DRI-304 for week of 8-4-13: Don’t Bemoan the Demise of Truck Driving – Hasten It

An Access Advertising EconBrief:

Don’t Bemoan the Demise of Truck Driving – Hasten It

Milton Friedman aptly described the profession of economists when he declared that “we are all of us teachers.” An occupational pastime is using economics to overturn popular fallacies and conventions. The other side of that coin is exposing the misuse of economics by those who purport to understand it, but don’t.

The mainstream press has long run rampant with pseudo economics, but the world’s leading financial publication would seem to be the wrong place to look for it. Thus, the July 24, 2013 article by Business Editor Dennis K. Berman, entitled “Daddy, What Was A Truck Driver?” comes as an unpleasant surprise.

The subtitle captures the tone of the piece. “Over the Next Two Decades, the Machines Themselves Will Take Over the Driving” invites the reader to draw two obvious inferences. First, machines will replace people as drivers of trucks. Second, the process of replacement will take a long time.

What should we say about that? The author says quite a bit, cloaking himself in what he thinks is the rhetoric of the economist. Not only does he say it badly and wrongly, he omits what most needs saying – the matter of life and death.

The Implications of the Driverless Motor Vehicle

The WSJ piece trades heavily on the hoary pejorative cliché of technology as relentless destroyer and dehumanizer of work, the subtle message is that machines are inevitably fated to “take over” from human beings. The reader feels that same visceral loss of control most people feel when forced to relinquish the driving to somebody else. Ceding control to a machine they have been repairing and replacing since adolescence does not come easily.

Having set the (poisoned) mood for his audience, editor Berman proceeds to work them into an emotional state using bad economics. Although he feels that “most of the hubbub” created by driverless vehicles “has focused on passenger vehicles, notably Google’s promotional wonder, the Google Car,” we should really be worried about the nation’s 5.6 million licensed truck drivers. “Over the next two decades, the driving will slowly be taken over by the vehicles themselves. Drones. Robots. Autonomous trucks” like the fleet of 45 self-directed mining trucks now working Caterpillar, Inc.’s Australian iron-ore site.

Uh-oh. With the hostile takeover of machines in place, can an emotional appeal for their human victims be far behind? No, indeed. After “watching a half-decade of lagging U.S. employment, it’s hard not to feel a swell of fear for those 5.6 million people, a last bastion of decent blue-collar pay… A world without truck drivers may eventually be a better one. But for whom?” The dispassionate reader is left to account for the rapid decline of print media by its lack of a string section to accompany operatic prose like this.

Berman makes a feeble effort to make an economic case for the driverless car. “Economic theory that such basic changes [as the substitution of machines for labor] will, over time, improve standards of living by making us more productive and less wasteful.” His example of improved productivity is that an “idle truck with a sleeping driver is just a depreciating asset” to be corrected by driverless vehicles.

This is both brainless and half-hearted.  The economics he thinks he is preaching are foolish and he does not know the subject well enough to preach the real thing. Virtually any truck – including driverless ones, when they begin to operate – is a depreciating asset, so depreciation itself is not the wasteful element. An idle truck is a non-productive asset, regardless of its driver’s state of consciousness, which is where the waste lies. Driverless vehicles will indeed operate 24/7, which only scratches the surface of their productive potential.

Driverless vehicles are a wondrous innovation not in spite of the fact that they replace human beings but because of it. The worst thing about people driving cars and trucks is that they get killed doing it. Intrepid editor Berman never explicitly mentions the 30,000-plus annual fatalities lost to auto and truck crashes in the U.S.; the closest he comes is to acknowledge a “payoff” to driverless vehicles of $87 billion in cost savings from the 116,000 injuries and deaths resulting from accidents. This is conclusive proof that the author’s effort to cover his subject has gone off the road and into a ditch, figuratively speaking. What ordinary person could overlook the death of 30,000 people yearly?

A child goes missing for a few hours and the local community switches to full alert. A man dies while jogging and a period of mourning ensues. A plane crash killing three people hogs the headlines for a month. How could it be that an innovation now operational that is virtually certain to save 30,000 lives per year could simmer gently on a developmental back burner while journalists agonize over its labor-market effects? This must be the most half-hearted job of reporting ever done in a profession whose entire raison d’être has morphed into the task of mobilizing emotion.

What went wrong here?

Economics Is All About Value, Not Jobs

For over 40 years after the ascendancy of Keynesian economics in 1936, the economics profession obsessively erected, refined, discussed, researched, picked over and sifted the Keynesian model. Eventually, its major tenets were overturned. But by that time, the Keynesian framework had been established as the lens through which the profession saw the world. Specialties in macroeconomics were available in every major Western university; courses and textbooks were features of the landscape. Although the bases for Keynesian policy recommendations had been discarded, the policies were retained on the ground that macroeconomic stability could be maintained more securely and regained more quickly by activist policies than by laissez-faire.

