Latest news with #DaronAcemoglu
Yahoo
9 hours ago
- Business
- Yahoo
Economics Nobel Laureate calls for a 'working-class liberalism'
Economics Nobel laureate Daron Acemoglu has called for working-class liberalism. In his talk at the London School of Economics on Wednesday, as part of LSE Festival: Visions for the Future, professor Acemoglu said that despite liberalism's enormous success, he's become convinced that the old version of liberalism is dead and needs remaking. "I have become convinced over the last decade that liberalism's enormous successes are being overshadowed by some problems. So it does require remaking of some sorts," he said. In the Great Hall of LSE's Marshal Building, packed to the brim, Acemoglu, the joint winner of of 2024 Sveriges Riksbank Prize in Economic Sciences and an MIT professor, said the ideas space was being won by those on the right. "This may come as a shock to some of you, but my view is that right now, new ideas are coming not from the liberal side, but they're coming from the anti-liberal, the right. Read more: Nobel economics prize awarded to Daron Acemoglu, Simon Johnson & James A Robinson "If you look at ideas that are spreading and articulating new ways of organising society, which many ... find very unattractive, they are the ones that are getting traction." He said the old version of liberalism was not enough. "Liberalism failed to adjust to being the establishment," Acemoglu said. The Nobel laureate sketched out his case for "Remaking Liberalism", which is also the working title of his forthcoming book, scheduled to be published in 2026. Delving into the history and the development of the moral and political philosophy that underpins liberalism, he said it played a crucial role as a force of good, mostly delivered via a democratic state. "Liberalism, broadly speaking, is respect for individual liberties and freedoms, efforts to create a rule of law, a level playing field, commitment to helping the disadvantaged via redistribution and other public investments. "So sort of not classical liberalism, but a little bit more left leaning liberalism, which has been the dominant force in generating new ideas for much of the 20th century, is responsible for many of the achievements that we have witnessed over the last 150 years, perhaps longer." Read more: UK borrowing rises in May, making tax hikes 'increasingly likely' He said liberalism's success was rooted in three implicit promises. First: shared prosperity, meaning that economic growth would take place and pretty much every group in society would get some share out of it. Getting voting rights was part of this agenda of creating shared prosperity, he said. Second: public services or drains. "I think the mood is captured by the once poet laureate of Britain, John Beecham, who said our nation stands for democracy and proper drains; getting services to people which did not exist for the most part in the 19th century." Shared prosperity and public services are the secret sauce of liberalism, Acemoglu said. The third promise of liberalism was economic growth. "Shared prosperity already bakes in economic growth. I think one of the most inspiring things about liberalism was that its belief in progress, not [the] inevitability [of it], but possibility of progress. He said liberalism allowed for the building of democracy from the bottom up, it allowed people to exercise their freedoms, including economic freedoms within a market system with economic growth as the glue that kept the system intact. But how did the political economy of this work out? Acemoglu explained how the two elements of political economy, the economics and the politics, manifest to produce what he called "an industrial compact" in the decades following the second world war, leading to a rise in demand for labour and wages – creating a pathway for prosperity. The industrial compact peaked with rapid economic growth, the spread of technology and the beginning of mass production. However, cracks started to appear as the industrial compact gave way to post-industrial economics, especially with the introduction of digital technologies alongside globalisation and deregulation. "Digital technologies did a couple of things at the same time. The first one is that by their nature, early digital technologies were very complementary to more skilled, educated workers. "They started creating a wedge between what the economic opportunities were for the less educated and the more educated." More importantly, however, digital technologies ushered in automation where firms could produce more with less labour which severed links of industrial compact, Acemoglu said. This, in turn, saw inequality exploding and the less-educated, manual workforce not keeping up. The labour that was shed from manufacturing was less educated and the labour that was needed for new industries was highly educated. This divergence accentuated the fortunes of the educated and the uneducated, creating crisis for liberalism or liberal democracy, he said. "But I think the big crisis came because post-industrial economics – in a classic political economy fashion – then was coupled with post-industrial politics ... where the highly educated group starts viewing itself as a distinct from the rest of society, and also cutting, severing its links with the rest of society." Read more: Why bitcoin and gold are rallying as bond yields hit 30-year highs Acemoglu said that the highly educated [elite] are a big part