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Economic possibilities for our grandchildren (re-visited)
An annotated reading of John Maynard Keynes' 1930 lecture about what 2030 might look like.
In 1930, the economist John Maynard Keynes imagined what life could be like in the year 2030 in his famous lecture “Economic Possibilities for our Grandchildren.” I’ll give you the cliff notes: he imagined most of our work would be automated, that it would make us so economically prosperous that we wouldn’t need to work as much, and that the greatest challenge we would face today is finding meaning in lives that required so little work.
So much of what he said about automation then, is being said about the AI revolution today. In fact, this exact speech might as well be given today. I originally intended to write an essay comparing notes between what Keynes thought then, and what we think now, then I realized his lecture was in the public domain and I changed course. I thought it might be more fun to annotate his original work with modern thoughts on the topic.
For the sake of brevity, I edited out some of the “super specific to the speech he gave in 1930 England” bits as well as the “a little bit long and fluffy because this was a speech” bits as noted by a “…” I also bolded some of the more interesting bits in case you are a skimmer. Here’s his lecture:
We are suffering just now from a bad attack of economic pessimism. It is common to hear people say that the epoch of enormous economic progress which characterised the nineteenth century is over; that the rapid improvement in the standard of life is now going to slow down—at any rate in Great Britain; that a decline in prosperity is more likely than an improvement in the decade which lies ahead of us.
I believe that this is a wildly mistaken interpretation of what is happening to us. We are suffering, not from the rheumatics of old age, but from the growing pains of over-rapid changes, from the painfulness of readjustment between one economic period and another. The increase of technical efficiency has been taking place faster than we can deal with the problem of labour absorption;1 the improvement in the standard of life has been a little too quick; the banking and monetary system of the world has been preventing the rate of interest from falling as fast as equilibrium requires.
The prevailing world depression, the enormous anomaly of unemployment in a world full of wants, the disastrous mistakes we have made, blind us to what is going on under the surface to the true interpretation, of the trend of things. For I predict that both of the two opposed errors of pessimism which now make so much noise in the world will be proved wrong in our own time: the pessimism of the revolutionaries who think that things are so bad that nothing can save us but violent change, and the pessimism of the reactionaries who consider the balance of our economic and social life so precarious that we must risk no experiments.2
My purpose in this essay… is not to examine the present or the near future, but to disembarrass myself of short views and take wings into the future. What can we reasonably expect the level of our economic life to be a hundred years hence? What are the economic possibilities for our grandchildren?
From the 16th century, with a cumulative crescendo after the 18th, the great age of science and technical inventions began, which since the beginning of the 19th century has been in full flood—coal, steam, electricity, petrol, steel, rubber, cotton, the chemical industries, automatic machinery and the methods of mass production, wireless, printing, Newton, Darwin, and Einstein, and thousands of other things and men too famous and familiar to catalogue.3
What is the result? In spite of an enormous growth in the population of the world, which it has been necessary to equip with houses and machines, the average standard of life in Europe and the United States has been raised, I think, about fourfold. The growth of capital has been on a scale which is far beyond a hundredfold of what any previous age had known. And from now on we need not expect so great an increase of population.
If capital increases, say, 2% per annum, the capital equipment of the world will have increased by a half in 20 years, and 7.5 times in a hundred years.4 Think of this in terms of material things—houses, transport, and the like.
At the same time technical improvements in manufacture and transport have been proceeding at a greater rate in the last 10 years than ever before in history. In the United States factory output per head was 40% greater in 1925 than in 1919. In Europe we are held back by temporary obstacles, but even so it is safe to say that technical efficiency is increasing by more than 1% per annum compound. There is evidence that the revolutionary technical changes, which have so far chiefly affected industry, may soon be attacking agriculture. We may be on the eve of improvements in the efficiency of food production as great as those which have already taken place in mining, manufacture, and transport.5 In quite a few years—in our own lifetimes, I mean—we may be able to perform all the operations of agriculture, mining, and manufacture with a quarter of the human effort to which we have been accustomed.6
For the moment the very rapidity of these changes is hurting us and bringing difficult problems to solve. Those countries are suffering relatively which are not in the vanguard of progress. We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come—namely, technological unemployment. This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.7
But this is only a temporary phase of maladjustment. All this means in the long run is that mankind is solving its economic problem. I would predict that the standard of life in progressive countries 100 years hence will be between four and eight times as high as it is today. There would be nothing surprising in this even in the light of our present knowledge. It would not be foolish to contemplate the possibility of a far greater progress still.
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Let us, for the sake of argument, suppose that 100 years hence we are all of us, on the average, eight times better off in the economic sense than we are today.8 Assuredly there need be nothing here to surprise us.
