Rodonomics. Scenarios for the development of an economy based on the exploitation of robots
Автор: ШИПИЦЫН ПАВЕЛ ЭДУАРДОВИЧ | SHIPITSYN PAVEL

Introduction

Over the past 200 years, humanity has made a significant leap in science and technology. The automobile, subway and aviation accelerated movement, the conveyor accelerated production, and the computer accelerated computing. It is possible to notice a steady trend towards automation of production processes and the replacement of labor with capital. Thus, due to the use of manipulators, factories managed to reduce jobs.

But the top of automation will be the complete robotization of production processes. Production will become exceptionally capital intensive. Since the Industrial Revolution, there has been a trend towards increasing capital intensity. This is evidenced by the data: from 1890 to 2022, it increased 29 times.1

Based on what humanity is striving for, it can be concluded that the total robotization of production is a matter of time. According to Youth in Policy Univercity2, this could happen in the next 120 years, and according to a report by Nelson3, about 42% of professions will be replaced to some extent by artificial intelligence by 2030.

Some researchers of this question4 have repeatedly argued that machines will not replace people, at least because there have already been technological revolutions, as a result of which, although there were indeed massive job cuts, new professions were born at the same time. For example, when electric lanterns appeared, completely displacing their counterparts working from fire, the lamplighters who lit and extinguished them disappeared. But at the same time, electricians appeared who were engaged in related activities already in new realities. Therefore, there were no catastrophic problems with unemployment at such moments.

However, in the case of total robotics, the scenario of the emergence of new professions that will save jobs is less likely. Firstly, because if robots can replace most of the professions that exist now, it will be quite possible to create a machine that can cope with the challenges of the future. Moreover, it will initially be assumed that with the advent of some new kind of activity, a robot specially tailored for this activity will be created.

But in this case, humanity will inevitably face the issue of unemployment – if robots do the work, then what will people do who will be replaced by robots? The world will have to change. The economy will be rebuilt. And the purpose of this work is to identify and build new most likely models of the economy. In order to achieve these goals, the following tasks will be solved during the work:

Qualitative forecast of changes in key indicators with an unchanged economic model
Creating alternative models based on improving economic performance
Forecast of key indicators under alternative economic models
Comparing the results and concluding conclusions about the likelihood of the model appearing in a particular country and its effectiveness.
The main economic indicators that will change in the era of robonomics are, of course, the marginal product of capital and GDP growth rates.

In the status quo economy, the GDP function depends on capital, labor, and scientific and technological progress, respectively, the change in GDP depends on the marginal products of the above parameters:

dY(A, K, L) = MPAdA + MPKdK + MPLdL,

where Y is a function of GDP, A is the level of scientific and technological progress, K is the stock of capital, L is the number of workers, MPA, MPK, MPL are the marginal products of the corresponding parameters.

The use of robots should not only replace the labor of workers, but also increase the marginal productivity of this labor. That is, the ultimate product of the "labor" of robots

MPR > MPL

A robot in production is listed as an element of the company's capital, which means that when using robots, the marginal product of capital increases.

The growth of the marginal product of capital, in turn, invariably leads to an increase in GDP growth rates.

This means that the replacement of workers' labor will necessarily lead to an increase in production, which undoubtedly leads to an increase in national welfare.

The next economic indicator that will change in the case of robonomics is employment.

Given that human labor is not used by firms at all, unemployment will increase significantly. Most of the population of the countries that have switched to robonomics will be out of work. Moreover, it is the natural unemployment caused by the structural shift of the economy that will increase. Unemployment in a stationary state will increase.

Consequently, such an indicator as the level of income inequality within the country should also increase. Those who were left without work had seriously decreased incomes, and the owners of production had seriously increased their incomes.

Household consumption will also decrease as a result of lower incomes .

And the negative consequences for the quality of life of citizens are primarily caused by a decrease in consumption and an increase in inequality. That is why the task of the new economic model is to reduce inequality and increase household consumption at least to the level in the status quo economies and at the same time not worsen the productivity of firms in relation to the status quo. 

