Will the rise of robots and artificial intelligence deliver
a prosperous economy? And what policies should we adopt to ensure that all
Americans are included in this prosperity? On this episode, Carl Benedikt Frey
discusses the impacts of technological progress on the economy, past and
present.

Dr. Frey is the Oxford Martin Citi Fellow at Oxford
University, where he teaches economics and economic history. In 2013, he
co-authored a widely-shared paper with Michael Osborne titled “The Future of Employment: How Susceptible Are Jobs to
Computerisation?” in which he estimated that 47 percent of jobs were
susceptible to automation. This year, he returned to the subject with his new
book, The Technology Trap: Capital, Labor and Power in the Age of
Automation.

Below is an abbreviated transcript of our conversation. You
can read our full discussion here. You can also subscribe to my podcast on iTunes or Stitcher, or download the podcast on Ricochet.

Pethokoukis: Dark-horse
candidate Andrew Yang has predicted that one out of three Americans will lose
their job to automation in 12 years. What do you make of this prediction?

Frey: I think anyone who tries to put the timeline on how
fast automation might happen is bound to be wrong. It will always involve the
human factor — organizations, legislation, and people will have to adjust to
the new technology. I don’t think there’s a way of trying to estimate how fast that
will happen here.

Lots of people think that we published a study back in 2013
which said that 47 percent of American jobs will be gone in 20 years. Maybe
that’s what Andrew Yang is referring to, I don’t know.

But what we actually did in the study was try to address the
potential scope of automation purely from the perspective of technological
capabilities. We didn’t try to make any assessment of its pace, which would be
shaped by lots of other factors that have little to do with the technology
itself.

But I do think, at the same time, that the impact of technology on the labor market has been very significant in the long run — the majority of people used to work in agriculture. The reason they don’t now is primarily due to changes in technology and mechanization of agriculture and the appearance of better paying manufacturing and service jobs.

In your book, you
differentiate between “replacing technologies,” which replace jobs, and
“enabling technologies,” which create new jobs or enable workers to do their
jobs better. Do you think we’re creating enough enabling technologies now? Do
we even know how to create more of the enabling technologies alongside the
replacing ones?

Different episodes of technological change have been more
labor-replacing than others, and some are more augmenting and enabling, in a
happier way. And different technologies have different impacts on average
people.

The telescope, for example, didn’t replace any occupations
doing any preexisting work, and it allowed us to do previously unconceivable
things such as looking at the moons of Jupiter. As for the automatic elevator, it
replaced elevator operators even though there are more elevators in cities than
ever before. So it stands to reason that different technologies will have
different impacts on peoples’ jobs and wages.

With regard to the question of whether we can create more
enabling technologies to counterbalance the replacing ones on the horizon? That
sounds good in theory. But I don’t think we have the knowledge to do that in
practice. It’s very hard to steer technological progress from the top down. I
haven’t heard of any good example where that has been done in a convincing way,
so I just think that we don’t really have the knowledge of how to do that.

Your book is a
history of technological progress. So, in your view, what was the original
catalyst for the industrial revolution?

I don’t believe in mono-causal explanations of economic
development. I think it was a blend of things that came together that made the
industrial revolution.

One underestimated factor was the structure of political
power. In most pre-industrial societies, craft skills were a source of
political clout. They didn’t have any interest in technologies that threatened
their jobs and incomes. So governments typically sided with the guilds rather
than pioneers of industry, fearing that they might challenge the political
status quo.

In Britain, with the rise of Atlantic trade, the new
merchant class emerged. They were the ones who stood to benefit from
mechanization because, with rising wages, mechanization was what allowed them
to remain competitive in trade.

The political power of the craft guilds was also gradually
eroded because the turnpike trusts paved the way for the construction of much better
road networks in Britain. This led to the integration of markets throughout
Britain, exposing local markets to a lot more outside competition.

And as the political power of the crafts guilds diminished, competition
among nation states in Europe grew. The fear of foreign invasion made it
increasingly hard to align technological conservatives with the political
status quo.

You read about all of
these advances in robotics and artificial intelligence, but we’re not seeing
some explosion of growth in peoples’ living standards. Do you think we’re in a
kind of new Engels’ pause right now, and in 10 years, we’re going to see rapid productivity and
income growth?

I think that’s broadly where we are, although I’m wary of
predicting the future because much depends on the political economy of
technological change. I don’t think that we can take progression for granted.

Much of the positive attitudes that people have towards
technological progress in the 20^th century was a historical
exception rather than the norm. For most of history, people resisted anything
that they felt threatened their skills and incomes. In the late 19^th
century, working people saw that mechanization translated into higher wages.
But if people don’t see that happening today, I don’t think they are as likely
to remain positive to it.

Today, wages of prime-age men with no more than a high
school degree have been steadily falling for 40 years. Their consumption
possibilities have clearly not diminished, but I think if people see
diminishing prospects in the labor market, they could potentially opt for
policies that aim at slowing down the pace of automation.  So I don’t think that the progression of
technology can be taken for granted.

Looking
forward, which is the more likely scenario: Because of technology and advances
in living standards we’ll have unemployment and income growth that’s better
than what we’ve seen over the past few decades? Or, will we see slower income
growth and higher unemployment due to automation?

I think that one important point that Daron Acemoglu and
Pascual Restrepo make in a recent paper is that even if the technology is of
the replacing sort, the worst periods for labor and productivity growth are
those with replacing technologies. The boost in productivity growth still comes
decades later when businesses figure out how to restructure their production
processes to take advantage of the new technology.

So I think that, even if this technological progress
continues to be of the replacing sort in the following decades, the long-run
benefits for labor are likely to be greater than these short-term pains they’re
going through now.

The post 5 questions for Carl Benedikt Frey on the legacy of innovation appeared first on American Enterprise Institute – AEI.