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I’ve owned a CNC machine shop for 40 years. As we’ve added automation, so have our competitors. All gains from automation have been competed away - there are no

by akgoel 5y ago

I’ve owned a CNC machine shop for 40 years. As we’ve added automation, so have our competitors. All gains from automation have been competed away - there are no gains going to the owners of the capital, as we are all competing. Meanwhile, the real wages for the employees have been falling for those 40 years. Instead, I’d argue that returns are going to IP holders.

codekansas 5y ago
Well, and to the people buying your products, presumably
- harry8 5y ago
  Who may also have margin competed away. And to the overall economy - more stuff with less resources is growth. But that's all going to capital, look at the s&p500 vs wages over the same time period.
  - codekansas 5y ago
    OP owns a CNC shop which is almost tautologically capital
    - rjtavares 5y ago
      Saying a CNC shop is comparable to a an S&P500 company because they're both capital is like saying a retail clerk is comparable to an NFL player because they're both labour. While true, it's not really relevant to this discussion. I agree the parent comment should be more specific, but his point stands: gains are going to a few companies that automate everyone else's processes or benefit from the huge economies of scale that automation provides.
sokoloff 5y ago
Haven’t many of the gains gone to the customers who are buying CNC parts? That competition and reduction in labor cost per part means that some people can now afford CNC parts who couldn’t have afforded manually crafted parts previously.
- KineticLensman 5y ago
  > Haven’t many of the gains gone to the customers who are buying CNC parts? Potentially yes, as long as the competition doesn't destroy the manufacturing landscape, e.g. by emergence of lowest-common-denominator or monopoly suppliers.
jopsen 5y ago
Or to your customers who are getting cheaper products?
- jbay808 5y ago
  On the macro scale, this results in deflation, which the central bank attempts to cancel out by implementing interest rate cuts, which pulls money into stock market valuations and mortgages, so ultimately the beneficiary of CNC mills are real estate and stock owners.
  - jeffparsons 5y ago
    Gosh, that's bleak. I've recently been thinking a lot about policy changes that might help with housing affordability, and the same thing keeps happening: every time I think I've come up with something clever, I eventually realize that I've just accidentally made things even better for people that started off with a lot of capital. It feels like aside from explicit redistribution of wealth (raise minimum wage, tax high income earners more, raise high-end property taxes), you can't change _anything_ without making the rich richer and the poor poorer.
    - imtringued 5y ago
      You can introduce negative interest rates to pay off debt and reduce the money supply. Do the same to land via a land value tax. A lot of equity derives its value from real estate so the obvious escape into stocks won't work in practice.
      - jbay808 5y ago
        Negative interest rates increase the money supply though, and explode the valuations of real estate and other assets.
    - jbay808 5y ago
      My preferred policy would be to have central banks adjust rates to maintain inflation at 2% average, and more gradually have governments adjust UBI to maintain a central bank interest rate average at 5%. (You can certainly have the input to one feedback loop be the output of another). Then structural deflationary forces would manifest as UBI increases instead of interest rate decreases. I think the positive real interest rates would ensure the UBI isn't all captured by rent increases, although it's hard to be certain unless it's tested.
maxerickson 5y ago
How complex is your automation?
mandernt 5y ago
deleted 5y ago
[deleted]
jacquesm 5y ago
Productivity will be up considerably and variance will be down. But for the most part you now have machine operators hired rather than machinists and those are to different professions entirely, which rightly have different real wages. Someone who is capable of cleaning a machine and loading materials and tools as well as unloading product is valued different than someone who actually knows how to make any kind of object that is within reason to be fabricated with lathes, mills and other shoptools, which is what a master machinist is. Those people are rare, they always were rare and historically they were valued as much in the past as they are today. Using them to operate a CNC machine is a complete waste of their skills. Typically those people are making one-offs that CNC jockeys would not be able to due to the difficulty of setting things up and/or the need to get it right the first time because the part is irreplaceable.
neilwilson 5y ago
What you have discovered is known as the 'paradox of productivity'. Productivity improvements are essentially running up the down escalator. The returns go to cheaper items, because there is less labour time going into each item as productivity improves. If you redenominate in the 'labour hour' currency, then it all starts to make sense. As does the apparent increase in pay of a concert violin player. Ultimately a concert level violin player doing their thing still takes the same amount of time top produce as it always did, society still likes concerts, and they haven't yet become fond of AI violin players. They exchange those hours for products with less hours in them. So they appear to get a wage increase. Classically this is known as the Baumol effect. This goes beyond 'real wages', to 'real stuff'. People are definitely getting more stuff than they did 40 years ago. My iPhone is testament to that. As is the lack of power cuts. Underlying everything is essentially an exchange of labour hours. As to returns to IP holders, those are often the pension fund, who then pay the pensions to pensioners who then spend it on stuff. Since we have an ageing population there will definitely be an increase in the transfer to the elderly. It can't be any other way. Is that a fair transfer? Well that's the debate.
- tlocke 5y ago
  > As to returns to IP holders, those are often the pension fund, who then pay the pensions to pensioners who then spend it on stuff. Pensions aren't distributed evenly across the population, it tends to be that the richer you are, the bigger the pension. That means that IP has the effect of making the rich richer, increasing inequality.
- ChuckNorris89 5y ago
  >People are definitely getting more stuff than they did 40 years ago. My iPhone is testament to that. As is the lack of power cuts. Yeah, we can get much more and much cheaper stuff than before thanks to the 'Made in China' boom, but what we can't get now is affordable real-estate. Too bad we can't go live inside our iPhones. /s
  - MichaelRazum 5y ago
    Good comment. To be honest I got puzzled by this as well. My explanation is that it is just artificial based on low interest rates and high competition for real estate. So basically the cost of build stuff maybe remained kind of the same but people have more money and can get higher credits so the prices are dictated by this competition instead of real build costs + it is not always possible to build a lot of new houses in nyc for example.
errcorrectcode 5y ago
Yep. Nearly everyone but equity owners is either hurting or not going anywhere while delivering more for the same or less. Graph after graph Robert Reich has put out there shows the dismalness of the situation. Another infographic video about the distribution of wealth in reality vs. perceived reality vs. desired: https://youtu.be/QPKKQnijnsM https://youtu.be/QPKKQnijnsM Somehow there is also a systematic economic double-standard that works for some but not others: "free markets" of dog-eat-dog inputs (i.e., suppliers), but less free markets on outputs (i.e., monopolies, mega corporations, patents, proprietary-ness, closed-source). Unregulated greed fixes all problems by the "invisible hand", right?
simonh 5y ago
Most of the benefits of that sort of automation are actually going to customers. Aggregated across all such automation in an economy, that means we all benefit.
BeFlatXIII 5y ago
I wonder if there have been any serious studies to determine whether there is truth behind Marx’s claims of an automation arms race leading to a declining rate of profit.
- imtringued 5y ago
  Profit must go down to zero because of structural reasons. Profit isn't a reward, it is a reallocation of capital to a new sector. At some point growth stops and there are no new sectors meaning there is nothing to reallocate existing capital to.

