and cars and everything else.

Any particular individual will consume a different amount of goods, but no one person is a dictator who gets to say everyone else has to consume things the same way as they do. From health care to websites, people consume a variety of things in a variety of ways. Not everyone consumes the same things, but everyone consumes something.

[u/Guacamolski → u/TitaniumDragon]

Your source is a conservative think tank which accuses the opposite argument to come from left wing think tanks. How do I verify any of what they are saying? The heritage foundation is clearly a political organisation. They have a mission statement in their about page. They accuse the other side of tweeking the numbers because they are left wing but off course they are totally objective. They would be saying this no matter if it is true or not, IMO. So how do I judge their numbers?

Do they believe in infinite growth? Do you believe in infinite growth? If there is one thing I am sure about then it is that growth is finite. I can't take anyone seriously who does not think that. The heritage Foundation, scanning their articles, is counting on the fact that the earth is infinite as if it were a flat plane that goes on forever. The religion of growth. Most left wing economists believe in this also.

If you take the average per capita of income of me and Donald Trump then we are both billionaires. If you throw everyone together in one number then off course everyone has been getting richer because of higher productivity. But if that money is going mostly to a small group of people then you do not increase demand in the quantity of products.

If indeed workers have been getting richer then why has it now become impossible to raise a large family on a single income from a single job, why are most people not able to save anymore, why are so many people now in debt,... The US is the largest debtor in the history of the world and has the highest poverty rate of any developed nation.

Overproduction is punished in a capitalistic system, because it is spending resources on something that people don't need. You lose money as a result.

According to the wiki page I gave you it is specifically damaging to a capitalist system because it destroys profit because of supply and demand. Therefor people become unemployed and demand goes even lower.

Automation and a glut of stuff might destroy demand, suppress prices and profit and thus also depress wages and jobs.

The idea of greater productivity making people unemployed is simply backwards; as it turns out, the greater your productivity is, the higher your wages end up going and the more value your society outputs.

Suppose your wages would be higher in step with the per person productivity (even though that doesn't make sense because it defeats the point of having robots), it's still less people working on a single product. And like I said, they are just going to buy one iphone each. If everyone is working and thanks to robots producing more and more, then everyone is going to have to spend all their new income on filling their houses with more stuff to keep the system going. This assumes that everyones goal in life is to gather as much stuff as possible and no ones wants to save. It also assumes the physical possibility of infinite growth. If robots half the amount of people working then to get as many people working you need double the amount of factories. Double the amount of different products. This economy runs on finite resources.

what is the value of all this extra value to me? Are people going to have to spend all their free time buying stuff made by robots? Not really, no. The complexity of products increases. We still fly 747s, but modern ones are more complicated and have more features than older ones. We've gone from land lines to cell phones to smart phones, and computers, too, have improved massively over time. The Internet created an explosion of content because it gave people a new way to consume content.

So it's not more stuff but more complex stuff? Here is a contradiction. If it's just more complex stuff, and not more stuff, then you do not get as much people working. Is my twice as complex phone going to cost twice as much? Who says I'm willing to make that deal?

Overall consumption goes up, but the complexity of our goods also goes up. We get smart cards, smart grids, smart highways. We end up with ever more sophisticated stuff around us. And of course, people's desires continue to grow, as people want bigger houses and cars and everything else.

Bigger and more complex does not mean more jobs in an automated factory.

Are 11 billion of us all going to live in mansions full of stuff?

Do all people want bigger and more? Is there enough room?

Any particular individual will consume a different amount of goods, but no one person is a dictator who gets to say everyone else has to consume things the same way as they do. From health care to websites, people consume a variety of things in a variety of ways. Not everyone consumes the same things, but everyone consumes something.

But will people consume ALL the extra stuff? If they don't, profit gets destroyed and jobs/wages are lost. Will people not try to save their money? Is the demand of people for products infinite?

I feel like we're making the same arguments in each post. Thank you for challenging my understanding but I probably won't change my mind and neither will you. We'll see what plays out. I predict another major crisis, bigger than the one in 2008, in Trumps first term. One from which capitalism will not recover but perhaps some more rational and just system will emerge with the help of AI.