of the story of failure of liberalism. Money and status followed, as did a different set of values, especially in countries like the US and the UK, with the elite marrying among their status group. This has led to less mixing of communities and more segregation, eventually leading to to the rise of a "cognitive elite" with disproportionate influence on policy making. "Silicon Valley in the United States is one microcosm of the cognitive elite, they are much more pro-market. [They think] they're more entitled to redistribution. They think success is very much merit. And they have a number of other more right leaning ideas. Whereas if you ask people in the education sector or public administration, etc, they have very different values." The cognitive elite upended the bottom-up approach of liberalism. "That doesn't work with the nature of liberalism, because once you try from the top down to change the values of communities at the bottom, you are damaging the communities and you are destroying the basis of self-government, which is so important for liberalism and even more consequentially, perhaps you're going to create backlash. "So I think that's the basis of the crisis of liberalism." The Nobel laureate's proffered solution to the crisis was to create a working-class liberalism. "We need to create what I would like to call a working class liberalism, a liberalism that actually gets buy-in from the working classes. Read more: Why the UK's AIM is struggling 30 years on "So not a liberalism that is so centred on the educated, but much more about communities and much more about self-government at the community level." Acemoglu said that there are two elements that will make that feasible: "All of these communities want self-government. I think a lot of the discontent, a lot of the backlash is about the feeling of lacking self-government that should be part and parcel of any liberal project. "Second, they want jobs. Shared prosperity cannot be achieved without anything other than jobs. So this has to be a liberalism that is much more tolerant to the diversity of communities, especially working class communities, different religions, different traditions, different prejudices, takes their cultural concerns seriously, but also prioritises economic growth, especially job creation." Acemoglu said his next book will delve deeper into his case for "Remaking Liberalism". Acemoglu won the economics Nobel in October last year alongside Simon Johnson and James A Robinson "for studies of how institutions are formed and affect prosperity." He's also the best-selling joint-author of Why Nations Fail, published in 2012, and Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity.
Globe and Mail
03-06-2025
- Business
- Globe and Mail
AI will eventually lead to a more extreme society of haves and have-nots
The discussion these days is all about whether artificial intelligence will lead to a surge in productivity, lower inflation, higher economic growth, better living standards and value creation. The stock market seems to think so, as the shares of many AI-related companies have surged. This is leading many to believe that a bubble is forming. Such bubbles are not atypical. A 2018 paper published in Marketing Science titled Two Centuries of Innovations and Stock Market Bubbles shows that groundbreaking innovation tends to be linked to bubbles in the stock prices of companies commercializing innovation. Those investors who remain overallocated to an innovative company after the bubble has ended suffer the effects of long-term reversals. My sense is that AI will not improve productivity as much as markets expect. I tend to agree with Nobel Prize winner Daron Acemoglu, who believes that the AI-related frenzy will eventually lead to a tech crash that will leave everyone disillusioned with the technology. Historically, new technologies have been disappointing in terms of increasing productivity. There is no clear link between technological innovation and productivity growth, as defined by gross domestic product per worker. A recent example: Nobel Prize winner Robert Solow has written that the computer age was everywhere except in productivity statistics. Editorial: A real reform mandate for the first federal AI minister Here are three points to counter too much optimism about AI. First, it is hard to see the big societal problem that AI will solve. Second, AI may lower inflation but at the same time will increase demand for capital because of the huge investments and funding it will require in its early stages. This will push real interest rates up, leaving nominal interest rates little changed. Finally, AI may be hurting more than helping society. For example, researchers at Microsoft published a paper recently arguing that while AI may improve efficiency, it can also reduce human critical thinking capabilities and diminish independent problem solving. 