Robots, Growth, and Inequality

• Author: Andrew Berg, Edward F. Buffie, and Luis-Felipe Zanna

Robots, Growth, and Inequality Finance & Development, September 2016, Vol. 53, No. 3

Andrew Berg, Edward F. Buffie, and Luis-Felipe Zanna

The robot revolution could have profound negative implications for equality

Some say the world is entering a “second machine age.” Every week we read about a new application of artificial intelligence, so-called deep learning, and robotic technology. Automated delivery trucks, electronic teaching and scheduling assistants, computers that replace paralegals, and self-driving cars are just a few. Some seem to approach the “robot” envisioned by Czech science fiction writer Karel Čapek, who coined the term in 1921 to describe an intelligent machine essentially indistinguishable from a human.

No one knows where this technology is headed. Robert Gordon argues that economically meaningful technological change—and productivity growth in the United States—has slowed since the 1970s, except for a decade-long tech boom ending in 2004 (see the June 2016 F&D). But when it comes to intelligent robots, we may be in the early stages of a revolution, and economists should think hard about what it means for economic growth and income distribution.

Competing narrativesTwo narratives have emerged in the economic literature on technology, growth, and distribution. One says that technological advances raise productivity and thus output per person. Despite some transitional costs as particular jobs become obsolete, the overall effect is a higher standard of living. The history of this debate since at least the 19th century seems to yield a decisive victory for technological optimists. The average American worker in 2015 worked roughly 17 weeks to live at the annual income level of the average worker in 1915—and technology was a huge part of that progress (Autor, 2014).

This optimistic narrative points to the many ways that technology does much more than displace workers. It makes workers more productive and raises demand for their services—for example, mapping software makes taxi (and now Lyft and Uber) drivers more efficient. And rising incomes generate demand for all sorts of outputs and hence labor. A wave of fear about the implications of computerization for jobs surged in the United States in the 1950s and early 1960s, but subsequent decades of strong productivity growth and rising standards of living saw roughly stable unemployment and rising employment.

The other, more pessimistic, narrative pays more attention to the losers (see, for example, Sachs and Kotlikoff, 2012; Ford, 2015; Freeman, 2015). Some of the increased inequality in many advanced economies in recent decades may result from technological pressure. The computer revolution has reduced relative demand in developed economies for jobs involving routinized work (physical or mental)—think bookkeeper or factory line worker. Because computers combined with a smaller number of—generally more skilled—workers have been able to produce the goods previously associated with these jobs, relative wages for people with fewer skills have fallen in many countries.

Will robots be different?Where might intelligent robots fit in? For a bird’s-eye view of this question, we designed an economic model that assumes robots to be a different sort of capital, one that is a close substitute for human workers. Macroeconomists usually think of production as resulting from the combination of physical capital stock (comprising machines and structures, both public and private) and labor. But thinking of robots as a new type of physical capital, one that in effect adds to the stock of available (human) labor, is surprisingly instructive. Production will still require buildings and roads, for example...