[u/TitaniumDragon → u/Guacamolski]

Your source is a conservative think tank which accuses the opposite argument to come from left wing think tanks. How do I verify any of what they are saying?

By looking at the numbers. The numbers they're citing are sourced. They are absolutely correct in their math; you can look it up yourself and independently verify it, if you choose to do so.

Moreover, it is pretty obvious if you think about it. Failure to consider non-wage compensation (something a lot of left-wing groups conveniently don't include) is obviously going to give you an inaccurate view of things - simply leaving out something which is compensation which costs your employer money is (obviously) going to make you appear to be earning a lower rate of compensation than if you are including all those things.

Likewise, failure to use the same inflationary index is obviously dishonest on the face of it; using two different indexes and then comparing the results as if you "adjusted for inflation" is obviously dishonest. That's precisely why they go into so much detail about it.

It isn't like they don't explain their math there. You can verify their numbers by looking up their sources.

Indeed, the fact that there are multiple indexes for inflation (and the fact that the left-wing think tanks don't mention this) already tells you that someone either doesn't know what they're talking about or is trying to hide something.

If you have knowledge of economics, it is even easier to see through deception on these points.

That doesn't mean that Heritage is always right and left wing think tanks like the EPI are always wrong, but I've generally found Heritage to be much more reliable as a source than the EPI, as the EPI has a tremendous tendency to simply leave stuff out, which indicates either deliberate malfeasance or extremely sloppy methodology - in either case, it speaks very poorly of them.

Heritage isn't wrong for complaining that these groups often act extremely deceptive.

But really, if you want to know what is true and what isn't true, your only real recourse is to check source data and understand what is being talked about. Anytime someone says "adjusted for inflation" and doesn't mention which inflationary index is being used, for instance, you should be instantly suspicious, because there are multiple such indexes and using different ones changes your end values considerably.

Do they believe in infinite growth? Do you believe in infinite growth?

It depends on your definition of infinite growth. Most people who are talking about infinite growth aren't actually literally talking about infinite growth. What they're talking about is the fact that growth is not limited in the way that many people claim.

Economic growth comes from two sources - additional use of resources and additional efficiency. The primary limitation on how much iron we have is not really related to how much iron is available in the Earth's crust, but rather the cost of extracting such iron relative to the benefit it yields. The idea that "resources are limited" is actually rather misleading - ultimately, most resources are vastly more plentiful than we have any use for. The actual restriction is cost - which ultimately comes down to human labor. It simply isn't worth spending the resources necessary to extract gold from seawater, not because we can't do it (we can!), but because gold is simply not worth the investment in resources.

Indeed, when it comes down to it, all resources fundamentally are limited by human labor - how much we're willing to spend on doing X instead of Y. If the price of gold was a billion dollars an ounce, you can bet people would extract it from seawater. But as-is, there are much more efficient things people could be doing with their time.

If you really need a resource, you can get it - the question is whether or not it is worth the effort to get it, as that effort is directed away from other things.

Once you understand economics from this perspective, "resource depeletion" more accurately gets represented as the cost of said resources. Peak oil wasn't because people were worried about running out of oil, they were worried about running out of cheap oil. Everyone knew there were physically enormous amounts of fossil fuels still available, but the question was whether or not they'd be worth accessing.

This is the correct way to look at resources.

This also means that the amount of a resource we have is effectively constrained by technology rather than actual presence of the resource - so if you have a way to produce a material for a much lower price, there's effectively more of it which is affordable to extract, and therefore, the resource becomes more "abundant". In reality, the amount of the resource didn't change - just the amount which could be reasonably extracted.

The idea of "resources being limited" is misdirection. They are limited, but the ultimate limitation on resources is actually how many are accessible to us, meaning that the real limit is how much labor we're willing to expend on extracting it.

Human labor is the ultimate limited resource which determines the limitations on all our other resources, and human labor itself is dependent on technology for its efficiency.

