From the Worthwhile Canadian Initiative:
Q1. What happens if they built robots that could do my job as well as I could, and those robots got cheaper and cheaper over time? My wages would have to fall so I could compete with the robots, and I would be worse off.
Q2. What happens if they built robots that could do everyone's job as well as they could, and those robots got cheaper and cheaper over time? Everyone's wages would have to fall so they could compete with the robots, and everyone would be worse off.
Q1 is a partial equilibrium question and answer.
Q2 is a general equilibrium question and answer...
It is very easy to understand that if I stand up I can see the stage better. It is less easy, but still easy to understand, that if I stand up I will make some other people see the stage worse. It is much harder to figure out whether the losses to some other people's vision are bigger or smaller than the gains to my vision. It depends. On a lot of things. And adding up those gains and losses when each individual stands up in turn is extremely hard. Instead we have to jump to the general equilibrium experiment, where everyone stands up at once. And even then we need to make some assumptions about the distributions of people's heights, and the locations of seats in the theatre, to figure out who can see better or worse when everyone stands up.
Trying to add up all the partial equilibrium effects in the case of robots is almost impossibly hard. Let's see. If a robot could replace me, and my wages fell, what would that do to the cost of a university education? And how would that affect prices and other people's wages? And how would the Bank of Canada react if it pushed down prices across the economy? And what about investment in robots, and the jobs created there? What would I do instead? And what would happen to profits of robot manufacturers? And the owners of robots?
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