'Used improperly, technologies can and do result in the deterioration of cognitive faculties that ought to be preserved,' it found. Despite all this, I do believe that AI needs to be embedded in our day-to-day lives, as it is not going away. Whether we like it or not, we are headed full speed toward an AI-powered future. The key question is, will AI benefit and reach all people? Historically, that hasn't been the case when it comes to new technology, which is usually controlled by a few people. And it may be worse this time. In my opinion, AI will most likely create a more rigid class-based society: the upper class, which will include people who are on top of AI knowledge and applications, and the lower class – those who are not, and who will be left behind without embedding AI into their everyday life. A recent article in The Globe and Mail hit the nail on the head. Author Don Tapscott, who is co-founder of Blockchain Research Institute, said, 'AI will become a new social fault line. Those with intelligent agents [i.e., large language model-powered systems] will be superpowered; those without them will fall behind. A small class of enhanced individuals could dominate productivity, creativity and influence.' An AI-powered future and an AI class-based society reminds me of the landlord-serf relationship in medieval Europe, which was a central feature of the feudal system and could end up being a central feature of the AI-powered future. 'Landlords' were typically those who controlled large estates, while 'serfs' were peasants bound to the land, obligated to work for the landlord and lacking many freedoms. The land cultivated by serfs was owned by a landlord. A large portion of what serfs produced had to be given to their landlord. Serfs lacked freedom of movement; they could not permanently leave their village, marry, change occupation, or dispose of their property without their landlord's permission. In the future, these landlords will be those in control of AI, and the serfs will be those without much knowledge about AI. This looks like a scary dystopian future that should force us all to become sufficiently prepared ahead of time in AI and be in full command of AI agents, irrespective of whether we believe the technology will solve the society's productivity problems or not. George Athanassakos is a professor of finance and holds the Ben Graham Chair in Value Investing at the Ivey Business School, Western University. His latest book is Value Investing: From Theory to Practice.
CBS News
02-06-2025
- Business
- CBS News
Budget bill would add trillions to U.S. debt and increase inequality, Nobel laureate economists say
Trump "one, big beautiful bill" holdout Sen. Rand Paul says "the math doesn't really add up" Six Nobel laureate economists said a massive budget bill passed by House lawmakers last month and backed by President Trump would weaken key safety-net programs while greatly lifting the federal debt. The tax and spending package, which Republicans have dubbed the "one big beautiful bill," would hurt millions of Americans by slashing Medicaid and food stamps, the economists wrote in a June 2 letter on behalf of the Economic Policy Institute, a left-leaning think tank. "Even with the safety net cuts, the House bill leads to public debt rising by over $3 trillion in coming years (and over $5 trillion over the next decade if provisions are made permanent rather than phasing out)," the economists state. "The higher debt and deficits will put noticeable upward pressure on both inflation and interest rates in coming years." The authors of the letter are Daron Acemoglu, Peter Diamond and Simon Johnson of MIT; Oliver Hart of Harvard University; Joseph Stiglitz of Columbia University; and Paul Krugman of City University of New York. Including interest, the House bill would boost the nation's debt by $3.1 trillion, according to the Committee for a Responsible Federal Budget, an advocacy group focused on fiscal policy. The nation's rising deficit — the gap between annual government spending and revenue — and growing federal debt have sounded alarms on Wall Street, roiling financial markets and raising questions about the country's long-term financial stability. The Trump administration describes the budget package as a "once-in-a-generation opportunity" to cut government spending and drive economic growth. Senate hurdles The Senate is expected to take up the bill this week, and its fate is uncertain amid strong opposition from Democrats and concerns by some Republicans. "One of the things this 'big and beautiful bill' is, is, it's a vehicle for increasing spending for the military and for the border," Sen. Rand Paul, a Republican from Kentucky, said Sunday on "Face the Nation with Margaret Brennan." Paul is among a small group of Senate Republicans who have expressed opposition to the bill. "It's about $320 billion in new spending. To put that in perspective, that's more than all the DOGE cuts that we have found so far," he added, referring to reductions in government spending advanced by Elon Musk's Department of Government Efficiency. "So, the increase in spending put into this bill exceeds the DOGE cuts." Raising inequality? The six economists who penned the letter criticizing the Republican bill also said that large tax cuts under the legislation, combined with the hits to Medicaid and food stamps, would increase inequality. "The combination of cuts to key safety net programs like Medicaid and SNAP and tax cuts disproportionately benefiting higher-income households means that the House budget constitutes an extremely large upward redistribution of income," they said. Mr. Trump has said the proposed tax cuts, which would extend reductions passed under his 2017 Tax Cuts and Jobs Act, would boost workers and incentivize investment in domestic manufacturing. The White House Council of Economic Advisers claims that the Trump administration's policies, which include steep import tariffs on major U.S. trading partners, will supercharge growth and shrink the deficit. contributed to this report.
