 Like economic inequality also get reinforced by all sorts of biases that may be implicit or explicit and for that reason I think that places like Los Andes play a pivotal role When thinking about a more equal academic environment across the world the globe and when I mean pivotal I mean We are kind of a crucial link in the sense that we have these privileged access to Academia in the most of those nations, but we also are in the periphery and have also access To places that typically do not get the conditions to the advancements of science So I think we are at least we should be Kind of like a hinge that can bring two parts together Into into into a functioning hole and can open new doors So I think I see that as our responsibility and in fact, I'm so convinced about this that one often hears in discussions in this University and I'm sure that my colleagues from Latin America In leading institutions that are here with us have had similar experiences that when we're discussing issues about the university Management or resources or whatever someone says well, but we are not Harvard or MIT and my response always is oh No, yes, we are the Harvard or the MIT of Colombia And we should aim to be the one of the MIT's of Latin America. I prefer to say MIT by the way Rather than Harvard So in that sense, I think this conference falls in line with that It has it's been a great opportunity to be exactly that to play a pivotal role in which we recognize that being in the global South and having access and connections to the global north is a unique opportunity to bring people topics issues That need to and deserve more attention and deserve more resources and to draw bridges that help reduce those gaps so therefore, thank you again, you know wider to For letting us continue working on this erection and in fact say is working on initiatives along these lines Which I cannot tell you about but expect some news very soon on that So I won't talk much more because having officially ended where the you know wider development conference and the Congress we're going to be on a we now have and Impossible to to to Impossible a better event to end these three exciting days with the Dharon as a model offering the annual development lecture So we will have during the session a proper introduction to our extremely distinguished guests, but I cannot help saying a couple of things just in the spirit of appreciation for Towards Dharon for joining us Dharon I think has been an inspiration for so many economists He has opened new avenues of research along so many dimensions that I would at least here I just going to share an anecdote when Carlos and Kunl suggested Well, we want to discuss and to be someone from Los Angeles and they kindly suggested this And then I went to Marcella. It's a Marcella. You should be the discussant to that owns lecture I'm I said, no, no, no, you should be liable. There's much more closer to your research I said, no, no, no, it's not that part of Laura's research. It's much closer to your research And that might have happened with many other my colleagues on areas that neither of us work on so really you have been Such influence so influential in so many areas that I think it's really great to have you here But second, I want to emphasize that Dharon has not only been a professor Has been a professor in the fullest and the best meaning on the of the term for many people probably thousands That have probably millions that have read his his his book selectors and probably hundreds But now that have directly had the privilege like like I've been in that position of being Directly mentored and taught by him and Dharon is simply an outlier in ways perhaps even bigger than he is in terms of his research Output in how he devotes with generosity His energy to promoting his and helping and advising his students and since as I said before the Congreso Colombiano economia is all about that Investing and believing in our students. I think there's no better Person giving this lecture than that own so this is just in the way of Saying to you that on that really my deepest gratitude for joining us and thank you again everyone and you know why they're especially for these amazing conference Thank you very much Can I have some light here, please? Thanks very much So welcome the wider and I will lecture 20 to 6 to be provided by Dharon Archimoglu the name of progress will technology solve inequality I'm Kunal Singh the director of any wider and I'm chairing the annual lecture today I would first like to introduce those of you who are new to a univider event the United Nations University and to univider the United Nations University was established in 1975 to act as a research arm of the United Nations Univider the world Institute for developed economics research was the first research institute the university back in 1985 Today you any water sources as a unique blend of a think tank research Institute and UN agency This event is our 26th annual lecture The lectures have been delivered by prestigious line of scholars and policy makers for of whom are noble audience It's a pleasure to welcome Dharon Archimoglu to that lineup Today's lecture will run for approximately 50 minutes followed by comments by our discussion for the lecture Marsala Aslova Afterwards I'll return to chair the Q&A and I think you'll have about 30 minutes the Q&A I'm delighted that this lecture is being live streamed if a large virtual audience along with all of us all of you here today If you're watching on the YouTube stream virtually You can submit questions directly on YouTube or Twitter's at univider with hashtag a l26 I'll also let you inform you that this lecture will be recorded the recording will be added on univider's YouTube channel in the coming days I'll now let you use the wider and a lecture for 2022 Dharon Archimoglu is Institute Professor of MIT and Elected Fellow of the National Academy of Sciences the American Philosophy of Society the British Academy of Sciences the Turkish Academy of Sciences The American Academy of Arts and Sciences the economic Society the European Economic Association The Society for of Labor Economists. He's also a member of the group of 30 Dharon's author of five books including the New York Times bestseller why nations fail power prosperity and poverty John with James Robinson a book that has become compulsory reading to all their scholars and practitioners I can't imagine any of us here haven't read the book He's also of course there's a text wonderful textbook that he has introduction modern economic growth and along with that also the narrow college I which was published more recently state society the fate of liberty again with James Robinson Dharon has published over 140 journal papers and several of his papers had huge impact of the profession His 2001 AR paper the colonial origins of compared to compared to development had received a stunning 16,000 citations and one of the most cited papers in economics Dharon has made path-licking contributions to a wide range of areas including Work economy economic development economic growth Declogical change inequality labor economics and the economics of networks He's elected today is in the interface of technological change inequality and labor economics He's also highly influential public intellectual the regular columns and partisan ticket and other media outlets Dharon has received the inaugural TW schools prize for the University of Chicago in 2004 inaugural Sherwin-Rosen award for outstanding contribution to labor economics In 2004 the John Bates clock medal in 2005 the John We will know John we will not Newman our word and a John love Georgia on price in 2018 among many other prizes It's a great honor for us to have Dharon Archimoglu provide the wider and a lecture 26 I would also like to welcome the discussion Marcella Slava Marcella Slava is the professor and Dean of economics at our host institution here You visit our laws and this a fellow of the company society and vice-president 20 20 to 20 30 3 as well as president for 20 20 for 20 25 or the Latin American and Caribbean economic association Her current research interests it will all from the lack of inclusive growth in Latin America We heard wonderful insights of Marcella yesterday With the focus and form firm dynamics productivity as well as informality Marcella Slava's research has been published in leading academic academic journals She's been involved in multiple initiatives research project missions led by multilateral organizations and the Colombian government Contribute the understanding the origins of the deficit inclusive inclusive growth in the region and the device solutions to it Now moving on to the annual lecture The annual lectures is based on Dharon Archimoglu's newest book in the name of progress our thousand-year struggle over technology and prosperity go out to the gems Simon Simon Johnson Challenges the techno optimism of our age and of our academic profession which maintains the technology advances ultimately benefit society at large As we move to ever-increasing use of digital technologies, especially in the wake of the pandemic Lecture asks what is perhaps the most crucial question of our times? Will technology deliver shared prosperity prosperity to the cities of the world or will it simply accentuate inequality? within across countries I would now like to invite Dharon Archimoglu to deliver the wider annual lecture twenty six Dharon over to you. Thanks Thank you very much Thank you very much for those wonderful introductions. I think after those Everything I do will be downhill. So not not sure I'm looking forward to that. You don't want to build up expectations too much It's my true pleasure to be here to give the annual wider lecture in this wonderful conference in this wonderful University and lovely town and Thanks to all of you for being here. So I'm going to talk about power and progress our thousand-year struggle over technology and prosperity It is very much on the topic of inequality But much of the emphasis in the In the conference has been rightly on Persistent inequality in the developing world for example, Latin America