Erik Brynjolfsson Discusses How Rapid Technological Change Will Affect the Economy

By TAP Staff Blogger

Posted on April 9, 2020


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Professor Erik Brynjolfsson, Director of the MIT Initiative on the Digital Economy and Schussel Family Professor at MIT Sloan School, discusses the impact of rapid technological change and public policy with James Pethokoukis on American Enterprise Institute's (AEI) Political Economy podcast.

 

Topics explored include:

  • Will upcoming technological changes finally drive up productivity growth?
  • What is artificial intelligence’s (AI) impact on the labor market in the near and far future?
  • How can policymakers best prepare the labor force for the adoption of technological innovation?
     

Below are a few excerpts from “How Will Technological Change Affect the Economy? My long-read Q&A with Erik Brynjolfsson.”

 

Translating Technological Innovation into Improvements in Living Standards

 

But the problem is not in the core technologies. Those are as fundamental as anything we’ve ever seen — maybe more fundamental in terms of the breakthroughs. Again, intelligence, being able to have vision, voice recognition, diagnosing diseases, and soon, machines that can do increasingly dexterous things. Those are really, really big deals.

 

But our society is not translating them. And part of it is that entrepreneurship is actually down. There’s more occupational licensing. I have a paper just coming out about how that’s been bogging things down, and it just takes time for companies to reinvent their business processes, their organizations, and the way they do business. That is something we need to work on. The bottleneck is in there, not in the core technologies.

 

I mean, I’d be all for even more breakthroughs in the core technologies. But if you want to speed productivity growth, what you do need to do most of all is do a better job of translating the technologies that we have into new products, services, organizational forms, and ultimately higher living standards.

 

America Is a World Leader in Education and Immigration

 

… the way that America — this is a mainly American audience, but everyone can learn from it — has been a world leader is education and immigration. It’s been a talent magnet for smart people from around the world. And I believe in the O-ring Theory, which Michael Kremer described and got a Nobel Prize in part for, which is that smart people make other smart people more productive. Immigrants don’t reduce the wages of our own engineers, they increase their wages by making it possible to build even more amazing products.

 

So we need to work on both sides. We need to invest more in our education. We were always the world leader in America, and we need to continue to be a talent magnet.

 

Impact of Artificial Intelligence on Jobs

 

When I look at the next five, 10, probably 20 years, there’s no shortage of work that only humans can do. I look around at what machines can do, and they can’t do most of the creative work. They can’t do the interpersonal work, the stuff that requires the human touch, even most work that requires dexterity. So there’s lots of things in healthcare, childcare, cleaning the environment, the arts and sciences, and entrepreneurship that only humans can do. We need to repurpose people into those kinds of opportunities. And that’s what I see as the big opportunity for the next few decades.

 

That said, you turn the dial far enough into the future — I don’t know whether it’s 50 years or a hundred years — I can imagine a time when machines can do most of those things that I just listed. But that’s not the challenge for today. And I sometimes worry that we jump too far into that science fiction future. For today, we have lots of work that only humans can do.

 

Is the Techlash Against AI and Machines Warranted?

 

…we haven’t been as careful about using the technology to create widely shared prosperity or, for that matter, to create fairness, privacy, and other things that are being eroded by some of the technologies today.

 

These tools are more powerful than anything we’ve ever had before. And by definition, that means we have more power to change the world. So we need to think carefully about how we want to change the world. It will be a huge mistake to assume the machines will automatically do the right thing, or they can only create good outcomes. Too often, the machines have been used to create more concentration of wealth or to erode privacy and amplify biases, but it doesn’t have to be that way.

 

So the techlash serves a purpose if it helps us point these powerful tools in the right direction. If the techlash simply slows down progress, though, then that’s going to be very damaging. Then people won’t be saved from cancer the way they could be, and poverty won’t be alleviated the way it could be, and our living standards won’t rise as fast as they could be rising. So let’s make sure we take this techlash and channel it towards using technology to create more benefits for the world and not simply slowing down progress.

 

How Can Policymakers Best Support Innovation and Prepare the Labor Force for the Adoption of Technological Change?

 

This is one of the most frustrating things for me: I see these amazing technologies and they are breathtaking, especially if you get up close to them. And then I see that on the government side, we’re almost going backwards. Things are worse and worse. We aren’t unleashing them the way we could. There are half a dozen things we can do. And I mentioned these in my book, Second Machine Age with Andrew McAfee, and other writings.

 

Let me just list them quickly and then I can dive in deeper. So on the top of the list is education. Reinventing that, not just spending more.

 

Second, I would put entrepreneurship. It has slowed. We need to make it easier for people to recombine technologies with labor and capital to do new things. We actually have fewer startups than we used to, believe it or not.

 

A third thing is investing in innovation directly through R&D. I like Simon Johnson and Jonathan Gruber’s idea of these innovation hubs. Ro Khanna has picked up on that. But just directly investing in R&D. We’re doing less of it now than we used to as a nation.

 

Fourthly, I would mention immigration: Bringing more smart people together so they can create great things for each other. It’s good for America. I think it’s good for the world when people can freely move, connect with each other, and work on breakthrough ideas.

 

Finally, I wouldn’t leave out things we can do to make the tax code fair, to distribute wealth more evenly. It’s very unevenly balanced right now. Things like the earned income tax credit are very appealing to me because they help people at the low end of the wage scale, while also encouraging them to stay in the labor force.

 

Also, we’ve really been very unbalanced in terms of how we tax labor and capital, having low rates on capital and much higher rates on labor. And that’s probably exactly backwards. My colleague, Daron Acemoglu, has shown that if anything, the optimal tax code would have somewhat higher rates on capital than labor. But I would say, at least let’s try and even them out, and balance and level the playing field and not favor entrepreneurs who put people out of work by replacing them with capital.

 

From AEIdeas, listen to the full Political Economy podcast: “Erik Brynjolfsson: Can AI Help Us Overcome the Productivity Paradox?

 

You can also read the full transcript: “How Will Technological Change Affect the Economy? My long-read Q&A with Erik Brynjolfsson.”

 

Or read a curated set of questions and answers: “5 Questions for Erik Brynjolfsson on Rapid Technological Change and Public Policy.”

 

Erik Brynjolfsson is a professor at the MIT Sloan School of Management, Director of the MIT Initiative on the Digital Economy, Director of the MIT Center for Digital Business, and a research associate at the National Bureau of Economic Research. In July 2020, he will join the faculty of Stanford University with appointments in the Stanford Institute for Human-Centered Artificial Intelligence (HAI), the Stanford Institute for Economic Policy Research (SIEPR), and the Stanford Graduate School of Business.

 

Professor Brynjolfsson is also the author of several books, including Machine Platform Crowd: Harnessing our Digital Future (2017) and The Second Machine Age: Work, Progress and Prosperity in a Time of Brilliant Technologies (2014), both of which he co-authored with Andrew McAfee.


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