Thursday, July 27, 2017

Error in 2014 Energy Journal Paper

I hate looking at my published papers because there are often typos in them which I didn't catch at the proofs stage...This time my coauthor, Stephan Bruns, found one in our 2014 paper in the Energy Journal: "Is There Really Granger Causality Between Energy Use and Output?" In Table 1, which describes the details of the studies in our meta-analysis, the control variable labeled "energy production" should actually be labeled "energy price". Energy production would be a weird control variable...

After digging into our draft files, it turns out I changed "energy pr." to "E Prod." systematically in this table just before we resubmitted it to the journal. I also added a footnote: "E Prod.=Energy Production". I don't know why I did this. I would have thought I would have asked, Christian Gross, who made the original version of the table, before doing this, but I can't find any email to prove that...

Sunday, July 9, 2017

Robots, Artificial Intelligence, and the Future of Work

I think that robots/artificial intelligence and the future of work is a hugely important topic. This is a very active research field but it seems to me that people (some informed by this research but most without referring to the research) are rushing to one of two conclusions. The first of these conclusions is that up till now economic growth has resulted in rising wages and full employment and so it surely will in the future too. The other is that robots must mean structural unemployment and so the solution is to introduce universal basic income or some similar redistributive policy.

I don't think either is necessarily true. In the past, the elasticity of substitution between labor and capital seems to have been less than one - both inputs were essential in production. Also, the two inputs are q-complements - an increase in capital per worker results in an increase in the marginal product and, therefore, wage of a worker. But it's possible that now, or in the future, that the elasticity of substitution between labor and capital is or will be greater than unity so that labor is not an essential input. Or that there are techniques that are designed just to use machines. Acemoglu and Restrepo (2016) assume that as some low-skilled tasks become automated other new high-skilled tasks are introduced. But there may be limits to people's cognitive ability. Most people aren't intelligent enough to be engineers and scientists. And the people that are intelligent enough now, might be worse than artificial intelligences in the future.

The other premature conclusion is that, definitely things are different now, and robots will result in structural unemployment or immiserizing growth, so that government intervention is needed. Usually, universal basic income is mentioned. Sachs et al. (2015) argue immiserizing growth is possible. This is one of the better papers out there I think, but still the framework is quite limited. as technological change is exogenous. It is possible that there is some self-correcting mechanism similar to that in Acemoglu's (2003) paper on capital- and labor-augmenting technical change. In that model, capital-augmenting technical change is possible for a while, but it introduces forces that return the economy to a pure labor-augmenting technical change path. Another important question is whether people have a preference to have at least some of the goods and services they consume produced by humans. Sachs et al. assume that utility is a Cobb-Douglas function of automatable and non-automatable goods. That means that consumption of human made goods could become infinitesimally small in theory.

I think we need to consider a range of models as well as empirical evidence before we can say what kind of policy, if any, is needed.

I wanted to do research on this and started doing some research on this but concluded that it is not realistic given my limited time for research because of my administrative - I am still director of our International and Development Economics Program - and parenting roles and my existing research commitments. Twitter isn't the only reason that I haven't updated this blog in 2 1/2 months. Comparative advantage suggests to me that I remain focused on energy economics. However, I think that the Crawford School of Public Policy should be looking at these kind of issues, and I am trying to encourage that. This is going to be one of the key policy questions going forward I think.