For the purposes of the rest of the discussion, this negative but
plausible scenario will help provide a context for structural change
in the economy. This, though, is not a unanimous perspective; there
are also those (e.g., David Autor, an MIT economist[ 3]) who hold
the view that the fallout from advanced technology could be quite
the opposite and prove to be a catalyst for economic expansion,
as has happened previously throughout history.
To comprehensively explore technological unemployment, a
much more in-depth look is required—not only into advanced
technologies and their impact on the economy (both the potentially positive and negative labor market outcomes) but also
at how any associated economic transformation unfolds, the
human condition as jobs become scarcer, the possible range (and
urgency) of political responses, and perhaps some consideration
of possible end-states.
Several solutions have been proposed in response to an employment outlook that is significantly worse than of the late 20th
century. These include a “robot tax”[ 4] that could provide funds
for retraining (and act as a mild disincentive to adopting new
technology) and programs such as UBI. While there are variations,
UBI generally refers to a national income program that provides
unconditional, periodic, preset payments to all the citizens of a
country, in lieu of the different safety net programs such as unemployment benefits, earned income tax credits, and others payable
on satisfying program criteria for the benefits.
Before considering UBI, though, it may be helpful to revisit the
topic of “money” because UBI may seem to be a radical departure from current norms for income—such as its give-and-take
relationship with labor, for example.
And, perhaps to a lesser extent, because actuaries’ work is
closely allied to monetary evaluations, a refresher on the concept
may add more color to our world.
The Color of Money
In what follows, the treatment of “money” is rather focused,
not exhaustive. The description here is in the context of the U.S.
environment, including the U.S. dollar’s international role as a
So what is money? Money essentially is an abstract idea pred-
icated on trust, without which it does not work. When it does
work, it is indeed a very powerful idea. Money shapes and defines
us and is an important factor in the choices we make—whether
individually or collectively. It has been a key ingredient in the
development of market economies.
Before the advent of currency, barter was the method for trade,
which had become an important economic activity. Barter is not the
easiest practice, and so it gave way gradually to commodity-based
currency and over time to fiat currency.[ 5]
Fiat money, unlike money based on a commodity like gold,
has no underlying value, nor a “promise of redeem-ability” into
something of value. On its own, it is composed of cheap paper and
worthless metal. It derives its value from its status as legal tender
for payments and because of universal trust in its stability. Central
banks, however, target a certain level of inflation in an economy
(presently around 2 percent in the United States) and so build in
a gradual erosion to its purchasing power.
Most major currencies—U.S. dollar, euro, yen, British pound,
Swiss franc—are fiat currencies; some currencies are pegged to
others, e.g., the U.S. dollar or the euro.
Neha Narula, research director of the Digital Currency Initiative
at MIT, in her TED talk, “The Future of Money,” mentions that
irrespective of what is backing the currency, “The only reason these
By the Numbers
To give a context to the U.S. currency, the actual amount
of dollar bills and coins in circulation on April 26, 2017,
was around $1.5 trillion, compared to total Fed assets of
$4.5 trillion.[ 8]
To provide context, the U.S. GDP is approximately $18.9
trillion as of April 2017.
The “currency component,” which circulates in the
system, is estimated to be around 10 percent of the total
money measured by the broader M2 definition.