*Deep Utopia*, § "MONDAY" ## A simple three-factor model Consider a very simple three-factor model in which economic output is produced by combining labor, capital, and what is commonly referred to as “land”. Land here means any non-labor inputs that we cannot produce more of, so not just planetary surface area but other basic natural resources as well. We will consider an extreme scenario in which the share of income that goes to labor is zero: one in which, consequently, the combined factor shares of capital and land is one hundred percent. Let’s first consider what happens if we assume that there is no change in population, no technological progress, and no increase in land, but there is an unexpected shock, namely the sudden invention of cheap robots that are perfect substitutes for all human labor. We’ll also assume a fully competitive economy with no monopoly rents, and we’ll assume fully reliable property rights (and that the robots remain under human control). We start with an economy of full human employment. Then the perfect robots are invented. This causes massive amounts of capital flow into the robotics sector, and the number of robots increases rapidly. It is cheaper to build or rent a robot than to hire a human. Initially, there is a shortage of robots, so they don’t immediately replace all human workers. But as their numbers increase, and their cost goes down, robots replace human workers everywhere. Nevertheless, the average income of humans is high and rising. This is because humans own everything, and the economy is growing rapidly as a result of the successful automation of human labor. Capital and land become exceedingly productive. Capital keeps accumulating; so eventually land is the only scarce input. If you want to visualize this condition, you could imagine that every nook and cranny has been filled with intelligent robots. The robots produce a flow of goods and services for human consumption, and they also build robots and maintain and repair the existing robot fleet. As land becomes scarce, the production of new robots slows, as there is nowhere to put them or no raw materials with which to build them—or, more realistically, nothing for them to do that cannot be equally well done by the already existing robots. Non-physical capital goods might continue to accumulate, goods such as films, novels, and mathematical theorems.[^1] There are no jobs and humans don’t work, but in aggregate they earn income from land rents and intellectual property. Average income is extremely high. The model doesn’t say anything about its distribution. Even though economic work is no longer possible for humans, there may continue to be wealth flows between individuals. Impatient individuals sell land and other assets to fuel consumption spurts; while more long-term-oriented individuals save a larger fraction of their investment income in order to grow their wealth and eventually enjoy a larger total amount of consumption. Another way to climb the wealth ranking in this steady state of the economy may be by stealing people’s or countries’ property, or by lobbying governments to redistribute wealth. Gifts and inheritances may also move some wealth around. And beyond these sources of economic mobility, there is always the craps table and the roulette. --- This may all seem a bit wild? But notice that if we replace “robot” with “farmer”, what we have is not a bad description of most of human history. At equilibrium, both farmers and robots earn subsistence-level income. In the case of farmers, this means enough bread to raise two reproducing children per couple. In the case of robots, it means the revenue generated by each robot equals the cost of its manufacture and operation. In this analogy, the landowning aristocrats of the past correspond to the rich future human population, which, just like their historical counterparts, extracts rents from their landholdings.[^2] What allows the average income of the future humans in this model to rise above subsistence is the stipulation that the human population is capped. If the number of humans (like the number of robots) were permitted to grow freely, then average human income would fall to subsistence level (like the robot’s income falls to their subsistence level) once the size of the human population attains its evolutionary equilibrium. We would then have a situation in which there is a vast number of robots, a vast number of humans, very high world GDP, and mere subsistence-level average incomes. This would be essentially just a scaled-up version of the bleak picture of the world that Thomas Malthus presented. --- This simple three-factor model makes a number of assumptions which can of course be questioned. The assumptions that there is no technological progress and no increase in land are, I think, less rickety than might initially appear. I expect that the rate of economically relevant technological progress will eventually asymptote to zero (once most useful inventions have already been made). Land growth (from space colonization) will asymptote to a polynomial rate, since the volume of the sphere reachable from Earth by a given time is bounded by the speed of light. In the _very_ long run, land growth will asymptote to zero, since the expansion of space means that sufficiently remote galaxies are forever unreachable from our starting point. But even during the long period in which a polynomial rate of land growth could be sustained, a decline of average income to subsistence can easily occur, since a population is able to grow at an exponential rate.[^3] The assumption that humans will remain in perfect control of the robots is definitely open to doubt, though it is not one that I intend to discuss in these lectures. If that assumption is relaxed, the result would either be the same as above except with a somewhat smaller human population and a somewhat larger robot population at equilibrium; or, in the case of a more complete failure of control, the human population could disappear altogether and there would be even more robots. By the way, I should say that when I speak here of “the robot population” or “the number of robots”, what I mean to refer to is the factor share of the automation sector in the economy. Rather than a population composed of some specific number of independent robots, it could all just be one integrated AI system that controls an expanding infrastructure of production nodes and actuators. Another assumption in the simple three-factor model is that property rights are fully preserved and that there is, for example, no redistribution program or welfare system. And we haven’t yet considered economic inequality within the human population. Let’s poke some more… (It might seem as if we are going on a bit of a tangent here, but if one is pondering possible futures that involve notions of sustainable abundance, it is useful to be aware of these considerations and constraints. It also helps us to explicate our past human condition, thereby providing a backdrop against which utopian aspirations will stand out in sharper relief. And it begins to illustrate the many and various ways in which the quest for a better world, and for utopia, is often paradoxical.) [^1]: Cf. also Trammell & Korinek (2023). [^2]: In this simplified model, the outcome does not depend on whether the robots are owned by humans or operate as independent economic agents who sell their labor at market rates. In either case, the long-term equilibrium is one in which the robots receive bare subsistence income from their labor. [^3]: Cf. Malthus (1803), p. 14.