Now it is true that the needs of human beings may seem to be insatiable. But they fall into two classes—those needs which are absolute in the sense that we feel them whatever the situation of our fellow human beings may be, and those which are relative in the sense that we feel them only if their satisfaction lifts us above, makes us feel superior to, our fellows. Needs of the second class, those which satisfy the desire for superiority, may indeed be insatiable; for the higher the general level, the higher still are they. But this is not so true of the absolute needs—a point may soon be reached, much sooner perhaps than we are all of us aware of, when these needs are satisfied in the sense that we prefer to devote our further energies to non-economic purposes.9
Now for my conclusion, which you will find, I think, to become more and more startling to the imagination the longer you think about it.
I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years.10 This means that the economic problem is not—if we look into the future—the permanent problem of the human race.
Why, you may ask, is this so startling? It is startling because—if, instead of looking into the future, we look into the past—we find that the economic problem, the struggle for subsistence, always has been hitherto the primary, most pressing problem of the human race—not only of the human race, but of the whole of the biological kingdom from the beginnings of life in its most primitive forms.
Thus we have been expressly evolved by nature—with all our impulses and deepest instincts—for the purpose of solving the economic problem. If the economic problem is solved, mankind will be deprived of its traditional purpose.
Will this be a benefit? If one believes at all in the real values of life, the prospect at least opens up the possibility of benefit. Yet I think with dread of the readjustment of the habits and instincts of the ordinary man, bred into him for countless generations, which he may be asked to discard within a few decades.
To use the language of to-day-must we not expect a general “nervous breakdown”? We already have a little experience of what I mean—a nervous breakdown of the sort which is already common enough in England and the United States amongst the wives of the well-to-do classes, unfortunate women, many of them, who have been deprived by their wealth of their traditional tasks and occupations—who cannot find it sufficiently amusing, when deprived of the spur of economic necessity, to cook and clean and mend, yet are quite unable to find anything more amusing.11
To those who sweat for their daily bread leisure is a longed for sweet—until they get it.
Thus for the first time since his creation man will be faced with his real, his permanent problem—how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.12
The strenuous purposeful money-makers may carry all of us along with them into the lap of economic abundance. But it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.13
Yet there is no country and no people, I think, who can look forward to the age of leisure and of abundance without a dread. For we have been trained too long to strive and not to enjoy. It is a fearful problem for the ordinary person, with no special talents, to occupy himself, especially if he no longer has roots in the soil or in custom or in the beloved conventions of a traditional society. To judge from the behaviour and the achievements of the wealthy classes today in any quarter of the world, the outlook is very depressing! For these are, so to speak, our advance guard—those who are spying out the promised land for the rest of us and pitching their camp there. For they have most of them failed disastrously, so it seems to me—those who have an independent income but no associations or duties or ties—to solve the problem which has been set them.
I feel sure that with a little more experience we shall use the new-found bounty of nature quite differently from the way in which the rich use it today, and will map out for ourselves a plan of life quite otherwise than theirs.
For many ages to come the old Adam will be so strong in us that everybody will need to do some work if he is to be contented. We shall do more things for ourselves than is usual with the rich today, only too glad to have small duties and tasks and routines.14 But beyond this, we shall endeavour to spread the bread thin on the butter—to make what work there is still to be done to be as widely shared as possible. Three-hour shifts or a fifteen-hour week may put off the problem for a great while. For three hours a day is quite enough to satisfy the old Adam in most of us!
There are changes in other spheres too which we must expect to come. When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals.15 We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession—as distinguished from the love of money as a means to the enjoyments and realities of life—will be recognised for what it is, a somewhat disgusting morbidity,16 one of those semicriminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last, to discard.
Of course there will still be many people with intense, unsatisfied purposiveness who will blindly pursue wealth—unless they can find some plausible substitute. But the rest of us will no longer be under any obligation to applaud and encourage them. For we shall inquire more curiously than is safe today into the true character of this “purposiveness” with which in varying degrees Nature has endowed almost all of us. For purposiveness means that we are more concerned with the remote future results of our actions than with their own quality or their immediate effects on our own environment.
Perhaps it is not an accident that the race which did most to bring the promise of immortality into the heart and essence of our religions has also done most for the principle of compound interest and particularly loves this most purposive of human institutions.
I see us free, therefore, to return to some of the most sure and certain principles of religion and traditional virtue—that avarice is a vice, that the exaction of usury is a misdemeanour, and the love of money is detestable, that those walk most truly in the paths of virtue and sane wisdom who take least thought for the morrow. We shall once more value ends above means and prefer the good to the useful. We shall honour those who can teach us how to pluck the hour and the day virtuously and well, the delightful people who are capable of taking direct enjoyment in things, the lilies of the field who toil not, neither do they spin.
But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.
I look forward, therefore, in days not so very remote, to the greatest change which has ever occurred in the material environment of life for human beings in the aggregate. But, of course, it will all happen gradually, not as a catastrophe. Indeed, it has already begun. The course of affairs will simply be that there will be ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed. The critical difference will be realised when this condition has become so general that the nature of one’s duty to one’s neighbour is changed. For it will remain reasonable to be economically purposive for others after it has ceased to be reasonable for oneself.