by akgoel 5y ago

codekansas 5y ago

Well, and to the people buying your products, presumably

harry8 5y ago
Who may also have margin competed away. And to the overall economy - more stuff with less resources is growth. But that's all going to capital, look at the s&p500 vs wages over the same time period.
- codekansas 5y ago
  OP owns a CNC shop which is almost tautologically capital
  - rjtavares 5y ago
    Saying a CNC shop is comparable to a an S&P500 company because they're both capital is like saying a retail clerk is comparable to an NFL player because they're both labour. While true, it's not really relevant to this discussion. I agree the parent comment should be more specific, but his point stands: gains are going to a few companies that automate everyone else's processes or benefit from the huge economies of scale that automation provides.

sokoloff 5y ago

Haven’t many of the gains gone to the customers who are buying CNC parts? That competition and reduction in labor cost per part means that some people can now afford CNC parts who couldn’t have afforded manually crafted parts previously.

KineticLensman 5y ago
> Haven’t many of the gains gone to the customers who are buying CNC parts? Potentially yes, as long as the competition doesn't destroy the manufacturing landscape, e.g. by emergence of lowest-common-denominator or monopoly suppliers.

jopsen 5y ago

Or to your customers who are getting cheaper products?

jbay808 5y ago
On the macro scale, this results in deflation, which the central bank attempts to cancel out by implementing interest rate cuts, which pulls money into stock market valuations and mortgages, so ultimately the beneficiary of CNC mills are real estate and stock owners.
- jeffparsons 5y ago
  Gosh, that's bleak. I've recently been thinking a lot about policy changes that might help with housing affordability, and the same thing keeps happening: every time I think I've come up with something clever, I eventually realize that I've just accidentally made things even better for people that started off with a lot of capital. It feels like aside from explicit redistribution of wealth (raise minimum wage, tax high income earners more, raise high-end property taxes), you can't change _anything_ without making the rich richer and the poor poorer.
  - imtringued 5y ago
    You can introduce negative interest rates to pay off debt and reduce the money supply. Do the same to land via a land value tax. A lot of equity derives its value from real estate so the obvious escape into stocks won't work in practice.
    - jbay808 5y ago
      Negative interest rates increase the money supply though, and explode the valuations of real estate and other assets.
  - jbay808 5y ago
    My preferred policy would be to have central banks adjust rates to maintain inflation at 2% average, and more gradually have governments adjust UBI to maintain a central bank interest rate average at 5%. (You can certainly have the input to one feedback loop be the output of another). Then structural deflationary forces would manifest as UBI increases instead of interest rate decreases. I think the positive real interest rates would ensure the UBI isn't all captured by rent increases, although it's hard to be certain unless it's tested.