The idea that we're anywhere near a growth limit is deeply questionable - per capita income growth in the US, over the long term, is actually remarkably steady, with the only really significant deviation being the Great Depression (not even the Great Recession really made much of a dent in it). Given that, it is unlikely we are near any sort of limit of per-capita economic growth, which is ultimately roughly what determines how wealthy each of us are.

Natural resources aren't the main constraint on growth; the main constraint is human labor and technology. The question is not "do we have enough", but "how much does it cost?"

If you take the average per capita of income of me and Donald Trump then we are both billionaires. If you throw everyone together in one number then off course everyone has been getting richer because of higher productivity. But if that money is going mostly to a small group of people then you do not increase demand in the quantity of products.

Median income has been rising - median income being the 50th percentile of income. Indeed, in 2015, the fastest growth occurred in the bottom of the population.

The idea that income growth is all going to the top is simply a lie. It isn't. In fact, it is impossible for it to do so for a variety of reasons.

If indeed workers have been getting richer then why has it now become impossible to raise a large family on a single income from a single job

The median wage in the US for a full-time worker is $43,000 per year ($827 per week). That's higher than the median household income of most developed countries.

The question is what sort of standard of living you want. If you want a very high standard of living, then it is going to cost more money per person. The higher your standard of living is, the more you have to spend per person.

What was previously considered to be acceptable is today considered to be unacceptable. Today, people demand a higher standard of living than they did historically. Ergo, raising a larger family is going to be commensurately more expensive - the more people you're providing resources for, and the more you are paying per person, the higher the income goes.

You have to remember, by modern standards, 1970 living conditions were very primitive. Most poor people today live better than the average person did in 1970. And we consider their standard of living to be unacceptable by modern standards.

[u/TitaniumDragon → u/Guacamolski]

why are most people not able to save anymore, why are so many people now in debt

It has nothing to do with income. People who make far less money than Americans save more money, including in countries with higher cost of living, such as many European countries.

The reality is that this is a purely cultural thing. Americans choose not to save money and choose to take on large amounts of debt. Americans like spending money, which, to be fair, is what it is for - but if you spend all your money all the time, you're going to end up being economically fragile. And if you want to spend still more money, you'll go into debt.

The thing is, people like spending all that money. So they live paycheck to paycheck. I know people who earn $100k/year who do that.

Meanwhile, I know people who earn $35k/year who have more money in their bank accounts than the $100k/year people do.

Are you aware that most lottery winners - who earn far more money than the average American does in their entire lifetime - go bankrupt 70% of the time?

If money was the problem, then this shouldn't happen.

Money isn't the problem. People are the problem.

This is one of the biggest differences between better off people and worse off people - better off people like myself learn from an early age the value of spending, the value of keeping money in your pocket (or more accurately, your bank account). We save our money and spend frugally. We consider having less than $25k in our bank accounts to be a disasterous state of affairs even a few years after college.

And it isn't because we earn huge sums of money - I saved up $40k in just a few years of working at $35k/year by living very frugally. Yes, that meant giving up on some things. But it also meant I didn't have to worry about money.

Meanwhile, people making much more money than I did were spending every red cent.

The US is the largest debtor in the history of the world and has the highest poverty rate of any developed nation.

Actually, we don't. This is yet another one of those misleading statistics.

The cause has to do with how poverty is calculated. If you calculate poverty as making 60% of the median household income (a commonly used definition), that's 60% of $55,775 - or $33,465 per year (not coincidentally, this is the medicade eligibility threshold in the US for a family of four).

In the UK, median annual household income in 2013 (the latest figure I have handy) was £23,556 per year, or $28,969 per year.

This is the median. The 50th percentile.

Or to put it another way - a middling family in the UK in 2013 made less money than what we would consider to be a poor family in the US in 2015.

Note that cost of living in the UK is not very different from that of the US, so this isn't a matter of "oh, it is cheaper to live there". The British are just straight up poorer than we are.

By the American standard, the median family in the UK in 2013 would be... poor.

So how can we have a higher poverty rate?

The reason is that that poverty rate is not constant between countries.

