Paul Krugman is here actually addressing a slightly different question: have we reached a slow down in technological innovation? But in the answer to this question is the answer to what’s going to happen to us once the robots can do everything better than we can, what will happen when the robots take all our jobs.

"Well, suppose that we learned to build true androids – robots that could do more or less anything humans can do. Surely that would be transformative; it would effectively end diminishing returns to capital accumulation, and raising GDP per capita would simply be a matter of multiplying the androids."

That Krugman thinks we’re closer now to building androids than we were isn’t relevant to this next part of the argument. But that argument that “if we can build androids then” is exactly the same one as what happens when the robots take all our jobs? They’re the same statement in fact.

And the answer is that we humans all become immensely rich. Because if we want to have some more of something we just construct an android to go off and make more of whatever good or service it is that we want more of. We find ourselves in a world of pretty much no material scarcity. We’re still bounded by resource scarcity of course: we cannot have more energy or atoms of copper than is to be found on the planet. We also still have a scarcity of positional goods. But actual real material scarcity pretty much disappears. There is one further question though:

"You might also be a pessimist in the sense that you wonder what happens to wages once androids can do most human work."
 
That will depend upon the economic system we adopt. If we’ve pretty much abolished material scarcity then of course real wages have just soared. Real wages being, really, a measure of how much consumption is possible rather than the nominal value of earnings. If you are of a Marxist persuasion you might think that all of the money from those androids will just go to capital, leaving the workers starving and destitute without any jobs and thus not earning at all. But to do that you would have to believe in Monopoly Capitalism, this idea that the capitalists as a class will gang up on everyone else and keep all the good stuff for themselves. But note that this does depend upon that monopoly.

If the monopoly is broken then the various capitalists will be competing with each other for the custom either of building and selling androids to people or of selling the things made by robots and androids to people. Competition does, as we can see from the world outside the windows, bring prices down somewhat. And if everything is being made by robots (including the robots themselves of course) then there is effectively no cost of production. Or rather the only cost of production is the original capital investment in the androids, the hard limits of resource availability and the inherent shortage of positional goods. For everything else, as no human has had to drip the sweat of their brow to produce it then no human being needs to get paid to do so. Which is what is being complained about of course, the absence of jobs. But that very absence of jobs in producing anything means that the cost of production is zero.

At which point we’ve legions of competing capitalists attempting to outdo each other at selling us the production of their armies of robots. Prices collapse and we’re all near infinitely rich.

Amusingly, at this point, those of a Marxist cast of mind should be able to recognise the scene. For this is what Marx called true communism. When the productive capacity of industry has reached the point where all needs and desires could be met then we will indeed be at that communist nirvana. Marx though that this would means that people could do much as they wished, be a farmer in the morning and a philosopher in the evening. Or as we might put it, do a bit of gardening and then yakk with the guys over a few beers. If we’re honest it doesn’t sound like such a bad world either. And it is what will happen in a competitive marketplace if the robots ever do get good enough to steal all our jobs. We’ll have a cornucopian river of goods and services to consume that are produced for us by said robots. That is, we’ll all be rich.

I don't buy it. People will jet start having kids like crazy