Possible models of robonomics

Background

Moving on to robonomics models, it is necessary to clearly outline the framework in which they will work.

First of all, robots can fully perform any functions in all spheres except management, science, religion and higher authority. Companies are still run by people, discoveries are made by people and people also run the state directly.

Secondly, companies use exclusively robot labor in production.

Thirdly, the majority (>60%) of citizens are unemployed.

Now it is necessary to move directly to measures that can be taken by the State to reduce inequality.

Some researchers5 predict the emergence of a universal basic income (UBD) for citizens, which will allow them to live a full life, thereby reducing inequality.  

Based on the concept of a universal basic income, it makes sense to consider 3 models: a mixed economy with high taxes (>30%), a team economy with UBD and a team economy with UBD distributed evenly.

Let's consider the first model. Its peculiarity lies in the fact that the UBD is formed from the collected taxes:

UBD = aT, where T is the amount of taxes collected, 0 < a < 1.

T = tY, t is the tax rate.

N is the population of the country

u is the share of the unemployed, the income of the unemployed is proportional to the loss.

e is the percentage of employees, e << u.

Pr is profit, the income of the employed is proportional to the profit of production.

Pr = (1-t)Y

Income of the unemployed Iu = 

Income of the employed Ie = 

The coefficient of inequality between them:

=    =

It is precisely this number of times that the income of the average employed person will be greater than the income of the average unemployed person.

For example, if there are 80% of the unemployed, the tax rate is 30% and 70% of tax deductions go to UBD, the inequality coefficient will be 0.8*0.6/(0.2*0.3*0.7)=11,4. The same figure in the United States was 15 in 2009.6

Thus, the model not only does not increase inequality, but also reduces it.

The main disadvantage of such a model is the need to maintain high taxes, which may run counter to the interests of companies.

Such an economic system may appear in Western countries with very large IT companies that are not afraid of macroeconomic changes, such as the United States or in countries that have already adapted to high taxes, such as Sweden or Denmark.

The problem of high taxes is solved by the second model, in which all firms are state-owned. Then there will be no conflict of interest between the state and companies, and the indicators of inequality and production will have to remain at the same level as under the mixed model.

The disadvantage of the second model is the lack of freedom of firms and their dependence on the state. Since they all belong to the state, they will be too dependent on it, which will undoubtedly affect the flexibility of management actions.

Such a model may appear in countries where communist ideas have traditionally prevailed, for example, in North Korea.

In the third model, the UBD is distributed evenly among all citizens. This is exactly the model that was proposed by specialists from forklog5.  Such an alternative guarantees the absolute material equality that philosophers and economists have dreamed of for so long.

However, in such a scenario, it is likely that employed people will lose motivation to work: they receive the same amount as the unemployed, but with great effort. There is an opinion that in such a situation, money should stop being a motivator at all, and instead the pleasure of work itself will encourage you to work. Moreover, the model of uniform distribution of UBD becomes relevant precisely under this condition. Indeed, under classical economic assumptions, which state that an individual maximizes his consumption and minimizes his efforts, such a model is impossible. Her work requires a major shift in values.

Nevertheless, such a scenario is likely for countries with traditionally high standards of living and low levels of inequality, such as the Scandinavian countries, since in this scenario the culture of work for self-realization, rather than for money, is more developed.

In this part, scenarios for developed countries that can make a robotic transformation of the economy were considered. However, countries lagging behind in scientific and technological development will lag even further behind after the transformation of the leading economies. For example, Central Africa, where employment was largely determined by the presence of multinational corporations, will find itself in a deplorable situation if it is not provided with appropriate assistance, both financially and in strategic planning.

Despite the abundance of challenges that robonomics poses to humanity, it is possible to say exactly what great advantages it can provide: a tremendous increase in productivity and a huge boost to the growth of the world economy, as well as a reduction in inequality within countries that have switched to robonomics, which may seem surprising, because it was originally assumed that total automation would lead to the most dramatic leap in inequality.

The robotic transformation is actually happening right now. And humanity needs a guide to where it will come. The value of this work is precisely to make it clear to everyone who reads it – a politician, a manager or a financier, what the economy can expect in the future.