I'm gonna change the focus a little bit and talk about increasing inequality and Non-shared nature of prosperity in the developed world and there's a good reason for that This is actually The theme of a new book by myself and Simon Johnson It used to be called in the name of progress, but the book has not changed It's exactly the same but the title has been changed by the publishers to power and progress. So that's the title So without further ado, let me just jump in in 1791 Jeremy Bentham proposed the Panopticon as an efficiency-enhancing monitoring system in a well-lit circular room essentially placed guard can look over and Monitor what the prisoners are doing either in terms of work or security Thanks to its resonance in popular culture Michelle Foucault and the guardians of the galaxy included, you know, Panopticon is an ever present Contraption in our lives But actually the person who dreamt of it was not Jeremy Bentham was his brother Samuel Bentham. He was working in St. Petersburg in a factory By owned by the Tsar and he came up With this idea as a way of monitoring the workers Jeremy's contribution was seeing this as a broader efficiency-enhancing device and publicizing it for example, I won't read the quote But it sort of captures his view. This is such a wonderful thing It's going to be revolutionary in all sorts of places hospitals schools Manufacturing facilities and of course prisons to Bentham. This was all in the name of progress. If something improved efficiency Society should welcome it with open arms. There was a Undercurrent that if something if it improves efficiency, and he thought that better monitoring would certainly do so more information for the employers Why not? This would somehow be beneficial for everybody and but Bentham's philosophy as you know The utilitarianism even if some people were losers not that important we sum across their utilities and still something like this Efficiency improvement must be accepted and in this Bentham was not alone Many of the famous philosophers of the late 18th early 19th centuries were of the same view Adam Smith of course much more famous among economists for many Pathbreaking contributions was very much of the same opinion even though in some domains his thinking was more nuanced For example, Adam Smith, although he didn't talk about Industrialization per se that much he talked about many components of it And he felt compelled in why nations in in the wealth of nations to take on the idea that better Technology might be bad for workers again. I'm not gonna read the full quote But the he goes on through the argument that well, you know, you save labor that might be bad for workers You can produce the same amount with fewer employees, but at the end of the day the efficiency improvements are going to Be good for the real price of labor and it should rise considerably David Ricardo the other great towering figure was of the same opinion He argued so in the first two editions of his monumental principles. He argued in parliamentary debates. He was an MP Against concerns related to the Luddism that, you know, he couldn't imagine how Technological improvements would be bad for workers on the whole but later on he actually changed his mind and that's sort of interesting So perhaps we're following a little bit in David Ricardo's Footsteps he wrote if machinery could do all the work that labor now does there would be no demand for labor So he thought there were some concerns into the third edition of his principles was was quite Modern thinking completely turns back Turns its back to Ricardo And it's very much along the lines of Adam Smith's thinking of course in macroeconomics labor economics development economics There's a huge literature inequality but many of the approaches that we have developed at least in the medium run Sort of confirm Adam Smith and Bentham's ideas if something is efficiency improving It should be generally useful in fact This is completely ingrained in the models that we use in cobb Douglas models By fiat unless you go into labor market imperfections, which I'll go a little bit later on You're going to have labor and capital share constant So if something improves the size of the pie labor as a whole benefit Perhaps within labor there might be some small groups, but most people think well that might be a transitory phenomenon But again on utilitarian grounds. Yeah, I think probably are going to be good in economics We of course don't contain ourselves with cobb Douglas production functions You can go to other neoclassical constant returns to scale production functions with Competitive labor markets competitive factor markets you get more or less the same sort of conclusions that Generally technological change of any sort is going to be beneficial for labor and in economics We tend to sort of think of Luddism as a sort of a Derigatory term if you in a seminar if you accuse somebody of if you say that somebody's a lot Luddite That's not that's not a good thing So the the view that progress some sort of efficiency enhancing progress is is going to be Beneficial and we shouldn't sort of question it. I think it's you know, not completely accepted universally, but it's fairly fairly fairly general in fact so interesting that these effects in Aggregative macro models labor models are so pervasive. They don't even have a name It's so ingrained that we didn't even think as economists to give them a name But for a broad audience Simon and I had to come with a name and we came with the name of a productivity bandwagon You improve the you improve the productivity and then that as a bandwagon pulls most people who are on it There could be short-term disruption But most people will ultimately benefit and a good summary of that view is given not by an economist perhaps but by LinkedIn and Paypal co-founder Reed Huffman could we have a bad 20 years? Absolutely But if you are working towards progress your future will be better than your past your present, sorry So this is the view But this view very much Benthamite and Smithian Was not shared by workers in the midst of the industrial revolution Fortunately, we know Britain has very good records of petitions letters parliamentary Commissions, so we have very detailed information of what the workers thought and they thought nothing like Bentham and Smith They thought this was a horrible time. They were being exploited The the cards were stacked against them They complained about the fact that machines were taking their jobs. Luddites were not alone They complained about wage wages declining hard work work getting harder They complained about every aspect of the new production system So for example here is one from one petition From a weaver no man would like to work in a power loop. They do not like it. There is such cluttering and noise It would almost make some man mad next he would have to subject to a discipline that a hand loom weaver can never submit to Automation or what we call today automation or many contemporaries would have called mechanization Was a particular point sore point I am determined for my part that if they will invent machines to supersede manual labor They must find iron boys to mind them We don't have perfect data from this period, but by and large they were right From 1750 to about 1840s there is Almost no growth in the real earnings of British workers. Some regions show growth There's some movements up and down, but overall no growth, but during the same time period Industrial workers working hours increased by about 20% So the real wages almost surely fell by quite significant amounts Working conditions completely changed and for the worse workers had a lot of autonomy Wasn't a great system for them in the putting out system or other home-based production Structures were not great, but at least by their own accounts the additional discipline What Bentham wanted but did not actually achieve in terms of the penopticon was pretty bad for them and of course the Concentration of people in cities much worse health conditions much worse pollution all of these were adding up This is not an isolated incident. There are many other Defining transitions over the last several hundreds of years were our thousand year Which paint a very similar picture the dark ages are were not dark in most senses They were actually quite innovative. There were many new agricultural methods new technologies introduced windmills, especially And productivity increased quite significantly during many episodes But for much of this period peasants had almost no improvements in their living standards except during episodic events Advances in the Indo-European ship design were critical for growth commerce during this time period But of course, they were also the same technologies that were fueled and enable the transportation of millions of people as slaves from Africa to the new world. So another very clear example of Of Major efficiency improving technological innovations from which not everybody benefited in fact some very Clearly delineated groups became clear losers the introduction of steam engine was Absolutely critical as critical as the textile machinery But the steam engines for the first 80 years or so were used mostly in coal mines for pumping water And their immediate effect was that you could dig into deeper coal mines And if you go into deeper coal mines, that's very expensive and employers came up with a perfect way You're gonna use children to do that job children as young as five were sent to incredibly dangerous conditions And at the end of the 18th century the about 20% of most coal mines workforce were underage children and They had tremendous health hazards complete lack of education and And and and often death out of that the cotton gin. Let me mention one more Was another completely revolutionary technology US could not even produce its own cotton let alone export cotton and then after Eli Whitney's cotton gin Although there were other prototypes before Eli Whitney's they could Essentially apply it to the tougher southern cotton led to a huge cotton boom US became the world's leading cotton exporter and was a critical part