Are You Directly Complated Versus Substituted?

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Adam Smith was mostly focused on the division of labor as a way of increasing productivity. I don't think he really fully appreciated this role of capital augmenting labor, however. A second factor that affects how that automation affects your earnings and in the given activity is the elasticity of final demand. If we get really productive at something, but there's a fixed amount of it that people want, then eventually they just buy less and less of it.

David Autor of the Massachusetts Institute of Technology talks with EconTalk host Russ Roberts about the future of work and the role that automation and smart machines might play in the workforce. Autor stresses the importance of Michael Polanyi's insight that many of the things we know and understand cannot be easily written down or communicated. Those kinds of tacit knowledge will be difficult for smart machines to access and use. In addition, Autor argues that fundamentally, the gains from machine productivity will accrue to humans. The conversation closes with a discussion of the distributional implications of a world with a vastly larger role for smart machines.