Why AI Might Not Take All Our Jobs—if We Act Quickly

MIT economics professor Sendhil Mullainathan says it is in humans’ power to put AI on a path to help us rather than replace us

By Justin Lahart of The WSJ. Excerpts:

"Massachusetts Institute of Technology economist Sendhil Mullainathan, 53, makes the point that AI isn’t a thing that is happening to humans but a thing that humans are making."

Everything below are answers to Lahart's questions:

"People imagine that AI is going to automate things, but they don’t appreciate that automation is just one path. There’s nothing intrinsic about machine learning or AI that puts us on that path. The other path is really the path of augmentation."

"If we keep going down the automation path, it’s going to be very hard to walk back and start changing things."

"we’re building algorithms with a strong capability for automation. And when we say they’re getting better and better, we mean their capabilities for automation are getting better and better."

"An AI bot is introduced that gives suggestions to the workers [at call centers]. [The researchers] study the effect of the bot on performance, and they find that when workers get access to the bot they do better. And they find that the worst workers get helped the most." 

"But after a few months, remove the bot, and the worker is just as good as with the bot. So what was happening is this bot is actually not a helper bot, it is a teacher bot."

"One of the most useful things augmentation can do is it can help us with the things that we’re not as good at, to leave room for the things we are excellent at. Behavioral economics has helped identify those blind spots.

Take something like a résumé screening. We’re very bad at reading through things really fast. It’d be really interesting if, after I did the résumé screen, there was a product that said, “Hey, here’s 10 résumés that are the kind you usually don’t pick. But when you do pick them it looks like you actually hire the person, or they do well in the interview. Why don’t you give these more time?”"

Related posts:

Some economics of A.I. (2025)

Some good news on productivity (2025) (AI is mentioned)

The AI-Generated Population Is Here, and They’re Ready to Work (2024)

Robots writing science fiction (2024)

Will technology cost artists their job? (2023)

“Why did the human stare at the glass of orange juice?” “They were trying to concentrate.” (2023) (Partly about AI being used to tell jokes)

The $900,000 AI Job Is Here (2023) 

Prompt engineers chat with generative-AI chatbots (creative destruction and how the economy just keeps creating new types of occupations & professions) (2023)

Are robots writing fake product reviews? (2022)

What if companies can't afford real models for their ads? Use AI generated fake pictures (2020) 

An AI Breaks the Writing Barrier (2020) 

What Econ 101 Can Teach Us About Artificial Intelligence: Here's why advancing technology often leads to more jobs for humans, not fewer (2017)

They Are Hot, Upwardly Mobile Jobs. Here’s Why They Are So Hard to Fill.

Some of the fastest-growing careers lie in middle-skill roles like sterilizing surgical tools, yet too few people know about them

By Lauren Weber of The WSJ. Excerpts:

"a fundamental riddle of the U.S. labor market: how to match people eager for opportunity with the millions of good jobs that go unfilled because workers don’t know about them or whether investing in the training will pay off."

"many of the fastest-growing jobs with upward mobility stem from a class of careers that defy traditional blue- and white-collar labels. Somewhere in the middle, they require a modest level of tech-infused skills, not a college degree, and can pay in the high-five figures and eventually more, in areas such as healthcare, information technology and energy production."

"U.S. workers have long benefited from an “invisible hand”-style labor market based on supply-and-demand signals. Some are lucky enough to have some career counseling or training in high school or college. Most, though, learn what skills businesses need and how to acquire them by observing the people and economic activity around them, getting advice from family and friends, applying for open jobs and talking to employers."

"What’s needed is “a coordinated career-navigation system,” said Robert Espinoza, chief executive of the National Skills Coalition. Instead, “people may end up overpaying for low-quality training programs or credentials that don’t lead to good jobs, and then fall into low-paying jobs where they get stuck.”"

Brazil’s Stagnant Economy Is the Poster Child for High Tariffs

While high tariffs protect some jobs in the country, they have also driven up costs for consumers and helped make domestic industry inefficient

By Samantha Pearson of The WSJ. Excerpts:

"Brazil’s World War II-era policy of protectionism has kept some jobs home but has also driven up costs for consumers and, according to economists, stifled competition and innovation. That iPhone 16 made in Brazil costs almost twice as much as a Chinese-made model sold in the U.S. for $799.

