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In this week’s Grumpy Economist Weekly Rant, John Cochrane examines Governor Gavin Newsom’s executive order on artificial intelligence and its focus on the prospect of widespread AI-induced unemployment. The order calls for expanded safety-net programs, subsidized employment, worker training, collective bargaining, public-private partnerships, and government support for employee-owned companies.
Cochrane argues that these proposals apply familiar political remedies to a problem that remains largely hypothetical. Technological innovation has repeatedly changed the nature of work without producing permanent mass unemployment, while California’s existing employment challenges have little to do with AI. Rather than allowing consumers, workers, investors, and companies to shape technological adoption through voluntary choices, Cochrane warns that the order defines public participation primarily through government direction, taxation, and compulsion.
Transcript
Hi. I’m John Cochrane, senior fellow here at the Hoover Institution, and welcome to my Grumpy Economist Weekly Rant. Today, I’m going to rant about Governor Gavin Newsom’s AI executive order.
Now, last week, I poked a little bit of fun at an open letter demanding that policymakers act now to steer AI to complement humans and benefit society. But it turns out policymakers don’t need us eggheads to urge them on. They’re hard at work already. So today, I thought I’d take a look at Governor Gavin Newsom’s executive order on AI. Newsom is sort of a centrist Democrat, and given the voters’ habit of throwing the bums out every four years, his order offers a glimpse of what might be coming.
The order centers on the fear of widespread AI-induced unemployment—something so far completely hypothetical and never seen in other historical innovation episodes. And the answers are straight from the 1930s.
Even if they did any good then, AI unemployment is boom unemployment. It’s not Great Depression unemployment. And the order long-windedly announces how many of these programs the government’s already doing, which proves just how ineffective they are. California has an employment problem, and it has nothing to do with AI.
The order directs the state to pay lots of people to write reports that nobody will read. Well, maybe AI can write all the reports for free.
Newsom then gets to work, demanding a review of policies and practices that provide displaced workers with a safety net, including severance, strengthening existing programs, including subsidized employment. Apparently, the government needs a commission to review its own programs. Subsidized employment?
It goes on: expanding awareness of and enrollment in employment insurance programs. Apparently, the suffering masses need help to find the free money.
It says, identify, promote, and enhance service opportunities for those experiencing long-term unemployment and other potential employment disruptions. Connect unemployed workers to opportunities for training and upskilling. Volunteering? Really? More job training schemes added to the dozens already in place?
Review the collective bargaining process, including how workers’ voice is incorporated in the adoption of emerging technologies. More unions, worker voice. Like the useless firemen on diesel engines and rules against automating ports. You know where that’s going.
Support the regions facing systemically high unemployment. Yeah. There’s unemployment in Fresno, and it has nothing to do with AI.
And now here’s the crescendo with revealing euphemisms: alter incentive structures to generate AI development and deployments that advance the public good and address critical problems and emerging opportunities facing society.
Just think about what “alter incentive structures” means. Imagine the state’s definition of public good, critical problems, and emerging opportunities. It wants public-private partnerships, voluntary or mandatory programs that direct a portion of revenue generated by AI companies.
How would you like the governor to direct a portion of your salary? That’s called taxes.
It goes on: securing dedicated access to computing power for research and development of AI that meets specified criteria for advancing the public good. Securing? That means taking by means other than buying.
And finally, expand and enhance worker ownership models, employee-owned company structures, direct and indirect economic support, and government spending for the formation or conversion to employee-owned companies.
So that’s the answer to AI. The same warmed-over, soft communist idea that’s been batting around faculty lounges ever since they had to admit that Stalin was a pretty bad guy. Worker-owned collectives. Run the company like your homeowners association, a well-tried and proven disaster.
What will the government do about AI if it’s allowed to regulate? Round up the usual suspects. The answer’s always the same. It’s just the questions that change. AI poses an unprecedented challenge? Ramp up the New Deal.
The order includes a revealing statement on which I close: Workers and consumers should have a voice in the future of broad-based technological adoption.
Yes, they should. And they do, via the products they choose to buy and to use, and via the companies they choose to work for and invest in. That one sentence reveals so much: the view that people only have a voice through the political process, which ultimately means by compulsion. That’s the antithesis of America.
Well, thanks for listening. And if you enjoyed my weekly rant, please click to subscribe.
John H. Cochrane is the Rose-Marie and Jack Anderson Senior Fellow of the Hoover Institution at Stanford University. An economist specializing in financial economics and macroeconomics, he is the author of The Fiscal Theory of the Price Level. He also authors a popular Substack called The Grumpy Economist.