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Returning to Robots

In this week’s Economist, we see new developments on a topic that we have covered numerous times in the past: robotics.  In Polyphemus Does the Hoovering, the Economist discusses the creative use of existing technology to better enable robots to “see” and thus act without direct human commands.  Most commercially-viable robots today are blind and dumb; the Roomba robotic vacuum cleaner being a good example.  (Some of the Roombas are actually quite advanced and can even “see” using infrared sensors, but for the most part they bump along as they clean, oblivious to the world.) 

In the same issue, the Economist explores new advances in the self propulsion of robots (”Look, No Wires.”)  The Economist writes, “But it remains hard to shrink engines, batteries, mechanical actuators, and control electronics to the point where they are small and light enough to fly without impairing their performance.”  The solution, writes the Economist has been to “use magnetic levitation to life the robot.”  

The result is versatile robots that can hover in place.  Less moving parts make for a leaner, more efficient robot that is less likely to suffer from mechanical failures.   

What used to be science fiction is fast  becoming reality.  We may  or may not ever have robots as sophisticated as The Terminator or Data from Star Trek the Next Generation.  But with robotics technology progressing as quickly as it is, there are major implications for the future of labor and for future rates of price inflation and deflation. 

HS Dent has argued for years that the demographic  changes facing the developed world are inherently deflationary.  Aging populations consume less and are a drag on aggregate demand; in a consumer-driven economy, this is deflationary.  Traditional economists and academics–among them Fed Chairman Ben Bernanke and Wharton profession Jeremy Siegel–have argued the exact opposite.  In their view, aging populations will create a shortage of workers, which will cause the cost of goods sold to rise, thus causing inflation. 

We’ve picked this argument apart in other articles, so we will resist the urge to make our arguments again here.  But in a nutshell. we believe that technological progress will take care of the “supply side” of the equation.  Any shortage of workers will be overcome with labor-saving technology–such as robots–and with new less-labor-intensive business models (we’ve used the Asian food chain Pei Wei as an example in the past.  Pei Wei is a “sit down” restaurant with many of the labor-saving aspects of fast food). 

A robot might be able to replace many jobs, particularly lows-skill jobs.  But a robot is not going to keep retail stores in business.