of US Economic development in the 19th century, but the cotton gin also meant that slaves who were in more dispersed and Working under less harsh conditions were moved to the more Delta regions deeper south under much much harsher much more greater punishment based Production methods again very clear losers from efficiency so This I would say is not just of historical interest It's not something that we can turn our back on and say today in Industrialized nations these things are just memories today. We are going through a period of rapid efficiency enhancing technological changes led by digital technologies, but also biotech and And other high technology high investment sectors But in the midst of this we are seeing a complete remaking of the distribution structure of Industrialized nations led by the US but not confined to the US for example, the US labor share which hovered around two-thirds for 80 years at least perhaps for longer shows a remarkable decline almost 10 percentage point decline And this is not composition. This is not because some industries are new industries are more capital intensive The red line here is cap composition adjusted. You see exactly the same even more striking is the concurrent changes in wage structure in the United States this picture shows the real wage evolution of 10 demographic groups distinguished by gender and education All the way from workers without a high school degree in dark red to those with more than a college a postgraduate degree in dark blue And you see that from the 1960s onwards For about 15 years you have this period of shared prosperity where all 10 groups are Experiencing more or less the same growth in their real wages This picture starts in 1963 because before then you cannot distinguish college graduates and non-college graduates And that distinction is rather important for certain things But if you extend it back by just looking at college graduates, you see the same thing going back to 1945 Remarkable wage growth and if anything actually faster at the bottom of the distribution than the top, but then from 1980s around 1980 onwards you see a complete sea change inequality increases quite significantly, but most jarring is The fact that While wages at the top continue to increase those for low education workers, especially men But to some degree women as well is declining There's a quite significant decline in the real earnings of say high school graduate men If you are a high school dropout in the United States today If you're a high school dropout men you're in the United States today You are almost surely earning quite a lot less than your father did this type of Bottom of the wage distribution collapsing is Essentially unique to the United States because this is the country where you don't have much protection for workers minimum wages union bargaining or norms against very high weight wage inequality But wages at the bottom have been stagnant pretty much in all industrialized nations and inequality in various dimensions of inequality here Summarized by the Gini coefficient has increased pretty much everywhere Moreover The nature of work has changed in quite parallel fashion. So here again. I'm showing it for industrialized nations this The previous picture of course is not the same for Latin America where inequalities higher but declining in a few places This one is actually similar also in the in Latin America Jobs you would identify as the middle class and here in this Classified as those in the middle Occupations that are in the middle third of the wage distribution They have been disappearing pretty much everywhere in the industrialized world and of course no surprise These are blue-collar jobs and clerical office back office jobs There are many fewer of those in some places replaced by more technical jobs, especially with the educational upgrading in some places the Replaced by much worse quality jobs security food preparation and so on now in interpreting all of these facts and the broader optimistic view of what technology does I think the perspective of economists is shaped by Two factors one is what I've already mentioned the sort of idea that if something is efficiency improving It's going to increase the pie somehow the market process is going to ensure that The gains are shared The second is that of course we have many models that recognize the importance of choice endogenous technology model or other endogenous choice models But I think on the whole in many of these debates How malleable technology is how? Manipulable its direction is is often ignored This is the basis for again a reaction that I have been I've been working on this topics For over ten years now. I mean they go back to things I was working on in my dissertation, but much more actively over the last ten years and the criticism that I hear often is but Being critical of the current direction of technology is Essentially a way of being anti-technology and that's dangerous and that's bad. It's a form of ladders and I think the basis of That sort of view is that? Well because you cannot manipulate and change the direction of technology very much criticizing technology is the same as saying The criticism the current direction of technology is the same as saying well, perhaps we don't want this technology So choice is a very important element in how we should form a worldview about technology so perhaps criticizing the current direction of technology should be not Resisting technological change in general, but a plea for changing its direction And why is that important? Well, that's particularly important because I'm going to argue the productivity bandwagon has its limits and I want to highlight two of them here, although there are others that we can talk about one going back to the views of the Workers in the midst of industrial revolution automation Meaning use of machinery and increasingly algorithms for substituting for tasks that previously labor performed is very different than increasing efficiency of production uniformly or Finding new things new ways new productivity enhancing devices for workers Automation has very different distributional effects. I'll also mention in a second show you has very different productivity effects And it's not a type of technology that by itself Going to undergird shape pros shared prosperity second Efficiency improvements Will increase the size of the pie, but then institutional factors are going to determine How we share those gains we can increase the same size of the pie But if the environment is coercive for example some things that I studied with Alex will it's key that greater productivity might actually lead to higher coercion and lower wages or Rent sharing patterns might change or they may be bad enough that the gains are not going to be shared If the technological changes that you're talking in mind are like what Bentham imagine and what Amazon applies today Much better monitoring devices Perhaps you wouldn't be so surprised that those may not lead to sharing a lot of those gains with workers So those are the two elements that I want to emphasize, but time is short and I want to sort of spend a little bit of my Time with you today on the first point on automation So this is an integral part of the book But of course the book is written for a broad audience so we don't do the technical stuff So here I'm going to do just a little bit of the technical stuff. So think of this as a way for me to Propose a somewhat broader way of thinking of production structure And to do that I'm going to me a culpa. I'm going to use two slides of math But most of it I can just do it with diagrams So in the classic way of we think about Production especially at the aggregate level. We have an aggregate production function something shifts and then that increases output and Perhaps wages and employment Instead of doing that I want to think of production as consisting of a range of tasks if you want to produce a piece of garment You need to do a bunch of spinning tasks weaving tasks design tasks Then chemical processes then you have to do all the non-production tasks, etc. And all of these are done Then you get a piece of garment A key decision is which task is going to be allocated with to which factor of production in general Think of many different types of skilled an unskilled labor and different types of capital but let me simplify it here just to capital and labor and I'm going to assume I'm going to put the tasks on the horizontal axis I'm going to assume that only those to the left of some threshold I are Technologically automatable. So these are the ones that we know how to automate Okay, and then on the horizontal on the vertical axis. I'm plotting the cost of production of that task cost of Accomplishing that task with the two factors of production the orange one is with capital the rental rate of return of capital one type of capital Divided by the productivity of capital that task and the blue one is the same wage divided by labor's productivity And then the firm's cost minimization problem is easy choose the lower envelope Now in this framework, let me think about what different types of technological changes might be so the one that economists love You know, Uzawa theory and balanced growth all things work so beautifully is labor augmenting technological change So labor augmenting technological change would look like labor's productivity increasing everywhere So great. This is a wonderful thing if it only existed So I don't know of any technological change that makes labor more productive in everything But perhaps certain things might approach it What it does is that because it's making labor more productive in everything it creates a huge productivity effect That's shown in that shaded blue area What about its impact on the allocation of tasks to? factors here no impact in fact generally second order and As a result of that it has some distributional effect, but it's very tamed Institutional effects This is the reason why in the neoclassical world Technological change efficiency enhancements do improve everybody's welfare if you like capital augmenting the same thing Big