Miami Herald
23-05-2025
- Business
- Miami Herald
AI may cause a college graduate job crisis. What should young people do?
There's comforting news for veteran office workers and professionals, but bad news for recent college graduates. When it comes to the future of jobs, new data suggest that artificial intelligence (A.I.) may threaten young people's employment prospects more than any other group. Recent studies show that we're very close to a college graduate unemployment crisis, because entry-level white collar jobs are the easiest to be replaced by artificial intelligence. Most graduates entering the workforce do repetitive research and number-crunching jobs — precisely the ones A.I. does best. Unemployment among U.S. college graduates has risen 30%, from 2% to 2.6%, since September 2022. By comparison, unemployment among the general population has grown by only 18%, from 3.4% to 4%, according to Federal Reserve Bank of New York data. The ADP Research Institute, which specializes in labor market data, said in a report that 'finding a job has become harder' for young college graduates. This is not due to an oversupply of graduates: In fact, full-time student enrollment at U.S. higher education institutions has fallen in recent years, as The Wall Street Journal reported on May 19. A recent survey of 3,000 executives by LinkedIn, the social media platform, found that 63% agreed A.I. will eventually eliminate the jobs currently done by entry-level employees. Curious about how A.I. will impact all jobs — including mine — in the future, I contacted last year's co-winner of the Nobel Prize in Economics Daron Acemoglu. In a wide-ranging interview, he told me that he doesn't think experienced attorneys, accountants, physicians, teachers or journalists will lose their jobs to A.I. — at least not over the next 10 years. 'I would not want an A.I. to represent me in court,' Acemoglu told me. 'We're not going to see the end of lawyers, accountants, auditors, marketing professionals. These are deeply complex jobs.' He added that current A.I. models and the ones that are likely to be developed in the near future will be able to handle parts of these jobs, but not replace humans entirely. 'The same for physicians,' he said. A.I. is getting better and better at diagnosis, but there is a lot of tacit knowledge that doctors gain through experience that A.I. will find hard to replicate, he added. A doctor learns a lot from a patient's body language, or from the way a person describes his pain, or from the way different parts of the body react when touched, Acemoglu explained. But when I asked him about A.I.'s impact on young people's employment opportunities, he started by saying, 'Well, I'm worried, I wouldn't hide that from you.' As for what advice he's giving his students and other young people these days, he said they should focus on specialization and flexibility. 'The advice I would give is to build very specialized skills that they can be excellent in some domain, so that they are a potential partner for AI, not a target,' he said. And flexibility is essential, too, 'because you need to change what you do as technology changes,' he added. Acemoglu, who teaches at the Massachusetts Institute of Technology (MIT), says a small group of technology barons who dominate the industry are partly to blame for the college graduate unemployment problem. They are creating A.I. programs to help companies cut costs by eliminating jobs, rather than focusing on increasing productivity and creating more jobs. I confess that, after speaking with Acemoglu and other experts in recent months, I'm less optimistic than I used to be. When I wrote my 2018 book 'The Robots Are Coming,' about the future of jobs in the age of automation, I was a cautious techno-optimist. I tended to believe the technology industry mantra that new technological breakthroughs always end up creating more jobs than they destroy. But now? I'm not so sure. Think about it: When Henry Ford rolled out the car manufacturing assembly line in the early 20th century, sure, carriage makers and stable hands lost out. But whole new industries were created to build roads, bridges, tires and other car parts. But today, when a supermarket replaces a human cashier with an automated checkout machine, that job usually just disappears. To be sure, having a college — or, better, a graduate — degree is more important than ever. Even the latest figures show that those with college diplomas are much less likely to be unemployed than the general population. But it's imperative for high schools and colleges to teach students, in addition to specialized skills, how to use A.I. as a tool in their careers — not just as an enhanced Google search engine. That would help college graduates get jobs that until recently were reserved for people with two or three years of work experience. Without that, A.I. may end up hurting recent graduates more severely than it affects older, more experienced workers. Don't miss the 'Oppenheimer Presenta' TV show on Sundays at 9 pm E.T. on CNN en Español. Blog:
