Long Tails, Automation and Labor

Kausik, B.N. (2023): Long Tails, Automation and Labor.

Abstract

A central question in economics is whether automation will displace human labor and diminish standards of living. Whilst prior works typically frame this question as a competition between human labor and machines, we frame it as a competition between human consumers and human suppliers. Specifically, we observe that human needs favor long tail distributions, i.e., a long list of niche items that are substantial in aggregate demand. In turn, the long tails are reflected in the goods and services that fulfill those needs. With this background, we propose a theoretical model of economic activity on a long tail distribution, where innovation in demand for new niche outputs competes with innovation in supply automation for mature outputs. Our model yields analytic expressions and asymptotes for the shares of automation and labor in terms of just four parameters: the rates of innovation in supply and demand, the exponent of the long tail distribution and an initial value. We validate the model via non-linear stochastic regression on historical US economic data with surprising accuracy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Labor share; Automation; AI
• Subjects: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

References

C. Frey, M.A. Osborne, “The Future of Employment: How Susceptible are Jobs to Computerization?” https://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf (2013)

A. Korinek, J. Stiglitz, “Steering Technological Progress,” https://conference.nber.org/conf_papers/f143989.pdf (2020) E. Brynjolfsson, “The Turing Trap: The Promise & Peril of Human-Like Artificial Intelligence,”https://digitaleconomy.stanford.edu/news/the-turing-trap-the-promise-peril-of-human-like-artificial-intelligence/ (2022)

D. Acemoglu, “The Harms of AI,” https://economics.mit.edu/files/21848 (2022)

J.E. Bessen,“Automation and Jobs: When Technology Boosts Employment” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2935003 (2019).

M. Arntz, T. Gregory, U. Zierahn, U., “Revisiting the Risk of Automation,” Economics Letters 159:157-160 (2017).

D. Autor, D.Mindell, and E. Reynolds, “The Work of the Future: Building Better Jobs in an Age of Intelligent Machines” Cambridge: MIT Press https://workofthefuture.mit.edu/wp-content/uploads/2021/01/2020-Final-Report4.pdf (2020).

K. Basu, “An inclusive future? Technology, New Dynamics and Policy Challenges” Brookings Institute, https://www.brookings.edu/wp-content/uploads/2022/05/Inclusive-future_Technology-new-dynamics-policy-challenges.pdf (2022).

Karabarbounis, L., and Neiman, B. “The Global Decline of the Labor Share.” Quarterly Journal of Economics 129 (1): 61–103. (2014).

Oberfield, E., and Raval, D. “Micro Data and Macro Technology.” National Bureau of Economic Research Working Paper 20452 (2014).

Acemoglu, D., Restrepo, P., “Automation and New Tasks: How Technology Displaces and Reinstates Labor.” Journal of Economic Perspectives—Volume 33, Number 2. (2019).

D. Autor, C. Chin, A.M. Salomons, and B. Seegmiller, “New Frontiers: The Origins and Content of New Work, 1940–2018,” https://www.nber.org/papers/w30389 (2022).

Acemoglu, D., Restrepo, P., The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment, American Economic Review 2018, 108(6): 1488–1542 https://doi.org/10.1257/aer.20160696

C. Anderson, “The long tail.” Wired Magazine, 12(10):170–177, (2004)

C. Anderson, “The Long Tail: Why the Future of Business is Selling Less of More.” Hyperion, (2006).

E. Brynjolfsson, Y.J. Hu, and M.D. Smith, “Consumer surplus in the digital economy: Estimating the value of increased product variety at online booksellers.” MIT Center for Digital Business Working Paper, (2007).

S. Goel, A. Broder, E. Gabrilovich, B. Pang, “Anatomy of the long tail: ordinary people with extraordinary tastes.” Proceedings of the third ACM international conference on Web search and data mining, (2010)

Kausik, B.N. 2023. Long Tails & the Impact of GPT on Labor https://ideas.repec.org/p/pra/mprapa/117063.html