Economists place more blame on tech companies for rising inequality

Special for Infobae of The New York Times.

Daron Acemoglu, an influential economist at the Massachusetts Institute of Technology (MIT), has argued against the phenomenon he calls “excessive automation.”

He notes that the economy has not benefited from investments in machines and software. In contrast, the growing inequality derived from these investments and the public policy that encourages them is totally evident.

At least half of the progressive wage gap among American workers over the past 40 years can be attributed to the automation of tasks that humans used to perform, especially men without college degrees, their recent research reveals.

Globalization and the weakening of unions have also played a role. “However, the most important factor is automation,” Acemoglu said. In addition, he added that the inequality caused by automation “is not due to any fortuitous event or work of nature, but to the way in which companies and society have decided to use technology.”

Acemoglu, a multi-stakeholder researcher whose work has made him one of the most cited economists in academic journals, is not the only prominent economist to claim that computerized machines and software, with some help from legislators, have contributed significantly to the wide income gaps in the United States. More and more voices are joining the chorus of criticism around the Silicon Valley giants and the uncontrolled advance of technology.

Paul Romer, winner of the Nobel Prize in Economics for his work on technological innovation and economic growth, expressed alarm at the unbridled market power and influence of the tech giants. “The economists taught: ‘It’s the market. We can’t do anything about it, ‘”he said in an interview last year. “The truth is that this statement is totally incorrect.”

Anton Korinek, an economist at the University of Virginia, and Joseph Stiglitz, a Nobel laureate in economics from Columbia University, wrote an article entitled “Steering Technological Progress”, in which they recommend steps, from small nudges for entrepreneurs to fiscal changes, to favor “positive innovations for the workforce”.

Erik Brynjolfsson, an economist at Stanford, is generally optimistic about technology. However, in an essay to be published this spring in Daedalus, the journal of the American Academy of Arts and Sciences, he warns of “the Turing trap.” The phrase refers to the Turing test, named after Alan Turing, the British pioneer of artificial intelligence, whose challenge is for a computer program to participate in a dialogue so convincingly that it is impossible to distinguish it from a human being.

For decades, Brynjolfsson noted, the Turing test – achieving the performance of a human being – has been the guiding metaphor for tech experts, entrepreneurs and policy makers when it comes to AI. That is why AI systems are created designed to replace workers and not to improve their performance. “I think that’s a mistake,” he said.

The concerns expressed by these economists have resonated more in Washington as the tech giants are already the target of attacks from different fronts. Government officials frequently criticize companies for not doing enough to protect user privacy and amplifying misinformation. Lawsuits are ongoing at the state and federal levels accusing Google and Facebook of violating antitrust laws, and Democrats are seeking mechanisms to curb the market power of the industry’s largest companies with new laws.

Acemoglu testified in November before the House Select Committee on Economic Disparity and Equity in Growth during a hearing on technology innovation, automation and the future of employment. The committee, which was launched in June, will hold hearings and gather information for a year, and prepare a report on its findings and recommendations.

Despite the partisan stalemate in Congress, Representative Jim Himes, a Connecticut Democrat and chair of the committee, is confident that the committee will be able to find common ground in some measures to help workers, such as more support for proven training programs.

“There is nothing partisan about economic inequality,” Himes said, referring to the damage done to millions of American families regardless of their political preferences.

Some economists consider the postwar years, 1950 to 1980, to be the golden age of technological advances and increases in workers’ incomes.

The problem was that, after those years, many workers began to lag behind. Continuous advancement was seen in crucial automation technologies, such as robots and computerized machines for factories, and specialized software for offices. To stay ahead, the workers needed new skills.

Unfortunately, technological change evolved, while progress in higher education slowed and companies began to spend less on training their employees. “When technology, education and training move in unison, they produce shared prosperity,” said Lawrence Katz, a Harvard labor economist. “Otherwise, you don’t get that result.”

The growth in international trade in general encouraged companies to adopt automation strategies. For example, companies concerned about the low costs of their competitors in Japan, and later in China, invested in machinery to replace their workers.

Today, the next wave of technology is artificial intelligence. Acemoglu and others are of the opinion that it could be used primarily to help workers, making them more productive, or to replace them.

Acemoglu, like other economists, has changed his position on technology over time. In economic theory, technology is a kind of magic ingredient that inflates the economic pie and enriches nations. He related that more than a decade ago he worked on a textbook that included the standard theory. Soon after, when he investigated further, he began to have doubts.

“It’s a very restrictive way of thinking,” he explained. “I should have taken a more open stance.”

Acemoglu is no enemy of technology. His innovations, he stresses, are necessary to face society’s greatest challenges, such as climate change, and to produce economic growth and raise living standards. His wife, Asuman Ozdaglar, is director of the Department of Electrical Engineering and Computer Science at MIT.

Unfortunately, as Acemoglu studied the economic and demographic data in greater depth, the displacement effects of technology became more apparent. “They were bigger than I expected,” he said. “That affected my optimism about the future.”

In a post with his frequent collaborator, Pascual Restrepo, an economist at Boston University, Acemoglu reported last year that, according to his calculations, at least half of the widening wage gap in recent decades is due to technology. The conclusion was based on an analysis of demographic and business data showing a decline in the participation of workers in economic output in the form of wages and a rise in spending on machinery and software.

Acemoglu and Restrepo have published articles on the impact of robots and the adoption of “regular technologies”, in addition to recent analysis on technology and inequality.

Regular technologies replace workers, but do not produce noticeable increases in productivity. Some examples that Acemoglu cites are self-checkout boxes in supermarkets and automated customer service telephone services.

Today, you see too much investment in regular technologies, which partly explains the economy’s slow productivity growth. In contrast, technologies that are significant create new jobs in other areas, thus driving increases in employment and wages.

The rise of the auto industry, for example, created jobs in auto dealerships and in areas such as advertising, accounting, and financial services.

In Acemoglu’s view, well-designed education and training programs are essential for the jobs of the future. However, he is also convinced that technological development must be oriented in a “direction more respectful of human beings”. It takes inspiration from the development of renewable energy in the past two decades, thanks to the support of government research projects, production subsidies and the social pressure exerted on companies to reduce their carbon emissions.

“We need to change the direction of technology in such a way that it works for people,” Acemoglu emphasized, “not that it works against them.”