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A Technological Drive Toward Driverless Cars

Robots built by robots are changing the entire relationship between capital and labor.

A retrofitted Lexus R450 hybrid is being tested by Google as part of the company’s driverless-car research initiative. (Photo: Handout via Google)

Felix Salmon has been converted to the cult of the self-driving car. “While I’ve generally been a fan of just about any alternative to the automobile, now I’m not so sure,” Mr. Salmon, a financial writer for Reuters, wrote in a blog post on Jan. 24. “I think that smart car technology is improving impressively, to the point at which it could be the most promising solution, especially in developed parts of the world like California.” Indeed, this is starting to look like a real thing. And I’m impressed.

By and large, I’m in the camp of those disillusioned about technology — mainly, I think, because the future isn’t what it used to be. A case in point is Herman Kahn’s “The Year 2000,” a 1967 exercise in forecasting that offered a convenient list of “very likely” technological developments. When 2000 actually did roll around, the striking thing was how overoptimistic the list was: Mr. Kahn foresaw most things that actually did happen, but also many things that didn’t (and still haven’t). And economic growth fell far short of his expectations.

But driverless cars break the pattern: even Mr. Kahn’s list of “less likely” possibilities only mentioned automated highways, not city streets, which is what we will apparently see in the quite near future. And we’re also seeing a break with the pattern in which information technology lets you do great things in the virtual world, like share funny videos of cats, without having much impact on our physical lives; letting the robot drive while I, um, look at cat videos is a big change.

This could really change the whole way we live.

Rise of the Robots

In an article published in The New York Times in December, the reporters Catherine Rampell and Nick Wingfield wrote about the growing evidence for “reshoring” of manufacturing to the United States. They cite several reasons: rising wages in Asia, lower energy costs here, higher transportation costs. In a follow-up blog post, however, Ms. Rampell cited another factor: robots.

“The most valuable part of each computer, a motherboard loaded with microprocessors and memory, is already largely made with robots, according to my colleague Quentin Hardy,” she wrote on Dec. 7. “People do things like fitting in batteries and snapping on screens. As more robots are built, largely by other robots, ‘assembly can be done here as well as anywhere else,’ said Rob Enderle, an analyst based in San Jose, Calif., who has been following the computer electronics industry for a quarter-century. ‘That will replace most of the workers, though you will need a few people to manage the robots.'”

Robots mean that labor costs don’t matter much, so you might as well locate in advanced countries with large markets and good infrastructure (which may soon not include the United States, but that’s another issue). On the other hand, it’s not good news for workers!

This is an old concern in economics; it’s “capital-biased technological change,” which tends to shift the distribution of income away from workers to the owners of capital.

Twenty years ago, when I was writing about globalization and inequality, capital bias didn’t look like a big issue; the major changes in income distribution had been among workers (when you include hedge fund managers and C.E.O.’s among the workers), rather than between labor and capital. So the academic literature focused almost exclusively on “skill bias,” supposedly explaining the rising college premium.

But the college premium hasn’t risen for a while. What has happened, on the other hand, is a notable shift in income away from labor.

If this is the wave of the future, it makes nonsense of just about all the conventional wisdom on reducing inequality. Better education won’t do much to reduce inequality if the big rewards simply go to those with the most assets. Creating an “opportunity society” won’t do much if the most important asset you can have in life is, well, lots of assets inherited from your parents, and so on.

I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed.

© 2013 The New York Times Company

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Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed page and continues as a professor of economics and international affairs at Princeton University. He was awarded the Nobel in economic science in 2008. Mr Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes, including “The Return of Depression Economics” (2008) and “The Conscience of a Liberal” (2007).

Copyright 2013 The New York Times.

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