integral not much effect on the allocation of tasks, but now None of this looks like automation automation would be we introduce spinning machines or weaving machines now handloom weavers are replaced by machinery Well, that would be a shift of I to some I prime there When you do that Now you get something very different first of all the productivity effect instead of that big integral you get a small triangle That's triangle could be as small as possible as small as you want if orange and blue lines are very close together So the efficiency implications of automation could be very mild But it has huge distributional implications why because it displaces a lot of workers from the tasks that they used to perform It impacts not just those workers because those workers then go and compete for tasks that other workers Were performing so it has a generally depressing effect on wages Now if history was one of automation and nothing else We would not be talking of shared prosperity and things that actually were pretty good after say 14 1850s And the 19th century and certainly after 1945 we wouldn't be talking of labor share being constant In fact, it's not because of labor augmenting technological changes either because they were making technological changes Don't even have the power distributionally to undo the effects of automation something else This framework suggests and our empirical work and our historical work Sort of backs up that that's something else is new tasks new technologies have the capacity to introduce Tasks that did not exist before in which labor can specialize. So if you think of modern economy Look at think of most people around you Many of them perform tasks that did not exist 50 or 60 years ago even those like us Professors accountants we are performing tasks that professors and accountants 50 60 years ago couldn't dream of So that's the new tasks that is so important for labor demand okay, so this is the informal thing, but I want to now tax you for two minutes by Putting a little bit more flesh on the bones. So here is the math for it There's a purpose for why I'm doing this so think of The way that you have to perform these tasks as some CES aggregator some aggregator any aggregator would do So they have these task services you aggregate them you produce some output And what is the task production function that I summarize in that figure? Well? For tasks less than I you can produce them by capital by capital or labor for tasks above You have to use I labor that's it that was the model the only other thing I'm adding is this end here Which is going to be this index of new tasks. You're adding things to the right, okay? You solve this model and Express everything as a function of the labor supply and the capital stock of the economy and you get something that looks a little bit familiar So a k times k to something like elasticity of substitution So you might say oh we you know Daron just gave a micro foundation for the CES production function But actually it's not appearances can be deceptive. This thing is not a CES production function In fact, it couldn't be farther away from it The thing is that sigma here is endogenous. It's not a fixed parameter It changes depending on the endogenous substitution between capital and labor and most of the action doesn't come from a k or the Sigma it comes from these orange terms Which normally are dropped in the CES or are taken to be as given and one way of seeing that is to focus on The key economic object that this model highlights factor shares So since I have two factors that just I can focus on the labor share that thing that was like heading south before So SL labor share you can write it in this form So the blue terms are exactly what you would get from CES with a sick sigma. It's wage relative to Factor productivity all the action has to come from this sigma and if that sigma is not too far from one You have to work very hard to get anything out of CES But here all the action is going to come from these orange terms. What are these orange terms? That's what I'm going to call the task content of production How much of the tasks are being performed by labor how much by capital and automation directly impacts that that Orange term looks complicated. Don't worry about it. Think of it as n minus i approximately n minus i that's what it is So that orange term the labor Enhancing or labor friendly part of it gets the declines when there is automation i increases and increases when there are new tasks So now let's look at the effects of automation on wages so if you are a believer in the Efficiency enhancing view of technology will be spread as you can say well as long as automation is going to improve Output it will ultimately get Shared in one way or another with labor. So let's look at that so Let me look at the measure of The delay is okay, right So let me look at the measure of labor like wage bill that the corporate sector pays and see what happens to it when I Change i well don't look at the math. Just look at the label. This is a productivity effect. That's that triangle And this is the displacement effect the displacement effect completely about this orange term that gamma that I introduced going down And which one is larger? We don't know in general Productivity effect could be larger displacement effect could be larger, but let's go back to that figure if If I make the orange and the blue close enough together The green triangle is small enough. So that's necessarily the displacement effect is going to be smaller So therefore with automation technologies you can have productivity improvements capital business owners Perhaps high-skilled labor. We'll see that in a second may benefit But workers especially line workers may actually end up fairly worse off. Okay. Is this all theory? Well, it is but I hope not just theory. So one way of understanding that is to look at a Archetypal example of an automation technology robots actually robots are Stacking the cars against funding something like a large displacement effect because they're actually very productive I'll argue if I have time later on that many automation technologies that we have been enthusiastically adopting over the last 30 years are not so productive, but robots are the exception They're actually quite productive. They have revolutionized manufacturing, especially heavy manufacturing electronics chemicals and cars But if you look at their effects, they look nothing like a rising tide lifting all boats So let me not go into the details a lot but what Pasquale Restrepo and I do is We construct a measure of exposure of two robots based on which sectors are having most robotic innovations and different local labor markets in the United States that Specialized in different industries in the 1970s So on the basis of this we have this exposure to robots measure. We show that Higher exposure to robots predicts more robot adoption and then we look at what it implies for workers So here are three graphs that summarize it each circle here is one commuting zone or a local labor market And you see a very strong negative effect It's showcased by places like Detroit, Lansing City, Defiant City, heavy manufacturing hubs in the Midwest But if you leave those guys out you get the dashed line rather than the solid line So they're not driving the relationship. They're just bang on the regression line This is for employment lower employment to population ratio This is for wages quite significantly lower wages in places that have been adopting robots And if you look at the distribution say for example with a quantile regression you find that negative effects are borne by the low wage workers So this already gives you a hint that it's not just between capital and labor But the broader inequality trends perhaps are going to be related to automation as well. That's something that Pasquale and I turn in a more recent paper and We change the focus away from robots to all automation technology So software automation, which is a very important part of it And we look at the national labor market because a lot of inequality is not just local but at the national level again Let me summarize everything with one figure So what we do is that we construct a task displacement measure, which is loosely speaking In the 1980 your demographic group, which could be women with low education who are young and native born Your demographic group how what fraction of the tasks that you have been performing have been taken over by automation Which could be software automation non robotics manufacturing automation or robotics automation And then we put that on the horizontal axis and then change in the real wage of that demographic group for 500 demographic groups on the vertical axis and this is the Cloud of points if you look at the R square of this with or without control is about 70% So a huge fraction of the inequality between groups in the United States seems to be very strongly correlated with automation and All of those groups that you saw losing real incomes those are below the Real wages I should have said zero. They are all those that have heavily lost tasks to automation So automation, of course, is nothing new. So if there is Such a negative effect of automation on inequality on the labor share. How come we don't see them in the 40s 50s 60s 70s Well in a different paper Pasquale Restrepo and I Look at what's the overall rate of automation and displacement caused by automation and a proxies for new tasks So here is a summary so Here you have to make more assumptions. So this is more a little bit more assumption based than the figures that I showed you before but This is data from 1947 to 1987 So you have a lot of displacement and everything I've put in the labor share units because that's the key You have a lot of automation But at the same time you have a lot of workers being reinstated into the production process because of new tasks So much so that the sum of those two is hovering around zero So the two are balanced. So it's like a balanced growth path Same thing we didn't manufacture it, but now fast forward to the post 80s period You see a very different picture