Law of robots and AIs - lecture 2: Prospects for Society, Economics and the Substitution-Complement Model

Introduction to the Law of Robots and Introduction to the Law of Robots and Introduction to the Law of Robots and Introduction to the Law of Robots and ArtificialArtificialArtificialArtificial IntelligencesIntelligencesIntelligencesIntelligences

Prof. Nicolas Petit ©Prof. Nicolas Petit ©Prof. Nicolas Petit ©Prof. Nicolas Petit ©

UniversityUniversityUniversityUniversity of of of of LiegeLiegeLiegeLiege, 2015, 2015, 2015, 2015----2016201620162016

Lecture II: Prospects for Society, Economics

and the Substitution-Complement Model

www.lcii.euwww.lcii.euwww.lcii.euwww.lcii.eu

Pew Research Survey

48%48%48%48%

� Tech Tech Tech Tech pessimistspessimistspessimistspessimists

� “a massive detrimental impact on society, where digital agents displace both blue- and white-collar workers, leading to income inequality and breakdowns in social order”

52%52%52%52%

� Tech Tech Tech Tech optimistsoptimistsoptimistsoptimists

� “anticipated that human ingenuity would overcome and create new jobs and industries”

Source: http://www.futureofwork.com/article/details/rise-of-intelligent-robots-will-widen-the-

social-inequality-gap


A. Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776

� ““““A great part of the machines made use of in those manufactures in which labour is most subdivided, were originally the inventions of common workmen, who, being each of them employed in some very simple operation, naturally turned their thoughts towards finding out easier and readier methods of performing it. Whoever has been much accustomed to visit such manufactures, must frequently have been shewn very pretty machines, which were the inventions of such workmen, in order to facilitate and quicken their own particular part of the work”.”.”.”.


D. Ricardo, On Machinery, 1821


J-M. Keynes, “Economic Possibilities for our

Grandchildren”, 1930� “We are being afflicted with a new disease of which some readers

may not yet have heard the name, but of which they will hear a great deal in the years to come--namely, technological unemployment. This means unemployment due to our discovery of means of economisingthe use of labour outrunning the pace at which we can find new uses for labour. [...] But this is only a temporary phase of maladjustment. All this means in the long run that mankind is solving its economic problem”.

� “Yet there is no country and no people, I think, who can look forward to the age of leisure and of abundance without a dread”

� “ Three-hour shifts or a fifteen-hour week may put off the problem for a great while. For three hours a day is quite enough to satisfy the old Adam in most of us!”

� Concludes by touting to disappearance of economics as a science


Empirical studies

� Bank of Bank of Bank of Bank of AmericaAmericaAmericaAmerica/Merrill Lynch, /Merrill Lynch, /Merrill Lynch, /Merrill Lynch, 2015201520152015

� ““““Robots are Robots are Robots are Robots are likelylikelylikelylikely to to to to be performing 45% of manufacturing tasks by 2025E be performing 45% of manufacturing tasks by 2025E be performing 45% of manufacturing tasks by 2025E be performing 45% of manufacturing tasks by 2025E (vs. 10% today(vs. 10% today(vs. 10% today(vs. 10% today))))””””

� McKinsey Global Institute, McKinsey Global Institute, McKinsey Global Institute, McKinsey Global Institute, Disruptive technologies Advances Disruptive technologies Advances Disruptive technologies Advances Disruptive technologies Advances that will that will that will that will

transform life, business, and the global transform life, business, and the global transform life, business, and the global transform life, business, and the global economy, 2013economy, 2013economy, 2013economy, 2013

� By 2025, “By 2025, “By 2025, “By 2025, “knowledge knowledge knowledge knowledge work work work work automation automation automation automation tools and systems could take on tools and systems could take on tools and systems could take on tools and systems could take on tasks that would be equal to the output of 110 million to 140 million fulltasks that would be equal to the output of 110 million to 140 million fulltasks that would be equal to the output of 110 million to 140 million fulltasks that would be equal to the output of 110 million to 140 million full----time equivalents (FTEstime equivalents (FTEstime equivalents (FTEstime equivalents (FTEs))))” (knowledge work is ” (knowledge work is ” (knowledge work is ” (knowledge work is use of computers to perform use of computers to perform use of computers to perform use of computers to perform

tasks that rely on complex analyses, subtle judgments, and creative tasks that rely on complex analyses, subtle judgments, and creative tasks that rely on complex analyses, subtle judgments, and creative tasks that rely on complex analyses, subtle judgments, and creative

problem problem problem problem solving). solving). solving). solving).

