Incentive to Innovate

I’m spending a lot of time on Mandel. Here is another one I disagree with.

In other words, if we suddenly get access to a bunch of cheap Chinese labor, we don’t bother to invent robots. Then tomorrow, when the cheap Chinese labor runs out, we find ourselves without any robots.

The point is that necessity is the mother of invention and Chinese labor is dialing down our motivation.

Can’t you just argue that cheap Chinese labor provides even greater competitive pressure than robots? Now the robots have to be even smarter/faster/etc.

Firms don’t stop competing when they lose a round to someone. It doesn’t matter whether it’s Chinese people, American robots or Chinese robots.

The technology just has to hit a higher target. And when those Chinese people become truly highly educated and start earning higher wages as a result (ie they finish the catch-up process), total innovation in the world will explode.

I’ll take another billion minds working on today’s problems, thank you very much.

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