maxerickson 5y ago

How complex is your automation?

mandernt 5y ago

deleted 5y ago

[deleted]

jacquesm 5y ago

Productivity will be up considerably and variance will be down. But for the most part you now have machine operators hired rather than machinists and those are to different professions entirely, which rightly have different real wages. Someone who is capable of cleaning a machine and loading materials and tools as well as unloading product is valued different than someone who actually knows how to make any kind of object that is within reason to be fabricated with lathes, mills and other shoptools, which is what a master machinist is. Those people are rare, they always were rare and historically they were valued as much in the past as they are today. Using them to operate a CNC machine is a complete waste of their skills. Typically those people are making one-offs that CNC jockeys would not be able to due to the difficulty of setting things up and/or the need to get it right the first time because the part is irreplaceable.

neilwilson 5y ago

What you have discovered is known as the 'paradox of productivity'. Productivity improvements are essentially running up the down escalator. The returns go to cheaper items, because there is less labour time going into each item as productivity improves. If you redenominate in the 'labour hour' currency, then it all starts to make sense. As does the apparent increase in pay of a concert violin player. Ultimately a concert level violin player doing their thing still takes the same amount of time top produce as it always did, society still likes concerts, and they haven't yet become fond of AI violin players. They exchange those hours for products with less hours in them. So they appear to get a wage increase. Classically this is known as the Baumol effect. This goes beyond 'real wages', to 'real stuff'. People are definitely getting more stuff than they did 40 years ago. My iPhone is testament to that. As is the lack of power cuts. Underlying everything is essentially an exchange of labour hours. As to returns to IP holders, those are often the pension fund, who then pay the pensions to pensioners who then spend it on stuff. Since we have an ageing population there will definitely be an increase in the transfer to the elderly. It can't be any other way. Is that a fair transfer? Well that's the debate.

tlocke 5y ago
> As to returns to IP holders, those are often the pension fund, who then pay the pensions to pensioners who then spend it on stuff. Pensions aren't distributed evenly across the population, it tends to be that the richer you are, the bigger the pension. That means that IP has the effect of making the rich richer, increasing inequality.
ChuckNorris89 5y ago
>People are definitely getting more stuff than they did 40 years ago. My iPhone is testament to that. As is the lack of power cuts. Yeah, we can get much more and much cheaper stuff than before thanks to the 'Made in China' boom, but what we can't get now is affordable real-estate. Too bad we can't go live inside our iPhones. /s
- MichaelRazum 5y ago
  Good comment. To be honest I got puzzled by this as well. My explanation is that it is just artificial based on low interest rates and high competition for real estate. So basically the cost of build stuff maybe remained kind of the same but people have more money and can get higher credits so the prices are dictated by this competition instead of real build costs + it is not always possible to build a lot of new houses in nyc for example.

errcorrectcode 5y ago

Yep. Nearly everyone but equity owners is either hurting or not going anywhere while delivering more for the same or less. Graph after graph Robert Reich has put out there shows the dismalness of the situation. Another infographic video about the distribution of wealth in reality vs. perceived reality vs. desired: https://youtu.be/QPKKQnijnsM https://youtu.be/QPKKQnijnsM Somehow there is also a systematic economic double-standard that works for some but not others: "free markets" of dog-eat-dog inputs (i.e., suppliers), but less free markets on outputs (i.e., monopolies, mega corporations, patents, proprietary-ness, closed-source). Unregulated greed fixes all problems by the "invisible hand", right?

simonh 5y ago

Most of the benefits of that sort of automation are actually going to customers. Aggregated across all such automation in an economy, that means we all benefit.

BeFlatXIII 5y ago

I wonder if there have been any serious studies to determine whether there is truth behind Marx’s claims of an automation arms race leading to a declining rate of profit.

imtringued 5y ago
Profit must go down to zero because of structural reasons. Profit isn't a reward, it is a reallocation of capital to a new sector. At some point growth stops and there are no new sectors meaning there is nothing to reallocate existing capital to.