Even the Nicest Robots don’t Pay Taxes or Buy Things

Paul Krugman raises problems for the status quo even when he’s being optimistic about the future.

Last month in the New York Times, he penned a column that asked: Is Growth Over? He concluded that mainstream economic forecasts are too pessimistic because they can’t incorporate the exploding importance of smart robots in manufacturing and increasing in service industries, as well.

Private and, eventually, public employers will be able to grow profitably and expand their services without being as tied to the growth of the work force as they seem now. Society will look greyer. The workplace, on the other hand, will increasingly reflect the unpredictable tastes of robot manufactures.

“So machines may soon be ready to perform many tasks that currently require large amounts of human labor. This will mean rapid productivity growth and, therefore, high overall economic growth.

“But — and this is the crucial question — who will benefit from that growth? Unfortunately, it’s all too easy to make the case that most Americans will be left behind, because smart machines will end up devaluing the contribution of workers, including highly skilled workers whose skills suddenly become redundant.”

Krugman doesn’t close his column with a solution. However, it would belittle Krugman—and his profession—to assume that he merely set the stage for another populist campaign to raise tariffs and impose higher taxes on capital expenditures.

(Economists will follow fads when they’re operating largely in the dark. However, like hard scientists, mountains of evidence and decades of experience limit the range of options professional economists debate. And they know today that we won’t recreate Middle Class affluence by putting higher taxes on tools or raising the prices of consumer goods other people make.)

Let’s be clear, however. There are two indispensable worker activities that robots can’t perform. They can’t spend in the market place any of their contribution to the enterprise’s income or pay taxes to governments. Their lack of purchasing power and taxable incomes will cause grief in the public and private sectors.  

Their shortcomings needn’t be attacked with more government interference in the economy or in private management decision-making, or by smashing the machines. Nevertheless, allowing the economy to grow as fast as it can technically may require even more progressive taxes on the few fortunate and enterprising millions who pocket the gains from these extraordinary new technologies.