Was Keynes really wrong about the economic possibilities for our grandchildren?

In his 1929 essay “Economic possibilities for our grandchildren” Keynes wrote that technology would create an age of abundance and that by 2028 we would be working three hour days. Reading that just now in a New Yorker essay I was struck by the fact that I feel the same about our grandchildren.

Keynes, however was wrong. We’ve had the technology progress in spades, but we haven’t got any more leisure time. If anything we are working harder.

So why was Keynes wrong?

I think Keynes got it wrong because he misunderstood human nature. He erroneously thought that once people have achieved a certain level of life quality they would choose to work less and stay at that level, when in fact we have all chosen to work as hard or harder in a never ending quest for greater satisfaction. Put differently, we continue to work to our full capacity so that we can afford things like laptops, Xboxes, and True Religion jeans that we never knew we needed. The irony of course is that once we’ve had these things for a short time we stop deriving satisfaction from them and start craving the next new thing all the while never feeling we are any happier. This cycle of demand creation and fulfilment is at the engine of the capitalist system.

Will it be the same again in the next hundred years?

Predicting the future is of course a dangerous business, but I think that in the next hundred years Keynes’ prediction will come true. The main reason it will be different this time round is that in robotics and artificial intelligence we will have labour replacement technologies. The other reason it will be different this time is that the technological changes are coming through much faster this time round and I doubt our desire to consumer new things will accelerate at the same pace.

The path to reduced working will not be smooth though. For many it may be enforced rather than chosen as 45% of jobs are at risk from automation in the next twenty years. Already we are facing problems due to rising wealth inequality and the problem will get worse before it gets better. We need a strong response from government to address societal perceptions of unfairness and increase social mobility or I fear we will start to see great swathes of society taking to the streets in protest.

However, whilst I am nervous about the short to medium term I’m optimistic about the long term. Improvements in technology will bail us out in the end.