I was browsing the interweb this week and had stumbled upon this very interesting tweet from a multi-billionaire Mark Cuban:
This had really made me think about what will happen in the future (when robots are mostly in charge of production of goods and not humans.) What will happen to unemployment? Will people just reclass to different jobs or will they be completely unemployable and not beneficial to the society that we are living in. Mr. Cuban had also brought up a very interesting point, that the robots that are producing should be taxed on how much they are making. That is saying that we should be taxing the capital that is producing for us. What do you think about the statement that he had made, and how will this affect our future economy?
My definition of rational expectation theory is people absolute best guess at what will happen in the future while using the things that have happened in the past, that they have learned over a period of time. This means that people do not make errors while predicting the future and they use ALL of the information that they have observed and learned to make a most intelligent decision possible.
Do people have rational exceptions? – What have people not learned from their mistakes.
I believe that as a whole, rational expectation does not exist. People are very irrational at times and don’t learn from the past most of the time due to things “feeling good”. We as irrational beings mostly rely on feelings for most of our decisions. If humans were a robots and actually had learned from the past to make a future decisions (and not did what felt good,) then we would be able to accurately make rational expectations.
While reading the book, Prosperity for All, by Roger E.A. Farmer, my favorite chapter so far was, chapter 2, Keynes Betrayed. In the section “Classicals, Keynesians, and Bastard Keynesians,” the author had made a comparison,
“The economy is like a boat on the ocean with a broken rudder. As the club hits the rocking horse, so the wind blows the boat. In the windy boat metaphor, there is no self-correcting market mechanism to return the boat to a safe harbor. We must rely, instead, on political interventions to maintain full employment.”
It’s a very interesting view and made me think about how interpret the economy. I do agree with the statement that the author has made but I also have a few issues with it. I believe there is no such thing as full employment. It’s a hypothetical condition that will only happens in a perfect world, in our world and the free market economy we have it will never be achieved. This due to people that are willing and able to work are will always look for jobs. This is like saying that McDonald’s, that had 1.9 million employees in 2015, will not have a single job opening at any point in time, simply will never happen. Comparing this to a large economy that we have today is simple, people will always look for jobs and be unemployed for a certain period. I do agree though that we need to rely on political interventions, by raising and decreasing interest rates (Inflation Targeting), is one of the ways that political intervention may change the unemployment level. With higher rates the number of people that are looking for work will hypothetically increase. To summarize my thoughts, I believe that even if the economy is working the best it can and the interest rate is at 0% there still will be some sort of levels of unemployment. EX. Japan having a -.18% interest rate but still has a 3% unemployment rate, can anyone explain this?