Transforming Luddites into New Urban Artisans

I am in Singapore working at NUS but I continue to read the New York Times.   David Autor and David Dorn have written an important piece about the role that computers have played in hollowing out middle class jobs.   They end on an optimistic note;

There will be job opportunities in middle-skill jobs, but not in the traditional blue-collar production and white-collar office jobs of the past. Rather, we expect to see growing employment among the ranks of the “new artisans”: licensed practical nurses and medical assistants; teachers, tutors and learning guides at all educational levels; kitchen designers, construction supervisors and skilled tradespeople of every variety; expert repair and support technicians; and the many people who offer personal training and assistance, like physical therapists, personal trainers, coaches and guides. These workers will adeptly combine technical skills with interpersonal interaction, flexibility and adaptability to offer services that are uniquely human.

Three points:  For this new “nimble economy” to replace lifetime jobs will require some capitalist magic;

1.  Health insurance will need to be portable across jobs.   Read Dr. Madrian’s paper on job lock.  

2.  Internet services in providing kosher “rankings” of quality of different artisans will have to be developed.  In a fair world, a good artisan will be able to objectively signal to potential customers that she offers high quality services per $ she charges.

3.  This will be a risky world as self employed workers may still face periods of low demand.  In the Keynesian model, consumption today is a function of income today (do you remember:  C = a + b*Y?) .  If we take this model seriously, this means that artisans could face very volatile consumption as their incomes bounce around over time.  Since people prefer smoothed consumption over time,  such artisans will have to become shrewder life time consumers and explicitly embrace the permanent income hypothesis of consumption.   In this age of behavioral economics featuring myopic consumers, the nudgers will have to think about how to incentivize the Homer Simpsons to save for a rainy day.

In this age of product differentiation and celebrating the individual, it makes perfect sense that new artisans will arise in cities around the world.  Such services are often non-tradeable and this means that these producers will locate close to the final consumers.  Such final consumers will often be the 1% and in this sense they create jobs.  Read Moretti’s Local Multipliers paper.


Author: Matthew E. Kahn

Professor of Economics at UCLA.

21 thoughts on “Transforming Luddites into New Urban Artisans”

  1. Your linked piece does a reasonable job of doing justice to the term “Luddite”, but I flinch whenever I see the term used, and your post is less than clear in how you intend it. Somehow, the term “Luddite” has ome to mean a person who rejects, despises, or simply fails to grasp technology, which is a vile slander on the vile slander on the legacy of Ned Ludd? The so-called Luddites weren’t protesting and breaking machines because they hated progress or despised technology: they were in arms because they were being displaced from their livelihoods with no compensation and no provision for their future, by an economic structure skewed to enrich the most fortunate members of society. Frankly, we could use more of the Luddites’ awareness and their activism, if not their methods and their violence. And I’m far from encouraged by your notion that the internet will revive, streamline, and enable a late-Victorian notion of tradespeople circulating among and offering services to the comfortably situated gentry.

  2. The list of jobs that will grow is reasonable - though it leaves out cooks, gardeners, musicians, writers, and entertainers. But why should they be self-employed? Most teachers and nurses are employees of large organisations, for strong reasons. Many cooks are; has there been any trend away from chain restaurants? Gardeners and potters sare almost always self-employed; solitude is part of the point.

    1. Are gardeners self-employed? It’s my impression (at a fair remove; I rent an apartment, and one that has minimal greenery) that in the US gardeners often work for landscaping companies (or are employees of large firms with extensive grounds). The landscaping companies are often small, but the gardeners are not independent contractors working as daily laborers or tradespeople. Even those that do work as day-laborers (who are supposedly often undocumented workers doing unregulated, untaxed work) are described in news reports as often being hired for the day by a gardening contractor, not directly by the landowner.

      And potters are moot, surely? They’re artists; if you want a pot merely to fulfill a function, you go to Ikea or wherever, not to a potter. You wouldn’t expect to hire a pottery firm any more than you’d expect to hire a sculpture firm or a oil-on-canvas painting firm.

      1. I stand corrected on the gardeners; a hasty generalisation from Spain, where I’ve never come across a landscaping contractor.

  3. “such artisans will have toexplicitly embrace the permanent income hypothesis of consumption.”

    I just love how the Chicago economics “school” produces professors who believe, from their coddled tenured positions, that adding more mandatory financial management complexity to people who are already working as hard as they can in order to reduce their financial income irregularity is the most essential form of, wait for it… freedom.

    We are going to have to eventually rise up against this civilization destroying nonsense.

    Oh yeah, of course I’m being stupid, even ludditic. Obviously, in the future all these stovepiped servicers are going to buy and trade specialized hedges against their income irregularity. Not much opportunity for fraud from large scale capital there. Oh no.

    I cannot believe how transparent the financial scammers are getting.

    1. Huh???

      Matthew, who can’t help himself (after all, he’s a professor of economics), writes: “such artisans will have to become shrewder life time consumers and explicitly embrace the permanent income hypothesis of consumption.”

      I, who can help myself, would have written more simply: “such artisans will have to plan for their average, saving when they’re doing well so they’re prepared when times are lean.” Hmmm … sounds like “conventional wisdom,” not groundbreaking new economic theory.

      You, OTOH, see “coddled tenured position,” “more mandatory financial management complexity,” “civilization destroying nonsense,” “buy and trade specialized hedges,” “fraud from large scale capital,” and “financial scammers.”

      All that rant for the advice “save for a rainy day?”

      1. *I* save for a rainy day. Maybe you save for a rainy day, I don’t know.
        But it is an EMPIRICAL FACT that most people do NOT do so. Matthew and his cohorts can scream about this until they are blue in the face, but reality is what it is.

