Working Paper: NBER ID: w20941
Authors: Seth G. Benzell; Laurence J. Kotlikoff; Guillermo Lagarda; Jeffrey D. Sachs
Abstract: Will smart machines do to humans what the internal combustion engine did to horses – make them obsolete? If so, can putting people out of work or, at least, good work leave them unable to buy what smart machines produce? Our model’s answer is yes. Over time and under the right conditions, supply reduces demand, leaving everyone worse off in the long-run. Carefully crafted redistribution policies can prevent such immiserating growth. But blunt policies, such as limiting intellectual property rights or restricting labor supply, can make matters worse.
Keywords: automation; economic growth; labor markets; technological change; income distribution
JEL Codes: E22; E23; E24; J24; J31; O30; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technological advancements (O33) | Labor demand (J23) |
| Labor demand (J23) | Wages (J31) |
| Declining labor income (J39) | Saving rates (E43) |
| Saving rates (E43) | Capital accumulation (E22) |
| Technological advancements (O33) | Economic welfare (D69) |
| Increased supply of code (C88) | Demand for labor (J23) |
| Demand for labor (J23) | Economic welfare (D69) |
| Technological advancements (O33) | Wages (J31) |
| Technological advancements (O33) | Saving rates (E43) |