Foresight Alliance | Automation: The Seen and the Unseen

Frederic Bastiat, author of The Seen and Unseen, was one the first economists to explore the interaction between policy and and unintended consequences:

In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause — it is seen. The others unfold in succession — they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference — the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee.

In the public debate about the impacts of growing automation, the focus is on the looming threat of wide-scale job losses due to adoption of automated robotics and information systems. This is the seen. It is easy to extrapolate current automation trends into the future, and paint either a grim vision of widespread permanent unemployment for much of the population, or a more utopian “End of Work” scenario where the economic fruits of automation are somehow redistributed across the population in the form of a guaranteed basic income. Jobs — and job losses — are something easily seen. This frames automation as a zero-sum game with a fixed quantity of labor that can be performed, with human workers increasingly outcompeted by automated systems.

So what is the unseen for automation? The upsides of automation are nebulous and diffuse, but they are no less real because they are unseen: greater productivity and/or lower costs for goods and services. The unseen perspective focuses not on the jobs, but on the flows of money in these transactions. Today, shipping companies have to pay human truckers to manually drive freight trucks from state to state. As a result, monthly paychecks flow out to truckers who then purchase goods and services in the economy. In the future, many of these companies could replace these workers with automated systems. Yes, a job is destroyed, but the flow of money into the economy is preserved. The trucking company does not just hoard their labor savings in a buried shipping container, they do something with those savings. Perhaps they expand their operations (creating new demand for goods and services), perhaps they raise the salaries of remaining employees (creating new demand for goods and services), save the money (which the bank uses to make loans to satisfy demand for goods and services), maybe they pay out the new profits to shareholders (creating new demand for goods and services…among retirees in Florida).

While this is no consolation to the unemployed trucker, for the wider society the perspective of the unseen makes it possible to argue for a positive vision for automation, one in which the labor savings from automation are dynamically transmitted across the economy to generate new jobs that will gradually re-employ the human labor displaced by automation. Bastiat himself made this argument about mechanization 165 years ago, so the argument has a pretty good track record to date. (John Tamny brought this argument up to date in a rather hyperbolic Forbes.com op-ed earlier in the year.) ‘

Past economic history has shown that labor-saving automation improves productivity and helps spur job-growth in other economic sectors. Arguments that “this time is different” have been falsified again and again over the last two centuries. One may pity the buggy-whip makers, but entirely new industries were created on top of the remains of their dying occupation. However, on an emotional level, the argument rings hollow. It somehow doesn’t quite feel right. Instead of being empirical, it seems like a faith-based argument that somehow, somewhere the “Gods of Marketplace” will somehow provide for us and all will be right with the world. It seems to require a leap of faith that our crude sacrifices to the idols of economic efficiency will be returned as future economic manna in the form of entirely new jobs and occupations.

Why does the argument not ring true? Yet again, it is the workings of the unseen. The new jobs of the future are inherently unseen. Pundits don’t see them. Forecasters can’t extrapolate them. Politicians simply ignore them. What are they? Nobody really knows. The only people who might know are pitching their companies in front of venture capitalists and investors — and are keeping mum to the public about the potential billion dollar opportunity.

Another element of the unseen is the the vast potential demand for goods and services in the economy. Companies can focus group their products all they like, but consumers have a tendency of not knowing what they really like until they actually see it on the shelves. Their stated preferences may be strong, but their unconscious implicit preferences for products that satisfy their needs is even stronger. Even marginal improvement in productivity can trigger a cascade preference among consumers, as they rush to embrace products that they never realized they actually wanted, until they were offered to them.

A good contemporary example of this is Amazon Prime. A flat rate for two-day shipping is only a marginal improvement over free shipping for orders over 25 dollars. Yet, it managed to cross a demand threshold for consumers, who found that 2 day “free” shipping for any given item was a compelling offer. Amazon Prime members spend three times more per year than non-Prime Amazon shoppers. Amazon is now expanding the speed of its shipping to next-day and even same-day delivery in major urban markets. All of these expansions generate new demands for work, whether for USPS workers delivering for Amazon on Sundays, auto couriers delivering a same-day Amazon shipment, or packers at Amazon fulfillment centers. It is not just Amazon that benefits from uncovering new consumer demands — startups like Instacart, Drivr, and Postmates are all developing competing same-day delivery options.

Automation is undoubtedly going to disrupt the workforce in many industries — including cushy white collar professions — in the coming decades. If you look at what is seen, this is a looming crisis that will destroy the middle class in the developed world. However, if you begin to explore the potential in the unseen, there are the faint outlines of many new opportunities in the uncertainties of the future:

What benefits will be gained from new efficiencies and precision from automation and data analytics?
What new goods and services will be made possible by lowering costs through automation?
What enhancements to human insight will the power of automation and computation bring to science and industry?

Specific answers? Alas, answering those questions is going to to be the primary challenge posed by automation in the years to come. Companies, organizations, and individuals will all need to grapple with exploring and developing tangible answers to these questions over the next few decades. The impacts of automation on the future workforce will largely depend on the speed at which these new innovations can be developed and brought to market. While the negative consequences of automation will be easily seen, to get a more complete view of the impacts of automation, it will also be important to be on the lookout for early indicators and innovations that hint at where the unseen is beginning to come into view.

Automation and its impact on the future of work are discussed in depth in our forthcoming report, The Futures of Work. To receive a free copy of this report when it is released, email us at FuturesOFWork@foresightalliance.com.