� By 2025, “[By 2025, “[By 2025, “[By 2025, “[w]e w]e w]e w]e estimate that the use of advanced robots for industrial and estimate that the use of advanced robots for industrial and estimate that the use of advanced robots for industrial and estimate that the use of advanced robots for industrial and service tasks could take on work in 2025 that could be equivalent to the service tasks could take on work in 2025 that could be equivalent to the service tasks could take on work in 2025 that could be equivalent to the service tasks could take on work in 2025 that could be equivalent to the output of 40 million to 75 million fulloutput of 40 million to 75 million fulloutput of 40 million to 75 million fulloutput of 40 million to 75 million full----time equivalents (FTEstime equivalents (FTEstime equivalents (FTEstime equivalents (FTEs)”.)”.)”.)”.


Frey and Osborne, 2013

� “47 percent of total US employment is in the high risk category, meaning that associated occupations are potentially automatable over some unspecified number of years, perhaps a decade or two”

� “most workers in transportation and logistics occupations, together with the bulk of office and administrative support workers, and labour in production occupations, are at risk” + “a substantial share of employment in service occupations”

Wave IWave II Plateau


Substitution effect, consequences

Job Job Job Job polarizationpolarizationpolarizationpolarization

� Shift in the Shift in the Shift in the Shift in the occupationaloccupationaloccupationaloccupational

structurestructurestructurestructure

� DisplacedDisplacedDisplacedDisplaced workersworkersworkersworkers relocaterelocaterelocaterelocate

theirtheirtheirtheir laborlaborlaborlabor supplysupplysupplysupply to to to to lowlowlowlow skillskillskillskill

service occupationsservice occupationsservice occupationsservice occupations

� OtherOtherOtherOther humanshumanshumanshumans resistresistresistresist by by by by

investinginvestinginvestinginvesting in in in in skillsskillsskillsskills throughthroughthroughthrough

educationeducationeducationeducation (Frey and Osborne, (Frey and Osborne, (Frey and Osborne, (Frey and Osborne,

2014; 2014; 2014; 2014; CowenCowenCowenCowen, 2013), 2013), 2013), 2013)

� This leads to «This leads to «This leads to «This leads to « labour labour labour labour marketmarketmarketmarketpolarizationpolarizationpolarizationpolarization » (» (» (» (AutorAutorAutorAutor, 2014; , 2014; , 2014; , 2014;

CowenCowenCowenCowen, 2013), 2013), 2013), 2013)

DiscussionDiscussionDiscussionDiscussion

� Frey and Osborne, 2014 believe Frey and Osborne, 2014 believe Frey and Osborne, 2014 believe Frey and Osborne, 2014 believe this model still holds truethis model still holds truethis model still holds truethis model still holds true� “Our model predicts …

computerisation being principally confined to low-skill and low-wage occupations. Our findings thus imply that as technology races ahead, low-skill workers will reallocate to tasks that are non-susceptible to computerisation – i.e., tasks requiring creative and social intelligence”

� BrynjolfssonBrynjolfssonBrynjolfssonBrynjolfsson and McAfee, 2011 and McAfee, 2011 and McAfee, 2011 and McAfee, 2011 disagreedisagreedisagreedisagree: : : : whenwhenwhenwhen technologytechnologytechnologytechnologybecomesbecomesbecomesbecomes cognitive, substitution cognitive, substitution cognitive, substitution cognitive, substitution cancancancan alsoalsoalsoalso occuroccuroccuroccur for non routine for non routine for non routine for non routine taskstaskstaskstasks


Substitution pace

� ““““Technological advances are contributing to declining costs in Technological advances are contributing to declining costs in Technological advances are contributing to declining costs in Technological advances are contributing to declining costs in robotics. Over the past decades, robot prices have fallen about robotics. Over the past decades, robot prices have fallen about robotics. Over the past decades, robot prices have fallen about robotics. Over the past decades, robot prices have fallen about 10 percent annually and are expected to decline at an even 10 percent annually and are expected to decline at an even 10 percent annually and are expected to decline at an even 10 percent annually and are expected to decline at an even faster pace in the near future (MGI, 2013). Industrial robots, faster pace in the near future (MGI, 2013). Industrial robots, faster pace in the near future (MGI, 2013). Industrial robots, faster pace in the near future (MGI, 2013). Industrial robots, with features enabled by machine vision and highwith features enabled by machine vision and highwith features enabled by machine vision and highwith features enabled by machine vision and high----precision precision precision precision dexterity, which typically cost 100,000 to 150,000 USD, will be dexterity, which typically cost 100,000 to 150,000 USD, will be dexterity, which typically cost 100,000 to 150,000 USD, will be dexterity, which typically cost 100,000 to 150,000 USD, will be available for 50,000 to 75,000 USD in the next decade, with available for 50,000 to 75,000 USD in the next decade, with available for 50,000 to 75,000 USD in the next decade, with available for 50,000 to 75,000 USD in the next decade, with higher levels of intelligence and additional capabilities (IFR, higher levels of intelligence and additional capabilities (IFR, higher levels of intelligence and additional capabilities (IFR, higher levels of intelligence and additional capabilities (IFR, 2012b). Declining robot prices will inevitably place them within 2012b). Declining robot prices will inevitably place them within 2012b). Declining robot prices will inevitably place them within 2012b). Declining robot prices will inevitably place them within reach of more usersreach of more usersreach of more usersreach of more users””””

