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Tag Archives: unemployment

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  • Once there was a computer therapist named ELIZA. While her developer thought she was just a machine, the people who talked to her liked her patience and enjoyed her empathy.
  • In the operating room, da Vinci is a robotic surgeon whose sense of touch engineers have begun to develop.
  • Factories have robots that move, slice, sharpen and precisely place objects.
  • And what about Roomba, the vacuuming robot?
A human surgeon uses da Vinci.

A human surgeon uses da Vinci.

Researchers predict that by 2025 computers will have caught up with the processing power of the human brain. Calculated in flops–floating-point operations per second–the processing power of the human brain is 10 petaflops. (A peta is the next level after giga and tera.) If we agree with Moore’s Law, then every 18 months, computer capacity doubles. So, going back to the first computers in 1940, with processing capacity doubling every 1 1/2 years, it will take until 2025 for computers to have the 10 petaflop capacity of the human brain.

But…what then?? What if computers can equal the human brain’s capacity (and that is a BIG if)?

With computers able to do human jobs more productively, economist Paul Krugman says we wind up with a “capital bias” that is controlled by an affluent elite. Leaving many of us behind, the income gap will increase and inequality will accelerate.

Disagreeing, a second group says “capital bias” creates jobs. Technological leadership brings production back to the US from the developing countries. Yes, it requires structural economic change but people have always worried about the deleterious impact of machines. In 18th century England, the Luddites worried that mechanized looms would create joblessness by replacing people. Instead, we got railroads and steel factories and more production, more jobs, more wealth and a rising living standard. In 1900 a typical worker put in 2300 hours a year. Now that number is down to 1800.

Deciding whether robotics will be good or bad for jobs takes us to Joseph Schumpeter and creative destruction. The transition to robotics has begun. Replacing old technology, it is another example of the disruptive impact of innovation.

Sources and resources: Radiolab tells us more about ELIZA, here, and Slate discusses Da Vince here and Haptics (the touch part) here. However, the best article I read about the economics of artificial intelligence was in Mother Jones. Meanwhile the Krugman postion is here and the oppostion is here. Finally, for the overview, here is the Schumpeter, creative destruction explanation, a TED talk on “Robots Will Steal Your Job, But That’s Okay,” a 60 Minutes segment, and a NY Times discussion.

 

 

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Job Gains in Texas and Losses in Caifornia and Florida

Does your barista have a Ph.D?

When people have too much education for their job, the reason might be “cascading.” Explained by 3 researchers in a recent paper, the cascading story starts with the tech boom. During the 1990s, as tech firms popped up everywhere, so too did the demand for highly educated human capital.

Fast forward to 2000 when the tech bubble bursts and these highly educated individuals have to job hunt. Add the flow of new college grads and you have too many people chasing too few jobs that require their cognitive skills. The result? Highly educated individuals are doing jobs that require less knowledge. On the occupation ladder, they are cascading downward.

Although most of the cascading research is bleak, the good news is that more people want to become teachers. After having lost many of its gifted and talented to other occupations like the law and medicine, the teaching profession is again more attractive. With a 17% acceptance rate, Teach for America has become as selective as competitive colleges.

Our bottom line? Cascading might represent a reason that the unemployment rate has dropped so slowly in the US. Having hit a high of 10% during October, 2009, the unemployment rate was still 7.5% during April. The authors of  the cascading study believe that less demand for highly skilled tech workers is one reason. They agree that manufacturing is declining and we have had structural and cyclical unemployment. Also though, they suggest that cascading is creating unemployment and underemployment when it “crowds out” lesser educated workers.

Sources and Resources: For more discussion on cascading, this Freakonomics podcast was interesting while the paper on which it is based, “The Great Reversal in the Demand for Skill and Cognitive Tasks” provides all of the details and the math.

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Job Gains in Texas and Losses in Caifornia and Florida

Sort of, we can “celebrate” a birthday. 5 years ago, the Great Recession began.

And that takes us to Texas where they can celebrate. Among the large metropolitan areas in the US, Austin (#1), Houston (#2), San Antonio (#4) and Dallas (#7) are in the top 10 for employment numbers that have surpassed their 2007 totals.

Why Texas? The Economist suggests it is because of mortgage regulations that precluded a severe housing crisis, population increases, and of course, energy.

Based on BLS (Bureau of Labor Statistics) data, this Economist chart illustrates the employment divide between Texas and California.

Employment in Texas Exceeds 2007 Totals

Sources and Resources: My facts are from The Economist and business cycle data from the NBER (National Bureau of Economic Research).

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GDP...16843_5.2_9209625-gdp

If anyone ever asks you why economic growth is important, I suggest showing them the following graph from the Washington Post.

The goal of the graph is to show how our economy’s actual output, its potential output and unemployment are connected. During a recession, there is a big difference between what the economy produces and what it can produce. Called an output gap, land, labor and capital are not creating as much as they might. Predictably, when the output gap narrows, unemployment decreases. But, by how much? And that takes us to the graph. During the third quarter of 2012, the US real GDP growth rate (advance estimate) was 2%. You can see that we need a lot more than 2% GDP growth to solve our unemployment problems.  (Please note that the graph was published during 2010.)

Perfectly, the Washington Post presents a series of graphics explaining the output gap and its connection to unemployment here.

For Unemployment to Decrease Economic growth Needs to Increase A Lot.

 

 

 

 

 

 

 

 

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In China, a Big Mac costs close to the equivalent of $2.44. That same burger in the US is $4.20. The basic idea is PPP, purchasing power parity. The dollar can buy more when the yuan is undervalued. And President Obama and Governor Romney have both indicated that an undervalued yuan displeases them.

Actually, they probably would not mind if price fluctuated naturally in foreign currency markets. Instead though, they say currency manipulation might be occurring because a government is intentionally, over a long time period, affecting the demand for and/or supply of its money. And by impacting demand and/or supply, they are shaping its price.

China, though, is not the only one. We could add to the list, Denmark, Hong Kong, Israel, Japan, Singapore, Taiwan, Korea, Switzerland, Argentina, Bolivia, Malaysia, Philippines, Thailand, Angola, Algeria, Libya, Saudi Arabia, Azerbaijan, Russia. Some overvalue and others undervalue. But all, according to the Peterson Institute, are engaging in “currency manipulation.”

Finally though, I wonder whether currency “manipulation” is necessarily bad. One position says, “Yes.” An undervalued foreign currency lowers US demand for US made goods and destroys US jobs. The other side says that consumers and businesses that purchase Chinese goods benefit from their artificially low prices. Because consumers have extra money to spend elsewhere, jobs are created. In addition, businesses that buy Chinese metals and motors, for example, have lower costs.

Sources and Resources: To check out the PPP of other currencies, you might enjoy the Big Mac Index and also an econlife PPP explanation. For all the detail you could ever want about currency manipulation from many viewpoints, this Peterson Institute paper, this Treasury Department report and this Mark Perry blog are ideal complements.

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