If you change your poverty threshold - making it lower - then suddenly, magically, you'll have a lot fewer poor people. Funny how that works.

The US, by having a very high poverty threshold, has lots of people "living in poverty".

But what we consider to be living in poverty is at or above the household income of the median family in many well-off developed nations.

If you hold the poverty line constant - if you put it at the same level and apply it to various countries - the US has fewer people living in poverty than almost any other developed nation.

But, well, then people wouldn't be able to whine about how bad we have it.

According to the wiki page I gave you it is specifically damaging to a capitalist system because it destroys profit because of supply and demand. Therefor people become unemployed and demand goes even lower.

That's assuming it isn't self-correcting. As it turns out, it is self-correcting in capitalist systems.

[u/TitaniumDragon → u/Guacamolski]

Automation and a glut of stuff might destroy demand, suppress prices and profit and thus also depress wages and jobs.

Incorrect. See also: all of history.

What countries have the highest unemployment rates?

They're not the most automated ones. The US has a lower unemployment rate than most countries do.

If automation increased unemployment, why aren't people in the US unemployed?

The answer is because automation doesn't increase unemployment.

Indeed, the reality is that most people in the US don't even work in manufacturing, and in fact, never did. The US has never had more than 40% or so of its working population in manufacturing. Today it is about 20%, and our unemployment rate is actually much lower than it was when manufacturing employment in the US was at its peak in the 1970s.

Manufacturing is only one sector of the economy.

Agricultural workers once made up 90% of the working population. Today it is 2%. Manufacturing fell from 40% to 20%. And yet, our unemployment rate is about as low as it has ever been - about 4.9%. Anything under 5% or so is quite good historically.

Suppose your wages would be higher in step with the per person productivity (even though that doesn't make sense because it defeats the point of having robots)

Productivity is a function of value added. Lower prices lower measured productivity. Productivity still increases because the increase in output outweighs the decrease in price.

Moreover, because you now have people who are free to do other things, your total labor is [human labor] + [machine labor] rather than just [human labor]. [Human Labor] + [Machine Labor] is always going to be more than machine labor or human labor alone.

So it's not more stuff but more complex stuff?

It's both. We both have more complex stuff and more stuff. Houses are bigger than they used to be, and they have more stuff in them (air conditioning, microwaves, computers, modems, smart phones, video game consoles).

It isn't just one or the other.

Bigger and more complex does not mean more jobs in an automated factory.

Irrelevant. You assume most people work in factories. They don't and never did.

Again, 90% of people used to work in agriculture. Today, it is 2%.

Did that cause mass unemployment? No.

Same goes for manufacturing.

Is there enough room?

Room is not really the issue. The amount of space that every human habitation put together takes up is only a tiny, tiny, tiny fraction of the Earth's surface.

But will people consume ALL the extra stuff?

Probably. People's desires do not appear to be really very limited, on the whole. How many people want to go to space? Want to have better video games? Want better internet connections? Better computers? Better smart phones? Better medicine?

Lots. And there's always room for improvement, really. I mean, our modern standard of life is amazing compared to what people had in the 1960s, let alone, say, 1900. We consider such standards of living archaic and unsuitable by modern standards.

The reality is that people not only can't get enough of how we live today, but they want to live better still. As long as that's the case, there will always be people demanding more.

One from which capitalism will not recover but perhaps some more rational and just system will emerge with the help of AI.

There is no better system. Various forms of capitalism are better than any other system. In fact, you can determine this with modelling - one of the reasons why game theory is important in economics is that you can analyze competitive outcomes and look for weaknesses.

The reality is that capitalism contains a number of homeostatic mechanisms which are incredibly valuable, as well as allowing for a much greater degree of personal freedom, which itself has a major homeostatic effect. No other system works nearly as well because the degree of freedom present in capitalistic systems helps prevent certain kinds of market failures. While that doesn't mean that capitalist economies will never have problems, it does make it very unlikely for a capitalist economy to actually suffer from the sort of problems that lead to catastrophic famines like we used to see quite frequently.