Economy: Why Robots Will Make Us Richer

(Drivebycuriosity) - There is lively discussion about robots. Companies use more and more robotic systems to reduce the costs of labor. Robots - and other computer controlled machines (automats) - can execute a rising number of tasks - cheaper and often more precise than workers do. Pessimists claim that robots will destroy our jobs, optimists instead assert that these machines make us more productive.

Robots might even create more jobs. Take for instance Amazon.com. The online retailer uses more and more robotic systems in his gigantic fulfillment centers (geekwire). In 2012 the e-commerce giant bought Kiva Systems, a producer of warehouse robotic systems. In spite of the ongoing automation the number of jobs (workforce) in Amazon`s warehouses all over the world have been climbing significantly.  It seems that robots are reducing costs which translates into falling prices creating growing markets & revenues for Amazon.com.

The Harvard Business Review also observes that "robots are starting to make offshoring less attractive" (hbr). They write "despite the doom and gloom, advances in robotics and associated technology are having a positive impact on local manufacturing and services and both sustaining and creating jobs" and "the more processes can be automated, the less it makes sense to outsource activities to countries where labor is less expensive" .

The economists John G. Fernald and Charles I. Jones from Stanford University, California and from the Federal Reserve Bank of San Francisco see an even better outcome (common  overcomingbias). Recently they published their study "The Future of US Economic Growth", in the prestigious American Economic Review (May 2014) where they discuss theories which explain the "steady rise in living standards throughout much of the world (economic growth)".

Since 1870 GDP (gross domestic product = income) per person has been growing in the US annually around 2% on average. This growth can be explained (production function) by factors like physical capital (machines including robots & computers), labor (hours worked), human capital (knowledge & skills) and discovery of new ideas (inventions like computer, internet etc.). They add that "artificial intelligence and machine learning could allow computers and robots to increasingly replace labor in the production function for goods", meaning that the society can produce more things without increasing hours worked or even with a shrinking labor force.

Fernald & Jones conclude that  "it becomes possible to replace more and more of the labor tasks with capital. In this case, the capital share will rise", and the growth rate of income per person and the long-run growth rate (now around 2%) will rise as well: "The possibility that artificial intelligence will allow machines to replace workers to some extent could lead to higher growth in the future".

If this is true we all will become richer thanks to rising incomes,  falling prices for produced goods and investing into the stock market. On the long run stock prices accompany company profits which are climbing because of the growing economy (advancing demand) and rising efficiency (climbing productivity).