Worst of all, the economics profession forgot to tell the general public that Keynesian economics, like Freudian psychiatry, was an outmoded relic whose unsound precepts did more harm than good. Consequently, the public – particularly the mainstream news media – continued to follow a crude version of Keynesian economics by embracing the idea that saving was bad, spending was good and certain kinds of spending would trigger multiplier effects that would employ the idle, cure the sick and invigorate the halt.

The extended 20th-century release of economic theory from its sturdy microeconomic moorings to founder on the rocks of macroeconomics has been hard enough on the economics profession. But at least we can hope that professionals will eventually find their way back to sanity. What can be done for a public that long ago forgot the little it knew about sound economics?

The only refuge is the catechism of economic truths. Economics is about value, not jobs. We could achieve “full employment” by conscripting available labor to dig and refill holes or build pyramids, but that would not create value. Driverless vehicles not only use available vehicles more efficiently, they also preserve labor by preventing needless deaths.  This combination of capital goods more fully employed and more labor spared to produce goods and services cannot help but increase the volume of output tremendously. This is the productive value created by driverless vehicles.

But even this does not capture the full measure of value creation. The increase in human happiness resulting from an increase in goods and services cannot compare with the joy of those who are spared decapitation, crushing, fatal bleeding and death from shock in vehicular accidents.

Reporter Berman cites “economic theory” as his authority, but economic theory gives no grounds whatever for putting the displacement of 5.6 million truck drivers ahead of the lives lost to highway deaths – to say nothing of the vast productivity gains that would accrue to driverless vehicles. Just the contrary: economics is all about taking resources like truck-driver labor and putting them where they do the most good, which in this case is somewhere other than driving a truck

 

The fact that reporter Berman is in such agony over the future unemployed truck drivers rather than the present dying traffic-accident victims is implicit testimony to the ineffectiveness of macroeconomics. The very theory that gives such obsessive attention to the problem of unemployment has failed conspicuously to address it. The only valid theory of employment is the microeconomics of value creation, which enlists the price system to re-employ laid-off workers in pursuits suitable to their productivity. History testifies to the efficacy of this system as well as to the failures of macroeconomics.

 

Money Is a Veil; It Is Real Variables, Not Monetary Ones, That We Care About

There is no reason not to express the prospective gains of driverless vehicles in their most vivid form rather than obscuring them inside some enormous, round monetary sum. Alas, the decades of living under Keynesian thrall have convinced people like Berman that economics demands a knack for putting a dollar value on everything. That is why he says absolutely nothing about the real value created by driverless vehicles and contents himself with citing a monetary “payoff” of $87 billion. This bloodless bottom-line total says almost nothing worth saying on the matter.

Berman cites a trucking-company president who predicts that “we will have a driverless truck because there will be money in it.” Berman correctly says that “commercial uses are where the real money and action lie,” but doesn’t trouble to tell his audience why this is so. And this is not a case where the facts speak for themselves.

Every time a truck driver climbs into a cab, there is money on the line. A large number of real variables underlie this monetary relationship. Money rides on the successful completion of the trip, on its speed and on its safety. The driverless vehicle will improve rates of success in each of these areas. A truck is a capital good whose rate of utilization will be dramatically improved by going driverless. Drivers are expensive to acquire, train, pay, medically treat and support in retirement. Driverless vehicles will drastically reduce or even eliminate these costs – of course, these cost reductions will be counterbalanced by increases in maintenance and technical costs.

Safety is the real variable that gets, and deserves, special stress in this account. “Human drivers will often make judgments, most good, but some bad, and those inconsistencies can lead to problems,” reminds Ed McCord, Caterpillar’s safety director. If a truck “is supposed to be in fifth gear coming down a grade, it will be in fifth gear every time” when the truck is driverless. This elimination of driver error is what will cause vehicle accidents to approach zero asymptotically when we go driverless.

On the passenger side, the benefits of driverless vehicles are increased safety and convenience. These are considerable, but they do not approach those on the commercial side either in number or size. They are also somewhat counterbalanced by the driving pleasure and enjoyment of risk experienced by drivers of passenger cars, which have no correlatives on the commercial side. (The principle of risk compensation is why various safety features, particularly coercive seat-belt and anti-texting laws, have failed to meet predictions of improved safety results. The safer vehicles become, the more risky become the habits and behaviors of their drivers.) The incentives to adoption on the passenger side are nowhere nearly as strong as on the commercial side.

