Automation is radically transforming the economy.

This is not a process that started in the last few years. It is more than half a century of change that is starting to have severe impact.

When we talk about automation, in the economics sense, it is anything that is a labor saving activity. For decades, we saw this in the form of computers or industrial robots. Of course, as they say, you ain't seen nothing yet.

We are about, according to many, to see an explosion with regards to automation. Some still contest the idea, noting all the present limitations of AI (as an example). The challenge with this point of view is the fact that many of those limitations are eliminated with each new update of a model.

Then we have humanoid robots on the horizon. This is a major problem because there is nothing that says humans have a moat around cognition or labor producing work.

Here is where the post-labor economy can take hold.

Post-Labor Economy - Economic Redesign

Our present economy is rather simple.

The basic design is as follows:

Central bank liquidity ---> Commercial Bank lending ----> Business Investment -----> Household income through wages ------> Household spending

Where we have an issue is the entire model breaks down if hiring ceases. Since the majority of the economy is due to household spending, the removal of income via wages is catastrophic.

Here is where many are starting to voice concern. We are rapidly heading towards an adjustment as the labor component of the economy declines further. It already dropped globally over the last few decades, a fact that pushes trillions of dollars more into capital as opposed to wages.

This is not a new story. Economists discussed it for a number of decades.

The question on the minds of many is how to handle it?

Dividend Based Economy

We have UBI and other such proposals. This ultimately is nothing more than a transfer of funds, something that historically has not worked.

Automation offers a feature that is overlooked. Perhaps the solution is contained in the threat.

What we are looking at is automation rewiring the entire economy. Economic productivity is likely to explode as automation consumes more of the output.

Here is where we see a tremendous opportunity. The skyrocketing of economic productivity means capital benefits greatly. After all, we see hundreds of billions (moving to trillions) going into data centers and robotics. The key is simply to own some of the means of production.

It is where the idea of a dividend enters. We could structure the economy where people simply get paid on the output of the means of production. It is no different from how it works now. The difference is that one is not getting a little bit for the time provided. Instead, one has ownership in the capital asset base.

How does this happen?

The first is simply to focus upon those entities which are developing these systems. While owning a stock like Home Depot might make sense from a present day ROI, it is unlikely this company is going to be one of the major players in the automation realm. Instead, Google, Meta, Nvidia, and companies such as these are the ones to look at.

Another step could be the idea of a sovereign wealth fund. Governments are going to lose also since tax revenue is going to decline along with household incomes. Therefore, there is incentive to keep the income up.

We could see this adjusted from the wage based system to one where dividends make up the bulk of the payments. Since capital can be used to generate productivity, governments only need to follow what Big Tech is doing. Future compute needs are going to be near unlimited. We could see governments involved the same as the private sector.

The public fund is provides dividend capital to its population. This is where one simply gets paid for being a citizen. It is no different than the Alaska Wealth Fund which takes oil payments and provides a dividend to its people.

Major governments purchase a ton of GPUs. They have a lot of software that is written by engineers. With AI getting more advanced, governments can simply get into the game providing a "commons" to the population. The revenue generated from this compute is simply "owned" by the citizens.

Here is a quick way to approach this problem. There are other mechanisms which can be implemented. The point is we can look beyond labor and/or government transfers.

Posted Using INLEO