automation accelerates, but even more remarkably reinstatement slows down and In manufacturing, there's almost no reinstatement. It's all automation. So There is something Technological going on that I think is very important for the new non-shared nature of economic growth But I have not talked about red-sharing and institutions Because I don't have time but I want to also argue that these Technological trends are themselves not separate from institutional changes and to do that I'm going to use my last ten minutes to do a whirlwind tour of going back to the British industrial revolution So let me skip these Okay so things looked like Worrying like today during the industrial revolution Many workers not benefiting capital business owners benefiting and workers not doing so Why why was that happening? Well looked at it from this perspective Two major reason one is institutional workers couldn't organize In fact trade unions were illegal there were still master and servant acts that made it illegal for workers to quit their employers and Britain was an aristocracy oligarchy without any democratic counterweight and Early technological change had a strong automation bias This is what most employers were interested in in textiles and in some of the associated industries That's what some of these workers were complaining about as I said Why did things change in the from 1840s onwards? Well, I think both of these elements started changing first of all technology new industries and New technologies even in some of the existing industries took a very different direction There are many reasons for that. I don't have time to get into it Railways is emblematic of one of them Railways were very worried about low productivity of workers So they from early on experimented with many methods, but ponopticon and things like that wouldn't work They went for efficiency wages. So railways are much more into sharing the benefits with workers, but even more importantly Many industries went in a direction of trying to increase the productivity of low-skill workers This is most emblematic in the US and associated with the Habakkuk hypothesis. US had a very steep shortage of skilled labor and That was what people kept talking about in the 1830s 1840s And then they came up with a solution new technologies interchangeable parts being one part of it which Were trying to reorganize work in order to increase the productivity of unskilled labor and then these technologies then spread From the US very quickly to the UK Canada and Europe So this is the Habakkuk force That changed the nature of technology in a much less automation more worker-friendly direction But the institutional changes were no less sweeping Democratization was a huge deal civil service reforms You know British cities were places you wouldn't want to be in and they all got cleaned up But part of it because the civil service got on the case and so service got on the case because state capacity was much higher already in the 1850s, but also worker power increased. So collective bargaining trade unions became Becoming legal was one of the major part of the Chartist reform Questions that happened in 1871, but even after 1871 they were cases against collective bargaining attempts under the master and servant laws And those were repealed in 1877 The broader forces are actually captured by an early radical John Telwell Who is often associated also with the Luddite movement and in fact it shows that the Luddite movement wasn't just break the machines They were asking for a different social contract and and what Telwell said, you know You know these accumulation of capital that you're seeing all the inequality, but it is bringing something else it's bringing workers together and New ideas hence every large workshop manufactures sort of a political society which no active parliament can silence and no magistrate can disperse These were of course imperfect steps Britain the US don't look like happy shared prosperity societies in the In The late 19th century, but this is the sort of the Habakkuk path of technology continued again This is a large part of the book, but I don't have time to go into it today But there was a lot of effort at Increasing worker productivity creating new tasks throughout British and American especially American industry And again it was sort of bolstered by worker power and worker power took a very interesting form In many places, you know, it went wrong unions sometimes blocked technology But many union leaders not all many union leaders also understood that what they had to do was not to block technology to resist technology But to actually try to steer the direction of technology UAW in its heyday was very successful in this against GM against Ford We offer our cooperation a common search for policies and programs that will ensure that greater technological progress will result in greater human progress and What they emphasize is you want to create new tasks new training opportunities for low-skill workers and There were many successes, but then things went wrong Why did they go wrong? Many reasons this failure has many fathers but I think no part of it can be told without digital technologies and Again, this is both a qualitative account, but also quantitatively Showed you again if you believe it that 70 percent 50 to 70 percent of the inequalities Related to a subset of digital technologies the automation technologies So how come why why digital technologies in fact if you look at the ideology of digital technologies early on This is not what you would have expected the early pioneers of digital technology Some of them at Berkeley some of them at MIT were very much opposed to big corporations The this is quoting from one of them industrial approaches grim It doesn't work the design motto is designed by geniuses for used by idiots and the watchword for dealing with the untrained Unwatched public is keep their hands off This is what they were against they thought digital technologies would be liberating for worker liberating for citizens It would destroy IBM IBM was the organization. They hate it most and and it would sort of create much more basis for actively participating citizenry and shared prosperity at the end the opposite happened Institutional changes a new ideology among businesses in the shape of Friedman doctrine Union movements completely being decimated lack of countervailing powers, but very importantly the next generation of digital leaders Completely swallowed hook line and sinker the idea of IBM. We're going to produce big machinery so that companies can monitor workers Automate some part of it gives the control to managers rather than the workers So that's the direction in which the digital technologies when now again I can get going to the details with some more evidence But let me just show you one thing because I think this might be fun And people may not have seen it from some new work that I have done with Alex he and Daniel Lemaire One place where you can see the Friedman doctrine. We argue is in business schools And so what do business schools do? Well, we argue it turns out that if you have a Manager who graduates from a business school in the US and in Denmark. This is for the US what they do is they cut wages So nothing before a new CEO with a business school degree comes in wages decline labor share declines Well, perhaps they are doing that while at the same time increasing the pie No output doesn't increase employment and investment doesn't increase exports You see the same pattern in Denmark nothing before the business school CEO comes in thereafter wage declines This is just a tip of the iceberg I don't think business schools explain much much of what's going on But it's emblematic of a new ideology without countervailing powers That was I think part of how the direction of technology got Got dislocated well I'm almost at the end of my 50 minutes So let me Just say two more things one is artificial intelligence All of the things I've shown so far is be free AI But artificial intelligence is continuing and perhaps amplifying the trends that we are seeing with digital technologies And I think it's doing so again because it's embedded in an institutional structure that Elevates automation Rather than improving worker productivity, and it's also embedded in an ideological structure and in fact the very word machine intelligence and Artificial intelligence are in my view just telltale sign of that what you should want is not machine intelligence What we argue is machine usefulness what you want are machines that are useful to people not intelligent machines And in fact, this is not one criticism that I get from including from some of my closest co-authors Well, this is all well and good, but can you really redirect technological changes? They're really and a possibility that things like artificial intelligence or digital technologies more capable machines could actually be used for Improving what human productivity does well both historically and today the answer is yes There's some of the early luminaries of the field I think those that had a much better idea than Then then then then the ones that are followed by the current AI field actually had exactly that view people like Norbert wiener Douglas Engelbar J. Say are liquid and some of the most important digital innovations came out of that approach of machine usefulness and and The opposite of that is exactly what the early hackers described as the IBM approach You use digital technology to control Humans to monitor them to do the things that they used to do. That's a very different vision Now since the crowd here is very interested in development. Actually, let me say this is Bad news for development as well. I think for developing countries as Jacob is here. Jacob's wonderful work is on this also on Inappropriate technologies. I think have been a very major problem and in some sense artificial intelligence by automating white-collar work Again moving in that direction slowly albeit moving in that direction I think could be the mother of all inappropriate technologies because it's going exactly in the direction of using