Daron Acemoglu: prediction

Transcript context

…There’s plenty of papers showing automation brings prosperity, right? You could say the whole history since the Industrial Revolution. No, those are macro things, and let’s come back to that. The evidence in terms of what automation does, at least at the firm or the sectoral level, is very clear. It does reduce the labor share. I have several papers on this. There are another 20, 30 papers. This is one area where evidence and theory are very well aligned. When you look at how it does it, it just really coheres with the theory. What automation is, is that it takes tasks or activities that were previously performed by labor and it transforms them to capital, algorithm, machinery, or whatever, robots. That has a first-order impact on the labor share because fewer things are done by labor. Now, that doesn’t mean labor is going to get unemployed. There could be enough demand from nonautomated tasks for labor, but that would never come back to increase the wage enough to restore the labor share to where it is. That’s exactly what the theory is. Then when you look at the data, and in some papers we’ve been able to do that at the sectoral level, but in some papers really look at it very micro about what tasks are disappearing, what kinds of workers’ wages are changing, what kind of employment is changing, it coheres very well with the theory. Now, at the macro level, it’s more complicated because there are composition effects between like Walmart effects and things like that, so we can talk about those, but I think the evidence, at least the ones that I know, is very clear that automation will reduce the labor share. That doesn’t mean reduce the wage. Sure. Wages are very high in the United States.…

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