The strategy has done little to boost Brazil’s industrial production. On the contrary, it has lowered productivity and led to some notorious price-fixing scandals, economists said. Manufacturing made up 36% of gross domestic product in 1985. Now it has fallen to about 14%, the worst example of “premature deindustrialization” in the world, according to the São Paulo-based Institute for the Study of Industrial Development."

"Brazil has relied on domestic consumption during external economic crises, from the oil shocks of the 1970s to the 2008-09 financial crisis. But it has also bred complacency and protectionism during more prosperous times, ultimately making goods more expensive for consumers.

“They never felt the competitive pressure to innovate and to reduce costs and to find a way to survive in a competitive market,” said Alberto Ramos, head of Latin America economics research at Goldman Sachs. 

Brazilians who can afford imported goods typically pay several times the price they would in the U.S. The price differences are so vast that rich Brazilians spend much of their vacations abroad shopping, stuffing their suitcases so full that returning flights are often delayed as airline staff scramble to find room in the cabin."

Pope Francis on economics and the environment

This was an article that was published in The San-Antonio Express News September 22, 2015. See Pundits drinking Pope Francis’ Kool-Aid.

I was surprised by how both an Express-News editorial and St. Mary's professor Vincent Johnson so uncritically praised the pope's views on economics and the environment ("Our hope: Give us hell, Pope Francis," and "Pope's brave embrace of environmentalism inspires," Sept. 20).
 
The editorial said the pope is worried about the poor and “idolatry of money” and that unfettered markets could lead to “a new tyranny.” It also mentioned that trickle-down theories have "never been confirmed by the facts."
 
Some facts run counter to the pope's narrative.
 
Capitalism may serve the poor well. The poorest 10% of the population in the most capitalist countries have incomes about nine times higher than in the least capitalist countries. Life expectancy is much higher while infant mortality is much lower. Child labor rates are much lower, too.
 
From 1949-1961, as Charles Murray has pointed out, the poverty rate in the U. S. was cut in half, a time when we had few government programs.
 
Robert Rector of the Heritage Foundation reported in 2011 that 75% of poor households had air conditioning while 92% had microwave ovens. Once even the rich could not buy them. Capitalism brought products like these, and many others, to the masses, with constantly increasing ownership rates.
 
Hundreds of millions of people have been lifted out of extreme poverty in the last few decades in China and India as they came to rely more on markets and less on government planning.
 
Economist Tyler Cowen observed in The New York Times that global inequality fell in the last 20 years, partly due to improvements in China and India. International trade played a big role, too.
 
The pope also "advocates a thoughtful and reasonably regulated capitalism." Our economy has hardly been unregulated.
 
In the U.S., for example, we have many environmental regulations and an Environmental Protection Agency. We have recycling programs.
 
There is also the Corporate Average Fuel Economy (CAFE) standards that mandate each car maker achieve so many miles per gallon.
 
Regulatory spending by federal agencies is about nine times higher today than it was in 1970, adjusted for inflation. We add thousands of pages of new regulations each year.
 
Yet many regulations are not thoughtful and reasonable.
 
Electric cars get subsidized. If you buy as a Chevy Volt, you can get about $7,500 in the form of tax credits. But, as Megan McCardle reported, even if we all drove the Volt, U. S. emissions would only go down 3.5%.
 
There may also be environmental consequences from mining lithium, which is a component of car batteries.
 
Environmentalist Bjørn Lomborg has pointed that "The toughest global warming policy today is the European Union's commitment to cutting 20% of greenhouse gas emissions by 2020. This will cost $235 billion and cut temperatures at the end of the century by a measly 0.1ºF."
 
Johnson mentions that the pope is worried about wasting resources. But in 2008 the National Academy of Sciences reported that "Americans use about half as much energy per dollar of Gross Domestic Product (GDP) as they did in 1970." We are less wasteful than we used to be.
 
Johnson stressed the importance of the environment more than the editorial. But the EPA has reported that between 1980-2013, emissions of six principal air pollutants dropped by 62%. So there has been some good environmental news.
 
The pope seems either unwilling to acknowledge the benefits of capitalism and some environmental improvements over the last few decades or he is unaware of them. Whatever the case, his views should be viewed more critically.

Adam Smith Meets Joseph Campbell (the force of history is hard for man to change)

Campbell wrote the book The Hero With a Thousand Faces, which was one of the inspirations for Star Wars. He was interviewed by Bill Moyers in a six hour series in the 1980s on PBS. That series was called The Power of Myth.

