Lawrence Summers, arguing recently against Bill Gates’ proposed tax on robots, makes a point familiar to economists [emphasis added]:
[W]hy tax in ways that reduce the size of the pie rather than ways that assure that the larger pie is well-distributed? Imagine that 50 people can produce robots who will do the work of 100. A sufficiently high tax on robots would prevent them from being produced. Surely it would be better for society to instead enjoy the extra output and establish suitable taxes and transfers to protect displaced workers. It is hard to see why shrinking the pie, rather than enlarging it as much as possible and then redistributing, is the right way forward.
This last point has long been standard in international trade theory. …
None of this is to minimize the problem of job destruction and rising inequality … Rather, it is to suggest that staving off progress is a poor strategy for helping less fortunate workers. … There are many better approaches. Governments will, however, have to concern themselves with problems of structural joblessness. They likely will need to take a more explicit role in ensuring full employment than has been the practice in the United States. Among other things, this will mean major reforms of education and retraining systems, consideration of targeted wage subsidies for groups with particularly severe employment problems, major investments in infrastructure and, possibly, direct public employment programs.
Grow the pie, use part of that growth to compensate the “losers”– this idea, Summers might have added, is central to arguments for more wage-lowering immigration as well as for more trade and more technology. But what if we are terrible at compensating the losers — especially at compensating them without robbing them of dignity and self-respect? What, in our long record of “education and retraining” or “trade adjustment assistance” suggests these policies will ever do enough for the “losers” to make them whole? Just putting them on the dole — sorry, “transfer payments” — is inherently degrading, even when done under cover of “disability.” Retraining? Not everyone is easily retrained.** Even if many are, the resulting distribution of income will have a nasty meritocratic bite (smart people up, stupid people down) that those lower on the ladder may not appreciate.***
If there are principles of “Trumpism,” surely recognition of this reality is one good candidate. Maybe it’s not worth growing the pie “as much as possible” — through trade deals, immigration, automation — if that leaves losers who can only be compensated in theory, but not in practice. That doesn’t mean never embracing trade, technology, or international movement of people. It does mean we should make those decisions differently, and less easily, especially when the “losers” are going to be Americans who are already at the bottom.
** — That’s likely to be especially true of people performing physical labor who are now asked to perform mental labor.
*** — Summers goes beyond the orthodox loser-compensation kit when he proposes “direct public employment” — a good idea, and a Trumpish idea. But ultimately even that doesn’t solve the dignity problem. Once we’ve built all the roads and bridges and dams we need, the trade/tech/immigration “losers” doing makework jobs will know they are losers doing makework jobs. Think the Reconstruction & Reclamation Corps (“Reeks & Wrecks”) in Kurt Vonnegut’s Player Piano.