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Q&A with Daron Acemoglu: Digital Automation, Labor and Growth

October 14, 2015

Daron Acemoglu

Digital automation, and its impact on labor, society and the economy, has been studied from multiple perspectives and through many lenses.  In his new research and analysis, Daron Acemoglu, the Elizabeth and James Killian Professor of Economics at MIT, acknowledges inequalities created when automation displaces certain human skills. However, he also says it is possible for new technology to create more complex versions of existing tasks where labor has a comparative advantage, tipping the scales back toward a future with plentiful jobs.

Acemoglu completed his graduate work in mathematical economics and econometrics at the London School of Economics, where he also received his Ph.D. in economics. His recent research focuses on the political, economic and social causes of differences in economic development across societies; the factors affecting the institutional and political evolution of nations; and how technology impacts growth and distribution of resources. Acemoglu has published four books: Economic Origins of Dictatorship and Democracy (joint with James A. Robinson), Introduction to Modern Economic Growth, Why Nations Fail: The Origins of Power, Prosperity, and Poverty (joint with James A. Robinson), and Principles of Economics (joint with David Laibson and John List).

He recently spoke at an MIT IDE seminar on the topic of, “The Race between Machine and Man: Implications of Technology for Growth, Factor Shares and Employment.” IDE Community manager Paula Klein followed up with four questions. Below are his responses.

Q.  The current rivalry between digital automation and humans seems focused on economics and labor issues— concerns that labor will be progressively marginalized and made redundant by new technologies. Is this focus premature or overstated?

A: It is certainly not premature. We have seen many different types of tasks produced and performed by labor, even fairly skilled labor, become automated over the last 30 years. We also know of new technologies that will automate some very major occupations (regulations permitting), including driving, airplane piloting, some aspects of surgery, certain types of diagnoses and even parts of the practice of law.

Yet there is an aspect of it that is overstated. These are still only some of the occupations that humans perform today. The more important overstatement comes as one turns from automation to the prospects for future employment creation. This rapid process of automation does not mean that the future economy will not create jobs. If you look at the last several decades, qualitative evidence suggests rapid automation has been going on for more than a century, and a lot of the new employment comes in new tasks and occupations. So, as machines take jobs previously performed by humans, the economy appears to create yet other tasks and jobs to employ the displaced workers.

Q: How does your task-based framework help explain the current economic situation and provide context? Can you briefly summarize the model and your research?

A: Our framework helps us understand the aforementioned patterns and why the fact that new employment will come from new tasks and activities. But more importantly, because it endogenizes the speeds at which existing tasks are automated and new tasks are created, it also highlights why a period of unusually rapid automation generally brings a subsequent period of rapid creation of new tasks. Put simply, rapid automation depresses the price of labor which has fewer tasks to work. This then makes it more profitable for new tasks, which employ new labor, to be created.

Q: How might these new tasks spur economic growth and innovation?

A: The growth implications of creating new tasks are essentially a corollary of what I have just described. Growth comes about both because of automation — we can do things we have been doing more cheaply– and because of the creation of new tasks; we have new goods and services using better technology. Anything that spurs innovation triggers faster economic growth. So, rapid automation is a double whammy: it benefits us directly and it spurs additional creation of further growth-enhancing new tasks.

Q: What guidance can you offer to employers, workers, students and policymakers to prepare and adjust for the Second Machine Age?

A: All of these scenarios are no consolation if you do not have the skills that new tasks and jobs will demand. Some economists are now questioning whether college is a good investment. There are certainly reasons for rethinking some of our long-cherished assumptions: college is expensive and college graduates have not done very well in the labor force over the last 15 years or so. Nevertheless, improving the skills of our workforce and improving our own skills still remain the only ways of ensuring that we adapt to the future of technology.