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You might think the answer is easy, “Tax the owners of capital!” Of course, capital is highly mobile today, it will only be moreso in the future as better ways to identify and locate off-shore (or off-planet) will surely be discovered. You might say, “Tax the robots when they come in?” Remember your basic tax theory, the inelastic factors are going to be nailed – which is to say, all of us impoverished former-laborers cum consumption zombies. In a world where the robots massively displace human labor, you can easily imagine that smart redistributive policies could capture a Pareto improvement, but again I’ve never seen an explanation that the redistribution wouldn’t only be difficult, but even possible at all in principle.

Now, for the record, I am a “robot optimist” – so I don’t think that smart machines are going to massively displace workers in my lifetime, on the other hand I read and think enough to understand that my optimism is not in any way scientific, so I like to prepare for the possibility.

In today’s research, I perhaps should alter my estimate of the likelihood of robot impoverishment:

Seth G. Benzell, Laurence J. Kotlikoff, Guillermo LaGarda, Jeffrey D. Sachs

NBER Working Paper No. 20941
Will smart machines replace humans like the internal combustion engine replaced horses? If so, can putting people out of work, or at least out of good work, also put the economy out of business? Our model says yes. Under the right conditions, more supply produces, over time, less demand as the smart machines undermine their customer base. Highly tailored skill- and generation-specific redistribution policies can keep smart machines from immiserating humanity. But blunt policies, such as mandating open-source technology, can make matters worse.

To quote C3PO, “We’re doomed.”  On the bright side, it’s nice to see economists that one might suggest have different world views collaborating on a paper – I rarely see such thing. So perhaps the end of productive human labor will have some other bright sides to it.

2 Responses to “Who Will be Taxed When the Robots Take Over?”

  1. Harry says:

    I know a person who owns a “lights out” injection molding business. His son runs the plant on a computer in his home. The technology is not gee-whiz like Amazon, but he has clearly replaced people with machines. This has freed up much time for everyone to do something else worthwhile.

    Of course, somebody still has to line up parts contracts with manufacturers, convincing them that the company can make the parts to a sufficient standard of quality and cheaper than they can do in-house; somebody has to move the full barrels of parts, package the parts, and ship them economically and just-in-time. Somebody has to decide how long the run should be to avoid being stuck with unsellable parts and having to re-melt the plastic, or burn it (!) or throw the parts into a dumpster. Somebody has to change molds, which have to be designed and built. And somebody has to fix the machine when it is not making good parts, maybe by oiling it, or replacing a failed CPU. Somebody has to pay the bills, and somebody has to arrange to ensure that the money coming in gets to the person running the enterprise.
    Oh, and somebody has to pay taxes to the governments, the uninvested preferred stockholders.

    These arguments about machines replacing us are over two centuries old, and so far have not prevented us from finding something useful to do with our time, which is often limited to 29.9 hours for young people entering the workforce.

  2. Scott says:

    In the future, inflation will be the only possible form of taxation.

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