things capital skilled labor Programming that are scarce in the developing world and not using the resource that the developing world has which is abundant labor So it will be a force for within country and between country in equality And then finally all of these technologies make things much harder because they have also impacted the nature of democracy and then the way that they have done that is actually not a separate phenomenon I we argue in the book. It's part of the same ensemble if you have a business model of top-down technologies and technologies for control it lends itself very easily for monetization based on ads and data collection and that is the nexus that we argue is at the at the root of of A lot of the democracy troubles and redirecting technological change again is feasible the examples I have given our Our telling on that but another one that we see is renewable technology This is I think you know not much for us to be happy about in the environment climate change realm But there's one thing we should take pride in which is that even a very small amount of government and societal pressure led to a huge redirection of technological change more than 20 34 declines in solar and wind costs and The you have to look at the book if you're interested for our arguments of why the same is feasible in the realm of digital technologies Let me conclude here. Thank you very much for spending this 50 minutes with me. Thank you Well, let me start by thanking their own for a one for being here to for what really was a wonderful lecture eliminating as always Inspiring as well It also thank Leopoldo Carlos and and come on as because as you guys already said That discussion led me to me being here so what I want to do today is to Place the light a little bit more on on the final words The wrong gave gave us and and try to think a little bit more of the from the standpoint of developing economies Of course what the run just gave us is a very convincing and fair Challenges to to the idea of what he called the productivity bang wagon idea the idea that Productivity growth will bring all the good Edges that we need He plays the light on two main things That talk about the limitations of productivity growth one is the fact that the prevalence of automatization places challenges for the the absorption of the less privileged workers, but also the fact that there is poor Rain-sharing of course all of these worsened in the era of digitalization for all the reasons that their own mentioned But let me also add Because of the great gains that digitalization brings for the scale of corporations Through the fact that they rely on networks and the need for these big let me call them mutualities Of course this does place a challenge for the idea that technological adoption in progress may be Inequality reducing and does help us Answer the questions that we're all together here to to answer But of course is as they're all said his focus has been especially in these technologically leading countries And at the end he pointed that this may be even worse for Economists such as the ones that are of most interest to people here Because of their labor labor abundance and the great pearls that automatization does brings The other feature that I wanted to highlight Is is how crucial labor and social protection in general The welfare state Has been to lessen the problem so so let me pick up on some of these points and ask what what's in there for developing incomes I would say The the problem is even more complicated for developing economies because as all of these things matter for these economies Exactly in the way that they're on set they may matter even more We also have the problem That rather than the main issue being that this Developing slash adopting firms Exploiting their workers or shedding out their workers the main problem in developing economies is that we never had the absorption of Workers by firms that had already adopted or the well technologies that allow them to Even think of paying High incomes to their workers The problem let me emphasize is not that rain sharing is better or the feature that I wanted to emphasize It's not that been sharing is better in these countries and that's the reason we don't have to worry that that much about Automatization of the or the or the Or the or the rent sharing problem in fact I Markdowns are high in our countries here some data for China China here some data for Chile And in fact the larger corporations also pay larger Lower wages that is to say they have larger markdowns But rather the problem that I wanted to highlight is that rain sharing becomes less relevant because as I said in the beginning Less workers are being absorbed by firms which with with which they have the chance to bargain So the numbers I wanted to bring here To emphasize this point or these if you look at this more developed economies in in this chart The vast majority of workers are in firms Here exemplified by firms of ten or more workers The the typical technology adopters will be in the higher end of the firm size distribution instead in Latin American countries here the the only Countries for which I have numbers Among the developing in the developing world that is the best minority of workers That are absorbed by these types of firms instead a very large fraction of workers here are Self-employed and that is even worse for the workers for which the inequality problem is More problematic in these countries because sorry. I'm also having Because one interest the other interesting feature of inequality in this country the other the other Distinguishing feature is the fact that we not only are more unequal But inequality is more dominated by poverty rather than just by a very far and dense upper tail of the income distribution Sorry, there's a little bit of a of a delay so It's not a problem as you may think that in the late years We have adopted technologies that are very automatized and therefore we have shed a lot of the workers out This has been a problem that has been prevalent for very many years. There has been a nine-tie job creation bias by firms even pre the new era of Automatization and digitalization Here's some numbers for what the manufacturing share of employment and value added has been over the process of development It's very hard to distinguish that two lines But but in all countries the line that is farther above is the share of Total value added that's represented by manufacturing and the other line is the share of employment that is represented by manufacturing and whereas in Reacher economies, especially at the peak of industrialization They share that manufacturing meant for employment and for value added was very similar Developing countries here again exemplified by Latin America here Colombia in particular Have generated much less employment from from from the from the start. So What I want to bring with those numbers is The additional issue that we have to deal with in in these economies that Well, all the perils that their own mention are very very much there and Very much represented danger. There is an additional danger of an anti technology bias in a set of regions where technology has not even gotten there and has not been able to generate the value that that at some point did create the prosperity that The more developed economies saw let me also mention a similar or a related point Regarding the welfare state social protection more More generally understood and this is of course an issue that was raised yesterday in the policy panel Well while their labor protection is indeed central and central when we have the rent sharing problems That have been pointed at today There is also the question of how we combine social protection with technological progress in more general with The kind of growth that developing economies definitely need and so there is The question of how do you fund social protection when you have not gone through the Through the wealth increases done in that allowed for that social protection to arise in the countries that they're all told us about Some minutes ago so I leave you with that open question and Let me move now to the Q&A Come on. I think What's going to go? So we heard an amazing lecture and really interesting observations from our seller and And now I know that a lot of you asked one to ask questions both the iron all for also the master So let's get started. And what I want to do is take three questions. So that's okay Take three questions from the audience here one from here one from here and one from that so you get Parody into the questions. So let's start from this side and just put your hands up wait for The colleagues with microphones. I can see you for the first person to ask questions. Go ahead Yep, go ahead. Maybe you want to introduce yourself Thank you so much for the lecture. So On the empirical part that you show Which you show in the sort of the latter years during statement effect Being so negative that in the end the labor sure is coming down The question is how do you disentangle the productivity and technology part that you're emphasizing? vis-a-vis international trade What could I say look no, no, no, you're not really measuring that what you're really measuring is NAFTA plus China plus whatever. I don't know that and then one observation which is connected to Marcella. I Really like the emphasis on at the end of the day the sharing depends on the political institutions by which workers power and power but in our countries with more than 60 50 percent of labor force Unorganized the political power of labor is very weak Because they're very very dispersed. So that's yet another argument if in the future the gains from productivity Are going to be shared more equally. We need different political institutions by which workers need to organize to get them So a question and an observation. Thank you Question from here There's a question that keep your hand up Thank you. Very nice as always. So I come theoretical comment first. So Regarding the choice of technology you have like two Optimality issues the first one is if you have a planner the plan is going to choose the