Economics and Artificial Intelligence
Friday, Jan. 6, 2017 10:15 AM – 12:15 PM
Hyatt Regency Chicago, Grand Ballroom CD North
- Chair: Avi Goldfarb, University of Toronto
Exploring the Impact of Artificial Intelligence: Prediction versus Judgment
AbstractBased on recent developments in the field of artificial intelligence (AI), we examine what type of human labour will be a substitute versus a complement to emerging technologies. We argue that these recent developments reduce the costs of providing a particular set of tasks – prediction tasks. Prediction about uncertain states of the world is an input into decision-making. We show that prediction allows riskier decisions to be taken and this is its impact on observed productivity although it could also increase the variance of outcomes as well. We consider the role of human judgment in decision-making as prediction technology improves. Judgment is exercised when the objective function for a particular set of decisions cannot be described (i.e., coded). However, we demonstrate that better prediction impacts the returns to different types of judgment in opposite ways. Hence, not all human judgment will be a complement to AI. Finally, we explore what will happen when AI prediction learns to predict the judgment of humans.
The Race Between Machine and Man: Implications of Technology for Growth, Factor Shares and Employment
AbstractThe advent of automation and the simultaneous decline in the labor share and employment among advanced economies raises concerns that labor will be marginalized and made redundant by new technologies. This paper examines this proposition in a task-based framework wherein not only are tasks previously performed by labor automated, but also more complex versions of existing tasks, in which labor has a comparative advantage, can be created. We fully characterize the structure of equilibrium in this model, establishing how the allocation of factors to tasks and factor prices are determined by the available technology and the endogenous choices of firms between capital and labor. We then demonstrate that although automation tends to reduce employment and the share of labor in national income, the creation of more complex tasks has the opposite effect. Our full model endogenizes the direction of research and development towards automation and the creation of new complex tasks. We show that, under reasonable conditions, there exists a stable balanced growth path in which the two types of innovations go hand-in-hand. Consequently, an increase in automation reduces the wage to rental rate ratio, and thus discourages further automation, encourages greater creation of more labor-intensive tasks, and restores the share of labor in national income and the employment to population ratio back towards their initial values. Though the economy is self-correcting, the equilibrium allocation of research effort is not optimal: to the extent that wages reflect quasi-rents for workers, firms will engage in too much automation. Finally, we extend the model to include workers of different skills. We find that inequality increases during transitions, but the self-correcting forces also serve to limit the increase in inequality over longer periods.
Benjamin F. Jones,
Massachusetts Institute of Technology
- O3 - Innovation; Research and Development; Technological Change; Intellectual Property Rights
- O4 - Economic Growth and Aggregate Productivity