Working Paper: NBER ID: w18629
Authors: Jeffrey D. Sachs; Laurence J. Kotlikoff
Abstract: Are smarter machines our children's friends? Or can they bring about a transfer from our relatively unskilled children to ourselves that leaves our children and, indeed, all our descendants - worse off? \n\nThis, indeed, is the dire message of the model presented here in which smart machines substitute directly for young unskilled labor, but complement older skilled labor. The depression in the wages of the young then limits their ability to save and invest in their own skill acquisition and physical capital. This, in turn, means the next generation of young, initially unskilled workers, encounter an economy with less human and physical capital, which further drives down their wages. This process stabilizes through time, but potentially entails each newborn generation being worse off than its predecessor. \n\nWe illustrate the potential for smart machines to engender long-term misery in a highly stylized two-period model. We also show that appropriate generational policy can be used to transform win-lose into win-win for all generations.
Keywords: No keywords provided
JEL Codes: D30; D60; D9; F60; H10; H21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| smart machines (L63) | wages of young unskilled labor (F66) |
| wages of young unskilled labor (F66) | young workers' ability to invest in skills and physical capital (J24) |
| young workers' ability to invest in skills and physical capital (J24) | future generations' capital stock (E22) |
| machine ownership (L64) | income distribution across generations (D39) |