Here is one passage:

"“This is the threat to our lives that we all face today. Is the system going to flatten you out and deny you your humanity, or are you going to be able to make use of the system to the attainment of human purposes? How do you relate to the system so that you are not compulsively serving it? It doesn't help to try to change it to accord with your system of thought. The momentum of history behind it is too great for anything really significant to evolve from that kind of action. The thing to do is learn to live in your period of history as a human being. That's something else, and it can be done.”"

Here is another:

"The world is a wasteland. People have the notion of saving the world by shifting it around and changing the rules and so forth. No, any world is a living world if it’s alive, and the thing is to bring it to life. And the way to bring it to life is to find in your own case where your life is, and be alive yourself, it seems to me."

Adam Smith said something that seemed similar in his book The Theory of Moral Sentiments:

"The natural course of things cannot be entirely controlled by the impotent endeavours of man: the current is too rapid and too strong for him to stop it; and though the rules which direct it appear to have been established for the wisest and best purposes, they sometimes produce effects which shock all his natural sentiments."

Smith also seems to be hinting at the law of unintended consequences. Here is a longer excerpt to see the context:

"But though the general rules by which prosperity and adversity are commonly distributed, when considered in this cool and philosophical light, appear to be perfectly suited to the situation of mankind in this life, yet they are by no means suited to some of our natural sentiments. Our natural love and admiration for some virtues is such, that we should wish to bestow on them all sorts of honours and rewards, even those which we must acknowledge to be the proper recompenses of other qualities, with which those virtues are not always accompanied. Our detestation, on the contrary, for some vices is such, that we should desire to heap upon them every sort of disgrace and disaster, those not excepted which are the natural consequences of very different qualities. Magnanimity, generosity, and justice, command so high a degree of admiration, that we desire to see them crowned with wealth, and power, and honours of every kind, the natural consequences of prudence, industry, and application; qualities with which those virtues are not inseparably connected. Fraud, falsehood, brutality, and violence, on the other hand, excite in every human breast such scorn and abhorrence, that our indignation rouses to see them possess those advantages which they may in some sense be said to have merited, by the diligence and industry with which they are sometimes attended. The industrious knave cultivates the soil; the indolent good man leaves it uncultivated. Who ought to reap the harvest? who starve, and who live in plenty? The natural course of things decides it in favour of the knave: the natural sentiments of mankind in favour of the man of virtue. Man judges, that the good qualities of the one are greatly over-recompensed by those advantages which they tend to procure him, and that the omissions of the other are by far too severely punished by the distress which they naturally bring upon him; and human laws, the consequences of human sentiments, forfeit the life and the estate of the industrious and cautious traitor, and reward, by extraordinary recompenses, the fidelity and public spirit of the improvident and careless good citizen. Thus man is by Nature directed to correct, in some measure, that distribution of things which she herself would otherwise have made. The rules which for this purpose she prompts him to follow, are different from those which she herself observes. She bestows upon every virtue, and upon every vice, that precise reward or punishment which is best fitted to encourage the one, or to restrain the other. She is directed by this sole consideration, and pays little regard to the different degrees of merit and demerit, which they may seem to possess in the sentiments and passions of man. Man, on the contrary, pays regard to this only, and would endeavour to render the state of every virtue precisely proportioned to that degree of love and esteem, and of every vice to that degree of contempt and abhorrence, which he himself conceives for it. The rules which she follows are fit for her, those which he follows for him: but both are calculated to promote the same great end, the order of the world, and the perfection and happiness of human nature.

But though man is thus employed to alter that distribution of things which natural events would make, if left to themselves; though, like the gods of the poets, he is perpetually interposing, by extraordinary means, in favour of virtue, and in opposition to vice, and, like them, endeavours to turn away the arrow that is aimed at the head of the righteous, but to accelerate the sword of destruction that is lifted up against the wicked; yet he is by no means able to render the fortune of either quite suitable to his own sentiments and wishes. The natural course of things cannot be entirely controlled by the impotent endeavours of man: the current is too rapid and too strong for him to stop it; and though the rules which direct it appear to have been established for the wisest and best purposes, they sometimes produce effects which shock all his natural sentiments. That a great combination of men should prevail over a small one; that those who engage in an enterprise with forethought and all necessary preparation, should prevail over such as oppose them without any; and that every end should be acquired by those means only which Nature has established for acquiring it, seems to be a rule not only necessary and unavoidable in itself, but even useful and proper for rousing the industry and attention of mankind. Yet, when, in consequence of this rule, violence and artifice prevail over sincerity and justice, what indignation does it not excite in the breast of every human spectator? What sorrow and compassion for the sufferings of the innocent, and what furious resentment against the success of the oppressor? We are equally grieved and enraged at the wrong that is done, but often find it altogether out of our power to redress it. When we thus despair of finding any force upon earth which can check the triumph of injustice, we naturally appeal to heaven, and hope, that the great Author of our nature will himself execute hereafter, what all the principles which he has given us for the direction of our conduct, prompt us to attempt even here; that he will complete the plan which he himself has thus taught us to begin; and will, in a life to come, render to every one according to the works which he has performed in this world. And thus we are led to the belief of a future state, not only by the weaknesses, by the hopes and fears of human nature, but by the noblest and best principles which belong to it, by the love of virtue, and by the abhorrence of vice and injustice."

