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Robots Move? Tax Them!

Some policymakers see robots as a direct threat to jobs and hope taxes will slow them down

Both Microsoft’s Bill Gates New York Mayor Bill de Blasio have called for a tax on job-stealing robots, according to a Wall Street Journal tax policy reporter:

A robot tax could serve multiple purposes, slowing job-destroying automation while raising revenue to supplement shrinking taxes paid by human workers. It could take a few different forms. Lawmakers could limit or slow down deductions for businesses that replace humans with robots, or they could hit businesses with levies equivalent to the payroll taxes paid by employers and employees.

Richard Rubin, “The ‘Robot Tax’ Debate Heats Up” at Wall Street Journal

The current employment picture in the United States has been reasonably good (only 3.5% unemployment in 2019) so the proposed robot tax is just an idea at present. But a downturn could turn the idea into a cause.

Why wasn’t a tax levied on innovations like the tractor or the word processor in the past? Historically, new technology has not led to overall job loss because the economic growth that results from labor-saving devices usually creates new jobs.

Consider, for example, the small animal vet. At one time, vets generally attended to economically valuable livestock (working horses, beef and dairy cattle, etc.). Dogs and cats mostly lived and died without much veterinary attention.

When tractors replaced heavy horses, displaced newly urban people turned to small companion animals. Eventually, their rising living standards meant that they could afford veterinary care for their pets. But that in turn required the training of large numbers of veterinary medicine practitioners and researchers to address the specific needs of dogs and cats in a science-based way. For example, feed companies had to research and develop formulas suited to small urban animals. Most of these jobs, which require considerable skill and training, would not exist if farming had not been mechanized.

But, some worry, today might present a very different picture:

But what if the next wave of robots is different? What if robots aren’t like laptops or sewing machines or any other technology we’ve ever seen and they replace jobs without creating new ones?

“That’s the bazillion-dollar question,” says Shu-Yi Oei, a Boston College law professor. “Is this the same as the last manufacturing age? Or is it really something new?”

There’s a real risk that the next wave of automation and artificial intelligence will displace workers and not create enough jobs, says Daron Acemoglu, an economist at the Massachusetts Institute of Technology, who co-wrote a recent study that found technology already contributing to slower employment growth.

Richard Rubin, “The ‘Robot Tax’ Debate Heats Up” at Wall Street Journal

Business prof Jay Richards (right), author of The Human Advantage: The Future of American Work in an Age of Smart Machines, thinks that the “tax the robots” proposal is based on a fallacy. He told Mind Matters News,

Although governments have to tax something to generate revenue, a targeted “robot tax” would be stupid. No doubt it would be sold as a way to prevent jobs from being lost to robots. But this assumes the “lump of labor” fallacy which treats innovation as a net destroyer of jobs (despite the testimony of, well, all of history).

Just imagine if our government had taxed earlier technological innovations because they threatened jobs. Does anyone think a targeted “tractor tax” would have been a good idea in the early twentieth century? It might have “preserved” some farm jobs in the short term. The long term cost would have been to prevent new and better jobs from emerging. It would have also made American agriculture disastrously uncompetitive on the global stage.

In fact, such a tax, if severe enough, might have changed the course of the twentieth century, including the outcome of the Second World War. As Henry Hazlitt wrote, the art of economics consists in tracing the unintended consequences of any act or policy. Economic policies are shaped by economic reality, not by the good but misguided intentions of policy makers.

In any event, to cause widespread unemployment, robots would need to do two things at once: Take jobs that people now do and somehow prevent those people from developing new jobs that are harder to mechanize. It’s not clear how that would happen.

It was easy to replace the draft horse with a tractor. The horse did not want a job and the driver, who did want a job, could go away and get one in the city. But it would be much harder to replace the small animal veterinarian with a “vetbot.” Jobs that require long-term relationships of trust and sharing probably can’t be automated and they are the most rewarding ones.


Further reading: Technology kills jobs; creates new ones On this week’s podcast, Jay Richards looks at the way new jobs have historically grown from the turmoil around the deaths of obsolete ones

Robot-proofing your career, Peter Thiel’s way Jay Richards and Larry L. Linenschmidt continue their discussion of what has changed—and what won’t change—when AI disrupts the workplace

and

Jay Richards: Kurzweil’s Age of Spiritual Machines is fiction, Like Skynet. Kurzweil’s vision of computers taking over is “arresting,” Richards admits, but “your mind is running away from you if you think about technology in that way.”


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Robots Move? Tax Them!