Higher Order Labor

As demonstrated in this example of mechanization:

I’m in Chicago at my Mom’s place for Christmas, and over dinner last night we were talking about Race Against the Machine and the steady pace of automation (because what else do I talk about these days?). She and her husband Gene told me that the Walgreens in their neighborhood didn’t have any human cashiers any more.

I told them they must be mistaken. I’ve seen plenty of self-checkout stations, but they’ve always been accompanied by at least one human cashier to accommodate customers who for whatever reason — unfamiliarity, techno-fear, the desire to chat, whatever — don’t want to deal with a machine. I assumed the same would be true at this Walgreens. Mom and Gene were adamant that it was 100% self-checkout, so we got bundled up and walked over to get the straight dope.

They were right and I was wrong. There are six NCR self-checkout kiosks at the entrance / exit, and no cashiers at all there. There are human cashiers at the photo lab and the pharmacy and customers can take their purchases to these two locations if they want, but at the main checkout area you can’t get rung up by a person any more.

This goes back to something I wrote about a month ago. The tendency in the free market is for labor to become of an increasingly higher order. Note that this is not an immutable economic law so much as an ex post observation. There is no reason to believe that this trend will continue, save for the purpose of thought experiments.

At any rate, the historical trend demonstrates two things. First, as intellectual capital increases, humans have a tendency to mechanize labor. The cotton gin and mechanical harvester are early examples, and the robotic assembly line and aforementioned cashier are more recent examples. The problem with machines, though, is that for all of their advantages they still aren’t perfect. They generally need maintenance of some sort and occasionally fail. Fixing machines, for the time being, requires human involvement.

This problem is generally solved first by increasing pay for those skilled at maintaining and repairing machines and then eventually simplifying the operation and maintenance of said machines so as to tap into unskilled labor (which the machines initially replaced). Basically, then, machines are a net benefit in the long run because they enable humans to capitalize on a broad set of intellectual capital via higher order labor. As such, one need not be a Luddite for economic reasons, as the market generally does a good job of solving the problem of labor displacement.

A Weakness in the "Small Batch" Manufacturing Paradigm?

I’m a huge fan of the changes described in Kevin Carson’s The Homebrew Industrial Revolution: A Low-Overhead Manifesto.

I love the fact that technology is enabling things like the re-localization of manufacture and a “small batch” ethos that lets people get something a lot closer to what they want instead of just having to settle for whatever one-size-fits-all model some megacorp produced a billion of.

If there’s a weakness there, I think it looks something like this [hat tip -- Judy Morris].

Fisker has built only 239 units of its 2012 Karma hybrid car, and is recalling them all because of a possible fire risk from coolant leaks.

Yes, the advantages of product continuity, economies of scale, etc. are over-rated in some important respects. But producing large quantities of a product that’s altered incrementally does lend itself to gathering more data from which problems can be detected and predicted.

Just as a ferinstance, as of 2010, Ford had sold more than 2.3 million Focuses over a 12-year period. Presumably real-world-experience information gathered from each previous year’s model (and over the history of its predecessor, the Escort) was used to improve the current one.

When you’ve only made 239 of a car, and only put 50 of those on the road, there’s a lot less specific data to generalize and improve from.

And what if the actual build of the car is done not by “repeat the same action over and over” assembly line workers, but by the actual customers; and not at one facility, but at one of a number of “micro-factories,” as with the ultra-cool Local Motors Rally Fighter? It seems that would make it a lot harder to reach a determination along the lines of “ah, that’s what’s causing those breakdowns — we should change the design to call for x pounds, instead of y pounds, of torque on that bolt.” Because you really have no way of knowing if your customer who built his car from your kit actually put x pounds of torque on the bolt, do you?

Then again, if you only produce 239 cars, I guess you don’t have to worry about recalling 3.8 million at one whack, do you? So if problems are more likely to go undetected/unpredicted in early design/testing, they’re also less widespread and easier to correct when you do detect them.

And the smaller the batch and/or more bespoke the final product, the more it’s a case of people getting what they actually want instead of what some bureaucratic suitie in Detroit decided they should have. Which, I think, goes a long way toward balancing out increased risk of undetected/unpredicted flaws. Especially since the Big Guys haven’t actually eliminated that risk, and in at least some cases seem to have just factored it in as a risk worth taking versus the bottom line.

More Pittsburgh real estate trends

Lest we forget some of the bigger stories in all of this. The other day I played with the housing data  for the trends across metro areas since 1991.  I have renormalized the data to show changes over just the last 5 years.  Just fun with numbers, but this is what you get:

So we can quibble over what the Pittsburgh time series means in itself, but clearly some awful awful times in a lot of, if not most, other real estate markets over what is now a half of a decade. So we are not merely talking about a bad month, quarter or even year. Some markets out there are stabilizing, but not all are and by most opining I see projects more pain elsewhere. All while

Anecdotal I know it is.. but if this is not a sign of something weird in local real estate markets I don’t know what is.  It is almost done, but there is not one, but THREE  new townhomes being squeezed onto this triangle plot of land (below) in Lawrenceville that I thought for sure was undevelopable.It really is kind of remarkable.

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I honestly had imagined a drill of some kind going in on that site. A bit too small I know.  Just so Wiz does not feel forgotten: Look at those parcels. Lawrenceville was one of the first parts of the city where the Landmen started to buy up leasing rights for Marcellus shale production within the city of Pittsburgh. By all acounts they have given up for now on city development, but why they started with the densist part of the city is just a bit confusing.

Economic Events on January 3, 2012

At 10:00 AM Eastern time, the Construction Spending report for November will be released, and the consensus is that there was an increase of 0.5% in spending compared to the previous month.

Also at 10:00 AM Eastern time, the ISM manufacturing index for October will be released.  The consensus estimate is that it increased 0.5 points last month to a value of 53.2, and will still signal economic growth as it stays above the mid-point of 50.

At 2:00 PM Eastern time, the FOMC Meeting Minutes will be released, which will provide insight into how the Federal Reserve board governors and bank presidents view the economy.