        At which point, then, the issue is: how do you plan to deal with this fact, this REALITY?
        Option (1) is the Republican scheme: raise this to a matter of morality — people who do not save do not deserve to have pleasant lives; heck we’re all doing god’s work by making their lives even more unpleasant.
        Option (2) is the Democrat scheme: accept this flaw in humans, give up the pretense that maximal control of their lives is the route to maximal happiness — maybe not for you in particular, full of self-control that you are, but for the actually existing bulk of humanity — and so impose a variety of more-or-less enforced saving schemes.

        1. MayH - how about we don’t choose between Option 1 and Option 2? Both are in place now - compulsory deduction from income for Social Security, encouragement of 401(k) plans, etc. 401(k)s, after all, have lots of disincentives to drawing money out early, you do it if you are desperate. Shaming people who aren’t saving - the ‘nudges’, these things have useful effects. The EITC subsidizes low-wage work, so it’s worthwhile for people to take jobs flipping burgers even though the wage is $8 per hour.

          It is a problem that there is NOT ENOUGH MONEY in the lifetime earnings of a lot of people to provide a decent retirement, no matter how you slice and squirm. It’s less worse if you move from Manhattan to live out your days in a double-wide in Dothan, or Silver City NM, but it’s still tough. No amount of incentive to save will do it. Maybe we do a 401(k) sort of account automatically on top of EITC payments?

          1. “Maybe we do a 401(k) sort of account automatically on top of EITC payments?”

            And this is the entire goal of the um… Kahn Con. (To be fair, he’s got a lot of esteemed within the economics profession buddies in this Con)

            Except none so far are seeing how this is also going to generate a steady stream of “papers” (the entire tangible product of the Tenured Economist), because, let’s just think about it a little, a 401(k) penalizes you for withdrawing early, and early means before retirement. But what does it mean to implement financial instruments that “nudge” people toward the Permanent Income Hypothesis? Well you would need to be able to withdraw during low income periods. And you would need to be “nudged” into contributing to the fund during high income periods.

            Think of the complexification of the protocols required to implement this. Think of the profits! Think of the scams! It’s all part of the plan, people.

            Nobody has caught onto the hidden Paradox of Thrift driver he snuck into his post either. Step up! Jeez.

            Also, why is the “nudge” in scare quotes? Maybe because there won’t be a choice? As in Singapore? As I said, I can’t believe how transparent the financial scammers are getting.

      2. I’m not sure the problem is really lack of incentives to “save for a rainy day.” Perhaps the problem is simply insufficient income for savings.

  4. I think we’ll just find new jobs to do if or when the robots replace most routine work, assuming it ever comes to that. That’s what happened when improvements in technology meant that we needed fewer people working on farms - very few people at the time could have possibly imagined all the new jobs that would show up in the changed economy.

    1. But as Kevin Drum (citing others) recently pointed out, the transition from a rural to an urban job base (1) took decades in actual practice and (2) was facilitated by continual technological enhancements in the new industries. It’s not at all clear that (1) we are willing or collectively able to weather another several decades of economic dislocation, or that (2) the Internet- and robot-driven changes in urban employment will have similarly long tails that will allow freelance artisans to produce (or, just as important, capture) more value per person. Warren Terra’s concern about a return of Victorian class structure resonates with me.

      1. 1. Why wouldn’t we? In many ways, we actually have much more safeguards against starvation and poverty than the people in the 19th century had in the face of heavy economic and social dislocation.

        2. The problem with the return of a Victorian class structure is that it leans too much on a supply of cheap, replaceable labor, which is something we won’t have. We’ll have a rapidly aging population and a shrinking work force as a percentage of the population, which would tend to allow workers more leverage in getting higher wages from new jobs (or old ones being changed by technology).

        1. FWLIW, on #1 I think the dislocation would/will be worse in some ways because we now have a mass middle class; the prospect of people dropping out of it as their “mid-skill” jobs disappear is very scary and probably can’t be addressed with a social safety net alone. The loss of farm jobs didn’t threaten to upset the social class structure in quite the same way.

          On #2, I hope you’re right. AFAIK the scenario isn’t playing out quite so rosily in Japan so far, but there’s time.

        2. “We’ll have a rapidly aging population and a shrinking work force as a percentage of the population, which would tend to allow workers more leverage in getting higher wages from new jobs (or old ones being changed by technology).”

          First, we haven’t seen any sign of rising wages for the majority of the population. This ‘shrinking work force’ has been predicted since the mid-80’s (starting with Ph.D.’s) and has *never* manifested iself.

          Second, given inequality, the gutting of the middle class and the elite’s lust for ‘entitlements’, it’s more likely that an increasing percentage of the population which is elderly just means that their standard of living falls, and imiseration is becomes the norm.

  5. This is the kind of value-free analysis I have come to expect from Mr. Kahn. I would think that it were a joke if it were a one-off piece but the fact is he is paid by someone to produce this kind of thing consistently. How anyone other than a robot raised Ina closet can produce such material with a straight face is out of my powers of understanding.

    your nimble economy mr. kahn sounds to me like a nightmare, a dystopia.

    1. That’s because Matthew Kahn has one of those jobs for life.
      For him ‘risk’ is brisk, like a cold shower.

  6. And we’re sure that people and organizations with more capital and more information would never act in predatory ways by offering loans or income-leveling insurance-like products on terms highly profitable to the seller, not so much to the buyer. And that the necessary rating services will not start requiring kickbacks for decent visibility. Even though both of those things (payday loans, Yelp) are already happening.

    And we wonder why guilds existed.

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