Automation is upending the global order by eliminating human labor on an unprecedented scale–and the status quo has no reality-based solution to this wholesale loss of jobs.

Two recent articles highlighted the profound consequences of advances in robotics and AI (artificial intelligence) on employment: four fundamentals of workplace automation and Robots may shatter the global economic order within a decade as the pace of automation innovation has gone from linear to parabolic (via Mish).

The status quo apologists/punditry have offered two magical-thinking solutions to the sweeping destruction of jobs across the entire spectrum of paid work:

1. Tax the robots (or owners of robots) and use the revenues to pay a guaranteed income to everyone who is unemployed or underemployed.

2. Let the price of labor fall to the point that everyone has a job of some sort, even if the pay is minimal.

Neither one is remotely practical, for reasons I will explain today and tomorrow.

Today, let’s examine the misguided fantasy that automation/robotics will generate enormous profits for the owners of robots. Here’s the problem in a nutshell:

As automation eats jobs, it also eats profits, since automation turns labor, goods and services into commodities. When something is commoditized, the price drops because the goods and services are interchangeable and can be produced almost anywhere.

Owners must move commoditized production to low-tax regions if they want to retain any profit at all.

Big profits flow from scarcity, i.e. when demand exceeds supply. If supply exceeds demand, prices fall and profits vanish.

(Monopoly is a state-enforced scarcity. In our state-cartel economy, there are many monopolies or quasi-monopolies. While eliminating these would lower costs, that wouldn’t reverse the wholesale destruction of jobs and profits–it would only speed the process up.)

The other problem the “tax the robots and everything will be funded” crowd overlooks is the falling cost of software and robots lowers the barriers to competition: nothing destroys profits like wave after wave of hungry competitors entering a field.