Thus, driverless vehicles will be adopted en masse commercially, but much more gradually as passenger vehicles. As the cost comes down, technology improves and public acceptance increases, all vehicles will eventually go driverless.

Why In the World Must We Wait 20 Years For Driverless Vehicles?

Having upbraided editor Berman so severely for his errors, we now honor the practicality of his prediction that it will take two decades for driverless vehicles to become a reality. As we have shown conclusively, this delay will not be salutary. Thousands of human beings will die needlessly in highway crashes; huge amounts of potential output will be lost.

In mid-20th-century America, we resolved to reach the moon and succeeded within a decade. Today, with vastly superior technology and a whopping head start, we won’t forestall hundreds of thousands of deaths. We won’t increase our productivity by leaps and bounds. We will take twice as long to establish our goal of driverless vehicles as it took us to reach the moon.

What is holding up the show?

Berman gives us a broad hint. “It is going to take a long time to prove the case [for driverless vehicles] to government and the public.” It is? Well, it would certainly take Berman a long time, since he persists in ignoring the real value created by driverless vehicles. But we aren’t dependent on his efforts alone. Why should the public prefer to die rather than live, for example? Why should it choose less output rather than more? Left to its own devices and the results of competitive markets, the public would embrace driverless vehicles. No, Berman has identified the roadblock. It is government.

The federal government has an entire cabinet-level department – the Department of Transportation – devoted to regulating the transportation industry. It spends much of its time regulating drivers, particularly truck drivers. The demise of the drivers would leave it with very little to regulate, which would leave it with very little rationale for existence. This means that the federal-government bureaucracy will fight the advent of driverless vehicles tooth and claw. It will find and every possible excuse to delaying their introduction into the market. It will call them unsafe. It will call them introductory and untried. It will call them experimental. It will call them everything but Caucasian and it will require studies, hearings, public meetings, rulemakings and pronouncements by commissioners in order to sanction their use.

The more regulatory dust federal bureaucrats can throw up, the longer will be the delay in implementing driverless vehicles. The longer the delay, the more taxpayer money, agency employment and just plain power federal bureaucrats can wring from the regulatory process. In this case, “use it or lose it” applies just as strongly to regulation as to physical vitality. The opportunity to regulate is a crisis that regulators can’t afford to waste, just as political administrations can’t afford to waste the opportunity to accumulate power that a crisis affords.

The DOT has already telegraphed its intentions by stating that it will not allow private firms to proceed with autonomous vehicle development on their own. DOT will have to develop regulations governing that development. Naturally, that will take time. Public hearings will have to be held. There will be the usual process of rulemakings preceded by public notification and followed by public comment. The whole process will move forward with the speed of an aging glacier. We can’t be too careful, after all. People’s lives are at stake. Why, if we just let private business firms go full speed ahead, at their own pace, something might go wrong. Somebody might get hurt. Better to go slow. That way, nobody can accuse the federal government of responsibility for death or serious injury through carelessness or negligence.

Better safe than sorry, right?

Economists, sticklers for detail, aren’t satisfied by time-honored clichés. They want to know who is safe and who is sorry and how much, in each case. Regulators really mean “better that regulators should be safe than sorry.” But whose welfare are we supposed to be enhancing here, anyway? Regulators may feel safe, but that doesn’t do anything for the people that regulators are supposed to be protecting on the nation’s highways. The problem here is that the regulatory process puts all the emphasis on avoiding one kind of mistake – allowing death or injury that could have been avoided by regulation – and virtually none on avoiding the other kind of mistake – overregulation that prevents businesses from developing new ways of preventing death and injury. That allows regulators in effect to get away with murder under the guise of doing their jobs.

What Was a Truck Driver, Daddy?

Shockingly, editor Berman apparently thinks he has posed a devastating rhetorical question with his “What Was a Truck Driver, Daddy?” In fact, the answer is simple and straightforward.

During the course of 237 years, America has seen hundreds of jobs and dozens of professions come and go. Some of them, such as the cowboy, are still viewed with nostalgic reverence. Many more are now forgotten.

A truck driver was a dedicated professional whose heyday saw him haul some two-thirds of America’s freight. Like the cowboy, he enjoyed an outdoor life suffused in the simple virtues of mobility and independence. The romance of his job overshadowed its monotony and financial limitations – something else he shared with the cowboy. He rode high, wide and handsome for a century, a longer run than his Western predecessor. He had no kick coming and nothing to apologize for – unless he spoiled his final days by whining about his betrayal by fate and the living the world owed him. The many millions who went before him did not receive handouts or exemptions from obsolescence. When their time came, they stepped aside and either retired or changed jobs or careers.

A true Knight of the Highway would never claim a right to hang onto his job at the cost of somebody else’s life.