technology which maximizes output and then You know, you share the output, but when you have firms choosing the technology Maybe they choose a technology which much maximizes Capital income So then you have one problem and the second problem is then by this choice you change income distribution, so I Would want to hear an analysis of that the second one is You may have Let's say you talk about that the purely technologically distributional issue and then the institutional issue But in my view and I'm literally on the right these labor-saving innovations have the effect of reducing Bargaining power of the workers basically because they are less needed So I want to know if you have studied these these issues. Thank you Much let us have a question on from this side of the of the audience on my right anyone from that side Okay, let's go ahead We're gonna ask a very short but obvious question perhaps I want to know if those business school managers Increase the manager wages. You should tell us that The manager wages Okay, well Let me first say thanks to Marcella as well. I think those are Exactly right your points Let me make two comments and that's why the book is focused on the Technologically leading countries because I think the problem for the emerging world or middle-income world is much harder so both the type of social protection That is needed is becoming harder and harder, especially when these countries are being squeezed more and more by both technology and trade and And and second You know most emerging economies don't have control as much control over the choice of technology So even if you buy everything I've said and some people may not You know the extent to which say Columbia as a country or the Colombian business has a choice over the direction of technology is Significantly less than American or German firms And that's gonna be a really complicating factor put that together with the difficulty of building Missing institutions. I think it's a it's a challenge the the three comments were all excellent and and I think They're all They all require detailed answers. Well, except Leopold as I gave it already not detailed They increase they increase shareholder values. They increase share repurchases dividends and managers wages So That's a first order question that your question applies both to that Displacement and reinstatement figures it applies to the robots evidence and it applies to the inequality evidence on the task displacement and From a statistical point of view it turns out that Trade with China is fairly orthogonal. It's a curious pattern. But when you think about it a Lot of that was in the low value-added sectors such as apparel Furniture toys whereas much of automation both software and Equipment robots is much more in the high value-added sectors Now In terms of the inequality patterns that I showed you there There is the other aspect of globalization offshoring So I took credit for offshoring there So actually what I showed you on the horizontal axis was both offshoring and automation And I see offshoring very related to automation, but quantitatively it's about one-tenth of automation So if I didn't do that it the numbers wouldn't be that different But it is it can become even more important in the future NAFTA was very important for offshoring Much less. I think the WTO accession of China was much more for the final goods And there is a curious pattern there, which I don't understand Which is when you look at the China effects. They're very well identified on employment David outer and call these work and some work that I have done finds very large effects But inequality effects are more limited Whereas when you look at automation both the employment and the inequality effects are very commensurate with each other So there's some puzzle there that I don't fully understand her now let's a wonderful question and You know I'm going to give a lecture at the AA. That's exactly on these issues is when is it that the distortion when the direction of technology is distorted and You know if markets are perfectly competitive and All of the other neoclassical assumptions hold even if you know firms are making the decision They're looking at it from the point of view of the capital return the markets gonna work out But exactly once you deviate from these things Then there are gonna be distortions distortions can be technological in nature They can be because of this automation versus other things again in said settings in which not things things are not fully competitive and it also will be because of differences in markups and in general what I Going to your imperfect labor market comments bargaining and so on that's actually a topic of a new Work that Pascal Restrepo and I have and I think it's there are some lots of interesting things One thing that we also emphasize in the past is that there's already a pecuniary channel that leads to excessive automation I even had a slide on that but I skipped it in any labor market in which there is a difference between Observed wages and the social opportunity cost of labor efficiency wages bargaining, whatever Firms are gonna have automation incentives based on the wage Social planner would like to do it on the lower social opportunity cost of labor There's gonna be an excessive but there are other interesting effects that come Much amplified rent reduction effects of which tasks you automate In principle, there's another channel, which is exactly the one that you've pointed out Which is that you may also choose to automate in order to Not to reduce the rent directly not to remove the rent But you still keep the you use the threat of automation as a way of increasing your bargaining power I believe in that effect, but empirically it's hard to identify Theoretically it turns out to be also very tricky many models don't give that for a variety of reasons. We can talk more about Thanks Darren. We have a very large virtual audience for this lecture around 500 registered So I'm just curious whether there's a questionable over the virtual audience not so far So let's turn again to all of you and let's have a set of another round of three questions There's one for a kill there Go ahead. Yeah, maybe we just wait for the fight And You know, I you didn't mention a 19th century figure Economist also in some sense who would have said well, it's obviously a question of who owns the means of production and I Never would have disagreed with you that technological change is endogenous Well, why don't you think aside from what government can do in terms of thinking about you know? taxing certain types of technology What do you think about? sharing Those rents that come not at the firm level, but at the society level. I actually don't agree with my fellow in Thinking that social protection is going to be very helpful here because I think this is just a problem That's going to be accumulating over time. So What schemes could you come up with? Not by giving people stocks, but directly via automation, which is what's lowering labor's bargaining power to Rectify this problem or at least help rectify the problem. Thank you Raquel. I was not I think I'm supposed to take more questions A couple of more questions there are any more Go on see it. Okay. Yeah, that's one day. Yeah, and yeah Yeah, do great. Yeah, thanks for a super interesting talk and So as it has been mentioned before the political economy problem is that firms mostly make this decision This call of what technologies they want to develop with some bargaining in the story And I really like the paper on green technologies that you mentioned that really shows that it is feasible to provide some incentives That affect which technologies tend to be developed I'm just afraid that the parallel for in this situation is not as easy And it requires a whole lot of information We are and not only information but ability to predict as as one of the quotes Is maybe it will be a harsh time for 20 years But it will be worth it in the longer term and and some of it is true So how do you and in the meantime? I guess one doesn't want to become China and and as a government saying you have to Develop this kind of R&D and not this. So how do you see a feasible way of reconciling the positive forces of market? Decisions for what R&D where R&D should put its efforts and this rectification It seems like you convinced us that it's necessary But you didn't give us what you think is the best solution now and feasible Politically feasible. Thank you. There is a question at the back. I can't see where clearly the dog But yeah, sorry go ahead Is that right with the back? Yeah, I think thank you for the presentation So I remember in your presentation. You said many times like Eventually everyone will better off for the advancement of technology But I think Everyone's battering off is not the same as reducing equality because if the bottom Better off for a little bit and the top better off for a lot then actually inequality increase even though everyone is bettering off bettering off and another Comments of mine is I think how do I put it? So inequality if if in the words of the British it's It's it's the haves versus the have nots. So when we say will technology reduce inequality So whose technology? right, so if the technology is eventually say in the hands of a Few number of people then probably that wouldn't reduce inequality if that sounds too much like a Marxism Economist then let me put it into the Like an international perspective for example 60 years ago, the United States probably make everything from television to telephone to To toys right, but it's not because other developing countries 60 60 years ago They don't want to be because they don't have the technology But in the past few decades first Japan then China and then now Vietnam they will for one way or another They start to have this technology to make all these manufacture things So I think probably democratization of technology is what's eventually going to reduce inequality That's what that's just what I think thank you Thanks Raquel so in the book we discuss the other half of that duo angles a lot because he had the