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Automation and the Prospects of Economic Development

By: Joselito T. Sescon, M.D.E.
 
Technological anxiety has been with us since the first modern industries appeared. The angst toward new technologies is mainly about the fear of widespread substitution and displacement of human labor by machines. Historical experiences in early industrialization have shown that new technologies used in production initially had disruptive effects to labor and existing production assets. However, new technologies also ushered in the birth of new industries, created new jobs, becoming the source of productivity, economic growth and development.
 
Automation, like most new labor-saving technologies, has an effect of raising the comparative advantage and value of jobs that only humans can do, thus, instead may add new jobs more than it displaces. The economics is simple, only humans can determine the extent of the use-value of goods and services and the jobs associated with its production. If the demand of the use-value of a good or service increases as overall income increases, then automation that displaces labor and reduces cost and exchange-value (price) shall increase consumption and create room for investment to create new jobs and production of more goods and services.
 
David H. Autor, a professor of economics at MIT, in a journal-published study analyzed why automation does not necessarily reduce aggregate employment, even as it demonstrably reduces labor requirements per unit of output produced. Central to Autor’s economic analysis is that automation positively affects the demand for labor by raising the value of complementary tasks that workers uniquely supply. Demonstrating as an example the introduction of automated teller machines (ATMs) in US bank branches, it was found that it did reduce the number of tellers per bank branch. But because of reduced cost in opening new bank branches, it indirectly increased demand for more tellers through more branches. Also, the complementary tasks of providing other bank financial services to customers became valuable and in demand. The expected result is increase in productivity and output sans reduction in labor inputs.
 
Read the full article at http://www.businessmirror.com.ph/automation-and-the-prospects-of-economi...

3/3/2017