Thought for the Day: Learning and Imagination

Friday, 13 February 2015, 9:31 am
Opinion: Keith Rankin

Thought for the Day: Learning and Imagination

Keith Rankin, 13 February 2015

Economics as a subject in higher education is on the wane, at both university and institute of technology levels. It is less likely these days to be a compulsory part of a business degree, and is likely to be dropped from the New Zealand Diploma in Business.

Academic economists have done the discipline few favours by not adequately addressing the subject's shortcomings. The subject, for the most part, is built on the assumption that economies are constrained by resource scarcity, and that full employment is the near-permanent state of affairs. The only real adaption in the 20th century to reality came after the 1930s with Keynes' analysis of unemployment. Thus basic economics courses switch assumptions towards the end, with unemployment being analysed as a result of too little spending, not too few resources.

The low point for academic economics came late in 2008 when the Queen asked at the London School of Economics why the economics profession [meaning its mainstream] had not seen the global financial crisis coming. The answer, eventually given, was a 'lack of imagination' within the profession.

Yet this lack of real-world nous may not be the main reason that economics' teaching is undervalued by educational bureaucracy. Economics is widely perceived as a difficult subject, with low success rates. And that's because, more than most subjects, its subject matter is abstract; substantially theoretical or conceptual. What worries me these days is that abstract learning that is being lost, as we increasingly embrace learning through case studies, reflective blogs and anything that is amenable to being taught through technology in robotic ways.

This came through my inbox earlier this week:

THE FUTURE IS OURS — ROBOTS TAKE OVER by Frank Sonder, Linked In Pulse 8 Feb 2015

“The Economist” predicts that within the next 20 years half of all jobs will be taken over by machines. In some highly automated industries, like the automobile industry, it might be even up to 90%.

Then see What Jobs Will the Robots Take? in The Atlantic (23 January). The article suggests that all bets are off, and implies that the techno-utopian visionaries are playing a strong hand, globally, in higher education.

How can we evaluate whether it will be a good or bad thing for society if huge swathes of our economic lives are automated? The answer, as it often is, is "it depends". Our educated population therefore needs substantial abstract and critical skills to be able to evaluate answers like "it depends".

Robotic education is unlikely to impart abstract skills. Robotic education works best when we already know everything, and the role of teachers is simply to impart those known knowns.

What is the upside of "it all depends"? Let's imagine that 99% of market work is undertaken by machines, instead of a mere 50%. This is an abstract technique of testing our reasoning by taking it to its logical extreme. If we can imagine a world where almost all the necessary work is being done for us, then how can we pay for the robotically-supplied services using the one source of income (wages) that most of us rely on? We could not, of course. It becomes just so obvious that only a system of public equity benefits can distribute income in an era when labour is virtually redundant.

Now, one last exercise of the imagination. With the capacity for abstract thought, we can see one concrete state of affairs (regular income tax scales) in more than one way. Take this:

Assume (a good abstract word) that we have an income tax rate of 30% and an income tax exemption of $10,000. (This is a simplification of our familiar income tax scale; an excellent leaning device.) For a person earning $50,000 before tax, we could say the person pays $12,000 tax and receives no benefits. Or we could interpret the exemption as a benefit. Thus we would say the person pays $15,000 in tax and receives a benefit of $3,000.

For an individual the two approaches yield the same after-tax income. Yet conceptually the two perspectives are quite different. Further, under the second approach the total public revenue is substantially larger, and high income people can no longer say that they pay tax at a higher rate than low income people. In other words, looking at a familiar situation in a new way opens up whole new avenues of progressive thought.

Having done this exercise, we can call that $3,000 a public equity benefit. It becomes the conceptual starting point for something more precise, a public equity dividend that is equal for everyone. Our problem of robots taking our jobs is now solved. Over time, these public equity benefits – conceived abstractly by looking at something familiar in a new way – become public equity dividends. And, as our necessary work becomes automated, over time public equity dividends get bigger and wages become a smaller part of total income distribution.

It's not rocket science, just the application of imagination.

ends

© Scoop Media

Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

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