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Smart Machines and Long-Term Misery Online access to NBER Working Papers denied, you have no subscription Jeffrey D. Sachs, Laurence J. Kotlikoff NBER Working Paper No. 18629 Issued in December 2012 NBER Program(s): PE Are smarter machines our children’s friends? Or can they bring about a transfer from our relatively unskilled children to ourselves that leaves our children and, indeed, all our descendants – worse off? This, indeed, is the dire message of the model presented here in which smart machines substitute directly for young unskilled labor, but complement older skilled labor. The depression in the wages of the young then limits their ability to save and invest in their own skill acquisition and physical capital. This, in turn, means the next generation of young, initially unskilled workers, encounter an economy with less human and physical capital, which further drives down their wages. This process stabilizes through time, but potentially entails each newborn generation being worse off than its predecessor. We illustrate the potential for smart machines to engender long-term misery in a highly stylized two-period model. We also show that appropriate generational policy can be used to transform win-lose into win-win for all generations. You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery. Information about Free Papers You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy. If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
