Wednesday, May 23, 2018

Hugely Successful People Can Be Hugely Bad Economists

In Don Boudreaux's reply (below) to a concerned reader he makes the point that I find myself making over and over again to family, friends and business associates about the likes of Warren Buffett, Bill Gates, Mark Zuckerberg, Wilbur Ross and other famously successful people in their chosen fields: That is, having mastered the art of, say, locating and buying undervalued companies, technological innovation, social media or spanning the globe in search of distressed debt to buy, does not, in any way shape or form, make one a great, good, or even mediocre economist. Fact is -- based on notions these gents have passed along over the years about taxation, regulation, universal income, trade and per below the relationship between technology and employment -- they are at times profoundly bad economists.

Don Boudreaux, on the other hand, is a great economist. If you're not reading Cafehayek you're missing out.

From this morning:
Here’s an e-mail that I just sent to a Cafe Hayek reader, Rhonda Foley, who has long worried about the effects on human employment and wages of artificial intelligence:
Ms. Foley:
Thanks for sharing the late Stephen Hawking’s 2016 Guardian essay in which he argued that “the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining.”
Mr. Hawking was a great physicist. He was not, alas, a great economist. And so to answer your question: No; Mr. Hawking’s essay does not cause me to worry that artificial intelligence will lead to ever-increasing joblessness.
Consider this: However impressive artificial intelligence might be, and however close science gets to creating machines that are as intelligent as human beings, each and every human being is an instance of real, authentic intelligence. With the birth of each baby, the world’s stock of real intelligence rises. Should we worry that this daily rise in real intelligence will heave most human beings into the ranks of the impoverished unemployed? It hasn’t yet. Why, therefore, worry that the rise of artificial intelligence will create a problem that the dramatic rise in real intelligence has yet to create? Note that during Mr. Hawking’s own 76 years of life the amount of real intelligence on earth increased by 280 percent, and yet the number of jobs – for workers of all skill levels, including the lowest – impressively increased during those years, as did average real wages.
We humans have from our time in caves found ingenious non-human means of doing work once done by humans. Thus far, such innovation has elevated – enormously – both our material and non-material standards of living. I see absolutely no reason to worry that the labor-saving innovations of today, even though they be called “artificial intelligence,” will lead to any less-happy outcome.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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