Thanks, but I don’t think this example is very informative, because ‘taxi firm whose employees are also the customers’ is such a distant example from reality—in this example the taxi firm has no inputs (oil, cars, computers) and the people don’t buy anything else (food, rent, clothes). Even in communist countries there are often multiple possible employers. The reason I asked for an example for a small firm is because I think this sort of model better capture relevant dynamics in the actual economy (e.g. automation is not costless). Even though it’s not literally true, Perfect Competition is I think a good starting place for this sort of analysis.
Thanks. A general point is that I stripped the model of all nonessential elements (such as non-labor inputs, multiple goods, flexible prices, gradual automation with some firms remaining nonautomated, intl trade) to drive home the basic point that automation does not necessarily lead to an increase in output. That the interests of the firm owners are aligned with the output they get, not that of the total economy. One parallel (non-generous to firm owners) is to a dictator who may wish to increase grip of power at a huge cost to their country.
Now, if workers can find new jobs, possibly even in other industries, this is not a problem. This is the default argument and, at least over timelines that span generations, empirical observation. But this no longer holds when there are no other jobs, i.e. under fool automation. I am now not sure if the “full economy-wide automation” idea was clear in the post, maybe I should clarify it...
It does not seem that Perfect Competition alone would influence the result: the firms that automate would outcompete those that don’t. Also, it does not seem like constant per-unit of output costs (e.g. oil) would change much. Semi-fixed or fixed costs (cars, computers) could have more complex effects, probably dependent on the parametrization. I agree the model can be extended in a number of ways, this could be one.
Thanks, but I don’t think this example is very informative, because ‘taxi firm whose employees are also the customers’ is such a distant example from reality—in this example the taxi firm has no inputs (oil, cars, computers) and the people don’t buy anything else (food, rent, clothes). Even in communist countries there are often multiple possible employers. The reason I asked for an example for a small firm is because I think this sort of model better capture relevant dynamics in the actual economy (e.g. automation is not costless). Even though it’s not literally true, Perfect Competition is I think a good starting place for this sort of analysis.
Thanks. A general point is that I stripped the model of all nonessential elements (such as non-labor inputs, multiple goods, flexible prices, gradual automation with some firms remaining nonautomated, intl trade) to drive home the basic point that automation does not necessarily lead to an increase in output. That the interests of the firm owners are aligned with the output they get, not that of the total economy. One parallel (non-generous to firm owners) is to a dictator who may wish to increase grip of power at a huge cost to their country.
Now, if workers can find new jobs, possibly even in other industries, this is not a problem. This is the default argument and, at least over timelines that span generations, empirical observation. But this no longer holds when there are no other jobs, i.e. under fool automation. I am now not sure if the “full economy-wide automation” idea was clear in the post, maybe I should clarify it...
It does not seem that Perfect Competition alone would influence the result: the firms that automate would outcompete those that don’t. Also, it does not seem like constant per-unit of output costs (e.g. oil) would change much. Semi-fixed or fixed costs (cars, computers) could have more complex effects, probably dependent on the parametrization. I agree the model can be extended in a number of ways, this could be one.