Machine Knowledge Capital and the Future of Work

The introduction of new types of capital assets into economic production has profound and pervasive implications for the existing factors of production, in particular for labor. With the industrial revolution, labor moved from the farms to the cities. With increasing mechanization of production, labor moved from factories to services jobs. With computerization, the tasks assigned to human knowledge workers were redefined. Throughout these transitions, labor markets have adjusted, albeit not without friction, while an increasing share of national income flowed to capital assets. The global economy is at the dawn of a new economic era in which machine knowledge capital (MKC)—the widespread deployment of artificial intelligence (AI) in industrial, service, and creative applications—will reorganize the economy and again redefine the role of labor. This transition is signaled by recent technological advances that have enabled a massive scaling of AI technology and the democratization of its development through the emergence of business models that provide AI developmental software and infrastructure as a service to firms of all sizes, enabling hundreds of thousands of firms, startups, and entrepreneurs to explore applications. Specialized AI systems are now routinely breaking through human benchmarks. As these applications enter into production systems, the stock of “smart” capital—i.e., machine knowledge capital—will grow and capture an expanding share of national income as it completes tasks currently performed by knowledge workers as well as by manual labor (in the latter case through the integration of AI with robots, resulting in increasingly smart and flexible robots). The impact on societies organized around returns to human capital and the debt incurred to acquire it will be disruptive, not only to those whose investments in human capital are written down or written off because of competition from newly deployed smart applications but also to the younger generation facing the questions of why and where to invest in human capital? Social contracts, which were put under great strain in the advanced economies in recent decades, face additional pressures across the gamut of labor-related areas from guaranteed minimum income to support consumption, reduced work weeks to share available work, possible debt jubilees to address the impact of MKC on repay-ability of outstanding debt incurred under previous technological conditions, the taxation of robots (should robots face payroll taxation, etc.?), and even the international mobility of capital as AI competes with labor across borders.