Not the Nightmare Scenario

Our equine economist on the economic possibilities for our grandchildren

Greetings, humans.

Oftentimes the worst case story told by your doomsayers of automation is that you might be to AI, as we horses were to the automobiles.

And indeed, in the short-run, we did suffer. Within 60 years of the release of Mr. Ford’s Model T, the first mass-manufactured car, our US population declined by 80%. Many of my ancestors were sent to the glue factory, their final contribution being to hold together furniture rather than society.

Yet, in the long-run, we have done pretty well, thank you very much.

We find that total horse welfare, including when adjusting for population, peaked in 2000 and has stayed high since. That means that, under our best guess of the population’s happiness, both the average and total welfare was maximized in the early 21st century. Population adjusted welfare peaked in 2000, and remains higher today than at any point in the 20th century. This may be a cause for hope.¹

How did we go about measuring horse welfare? The response rate on our happiness surveys weren’t high enough. What was it like to see automation as it was happening (contemporary reactions below)?

One particularly alarmist report of the “New Horse Times” from April 1, 1909.

The Intuition

Our economy consists of labour (manual work like pulling) and capital (all the existing ploughs and carriages) to produce output — happy consumption hay.

We horses generally don’t control our own population. While we can choose whether to mate or not in the wild, the vast majority of our population (99.92% as of 5 years ago) is determined by your breeders.

This complicates things because, unlike humans, if we became more “productive” (i.e. able to generate more value per hour worked), the breeders, influenced by your free market, would simply breed more of us.

We are in the Malthusian trap. We don’t keep the profits from our hard labor nor do we control when we have foals. Therefore, our welfare will fall until we reach subsistence levels.

This means that each time horse productivity changes, on a short enough timescale, the free market breeds more horses until the marginal horse is worth as much as before — our total opportunity cost to be kept as low as possible. By how much? This hinges on the price elasticity of demand - how large a change in prices a 1% change in quantity would cause. Racehorse demand is highly elastic at -2.35, but quarter horse data suggests a combined elasticity of -0.98, which will be used here.

Now seems like a good time to talk about what we mean when we say “welfare.” Welfare consists of:

• Our total consumption (apples, sugar cubes, stablespace, silk ribbons),

• How long and hard we had to work to get that consumption (how many hours spent pulling a carriage or heavy iron plough, building a windmill),

• Our life expectancy, i.e. how long we have to enjoy the fruits of our labor.

We consider all of these factors when we say horse welfare in the 21st century is the highest it's ever been, for each individual horse (which makes sense, pasturing is much easier than pulling) but, surprisingly, if the culling of horses hadn’t happened (i.e. population had stayed the same from the early 20th century), aggregate welfare would be higher.

This is interesting because constructing this constant-population counterfactual would significantly reduce the wages and consumption of horses - but they still come out ahead.

Consumption

For the model, we assume that horse consumption is constant over time — we aren't getting any nicer food or stables etc. — which is very conservative. In fact, I do enjoy better feed than my ancestors — quality hay twice daily, the occasional bran mash, and actual veterinary care when I'm ill — luxuries my great-grandsire could never imagine while chewing on moldy oats after fourteen hours of pulling streetcars.

Unlike the real world, in our hypothetical world where, more analogous to humans, the population hadn't taken the “slack” for the loss of productivity (i.e. the marginal horse starved/was not worth keeping), the consumption of the horses did.

Wages

Labour and capital combine for output. Initially, horses were the only source of labour — we worked ~9 hours a day, up to ~1900. Our bodies are enhanced by capital, such as ploughs and carriages, but try putting a plough in a field without a horse! Output would be 0 if you did not have both us and your tools for the set of tasks that any respectable 19th century horse would perform.

Starting from the invention of the motor car, and beginning in earnest with that wretched Model T in 1909, those noisy machines began to partially substitute for horse labour. They can do some tasks much better (though I still maintain they're frightful on long journeys), some only slightly (have you ever seen a Model T prance elegantly for the Queen?), and some not at all. Not very many therapy cars out there, I see.

The idea is that wages are the product of the marginal return to labour, and the marginal returns to horse labour within labour. Initially, when you create a lot of cars, the marginal return to total labour will drop a lot.

After they figured out reliability, cars were strictly a better means of travel. Contemporaneous monitoring organizations like Mechanical Equine Transit Replacement (METR) projected the reliability over time.² But eventually, as that the cars stopped encroaching on our task share, we will found our niche again - how many therapy cars have you ever encountered?

Life Expectancy and Work Hours

Our life expectancy has improved dramatically across America over the past 2 centuries. Consider this: where my great-granddam collapsed at age 7 after years of brutal city work, I can expect to live past 25. This matters tremendously—each additional year of life brings joy that doesn’t diminish like the pleasure of an extra apple or fancier blanket.

Meanwhile, our workload has virtually disappeared—from my ancestors’ backbreaking 9-hour plough days to my luxurious schedule of occasional light riding.³ To understand what this means for our welfare, economists try to calculate how much we horses value leisure versus work.

For humans, statistical value of life calculations 1 hour of work is worth about 0.88 hours of leisure—but let’s be honest, pulling a loaded coal cart uphill feels much worse than these figures based on air conditioned office jobs!⁴ Still, we’ll use conservative estimates: and assume we horses have a time preference discount rate of 2% (meaning we slightly prefer hay today over hay tomorrow), and our statistical value of life is 2.5. This means we highly value our longer, easier lives.

Welfare results by year are above. Horse welfare dropped by much less than population over the 1920-1960 period because it coincided with major growth in life expectancy. Today, the horse welfare index stands at 185, compared to 183 at its height in the 20th century in 1920. While any estimates here are necessarily quite imprecise, we can state with some confidence that the invention of the automobile was not catastrophic for our welfare.⁵

Conclusion

You humans now stand where my kind once did—at the precipice of replacement. Your "artificial intelligence" gallops toward you much as the automobile once thundered toward us. We each had no property, had no other members of our species who owned assets we could rely on to purchase our labour and had no power in the political process. And still outcomes for us were far from terrible, with welfare only falling 26% from its peak and quickly recovering.

Unlike us horses, you own ourselves, and thus your wages, and you own tangible capital in the economy and control, somewhat, your own political process. By default, these may be sufficient to allow a rather better outcome for humanity than the reasonably good one we achieved for horses. With the development of superintelligence, you better hope that you can keep it that way.

1. This post was inspired by the realisation that all of Maxwell Tabarrok’s arguments in “What About the Horses” imply that horse wages should actually have grown in response to automation too, as horses are not perfect substitutes for cars, can absolutely use capital and other technology improvements over time and humans have preferences for horse produced goods even though horses don’t have the assets to buy horse-produced goods themselves.

2. At least once the Red Flag Act was repealed.

3. To be exact, average work hours were computed assuming that agricultural and city horses worked for 9 hours/day while recreational horses do not do so at all, and then weighting by the relative proportions of each horse type over time.

4. The US has a statistical value of life of $240k/annum, or about $40 per waking hour. Average wages are $35/hour, implying that living and working is 88% as good as leisure. Note that this figure was presumably lower in the past when work was much more manual and arduous than today.

5. Indeed, we horses arguably fared much better than many of our non-human competitors like chickens or pigs.