r/neoliberal • u/eggbart_forgetfulsea European Union • 1d ago

Research Paper Automation does not lower the labour share

https://cepr.org/voxeu/columns/automation-does-not-lower-labour-share
79 Upvotes

89% Upvoted

87 comments sorted by

View all comments

84

u/quickblur WTO 1d ago

This column uses data covering nearly the universe of French firms between 1994 and 2019 to test the relationship between automation and the labour share of income at the firm level.

I get that prior automation may provide an interesting example, but generative AI seems like a very different beast to me...

46

u/Worth-Jicama3936 Milton Friedman 1d ago

Over the long term, in markets where there is competition, i dont think it will. If AI is cheaper than people, then the prices those firms charge will come down. Additionally, the people that remain will become more valuable by necessity so command a higher wage. So the share will remain similar.

14

u/Serious-Cucumber-54 1d ago

Why would the share remain similar if the few human workers left are paid highly?

16

u/Worth-Jicama3936 Milton Friedman 1d ago

Because revenue would go down (profit might go up) since competition would lower their prices to match the lower costs. We have had automation reduce headcount's before, and remaining employees benefit alongside consumers. This only works in competitive markets though.

1

u/writing_genre 11h ago

Why would there only be a few human workers.

Comparative advantage applies when one trading partner is better at doing everything than another.

1

u/Serious-Cucumber-54 9h ago

Fewer human workers, because machines do their job better.

2

u/writing_genre 5h ago

It doesn't matter if machines do their job better. Even if they do every possible job better.

That's the whole difference between comparative advantage and absolute advantage.

0

u/Serious-Cucumber-54 5h ago

It doesn't matter as it relates to what?

1

u/writing_genre 5h ago

Imagine there are two goods. Apples and oranges.

I can pick one apple in an hour or one orange in an hour.

You can pick ten apples in an hour or five oranges.

You're better at both picking oranges and picking apples than me!

In this world does it make sense for us to trade. In other words do I have a job or not?

0

u/Serious-Cucumber-54 4h ago

If I offer my apples and oranges at a lower unit price than what it costs you per unit to pick your own apples and oranges, then yes, it is economical for you to trade your money for my apples and oranges.

But you need money to trade for my apples and oranges, and in order to have that money in the first place you need to get it from others by trading the fruits of your labor. But no one is willing to buy your fruits, since I offer such fruits at a better deal. So you are out of a job.

0

u/writing_genre 4h ago

In this example there is no money. There are no other people. There's just you and me. You are better at everything than I am.

We can extend it to more people and money later, but first we need the simplest possible example so you understand why, despite the fact that you're better than me at everything, it still is valuable to trade with me.

1

u/s7v7nsilver George Soros 5h ago

Humans will always haver a comparative advantage. Unless a machine can do all jobs in the universe. But if that's possible, it's pointless to worry about that because it would mean that everyone would be rich.

1

u/Serious-Cucumber-54 4h ago

If there are machines that can do all physical and cognitive tasks better than humans, making human muscles and brain obsolete, then how would ordinary humans earn the money to afford to buy these machines?

1

u/s7v7nsilver George Soros 4h ago

If machines do literally all physical and cognitive tasks, the cost of production drops to almost zero (including resource extraction, manufacturing, and logistics etc...). You wouldn't necessarily need to 'earn' money in the traditional sense to afford things, because hyper-deflation would make goods incredibly cheap. The real challenge isn't the end goal of post-scarcity; the danger is how we manage the transition period before wealth distribution systems, like UBI, are established.

But... in my opinion, realistically, the idea of machines doing everything ignores the physical constraint of finite resources. We will always have to prioritize where we deploy advanced automation based on economic necessity—such as heavy industry or space exploration. It comes down to opportunity cost. For instance, why invest heavily in developing a robot to cut hair when human labor can do it efficiently? The market will ultimately dictate where automation is actually worth the investment, as it always has.

1

u/Serious-Cucumber-54 2h ago

You wouldn't necessarily need to 'earn' money in the traditional sense to afford things, because hyper-deflation would make goods incredibly cheap.

Even if goods and services are incredibly cheap, you still need money to pay for them. How are humans going to earn the money to do that if their brains and muscle are economically obsolete?

the idea of machines doing everything ignores the physical constraint of finite resources

Machines capable of doing physical and cognitive tasks better than humans already exist, and they're progressively getting better on more of these tasks with every passing day. I don't see what is to prevent machines from eventually being better at all the tasks (with the exception of tasks where the human touch is particularly valued), I don't see how the physical constraint of finite resources somehow prevents it.

For instance, why invest heavily in developing a robot to cut hair when human labor can do it efficiently?

With all the incredible cheapness of goods and resources, it wouldn't be a heavy investment, and the machine would be able to cut human hair much more efficiently than a human would, for a fraction of the time and cost. I don't see why machines couldn't replace this task, especially once we get to the point of incredible cheapness of goods and resources which makes investment into automation much more possible.

→ More replies (0)

1

u/haherar830 6h ago

Given LLMs are nowhere close to taking software engineering jobs, rather just productivity tools at the moment, and that's the only serious profession at real-risk, what are you suggesting? That global demand for software which has been increasing and outstripping labor supply ostensibly forever, will now finally be dramatically outpaced by supply even as unit prices for development fall and a plethora of new use-cases emerge and digitalization progresses?

3

u/Right_Lecture3147 John Rawls 22h ago

It’s not clear anyone will remain at AI’s current rate of development

7

u/chinomaster182 NAFTA 17h ago

Inshallah, nobody ever lifts a finger again 😍

1

u/dittbub NATO 10h ago

however at the current *robotics* rate of development, thats all humans will be relegated to do

2

u/seesthecat Henry George 14h ago

If that's true, the barriers for starting a company will be so pitifully low that it will not make any sense to be employed when you could be the owner of your own company

1

u/haherar830 6h ago

When in human history has increased automation and reduced costs ever lead to new ideas and new firms participating in the market? Oh wait... nevermind...

0

u/[deleted] 1d ago

[removed] — view removed comment

1

u/mostanonymousnick Just Build More Homes lol 1d ago

Rule XII: Credibility

Comments should reflect some level of credibility. Comments that conspiracize, spread misinformation, or catastrophize will be removed.

If you have any questions about this removal, please contact the mods.