Politicians stick to the view that everyone is going to be better off thanks to innovation. They don’t want to highlight potential threats and they talk less about inequality. The fact is that advancing technology will result in many people shifting roles in society. The mckinsey.com website asked economy Nobel Prize winner Robert Shiller about possible solutions of the Second Machine Age’s "great paradox".
Inequality: Political consequences
Equalization programs can be a partial solution to these patterns and trends. Robert Shiller, a Nobel Prize–winning economist, says that an inequality indexation of tax systems may offset the inevitable surges of inequality. Tax systems would be a tool ready to help us keep the levels of inequality bearable. There are also ways how to design comprehensive wage insurance systems where there would be no moral hazard. It is possible to minimize the number of people who will stop working hard because they know that they can collect wage insurance instead.
A new kind of insurance
Since people very rarely undertake retraining, they are doomed to be well or badly off as their occupation rises or falls. However, an individual cannot really affect the position and prospects of his occupation. We need to measure the risks of occupations and track the historical income levels in various fields. Only then we can set up well-designed livelihood insurance policies, but we cannot afford to wait too long before we introduce such schemes.
USA: Entrepreneurial center?
Mr. Shiller also tells of how he tried to launch an innovative financial product. The primary aim of wasn’t solely to make money as there were social problems likely to be mitigated with the product. However, US regulators required the product to fit in with their existing structures and the process was bureaucratic and very slow. There is a legitimate reason to be cautious, because new financial products are usually motivated by an effort to exploit others. Another problem is the patent office is not getting enough resources to be able to deal with new patents properly. Therefore, the famous economist is encouraging young students who are willing enter a career aiming to improve society to choose a career as a regulator.
-jk-