1. Robots and Technology Everywhere2. Standard Economic Answers? Wrong!3. Why AI Robot Technology is Different4. Laws of Robo-economics and Ownership Solution

Richard B. Freeman, Harvard and NBER Hong Kong University of Science & Technology/Ernst YoungMay 16, 2017

Work and Income in the Age of AI Robots

Dictionary Definition: “Automatic device that performs functions normally ascribed to humans”

1.“Robots and Technology: headline hype

Will Robots Steal Your Job? Why the highest-paid doctors are the most vulnerable to automation

Robots And Computers Could Take Half Our Jobs Within the Next 20 Years

Robotic Construction Platform Creates Large Buildings on Demand

Robots competing at all skill levels

Robot Serves Up 360 Hamburgers Per Hour

Miniature Robots Perform Surgerybiopsies inside the human colon

Robots Are Replacing Factory Workers at Record Pace

Artificial Intelligence AI Decisively Defeats Human Poker Players

Headless Robot Dog Is Boston's Creepiest Delivery Machine Apr

2. Standard Economic Response: Wait! We've had these scares before

In Great Depression, FDR blamed unemployment on failure to “employ the surplus of our labor which the efficiency of our industrial processes has created”; technocracy movement said way to solve problem was to replace markets with planning by engineers.

In early 1960s fears that automation was eliminating thousands of jobs per week led the Kennedy and Johnson Administrations to examine the link between productivity growth and employment.

In the 1990s Jeremy Rifkind predicted that technology would produce the End of Work (1995) just before the dot.com boom raised employees/ adult population in the US to an all-time peak.

Standard Economics Answer rests on Comparative Advantage: everyone (country in trade) produces something even if they are less able in everything

“The Rock” is better at everything than you, but he is relatively better as wrestler/movie star than at other stuff. Even though he is better at your job than you but optimum is for him to stick to car chases/beating villains and for you to do activities where you have comparative advantage. (He may become next US President!)

Dwayne 'The Rock' Johnson might actually run for presidentMay 10, 2017 Fox News

So where is our comparative advantage vs AI-robots?NYT says robots might not take our jobs after all: they lack common sense.

Many say our edge is “intuition”/perception of patterns

Maybe our edge is in mobility – cheaper to move the chess/go piece – or in saving the day when machine has problem “the human in driver less car” – until there is an AI redundant robot that handles that problem

Many say our edge is general intelligence – flexibility: Random person can beat Deep Blue at Go or beat AlphaGo at Chess … but robot can choose from an ensemble of AI.

Herb Simon's Shape of Automation (1966) Analysis That Pooh-Poohed Automation Scares No Longer Fits Reality

1- Labor less elastic supply than machines. Labor market clears. Evidence – low unemployment despite tech change.2- Technology for producing machines has constant returns to scale so infinitely elastic. Evidence – real price of capital constant. 3. Then real wages of workers benefit rise through reduced prices or higher wages. Evidence – real wages increase with productivity.

“the world’s problems in this generation and the next are problems of scarcity, not of intolerable abundance. The bogeyman of automation consumes worrying capacity that should be saved for real problems...” (Simon)

But today labor's share of national income has fallen as real wages stagnate despite rising productivity/increase less than productivity; inequality has risen to levels that threaten democracy and stability.

I don't want to be robot assistant. I want a good job at good pay and autonomy

Imagine your boss was a machine. For some people it’s almost a reality, says Jane Palmer, so will we all end up working for robots and algorithms? In some warehouse jobs, workers are kept to a timetable by a handheld device which counts down the time they have to complete a task.

BBC - Future - Are we about to see the rise of robot bosses?

If robots do all the work, my life will be leisure, the joys of the idle rich: playing computer games or having fun with my sex-robot (CENSORED)

That is insanity. I do not want to work if I do not have to. The only reason to work is to get paid. .

What! Me worry if robots do all the work?

3. Why this Technology is Different

● Much work has shifted to on-line, where you have to compete with AI that is master of digital world, with big data and processing power → deep learning neural nets

● Sensors give robotics abilities to see off-line world (could be better than what you see) and to assess outcomes from algorithm

● Improved motion gives robots ability to change the off-line world.

● People become more like the technology –

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● Technology mimics general intelligence by ensemble of programs.

I don't know any facts. I don't think. I don't try to remember. I look it up on

Google Search – er Baidu or whatever search engine

works best … until the RTR replaces me.

AI Turns Malthus Upside Down

The power of robotic artificial intelligence is so superior to that of flesh and blood creatures that replacement by robot work must in some shape or other visit the human race” – Labor Economist, 2015

Industrial Robots Increasing(we have no measure of growing use of AI)

3. Laws of Robo-Economics (and Ownership Solution)

1. Artificial intelligence + improved computerization + robotics based on biological analogies→ better machine substitutes for humans: higher elasticity of substitution

2. Technological change reduces costs of robot substitutes for humans over time, bounding wages: W < Production cost of robot substitute.

3 Effect on incomes depends on who owns robots. If you own robot that does your job it is a tool that improves your work & income. But if I own robot that does your job, tough luck suckah! Who owns the robots rules the world!

Evidence on Effects of Industrial Robots on Jobs and Wages by Affected Areas in US, 1993-2007

Acemoglu-Restropo (NBER, WP23285)

Robots/machines near-perfect substitute for me? Owned by Mr. & Mrs. Big! Jobs and Wages Falling!

Labor's Share of Income, US

China is 27% of 2015 World Robotic Market(expected to be 39% in 2019)

A Robot Revolution, This Time in ChinaNYT MAY 12, 2017HANGZHOU, China — Even a decade ago, car manufacturing in China was still a fairly low tech, labor intensive endeavor. Thousands of workers in a factory, earning little more than $1 an hour, performed highly repetitive tasks, while just a handful of industrial robots dotted factory floors.

No longer. At Ford’s newest car assembly plant in Hangzhou in east central China, at least 650 robots, resembling huge, white necked vultures, bob and weave to assemble the steel structures of utility vehicles and midsize sedans. Workers in blue uniforms and helmets still do some of the welding, but much of the process has been automated. The state of the art factory exemplifies the vast transformation that has taken place across manufacturing in China. General Motors opened a similarly ultramodern Cadillac factory in the eastern suburbs of Shanghai, as well as one in Wuhan. …Robots are critical to China’s economic ambitions, as Chinese companies look to move up the manufacturing chain.

Can we prevent robotization from leading to more inequality/social unrest/division between few and many?

Try to stop robotization? Tax robots ala Bill Gates' suggestion? Neither feasible nor desirable

Adams: “the only possible way of preserving…equal liberty…is to make the acquisition of land easy to every member of society”

Jefferson: “legislators cannot invent too many devices for subdividing property”

Hamilton: “the desire of being an independent proprietor in land is founded on such strong principles in the human breast”; “equality and moderation of individual property” would promote growth

Madison: “without violating the rights of property reduce extreme wealth toward…mediocrity”

Land was the key form of capital in those years; business and knowledge capital are the key form of capital today. Diverse set of policies – from taxes/procurement policies favorable to ESOP/ profit-sharing to pension fund ownership to UBI.

Ownership Solution: American Revolution way to control inequality and preserve middle-class democracy

If citizen's own the robots/AI technology

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If the super-wealthy own technology Upper 1% Upper 0.1% Upper 0.001%