“Learning by Doing,” the Process of Innovation & the Future of Employment

by on September 25, 2015 · 0 comments

I recently finished Learning by Doing: The Real Connection between Innovation, Wages, and Wealth, by James Bessen of the Boston University Law School. It’s a good book to check out if you are worried about whether workers will be able to weather this latest wave of technological innovation. One of the key insights of Bessen’s book is that, as with previous periods of turbulent technological change, today’s workers and businesses will obviously need find ways to adapt to rapidly-changing marketplace realities brought on by the Information Revolution, robotics, and automated systems.

That sort of adaptation takes time, but for technological revolutions to take hold and have meaningful impact on economic growth and worker conditions, it requires that large numbers of ordinary workers acquire new knowledge and skills, Bessen notes. But, “that is a slow and difficult process, and history suggests that it often requires social changes supported by accommodating institutions and culture.” (p 223) That is not a reason to resist disruptive forms of technological change, however. To the contrary, Bessen says, it is crucial to allow ongoing trial-and-error experimentation and innovation to continue precisely because it represents a learning process which helps people (and workers in particular) adapt to changing circumstances and acquire new skills to deal with them. That, in a nutshell, is “learning by doing.” As he elaborates elsewhere in the book:

Major new technologies become ‘revolutionary’ only after a long process of learning by doing and incremental improvement. Having the breakthrough idea is not enough. But learning through experience and experimentation is expensive and slow. Experimentation involves a search for productive techniques: testing and eliminating bad techniques in order to find good ones. This means that workers and equipment typically operate for extended periods at low levels of productivity using poor techniques and are able to eliminate those poor practices only when they find something better. (p. 50)

Luckily, however, history also suggests that, time and time again, that process has happened and the standard of living for workers and average citizens alike improved at the same time.

Of course, that won’t stop some from proclaiming that, This time it’s different! Indeed, we’re hearing increasing concerns today about the “rise of the robots,” and the general negative impact of automation on the workforce.

But these concerns are really nothing new. “There have been periodic warnings in the last two centuries that automation and new technology were going to wipe out large numbers of middle class jobs,” notes MIT economist David H. Autor. Luckily, those dire predictions have not come to pass. The reason was because short-sighted skeptics failed to appreciate how as new technologies obliterated old businesses and jobs, it simultaneously opened up many more opportunities that were impossible to predict in advance. For every factory worker that lost a job due to technological innovation, new jobs opened up in entirely new sectors that usually offered workers better wages, a safer work environment, and more leisure time. And society clearly benefited in many other ways.

In a new essay for The Journal of Economic Perspectives on “The History of Technological Anxiety and the Future of Economic Growth: Is This Time Different?” Joel Mokyr, Chris Vickers, and Nicolas L. Ziebarth, note that “Discussions of how technology may affect labor demand are often focused on existing jobs, which can offer insights about which occupations may suffer the greatest dislocation, but offer much less insight about the emergence of as-yet-nonexistent occupations of the future.” They continue on to note that:

In the end, the fears of the Luddites that machinery would impoverish workers were not realized, and the main reason is well understood. The mechanization of the early 19th century could only replace a limited number of human activities. At the same time, technological change increased the demand for other types of labor that were complementary to the capital goods embodied in the new technologies. This increased demand for labor included such obvious jobs as mechanics to fix the new machines, but it extended to jobs for supervisors to oversee the new factory system and accountants to manage enterprises operating on an unprecedented scale. More importantly, technological progress also took the form of product innovation, and thus created entirely new sectors for the economy, a development that was essentially missed in the discussions of economists of this time.

And despite a resurgence of automation anxiety in recent years, that historic trend still generally holds true. In late 2014, economists at Deloitte LLP published a sweeping survey of the impact of technology and jobs over the past 200 years and found that “Technology has transformed productivity and living standards, and, in the process, created new employment in new sectors.” This is because human needs and wants constantly change and, therefore, “The stock of work in the economy is not fixed; the last 200 years demonstrates that when a machine replaces a human, the result, paradoxically, is faster growth and, in time, rising employment.” And they conclude that: “Machines will take on more repetitive and laborious tasks, but seem no closer to eliminating the need for human labour than at any time in the last 150 years. It is not hard to think of pressing, unmet needs even in the rich world: the care of the elderly and the frail, lifetime education and retraining, health care, physical and mental well-being.”

While it is easy for critics to highlight disruptions in some notable sectors where machines replaced human labor, fewer news reports or panicky books discuss the many new sectors where people have found new opportunities. Again, the historical evidence suggests that there are good reasons to have faith that humans will once again muddle through and prevail in the face of turbulent, disruptive change. As venture capitalist Marc Andreessen has noted when addressing the fear that automation is running amuck and that robots will eat all our jobs,

We have no idea what the fields, industries, businesses, and jobs of the future will be. We just know we will create an enormous number of them. Because if robots and AI replace people for many of the things we do today, the new fields we create will be built on the huge number of people those robots and AI systems made available. To argue that huge numbers of people will be available but we will find nothing for them (us) to do is to dramatically short human creativity. And I am way long human creativity.

Some tech critics may reject Andreessen’s bullish optimism about human resiliency, but real-world evidence already supports that his conclusion that we’ll learn to adapt to a world full of robots and robotic systems. A 2015 economic analysis from Colin Lewis, a behavioral economist who runs Robotenomics, showed that “despite the headlines, companies that have installed industrial robots are actually increasingly employing more people whilst at the same time adding more robots.” His research revealed that 1.25 million new jobs had been added by companies that make extensive use of industrial robots over the previous 6 years. He also found that this trend held among more recent disruptive firms like Amazon and Tesla Motors, but also older and more established companies like Chrysler, Daimler, Philips Electronics and others.

So, it’s worth keeping these facts in mind next time you read an article or book that declares that the sky is falling and that technological innovation is going to destroy labor markets and living standards. The entirety of human history points in the opposite direction. We should be bullish about our ability to muddle through tough times of technological change and flourish in the long run.

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