Robin Hanson asks

The second point seems easier to settle, as it is just an application of standard econ theory.  Any other economists care to weigh in?

referring to this point

I say prices usually fall when a very elastic supply curve rapidly gets cheaper. Russ would probably agree for something like computer memory, but is reluctant to agree for wages – he doesn’t think cheap plentiful immigrants lower wages. I say that if trillions of immigrants willing to work for a dollar an hour were waiting just offshore, letting in as many as wanted in would lower wages to that level. So I say cheap [human intelligent] robots getting cheaper fast should rapidly lower wages for tasks they do. Russ objects “You can’t just say your wage will be driven down, because if there are complementary types of labor they’ll increase the wage rate of some people. … There’s all these complicated secondary effects.” I say all things considered, the likely effect is falling wages.

There are a few of ways of looking at this. Robin uses supply and demand. Another way to looking at it is noting that immigration doesn’t change the total number of people in the world, it just changes the distribution.

In a world were all institutional systems were equally productive immigrants moving to America would simply mean that new factories are built in America instead of factories being built overseas. Unless their are strong market constraints then either the job will move to the immigrant or the immigrant will move to the job but ultimately the same capital will be combined with the same labor.

Because some institutional systems are more productive, total world productivity can go up by moving both the immigrants and the capital to the better institutional environment. That’s the essence of why the world gets richer when people move to America.

However, in principle the same level of growth could result by porting the institutions to other countries. This is more or less the story of China and India.

When Russ notes that immigration makes everybody wealthier he implicitly noting the effect of improving the average institutional arrangement under which people live. Without that difference, immigration wouldn’t matter at all.

 

The second way to look at it is to note that in general equilibrium all profits accrue to the irreproducible factors of production. If human intelligent robots mean that labor is reproducible then natural resources become the only irreproducible factor.

Without government intervention, the real price of land in the robot future will skyrocket as the earth becomes populated by trillions upon trillions of human intelligent robot workers and the return to labor will fall to the marginal cost of producing a new robot.

 

Robin suggests that the real return on capital would skyrocket. I am not sure this is the case. The reason is that the robots support savings in the same way that humans do. So the demand for capital is racing outward as labor expands but so is the supply.

What is clear is that  the real price of natural resources will skyrocket. In theory this could happen because prices of most goods are falling at a tremendous rate while the price of land and materials holds. I don’t think this could happen for monetary reasons. Piecing together optimal monetary policy in the singularity is a side project of mine and though it sounds silly possibly very important. [1]

So your house, for example, might still be worth 250K dollars but within a few years the cost of deconstructing your existing house and building a new house from the parts might be 500 dollars and could be done by several thousand robots in an afternoon. As you can see in a world of such cheap service the actual cost of materials becomes a huge consideration. Building an entirely new house and on new land is radically different proposition than reconstructing an existing house.

This is why everyone who owns something besides their own labor power would likely become very rich, very fast in the robot future.

To see how capital responds note that the total market cap of the US stock exchange would be exploding but this could occur as new companies are IPOed every few seconds. Thus the return to owning any particular company wouldn’t rise very fast even as the total capitalization of the economy was growing enormously fast.

 

One thing that is fascinating is that in some ways the robot future would seem more natural. It is a constant source of confusion to people that human time is vastly more valuable than natural resources.

People resist vehemently the fact that it is wasteful to build a careful quality-constructed thing once rather than to pop out thousands of cheap copies and then throw them away once they break. Our intuition places a really high value of materials and a comparably low value on human time. This is why recycling seems obviously efficient to most people but is profitable for no one but the homeless and then only after government subsidies.

The robot future would bring the world more into line with intuition. The price of human time would fall, the real price of materials would skyrocket and recycling in one form or another would be hugely profitable and indeed probably the basis for much if not most of the economy.

I imagine the robot economy as full of retoolers. Robots that are expert at finding new ways to use old stuff.

 

1: Whether the singularity is a time of skyrocketing nominal interest rates, rapidly falling prices, a decline or rise in nominal wages, etc will be vastly important in how it plays out for most people. If it happens as a relatively sudden collapse in nominal wages that could be disastrous for the social and political order as people see robots coming to replace them.

If on the other hand it happens as a time of rising nominal wages but ever accelerating real asset prices then it will look and feel to most people like a promised land where investing in certain things will lead to permanently increasing wealth.

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