Why deflation? Deflation is poison for any economy. If deflation is a risk, you must print more money. Central banks aim to keep inflation at 2% per year. (Which is a difficult task). Deflation is the death of market systems.
Robots already do most of the work. In every industry you see people operation machines to do all the work. The way our outdated financial system works is, that the machine owner gets the warnings. AI and fully autonomous robots will work the same way. So I doubt it will change something, when the system stays as it is.
Not sure if it really will stay this way. Autocracies are emerging more and more. China will be the next big financial superpower. It may be that they will force a overhaul for the better. (Unfounded careful optimism. One of the few positives of autocracy are easy change processes. Maybe it will work this time)
If you posit a world is coming where AI & robots can do more and more of the work humans do, and ever cheaper - it seems likely to be a world with deflation. Especially if incomes are falling. As AI & robots do more work - humans will need to compete with them for the remaining jobs, while overall incomes are falling. Perhaps it won’t be like this, but I don’t find the complacent ‘everything will be fine’ interpretations of how this will play out convincing.
I don’t see much difference between a machine replacing a bank teller to give out the cash, a machine to put together the majority of a car, or a robot replacing a health care worker completely.
In all cases some jobs were removed, but other jobs were created. Production and wealth go up quickly, but so does demand.
Almost everyone today has a larger television than the richest man 50 years ago. And you can afford new electronic devices every couple of years, while 50 years ago you only bought them when they broke after 20 years.
So I believe prices will still go up, as we will want to have more and more stuff.
If I only bought what my parents could afford at my age, then I would probably be quite rich. (Big exception is housing!) But that’s now how society works. We buy more and more, mostly for convenience. And convenience will go up with robots and AI. (Is it that unlikely that everyone will have a star-gourmet-quality chef robot cooking in their house and ordering all required ingredients on its own? I think that prospect sounds very reasonably realistic). But you will have to pay for the robot, the AI service, the truffles, the caviar, the ostrich egs…. and it will be just the normality people live in. (just like amazon replaced sending your butler to Harrods)
Therefore I believe there will still be an increased demand for goods even when our productivity goes up and people will need more money, hence inflation, not deflation.
In all cases some jobs were removed, but other jobs were created.
Yes, this has always happened before. But what happens when AI & robots can do most or nearly all work? What business will survive paying human wages (+health, +social security) when its competitors can get the job done for pennies on the dollar with robots & AI.
In the past there was a big overhead in managing all of that. But I could think that this is coming to an end.
Solutions could be: Make weekend longer / Work less hours a day / implement minimum income (regardless if you work or not).
A more realistic scenario would be: Scale up productivity. All work is done by AI and robots? Just create even more wealth with more people working on and with robots and AI.
AI is bad at creating things that have not been there. It is good at structuring data in a new way. So there is still a demand to create new things.
Why deflation? Deflation is poison for any economy. If deflation is a risk, you must print more money. Central banks aim to keep inflation at 2% per year. (Which is a difficult task). Deflation is the death of market systems.
Robots already do most of the work. In every industry you see people operation machines to do all the work. The way our outdated financial system works is, that the machine owner gets the warnings. AI and fully autonomous robots will work the same way. So I doubt it will change something, when the system stays as it is.
Not sure if it really will stay this way. Autocracies are emerging more and more. China will be the next big financial superpower. It may be that they will force a overhaul for the better. (Unfounded careful optimism. One of the few positives of autocracy are easy change processes. Maybe it will work this time)
That was precisely my point.
If you posit a world is coming where AI & robots can do more and more of the work humans do, and ever cheaper - it seems likely to be a world with deflation. Especially if incomes are falling. As AI & robots do more work - humans will need to compete with them for the remaining jobs, while overall incomes are falling. Perhaps it won’t be like this, but I don’t find the complacent ‘everything will be fine’ interpretations of how this will play out convincing.
I don’t see much difference between a machine replacing a bank teller to give out the cash, a machine to put together the majority of a car, or a robot replacing a health care worker completely.
In all cases some jobs were removed, but other jobs were created. Production and wealth go up quickly, but so does demand.
Almost everyone today has a larger television than the richest man 50 years ago. And you can afford new electronic devices every couple of years, while 50 years ago you only bought them when they broke after 20 years.
So I believe prices will still go up, as we will want to have more and more stuff.
If I only bought what my parents could afford at my age, then I would probably be quite rich. (Big exception is housing!) But that’s now how society works. We buy more and more, mostly for convenience. And convenience will go up with robots and AI. (Is it that unlikely that everyone will have a star-gourmet-quality chef robot cooking in their house and ordering all required ingredients on its own? I think that prospect sounds very reasonably realistic). But you will have to pay for the robot, the AI service, the truffles, the caviar, the ostrich egs…. and it will be just the normality people live in. (just like amazon replaced sending your butler to Harrods)
Therefore I believe there will still be an increased demand for goods even when our productivity goes up and people will need more money, hence inflation, not deflation.
Yes, this has always happened before. But what happens when AI & robots can do most or nearly all work? What business will survive paying human wages (+health, +social security) when its competitors can get the job done for pennies on the dollar with robots & AI.
That is the scenario I’m getting at.
In the past there was a big overhead in managing all of that. But I could think that this is coming to an end.
Solutions could be: Make weekend longer / Work less hours a day / implement minimum income (regardless if you work or not).
A more realistic scenario would be: Scale up productivity. All work is done by AI and robots? Just create even more wealth with more people working on and with robots and AI.
AI is bad at creating things that have not been there. It is good at structuring data in a new way. So there is still a demand to create new things.