Metadata
- Author: scott cunningham
- Full Title: A Primer on Acemoglu, AI and Automation
- URL: https://causalinf.substack.com/p/a-primer-on-acemoglu-ai-and-automation
Highlights
- I am going to try and help students understand two paragraphs from the Acemoglu and Johnson 2024 article on power looms and their effect on weaver employment and earnings (View Highlight)
- The first one is here:
In previous work (Acemoglu & Johnson 2023), we propose a framework that blends Ricardo’s and Thompson’s ideas to clarify when new technologies improve the lot of workers. For the benefits of growth to be shared, the right combination of technological and political conditions must exist.
New technologies can reduce the value of marginal productivity for workers even as they raise average productivity. Most saliently, automation—the substitution of machinery for tasks previously performed by workers—displaces workers and can reduce, rather than increase, the demand for labor. This is what happened to handloom weavers. (View Highlight)
- The short version of how this can happen is as follows. A technological improvement increases output for given quantities of factors of production and thus raises average labor productivity. Demand for labor, as well as employment and wages, is determined by labor’s marginal productivity (or, more precisely, by the value of the marginal product of labor). The general presumption is that average and marginal productivity of labor should move together, but there is no theoretical guarantee for this. They do so when the aggregate production function of the economy can be approximated by a Cobb-Douglas function, which imposes that these two quantities be proportional to each other. The same conclusion also applies when the aggregate production function exhibits constant returns to scale and the cost of capital remains constant even as the demand for capital increases. In general, however, there is no such guarantee, and automation—defined as machines taking over tasks previously performed by labor—expands the wedge between average and marginal productivity of labor (see Acemoglu & Restrepo 2018, 2019 for discussion). (View Highlight)