The pace at which we can reach our destination of economic bliss will be governed by four things: our power to control population, our determination to avoid wars and civil dissensions, our willingness to entrust to science the direction of those matters which are properly the concern of science, and the rate of accumulation as fixed by the margin between our production and our consumption; of which the last will easily look after itself, given the first three.
Meanwhile there will be no harm in making mild preparations for our destiny, in encouraging, and experimenting in, the arts of life as well as the activities of purpose.17
But, chiefly, do not let us overestimate the importance of the economic problem, or sacrifice to its supposed necessities other matters of greater and more permanent significance. It should be a matter for specialists-like dentistry. If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!
What did you think of Keynes words then? Do they seem relatable now?
Thanks for reading,
I feel like I’ve read 100 essays with this exact same headline this month alone.
NOTHING HAS CHANGED.
Today we might add to his list electricity, dishwashers, refrigerators, vacuum cleaners, airplanes, telephones, the internet, cell phones, computers, robotics, etc.
He was right. In the UK, GDP per capita has increased fourfold since 1930. In the US, GDP per capita has increased fivefold.
Food production efficiencies increased exponentially after this lecture. According to the USDA total farm production has tripled even as land and labor declined.
In fact, we automated things so much that 45.9% of our workforce were farmers in 1870, and only 1.1% were in 2009.
Technological unemployment just means that a job is made obsolete by technology—like when we stopped having pony express riders, elevator operators, or lamplighters. Though many worried then (and worry today) that technological unemployment would lead to widescale unemployment, Keynes believed then (and I do today) that this is only a temporary adjustment. During the last 100 years, unemployment rates were at their worst during Keynes’ time at 25% (the Great Depression) though technological unemployment was hardly the cause.
We are not eight times better off economically than we were in 1930. That’s because, though the economy grew fourfold/fivefold (as Keynes imagined), most of that wealth went to the top 10% of workers, rather than the typical worker. Though we generated all the wealth Keynes once imagined, it was not equitably distributed as he imagined (which might have raised the wealth of all but instead raised the wealth of a few).
Because of this income inequality, this wasn’t achieved. We still devote our energies to economic activities. In 1938 we started working 40 hours weeks and we have ever since.
We did have WWII shortly after this, but we still reached the economic heights he imagined.
I’m choosing to ignore this paragraph.
What does it mean to use leisure well? I thought about that a lot in my most recent post:
This is this growing sense today that AI will take over all the work so that we can have all the leisure and enjoy. Because we reached all the economic growth Keynes predicted but didn’t get all the leisure he predicted, I’m not convinced we’ll suddenly get it because of AI. Even if AI takes over a lot of the work, just as automation took over a lot of the work in Keynes time, we’ll still have to work to make those systems work.
Not to mention, we’ll still have the same structures in place that keep automation from creating wealth equitably. Unless we actually do something to change the system… like increase the minimum wage and change our compensation structures and stock option plans and decrease the hours that make up a full time job—but I’m going to think that all through in future essays.
I love Rae Katz' essay "If you were rich would you do laundry.” She says our time should not be split between work and leisure, but between work, creative work, and life maintenance tasks—in equal parts. Right now we try to fit all the life maintenance tasks into our leisure time, but what if they were better served with their own time? I think Keynes is right that we would still need some work to feel satisfied, but that if we did less of it those life maintenance tasks might be an enjoyable facet of life.
I think this is an interesting thought experiment. Imagine that we had more equitably distributed all the wealth we’ve earned since Keynes time, just as he imagined we would. If all of us have our needs met, and we could all afford homes and cars and everything we might need to live a good life, would we stop trying to pursue wealth?
Initially I thought Keynes was wrong. That even if we created a more equitable society, there would still be jockying for position above it. And yet, the Nordic countries, and many European countries, are proof that he might be right—they don’t appear to be as money hungry as the United States is. With so many of their needs met by the government, they don’t need as much from their companies. And they don’t seek it.
One New York Times article brilliantly illustrates that point through the lens of the Dutch refusing to let Jeff Bezos’ yacht out of their harbor. The title of the article alone says something about whether we would give up the pursuit of wealth if we didn’t need it, but I still recommend reading the whole thing: “The country that wants to be average vs. Jeff Bezoz and his $500 million yacht.”
As the article points out, there are still billionaires in the Netherlands, but people don’t really care—it’s not as much of the culture, and it isn’t the status symbol it is here. And maybe it doesn’t have to be. Maybe Keynes is right. If we solve the economic problem, maybe we solve some societal problems too.
While we work on creating better economic systems, I believe we can still live lives of purpose—with the right portions of work, leisure, and enjoyment of life—right now.