� Hanson on copiesHanson on copiesHanson on copiesHanson on copies


� Philips Philips Philips Philips bringsbringsbringsbrings electricelectricelectricelectric shaversshaversshaversshavers

production home? production home? production home? production home?

httpshttpshttpshttps://blogs.cfainstitute.org/i://blogs.cfainstitute.org/i://blogs.cfainstitute.org/i://blogs.cfainstitute.org/i

nvestor/2014/06/16/thenvestor/2014/06/16/thenvestor/2014/06/16/thenvestor/2014/06/16/the----

robotrobotrobotrobot----revolutionrevolutionrevolutionrevolution----innovationinnovationinnovationinnovation----

begetsbegetsbegetsbegets----innovationinnovationinnovationinnovation////

Effect on Developing Economies?

� McKinsey Global McKinsey Global McKinsey Global McKinsey Global Institute, Institute, Institute, Institute,

2013201320132013

� “Effects of these technologies on developing economies could be mixed. Some countries could lose opportunities to provide outsourced services if companies in advanced economies choose automation instead. But access to knowledge work automation technologies could also help level the playing field, enabling companies in developing countries to compete even more effectively in global markets”.


Substitution (Engineering) Bottlenecks:

Frey & Osborne, 2013

Perception and

manipulation tasks

Creative intelligence tasks Social intelligence tasks

Disorganized environment or

manipulation of non-

calibrated, shifting shapes

(towel problem)

Ability to make jokes; recipes

; concepts

Negotiation, persuasion and

care


Typology of D. Autor et al (2003), Autor

(2014)TaskTaskTaskTask DescriptionDescriptionDescriptionDescription Substitution Substitution Substitution Substitution riskriskriskrisk

Routine (incl.

skilled work)

Clerical work, bookeeping, back and middle office,

factory work

High

Non routine « Abstract » « Manual » Low

Problem solving, intuition,

creativity and persuasion

Situational

adaptability, in person

interaction, visual and

laguage recognition

High education, high wage Low education, low

wage

Doctors, CEOs, managers,

artists, academics

Navigating a car,

housecleaning, flight

attendants, drivers,

food preparation,

security jobs


Autor, 2014

� Routine tasks: “Human tasks that have proved most amenable to computerization are those that follow explicit, codifiable procedures”

� Non routine tasks: “Tasks that have proved most vexing to automate are those that demand flexibility, judgment, and common sense”

� Engineers “cannot program a computer to simulate a process that they (or the scientific community at large) do not explicitly understand”

� Non routine tasks less exposed to substitution

� Tasks that are not exposed may benefit from it, though complementarity

effect

� In construction, mechanization has not entirely devalued construction

workers, but augmented their productivity; but not true for all (worker

who knows to use shovel v excavator)


Findings of D. Autor et al (2003), Autor

(2014)� Computers Computers Computers Computers are more substitutable for human are more substitutable for human are more substitutable for human are more substitutable for human labourlabourlabourlabour in routine in routine in routine in routine

relative to nonrelative to nonrelative to nonrelative to non----routine routine routine routine tasks (substitution effect); tasks (substitution effect); tasks (substitution effect); tasks (substitution effect);

� And And And And (b) a greater intensity of routine (b) a greater intensity of routine (b) a greater intensity of routine (b) a greater intensity of routine inputs increases inputs increases inputs increases inputs increases the the the the marginal productivity of nonmarginal productivity of nonmarginal productivity of nonmarginal productivity of non----routine routine routine routine inputs (complementarity inputs (complementarity inputs (complementarity inputs (complementarity effect)effect)effect)effect)

� “Job polarization” effect“Job polarization” effect“Job polarization” effect“Job polarization” effect

� Increase of high education, high wage jobs

� Increase of non routine low education, low wage jobs

� No increase in wages for this later category, given abundance of supply

� AutorAutorAutorAutor, D., Levy, F. and , D., Levy, F. and , D., Levy, F. and , D., Levy, F. and MurnaneMurnaneMurnaneMurnane, R.J. (2003). , R.J. (2003). , R.J. (2003). , R.J. (2003). “The “The “The “The skill content of skill content of skill content of skill content of recent technological change: An empirical recent technological change: An empirical recent technological change: An empirical recent technological change: An empirical exploration”. exploration”. exploration”. exploration”. The The The The Quarterly Journal of Economics, Quarterly Journal of Economics, Quarterly Journal of Economics, Quarterly Journal of Economics, vol. 118, no. 4, pp. 1279vol. 118, no. 4, pp. 1279vol. 118, no. 4, pp. 1279vol. 118, no. 4, pp. 1279––––1333133313331333