The Age
18-05-2025
- Business
- The Age
Want greater productivity? Set wages to rise by 3.5 per cent a year
Remember this next time you see the (Big) Business Council issuing yet another report urging the government to do something to improve productivity. What businesspeople say about productivity is usually thinly disguised rent-seeking. 'You want higher productivity? Simple – give me a tax cut. You want to increase business investment in capital equipment? Simple – introduce a new investment incentive. And remember, if only you'd give us greater freedom in the way we may treat our workers, the economy would be much better.' Why do even economists go along with the idea that poor productivity must be the government's fault? Because of a bias built into the way economists are taught to think about the economy. Their 'neoclassical model' assumes that all consumers and all businesspeople react rationally to the incentives (prices) they face. So if the private sector isn't working well, the only possible explanation is that the government has given them the wrong incentives and should fix them. Third, businesspeople, politicians and even economists often imply that any improvement in the productivity of labour (output per hour worked) is automatically passed on to workers as higher real wages by the economy's 'invisible hand'. Don't believe it. The Productivity Commission seems to support this by finding that, over the long term, improvement in labour productivity and the rise in real wages are pretty much equal. Loading Trouble is, as they keep telling you at uni, 'correlation doesn't imply causation'. As Nobel Prize-winning economist Daron Acemoglu argues in his book Power and Progress, workers get their share of the benefits of technological advance only if governments make sure they do. Fourth, economics 101 teaches that the main way firms increase the productivity of their workers is by giving them more and better machines to work with. This is called 'capital deepening', in contrast to the 'capital widening' that must be done just to ensure the amount of machinery per worker doesn't fall as high immigration increases the workforce. It's remarkable how few sermonising economists think to make the obvious point that the weak rate of business investment in plant and equipment over the past decade or more makes the absence of improvement in the productivity of labour utterly unsurprising. Fifth, remember Sims' Law. As Rod Sims, former boss of the competition commission, often reminded us, improving productivity is just one of the ways businesses may seek to increase their profits. It seems clear that improving productivity has not been a popular way for the Business Council's members to improve profits in recent times. My guess is that they've been more inclined to do it by using loopholes in our industrial relations law to keep the cost of labour low: casualisation, use of labour hire companies and non-compete clauses in employment contracts, for instance. Sixth, few economists make the obvious neoclassical point that the less the rise in the real cost of labour, the less the incentive for businesses to invest in labour-saving equipment. So here's my proposal for encouraging greater labour productivity. Rather than continuing to tell workers their real wages can't rise until we get some more productivity, we should try reversing the process. We should make the cost of labour grow in real terms – which would do wonders for consumer spending and economic growth – and see if this encourages firms to step up their investment in labour-saving technology, thereby improving productivity of workers. Federal and state governments should seek to establish a wage 'norm' whereby everyone's wages rose by 3.5 per cent a year – come rain or shine. That would be 2.5 percentage points for inflation, plus 1 percentage point for productivity improvement yet to be induced. Think of how much less time that workers and bosses would spend arguing about pay rises. Governments have no legal power to dictate the size of wage rises. But they could start to inculcate such a norm by increasing their own employees' wages by that percentage. The feds could urge the Fair Work Commission to raise all award wage minimums by that proportion at its annual review. If wages of the bottom quarter of workers kept rising by that percentage, it would become very hard for employers to increase higher wage rates by less. A frightening idea to some, maybe, but one that might really get our productivity improving.
