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Technology does reduce demand
on 12 April 2013
Erik Brynjolfsson and Andrew McAfee are right to choose the `end of work' explanation of the current economic crisis. It is clear a priori that increased productivity will reduce employment for the same GDP output. This has the further effect of reducing effective demand in the economy. In a thought experiment of a totally automated economy, where a machine could simply be plugged into the earth and generate the total output GDP, there would be no wages and no demand. Distribution of GDP would have to be by government voucher. So ultimately the only solution is a universal credit or a citizen's income. Money becomes clearly virtual in this model - the vouchers are simply printed and destroyed. They do not have to be added as government debt. The only rule is that they must be linked to the output GDP they are distributing. These are important paradigms for policy in the current crisis.
Brynjolfsson and McAfee don't look at these implications or remedies. Instead they advocate that more people become high technology employees and entrepreneurs. But this doesn't address the problem if automation will then render further employment redundant. Unless the result of their prescriptions is taken as infinite levels of GDP?
Author `A Managerial Philosophy of Technology : Technology and Humanity in Symbiosis' Palgrave Macmillan 2012