Business, Politics & Society

The Economics of Technological Progress

Paul Krugman

Lesson time 7:29 min

Learn the impact of technological expansion on the job market, the economy as a whole, and on the individual citizen.

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Paul Krugman
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Around 2012 or so, it somehow rather became orthodoxy among a lot of important people. You had op-eds by Jamie Dimon or whatever, saying, structural modern technology, we have a workforce that's not suited for it, and there's no way we're going to get unemployment back down to the levels we used to have. And aside from the fact that I could give you very good economic analysis about why that was wrong, you could also say, gosh, there were a lot of people making exactly the same argument in the 1930s. Then, along came a big fiscal stimulus, otherwise known as World War II. And all of a sudden, not only did we need all of the workers that we had, but we needed Rosie the Riveter too, right? [MUSIC PLAYING] - At any given time there is a something that people think is what is the real economy and that the other stuff is fluff. And that view is usually pretty far behind the times. Takes a long time for people to catch up with reality. So if you go back, actually, before Adam Smith, there were the physiocrats in France. And what physiocrats believed was that agriculture was the real thing. These days, there are almost no farmers. And the reason is not because we don't grow lots of stuff, but because we're so productive at farming that we can feed the population with just a handful of people actually working the land. Somewhere I saw the claim that in America right now there are significantly more people playing World of Warcraft than there are farmers. Right? Farming is still important, obviously. We need to eat, but it takes very few people because we've become so productive. What came after farming was manufacturing. And manufacturing became more and more what the economy was about. So even in 1860 the majority of Americans were still on the farm, but by 1960 we were a manufacturing nation, where a third of the workforce was in manufacturing. And that was where wealth was generated, General Motors was the biggest company in the world, all of that. Mostly, we have less manufacturing for the same reason we have fewer farmers. We've gotten so good at it. We're still consuming lots of manufactured goods. And despite all of this globalization, most of them are made here. But it doesn't take very many people to make them because manufacturing has had a lot of technological progress. And so we've shifted our labor force into the parts of the economy where we haven't made that much progress, we haven't managed yet to replace nurses with robots, so we have lots and lots of nurses, but we have managed to replace assembly line workers with robots so we don't have very many assembly line workers. And, also, to a certain extent, as we get richer, what people want is services rather than stuff. We want health care, we want entertainment. Until recently, we had a lot of growth in retail. You need the people to sell us stuff. Now, that actually is in decline because of online shopping. But this is economic evolution. Like anyt...


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Students give MasterClass an average rating of 4.7 out of 5 stars.

Outstanding -- the instructor and the class and the online medium --- good photos, nice interface...

Dr. Krugman is on of the most accessible and incisive thinkers in economics and practical public policy. I just wish there was more.

The course was very well-organized, coherent with humor and insight, and fully explored the topic (for the beginner's level). This is my first Masterclass course and I am very impressed with the content and the thoroughness.

This was a very good overview in "conversational" language about many of the hot topics in economics. It's always tough to nail down exactly what a course or lecture should be...it cannot be everything for all people. Parts of the course are taught at about an undergraduate level, others at a little higher level perhaps.


Comments

Tapan P.

So quick thing- I don't think the hot dog theory is good. There are multiple different skill points being replicated via automation, and thus, may not disperse, but certainly, shift the job market to a market that demands more humanistic work. with he hot dogs, you've forgot to say whether or not the automation was caused by humans. If it was not, then, yes oyu'll have more in circulation...just not humans making them. I don't understand the contrast.

A fellow student

During this Lesson I thought of an Einstein Quote: It is not that I'm so smart, it's just that I stay with problems longer. These are the people to learn from.

Graeme R.

This is great information, and Professor Krugman's knowledge is deep and wide ranging. I do find his style of delivery painful, and bless the day that accelerated playback was invented.

Robert K.

Unbelievable how Krugman is unable to detach himself from politics. The academic ground was meant to be apolitical but is now infested with Maoists. If we are at it what about all those jobs lost to a totalitarian slave labor county named China? They exported a heavily subsidized production excess capacity to the world debilitating the working class on the west. All under the Clintons and Obamas and their advisors like Krugman here.

Pisko

what will happen is that we'll live in a more automated world, productivity rates will increase n only skilled non blue collar people will get a job in a few decades. Unenployement will raise until the education system is reinvented towards non manufacturing jobs. Mostly the older workers n the ones with less ability 2 learn new skills will suffer... so start learning quatum mechanics now!

Jack

Hi hot dog discussion goes against what he talks about in Say's Law. That is where, if you produce more, more will buy it, and he said that wasn't necessarily so. Now he is talking about automation produces more hot dogs. What are they going to do with all those hot dogs? Automation is not being built to produce more hot dogs, it is being built to lay off more people. And laid off people make very poor consumers. His discussion seems to be leaning toward political opinion backed by numbers he has chosen.

A fellow student

Technology can create machines that replace human jobs but finally, it takes humans to create the AI to keep those machines working.

A fellow student

Lack of manufacturing jobs in the USA is important to US citizens if all of the manufacturing is sent to Mexico and China. We mistakenly did this in the 1980s and 1990s. I was there and saw it for myself. (Once again his politics cause him to gloss over facts.)

Norm C.

With regard to some earlier posts about the Hot Dog Machine, I need more explanation. What happens if the hot dog makers automate to eliminate wage costs, not make more hot dogs? The unemployed won't be needed at the bun factory and if the bun factory automates to eliminate wage costs there will be even more unemployed. Then what? Will the cash strapped unemployed eat more hot dogs because they are cheap and increase demand? Wouldn't that be the ultimate irony and insult, eating the product of the machine that made you unemployed. I have seen such automation in logging, automation wasn't primarily done to increase output or cut costs, rather it was done to eliminate dealing with employees who can be troublesome. Just as farmers moved from horses to tractors. For those who are interested there was/is a political/economic school of thought named Social Credit which has a lot of ideas one of which was as the machine replaced people, the wealth produced by the machine should be shared by the people. Henry Ford for all his faults recognized that for all his innovations that reduced costs, unless people could afford his product he still couldn't sell it so he paid his workers more. This allowed his workers to buy his product and drove up wages overall and produced more customers. Benevolent self interest. We need more of that today.

Dewi A.

So, I hope someone of my fellow students of Paul Krugman or Mr. Krugman himself could answer it. I am wondering what could policy-makers do in terms of "Adapting with fast-paced technological evolution"? Because of course, what happen is some type of workforce can make a shift of industry, what happen with someone who couldn't make a shift? What type of training or education that policy-makers could do? Thanks