excellent analysis of the living and the working conditions You know Marx actually did talk about automation, but his Writings on that are a little confusing and confused. So we don't get Order sort of issues you raise are absolutely right and important. So I Know you're asking this partly to be provocative and in an intellectual way, so I don't want to sort of Say this in a negative way, but what you asked is exactly the Silicon Valley view. So there are many sort of semi Progressive Silicon Valley leaders including Reid Hoffman who I mentioned Eric Schmitz And many others who are very worried about automation and their solution is we should do all the automation that we can and then we have to find a way of sharing the benefits and And I think the problem with that is first of all, it's not an equilibrium in a political economy sense once you disempower labor and I think taking away the most important things that people do in their jobs Or their labor market presence you're really disempowering them once you disempower labor Then it becomes very difficult to have very generous redistribution and second there is growing evidence or the controversial that This isn't actually going to lead to a healthy Society either people when they don't have a job they feel very disenchanted alienated and So it has so it seems like the most immediate thing if it's feasible at all And that's where the feasibility issue and Rashid's question comes in Steering the direction of technology in a way that keeps on creating jobs meaningful jobs better jobs And that's the way to redistribute is much better so the the alternative yet another alternative, but I think it's not that different from the Hoffman Schmidt Zuckerberg solution, which is well you give some ownership of the means of production and that's where your Marx reference comes in and To workers and they become rentiers, but I don't think that's really fundamentally different from Social protection and redistribution doing it because if they are do that and they don't they don't work It's gonna be the same thing and even if you promise that are you gonna be able to implement it Even if you implement it once they start losing that those shares they sell them in the market Are you gonna give it back to them and what type of so the political economy cannot be bypassed through those mechanisms? Rashid that's an excellent question. So First of all, let me start by emphasizing I don't want any of my sort of Comments to be misunderstood in that I am Everything I said is not opposed to technology. It's all in the spirit of we want the technological change But we want the direction of technological change to be much more worker friendly and consistent with shared prosperity and Moreover again showing sort of my neoclassical affinity. I don't think that you can have that technological progress by a Very heavy state hand. So the private sector has to play a critical role So then Put the two together Which is I'm saying the private sector right now in the current institutional environment is generating highly distorted technology But at the end you need technological change. You need the private sector So the only feasible solution you need a better institutional framework and that institutional regulatory framework to change the incentives for The direction of technology now your your question was extremely well put it has two layers one is Is it feasible Technologically to steer direction of technology and yes, I 100% believe that now I don't have hard evidence but digital technologies are so versatile and so in the book there is a you know half a chapter devoted by Many things that you can do with digital technology that create new tasks new platforms new information for decision-makers at every level of skills with examples that Tries to bolster that case But then you were raising the second layer You know in energy it is possible to go to renewables or It's possible to go to fossil fuel in digital. It's possible to go to automation to worker-friendly technology But you were raising the second issue in Energy it's easy to find which one is renewables although I can tell you big oil companies are doing an amazing job of Masquerading some fossil fuel technologies as renewable, but that's a different matter, but generally I think it's a it's feasible and We admitted the book and I admit here. It's much harder You know AI technologies are they empowering managers to buy new tasks or are they empowering managers to cut the rents of workers? So there are many gray areas so for that I think I Specific technological choices I think would not have worked in the energy field It would not imposed by the government would not have worked in the energy field. It won't work in In technology, but there are many other things that can be done. So one of the other charts lies that I Removed for example is that right now? It's not that we are creating a level playing field We're actually in the US and the same is true in most industrialized nations The tax system provides a 20 25 percent subsidy for automation relative to Hiring workers or increasing worker productivity. So the first thing is that you would create that you would remove that bias So that if that's not enough, I think what you have to do is set broad goals for Labor-friendly technologies and the role of workers is much greater. So one model there is Germany So emphasizing that this is not just a global trend Choice is relevant. Germany is far ahead of the US in terms of robots, but it's embedded in a very different institutional structure so Work councils are consulted with robot adoption unions Just like UAW did are very engaged in training for workers after automation. So firms are Can introduce robots, but then they are they choose or they're induced to retrain many of the workers are for fewer layoffs and they also introduce other technologies that are complementary to humans in design inspection planning where Internally trained workers take many of these jobs So again the sort of combination of government oversight civil society pressure pressure and workplace Coordination much harder in the US but I think those would be solutions that at least can get us started and And and finally, you know first a clarification point I'm sure you did not misunderstand me, but I didn't want to when I said Ultimately, everybody will benefit. I wasn't saying my own view I was saying I was giving a caricature of not every economist But a model economist view and a view that follows from some economic model And why do I focus on people benefiting rather than inequality? Well, actually, I think inequality matters as well but even You know Reed Hoffman's quote and other sort of Silicon Valley and many economists would agree that Many of these technologies are going to increase inequality. So the claim isn't that You know Zuckerberg and Elon Musk are gonna benefit as much as the workers But the workers are gonna benefit as well, and I'm taking Exception to that view. So so that's a sort of a stronger claim and that's why I focused on that one I'm not sure whether I understood the last part of the comment But if you mean by democratization of technology, you know technology going in a direction That's Sort of broader in its applications and is useful for workers is useful for citizens consumers users I think that's exactly what I am sort of talking about and that's why just like you said a very important part Of the emphasis is about the control of technology But there's a lot of talk of democratization in Silicon Valley. That was you know, Facebook and Twitter were gonna democratize Communication and news sharing You know, some of that is is not, you know, not clear what democratization in general means in that context Thank you Just very quickly in response to to Raquel's comment Just just a clarification that I I don't think I said it but but I didn't mean to say That social protection was going to be the answer Just picking up on on on the rounds point that labor protection social protection have been so important to keep control on on the power of firms on Employees, but I completely agree with you that it is Limitations one of the limitations is whether we can pay for it and how we can pay for it As I mentioned, but of course it is also a very limited tool to start with I think all of the comments actually go in the way of pointing at the importance of generating income to start with before providing social protection from the state and most definitely the design of the tax system is going to be crucial Thanks, Marcella. It's time to bring this annual lecture to a close I know we would like to carry on a little bit longer, but it's already almost six o'clock I told absolutely agree with you that we have to as economists not take technology not in the sort of optimistic way We do but I think one key take away from what you said And that's off the optimistic view on this is that how do we deal with the worker-friendly technologies that are both create jobs Or good jobs and are also productive, right? This sort of balance is so important I think we would like all I would like all of us to thank Darren and Marcella for the wonderful lecture and the wonderful comments So let's thank them Before I end or in this and like I should mention that UNU wider has a very exciting project We just finished that looks at the role of technology Automation on workers on inequality and also on the changing nature of work Is a project that we have several research outputs on our website led by Carlos Graden and others Simone. It's also here And do take a look at the our publications because in our view the first project one has done Acro where we have like we have some evidence on the effect of automation and transition on inequality and and and Jopla regime so on so that's something we might just wanted to mention So let me stop ending here and say that I know many of you are here for UNU wide event for the first time I do hope you're going to sign on to our newsletter So you've got to get to know more about the work we're doing and hopefully I will see you again in a Future UNU wide event with us notches. Thank you