December 10, 2019
For most economists, John Maynard Keynes is the brightest star in the firmament of dismal scientists.
In papers published between the first and second world wars, he did everything from foreshadowing hyperinflation and the collapse of the Weimar Republic to predicting and helping trigger Britain’s withdrawal from the gold standard. With his ‘General Theory’ he also created the basis on which governments run economies today by inventing macroeconomics.
But one thing Keynes got wrong was his prediction that automation would usher in a life of leisure. In the 90 or so years since he made the claim1, however, working hours in the Organization for Economic Co-operation and Development (OECD) have been broadly stable at roughly 40-hours-a-week. This is strange since in other spheres of life, the adoption of labor-saving devices has cut working time.
But perhaps this is just temporary. If the advent of the fourth industrial revolution2 (Industry 4.0) ushers in true automation then, all things being equal, productivity should rise – as should wealth. People would then be in a position to ‘buy’ more time away from work and Keynes’s vision of a leisure-filled future would finally be within reach.
1In his 1930 publication Economic possibilities for our grandchildren, Keynes pointed to a 15-hour working week as being sufficient to fund “a life of abundance”.
2The first industrial revolution witnessed the advent of steam power. The second industrial revolution brought electrification into the mainstream. In the third industrial revolution, advances in computing and connectivity ushered in global communications and the Internet. Today’s fourth industrial revolution (Industry 4.0) refers to the current transformation of the economy and production through digitization, big data, the Internet of Things, machine learning, automation, robotics and artificial intelligence.
Shamik Dhar, chief economist, BNY Mellon Investment Management