Economists blame technology for increasing inequality
However, technological change came as post-secondary education growth slowed and companies began to spend less on training their workers. “When technology, education and training come together, there is mutual prosperity,” says Lawrence Katz, Harvard labor economist. “Otherwise you won’t.”
Increasing international trade tended to encourage companies to pursue automation strategies. For example, companies worried about cheap competition from Japan and later China invested in machinery to replace labor.
Today the next wave of technology is artificial intelligence. And Mr. Acemoglu and others say it can be used primarily to support, make, or displace workers.
Mr. Acemoglu, like some other economists, has changed his view of technology over time. In economic theory, technology is almost a magical ingredient that both enlarges the economic pie and makes nations richer. He remembered working on a textbook that included standard theory more than ten years ago. Shortly afterwards, while he was doing further research, he had doubts.
“It’s too restrictive a mindset,” he said. “I should have been more open-minded.”
Mr. Acemoglu is not an enemy of technology. His innovations are necessary to cope with the greatest challenges facing society such as climate change and to enable economic growth and a rising standard of living. His wife Asuman Ozdaglar is head of the electrical engineering and computer science department at MIT
But as Mr. Acemoglu delved into economic and demographic data, the displacement effects of the technology became more apparent. “They were bigger than I thought,” he said. “That made me look less optimistic about the future.”
Mr. Acemoglu’s estimate that half or more of the widening wage differentials in recent decades was due to technology was released last year along with his frequent contributor, Pascual Restrepo, an economist at Boston University. The conclusion was based on an analysis of demographic and economic data, which shows the declining share of economic output that goes to employees in the form of wages, as well as the increased expenditure on machines and software.