Related posts:

Science Proves That Adam Smith Was Right Over 200 Years Ago (sort of) (2009) 

Adam Smith vs. Ace Ventura (2010)

 

Adam Smith, Marriage Counselor (2011)

Adam Smith And Joseph Campbell On The Dangers Of "The Man Of System" (2017) 

Adam Smith Meets Jonathan Haidt (on political polarization and the animosity of hostile factions) (2021) 

Pride and Profit: The Intersection of Jane Austen and Adam Smith (2023)

Powell Warns of ‘Challenging Scenario’ for Fed as Trade War Rages

Sees strong likelihood that consumers face higher prices while unemployment rises because of tariff increases

By Nick Timiraos of The WSJ. Excerpts:

[Federal Reserve Chair Jerome] "Powell said he saw a “strong likelihood” that consumers would face higher prices and that the economy would see higher unemployment as a result of tariffs in the short run.

This would create a “challenging scenario” for the central bank because anything it does with interest rates to address inflationary pressures could worsen unemployment, and vice versa, he said. “It’s a difficult place for a central bank to be, in terms of what to do,” Powell said during a moderated discussion at the Economic Club of Chicago."

"When determining how to set interest rates in such a scenario, the Fed would weigh how far inflation is from its 2% target, how weak the labor market becomes and how long it could take for both of those variables to improve.

Powell also hinted that the central bank could give priority to its inflation goal over its labor-market mandate if the two were in conflict. The Fed would attempt to balance the two goals, “keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans,” he said.

The Fed’s focus, he said, will be to ensure that any one-time increases in prices from tariffs don’t fuel more persistent price increases."

"Powell suggested that the postpandemic experience was top of mind for policymakers who are now confronting new shocks to global supply chains from tariffs. Powell pointed to carmakers and their assembly chains as one example of economic activity that could be “disrupted significantly” by tariffs."

"the Fed is likely to hold back from lowering interest rates, which can stimulate demand by spurring purchases of interest-rate sensitive goods, until it sees an increase in joblessness." 

What this article hints at is a decrease or leftward shift in aggregate supply. Tariffs will raise the prices of resources and that is a shift factor for the supply curve or supply line. A fall in supply raises the price of goods while reducing overall output (which raises the unemployment rate). What should the Fed do in response?

It mentions lowering interest rates to increase demand. But if prices have just gone up throughout the economy, that could mean more inflation. The Fed could raise interest rates to reduce demand to lower the pressure on prices. But that might also reduce output and raise the unemployment rate.

This dilemma is illustrated in the graph below. AD stands for aggregate demand or demand for all goods and services. P is the price level like the CPI. Q is the output of all goods and services (or real GDP). Q_F is the full-employment GDP. That is the highest level of real GDP that also keeps prices stable (inflation no more than 2%). It is not possible to stay above this level for very long and it will probably mean creating alot more inflation.

The graph shows a decrease in supply (SRAS1 to SRAS2), raising prices and lowering output (with the unemployment rate increasing).

If the Fed raises interest rates, AD will shift to the left, lowering prices (but maybe not much since we are in the relatively flat part of SRAS). This reduces total output on top of the reduction caused by SRAS shifting. We probably don't want to do that.

But if the Fed cuts interest rates AD will shift to the right. That is okay as long as that happens in the relatively flat part of SRAS because prices won't go up that much. But it is hard to know ahead of time whether or not how far AD will move and if it will push us past Q_F. It does seem like the article hints that doing this might be okay. Near the end some other Fed officials offer a slightly different opinion than Powell's.