Check out the chart above. Take a close look and note the labels on those three lines. The first thing you'll note is that humanity has become overwhelmingly richer since 1820. If the chart went back further you can bet the contrast would be even more extreme.
The second thing you'll note is that the "moments" of the distributions have changed significantly, for the better if you care about a more equal world. In 1820, the right tail of the distribution shows an extreme disparity between a small rich minority and most of the rest of humanity; by the year 2000 there are both many more wealthy people and far fewer people living in poverty.
The World Got Wealthier While It Automated
This tremendous shift in income disparity (going away) around the world occurred during an unprecedented explosion of automation across all industries. Neither the Industrial Revolution nor the Information Age reversed the great shift out of poverty and into wealth around the world; in fact, it is much more likely that both processes contributed to it!
One of the first things you learn in statistics is that correlation does not equal causation. It is possible that the world became richer and inequality collapsed while it automated, but that the automation did not cause it. However, it is much more difficult to claim that automation causes the opposite when they are both so positively correlated.
Overweighting the Seen and Ignoring the Unseen
So why do we still have famous, and brilliant, people like Stephen Hawking saying that "Automation and AI is going to decimate middle class jobs?"
In an editorial in The Guardian, Hawking wrote:
The automation of factories has already decimated jobs in traditional manufacturing, and the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining.
Unfortunately, there is a persistent bias in overestimating what is easily seen, such as displaced workers from politically important industries, and underestimating what is unseen. The unseen, or perhaps misunderstood, aspect of automation is that increasing automation increases average wages, total output, consumer purchasing power, and returns to investment. That's the proximate relationship, but economics is also dynamic.
Increased wealth means greater compounding of wealth, a process which takes time but becomes obvious when looking across generations. Even a modest 2% growth rate in economic activity implies a doubling of wealth in just 35 years. In high growth parts of the world that have been catching up the West in the last few decades, a 7% growth rate means doubling wealth in just 10 years! The dynamics are under appreciated both because they are less obvious and because the processes take time.
A Future Dystopia is Possible, Just Unlikely
Anything is possible, and so it's possible that future automation and A.I. largely displaces the workforce and impoverishes humanity. The beneficial processes that have thus far enriched humanity could change and usher in a dystopian future.
The pessimism just isn't warranted given the evidence, and so forecasts should be biased positive. Most likely, automation and A.I. will simply continue to enrich humanity and eradicate poverty.
What are your thoughts?
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Rob Viglione is a PhD Candidate in Finance @UofSC with research interests in cryptofinance, asset pricing, and innovation. He is a former physicist, mercenary mathematician, and military officer with experience in satellite radar, space launch vehicles, and combat support intelligence. Currently a Principal at Key Force Consulting, LLC, a start-up consulting group in North Carolina, and Head of U.S. & Canada Ambassadors @BlockPay, Rob holds an MBA in Finance & Marketing and the PMP certification. He is a passionate libertarian who advocates peace, freedom, and respect for individual life.
Image source: https://ourworldindata.org/income-inequality/