Power & Progress
Technology leaders are captivated by AI’s potential to reshape society economically, politically, and socially. While many are influenced by these visions, an alternative view argues that automation and data collection primarily benefit those controlling digital technologies. In Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity, Daron Acemoglu and Simon Johnson demonstrate that globalization and automation have worked in tandem, driven by the desire to reduce labor costs and marginalize workers. Their research shows how AI can increase average productivity but may reduce workers' marginal productivity (additional output produced from adding one more worker, while holding all other inputs constant), thus reinforcing inequality rather than promoting shared prosperity.
Power and Progress shows that similar claims of machines replicating human intelligence generated great hype in the 1950s as well. The authors challenge today’s belief in the so-called "productivity bandwagon"—the idea that increased productivity from technology will automatically raise wages and improve living standards. This phenomenon, they argue, cannot materialize if the market does not enhance both workers' marginal productivity and their bargaining power. One of the book’s more striking claims is that the current trajectory of AI could reverse decades of economic progress in the developing world by exporting automation globally.
The book also emphasizes the need for government policies to reform the U.S. tax system, which currently favors capital over labor by imposing lower effective taxes on capital earnings than on labor income. The authors propose bold reforms, such as significantly reducing—or even fully eliminating—payroll taxes, arguing that raising the cost of labor is counterproductive in today's economy. They advocate for modest increases in capital taxes, noting that many industrialized economies’ current tax systems encourage automation. Additionally, the authors call for stronger user privacy protections, emphasizing that platforms that collect vast amounts of user data create a significant power imbalance. To address these challenges, they recommend investing in workers through vocational training and continuing education, and urge government leadership in steering the direction of technological development. Lastly, the book underscores the importance of a more independent academia, as universities play a central role in shaping the perspectives, interests, and skills of young people who will work in the technology sector.
Some key takeaways and predictions about AI from the book include:
AI’s most significant likely impact is to further lower wages for many people, rather than creating a completely workless future.
Tasks that involve the social and situational aspects of human cognition will continue to pose formidable challenges for machine intelligence.
Although AI fails to deliver on many of its promises, it still manages to reduce the demand for workers.
When humans are not as dispensable as often presumed, and intelligent machines are not as capable as typically assumed, we get what the authors call "so-so automation."
Human-complementary machines are not appealing to organizations focused on cost-cutting. The tech community did not need to be captivated by machine intelligence alone but could have focused on machine usefulness.
China remains a follower in most frontier technologies, and redirection efforts in the United States and Europe will significantly impact global technological trends.
The insights from Power and Progress are essential reading for anyone concerned about the future of technology and its impact on society. The book offers a critical roadmap for redirecting technological innovation towards shared prosperity, emphasizing the need for intentional policy changes and societal shifts. By focusing on a more equitable approach to automation and AI, the authors provide a powerful guide for ensuring that future technological advancements benefit the many, rather than deepening inequalities and leaving workers behind.
