Technology and Changing Elasticity of Substitution
The social and economic benefits of AI depend on whether applications augment human activity or automate human activity. When AI augments activity, the solution complements the effort of humans, creating capabilities and enabling activities that were previously not possible. In complementing human activity, the skill and contribution of human labor retains value with compensation rising for those tasks well-suited for human skill. Conversely, when AI automates activity, the technology substitutes for human activity, workers lose employment opportunities and income. The result is a reduction in the share of income earned by labor and increased capital income, benefiting entrepreneurs ...
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