Robot Econ in AER

In the May ‘014 American Economic Review, Fernald & Jones mention that having computers and robots replace human labor can dramatically increase growth rates:

Even more speculatively, artificial intelligence and machine learning could allow computers and robots to increasingly replace labor in the production function for goods. Brynjolfsson and McAfee (2012) discuss this possibility. In standard growth models, it is quite easy to show that this can lead to a rising capital share—which we intriguingly already see in many countries since around 1980 (Karabarbounis and Neiman 2013)—and to rising growth rates. In the limit, if capital can replace labor entirely, growth rates could explode, with incomes becoming infinite in finite time.

For example, drawing on Zeira (1998), assume the production function is


Suppose that over time, it becomes possible to replace more and more of the labor tasks with capital. In this case, the capital share will rise, and since the growth rate of income per person is 1/(1 − capital share ) × growth rate of A, the long-run growth rate will rise as well.6


Of course the idea isn’t new; but apparently it is now more respectable.

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    • Thanks; I’ll link to there from the post.


    “Of course the idea isn’t new; but apparently it is now more respectable.”

    Yep, looks like they either stole or reinvented your ideas. Do you think Fernald and Jones are so much more respected/known/liked in the field of economics than you that in time the idea will spread through them instead of through you and that people will remember this as being their idea instead of yours?

    • blink

      Let’s not get over excited about the publicity/respectability here. Robin calls it AER, but the FJ article is in P&P, not a regular issue, and just six pages at that.

  • Tim Tyler

    It takes some guts to speculate about incomes becoming infinite in finite time in an economics journal. Most of the mathematically literate readers will surely roll their eyeballs upward and start wondering if the authors know what they are talking about at this stage.

    • To me, it sounds like a veiled allusion to the ‘divide by zero’ understanding of the singularity. The question I have is, in that world, wouldn’t the metaphysical distinctions between capital and labour dissolve? At least in Robin’s vision, Ems are basically incorporeal humans.

    • oldoddjobs

      It all looks like so much metaphysical gibberish to me. Guess I’m mathematically illiterate, oh well.

      • Maybe it has more to do with the role of abstraction/idealization in model building.

        In applying any abstraction, you must, of course, consider what is abstracted from. At least two things would seem to be left out:

        1. “Land,” from the standard calculus.

        2. Realization: will the institutions work efficiently to actually produce the value theoretically possible, or would the market economy be mired in a severe chronic crisis of overproduction (my guess).

  • consider

    Minor prophets should always date their work…

  • vaniver

    Robin, when I was at GenCon with Bill Dickens (this was either last year or the year before, I think) you came up and he mentioned that he didn’t understand why you thought that ems would lead to a significant change in the growth rate of the economy. (The following recounting is subject to fuzzy memory.)

    I asked, “well, in the standard economic model, you assume that labor is fixed, or grows at a flat rate, right?” He affirmed that it was so. I followed up with, “What happens when you edit the model to allow labor to be built like capital?” He thought for a second or two, then said “ah, I get it now.”

    I’m not sure what to take away from that. On the one hand, it seems like the argument makes sense, and is at its core very simple. On the other hand, given that simplicity it’s not clear to me why Bill didn’t already know the argument. (I don’t know what your professional relationship is like–I just know the social links–and so it may not surprise you that didn’t know the argument.)

    • The space of simple arguments is very large, so most of us aren’t familiar with most of the simple arguments that could persuade us to change our minds.

      • erniebornheimer

        This is completely counter-intuitive to me. I tend to think that the best way to expand understanding is to dig deep to find a few fundamental truths (which will turn out to underlie various phenomena and thus have a wide application). But you seem to be saying that in fact understanding is best gained by discovering lots and lots of simple truths (that can’t be derived from each other). Have I got that right?

      • You should dig to find powerful insights, but the space is of such a high dimension that most of the value you can find is a short distance away from where you start. A vast volume is within that short distance.

  • When the rain falls on the fire, it is put off but the green grass already has been torched as we say the when the dry grass burns, the green grass also burns. Where are the honest ones will become dishonest if they keep on going to the hoses of the dishonest, that is valid here too. I know this a blow up to certain extent but there is hole that of truth in the politics but the not all speak right, and few speak of others, as they speak more of themselves the egoists. The word for these. The Conservative Party is facing fresh “cash-for-access” allegations over its failure to report private meetings between the Prime Minister and party donors. Disgraced former Tory Party treasurer Peter Cruddas, claimed to have direct access to David Cameron on at least 13 occasions. Details of the meeting emerge a week after the Prime Minister was forced to disclose the names of donors who he had entertained in his Downing Street flat and at Chequers, his country retreat. The Downing Street gathering
    on January 11 last year has been revealed by Lord Hesketh, who was sacked as chairman of the foundation at the same meeting. “It was in a ground floor office,” said the peer, who previously served as Conservative party treasurer and as a Tory minister in the 1980s and 1990s. Sir, I was born under the strong
    star that is not my error, if my mom would hold on I would be Leo, I think they are brave and they do not say untrue stories, but then that is it. He also claimed to have secured a £1m donation. “There is one very simple solution to all of this – state funding for political parties. But right now, at a time of austerity, it would seem that politicians would be the last thing the public would wish to pay for.”