[Dean's World] Dave Price: The Economics of Robotics

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Posted by Dave Price:
The Economics of Robotics
http://www.deanesmay.com/posts/1171057555.shtml


   With the first useful autonomous robots [1]starting to appear in the
   news, itâs probably a good time to take a look at what the economic
   viability and effects of widely available robotic equivalents to cheap
   human labor might be.
   Letâs say youâre a small business owner who utilizes the cheapest
   human labor, e.g. a farmer or a landscaper or such. Letâs imagine a
   company has developed a robot that can perform simple tasks like
   clearing brush, picking tomatoes, etc, as well as a human, and the
   company is marketing this product to you as a replacement for your
   human laborers. At what price does this become a cost-effective option
   for you?
   Letâs be conservative and assume your total cost of labor per employee
   hour worked is $10 (this is probably actually too low for all but
   illegal laborers). Our hypothetical robot can work an average of 20
   hours a day (weâll assume it needs a few hours of downtime every day,
   or cannot be utilized during certain times of day due to industry
   constraints), 50 weeks a year (weâll give him two weeks a year for
   repairs), and has a useful life of five years. That means it can
   produce the equivalent of 20x7x50 = 7000 man-hours of labor per year,
   the equivalent of $70,000 of human per year, or $350,000 over 5 years
   (I am ignoring NPV considerations for simplicityâs sake). Thus, all
   else being equal (for this example, we'll assume the robot has no
   other advantages or disadvantages versus an unskilled human), your
   employer of unskilled labor is probably in the market for such a robot
   if its total cost of ownership is $350,000 or less.
   With economic viability at the price of a Ferrari, one has to think
   this transition is going to happen sooner rather than later.
   Interestingly, this might solve the illegal immigration problem in one
   fell swoop. If such a robot could be constructed for $175,000 or less,
   the entire unskilled labor market would collapse; with machine labor
   available at half the price, there would no longer be any incentive
   for such workers to come to America. Instead of the [2]inherently
   derisive and elitist formulation âjobs no American is willing to do,â
   we would have the moderately less offensive âjobs no human is willing
   to do.â
   Of course, with the [3]exception of [4]Glenn Reynolds, robots are not
   yet near being able to do complex tasks like writing a blog or arguing
   a legal case, and even low-skill service jobs like taking your order
   at Wendyâs probably benefit from a human touch, so non-manual labor is
   probably safe, at least for a couple decades.

References

   1. http://news.google.com/nwshp?ie=UTF-8&oe=UTF-8&hl=en&tab=wn&q=robot
   2. http://corner.nationalreview.com/post/?q=NTZhZDdiYmJlNDViYTAwOWExNmUyMmQ5ODlmMWYwYTU=
   3. http://www.indcjournal.com/archives/002759.php
   4. file://localhost/var/www/powerblogs/deanesmay/posts/www.instapundit.com