Job Polarization, some evidence (Autor,

2014)


� “Obtaining skills takes time studying in school and learning on the job. Thus skilled workers are disproportionately older workers”

� “machine-biased productivity improvements effects a redistribution from younger, relatively unskilled workers to older relatively skilled workers as well as retirees”

� “When today’s machines get smarter, today’s young workers get poorer and save less”

� “The fall in today’s saving rate means that the next generation will have even lower wages than today”

� “In short, better machines can spell universal and permanent misery for our progeny”

Generational effect, Sachs and Kotlikoff,

2012� Long Long Long Long termtermtermterm miserymiserymiserymisery


T. Cowen, 2013

AverageAverageAverageAverage isisisis overoveroverover

� The The The The richrichrichrich willwillwillwill getgetgetget richerricherricherricher, , , , poorpoorpoorpoor

willwillwillwill getgetgetget poorerpoorerpoorerpoorer

� SubsitutionSubsitutionSubsitutionSubsitution effecteffecteffecteffect strongerstrongerstrongerstronger in in in in

workworkworkwork w/o w/o w/o w/o

consciousnessconsciousnessconsciousnessconsciousness////abilityabilityabilityability to train to train to train to train

Freestyle Freestyle Freestyle Freestyle chesschesschesschess metaphormetaphormetaphormetaphor

� HumanHumanHumanHuman----computer computer computer computer teams teams teams teams

outperformoutperformoutperformoutperform machine machine machine machine teamsteamsteamsteams

� Not Not Not Not necessarynecessarynecessarynecessary teams of grand teams of grand teams of grand teams of grand

mastersmastersmastersmasters

� ““““In the In the In the In the language of economics, language of economics, language of economics, language of economics, we can say that the productive we can say that the productive we can say that the productive we can say that the productive worker and the smart machine worker and the smart machine worker and the smart machine worker and the smart machine are, in today’s labor markets, are, in today’s labor markets, are, in today’s labor markets, are, in today’s labor markets, stronger complements than stronger complements than stronger complements than stronger complements than beforebeforebeforebefore””””


Substitution-Complement Framework


The model explained

MultiMultiMultiMulti----causal substitutioncausal substitutioncausal substitutioncausal substitution

� «««« DeskillingDeskillingDeskillingDeskilling »»»»

� ExponentialExponentialExponentialExponential decreasedecreasedecreasedecrease in in in in costscostscostscosts

of of of of technologytechnologytechnologytechnology

� «««« The copy The copy The copy The copy economyeconomyeconomyeconomy » » » »

(Hanson, 2014)(Hanson, 2014)(Hanson, 2014)(Hanson, 2014)

Two types of complementsTwo types of complementsTwo types of complementsTwo types of complements� Complements arising from Complements arising from Complements arising from Complements arising from

substitution (substitution (substitution (substitution (upward slopping upward slopping upward slopping upward slopping curvecurvecurvecurve))))� AI and Robots-related jobs (those of

Autor and Cowen)

� Enabling technologies and new jobs

� Punch cards, typewriters, printers, calculators, etc.

� Complements with indifference (Complements with indifference (Complements with indifference (Complements with indifference (L L L L curvecurvecurvecurve))))� Indifference on human labour of an

increase in machine labour(horizontal line)

� Indifference on machines of increase in human labour (vertical line)

� Superstars (footballers, singers, etc.); aircraft pilot v flight attendants


Extension of substitute-complement

framework� Works Works Works Works beyondbeyondbeyondbeyond employmentemploymentemploymentemployment

� Can Can Can Can alsoalsoalsoalso workworkworkwork for «for «for «for « existential existential existential existential riskriskriskrisk »»»»

� Social Social Social Social acceptabilityacceptabilityacceptabilityacceptability of new technologies of new technologies of new technologies of new technologies dependsdependsdependsdepends on on on on theirtheirtheirtheir

� Propensity to substitute to humans

� Ability to complement humans


The Future of lawyers

� httpshttpshttpshttps://lexmachina.com://lexmachina.com://lexmachina.com://lexmachina.com////

� How likely is a judge to grant or deny a specific motion?

� How long do cases take to terminate, get to trial, or get to the claim

construction hearing before a judge?

� How likely is a judge to find patents, trademarks or copyrights infringed,

invalid, or unenforceable?

� Your opposing counsel’s experience before specific judges and courts,

� Your opposing counsel’s client list

� Which law firms have the most experience against opposing counsel


Contract analyzis


Katz, 2013

Wind of changeWind of changeWind of changeWind of change� ““““Like Like Like Like many industries before it, the many industries before it, the many industries before it, the many industries before it, the

march of automation, process march of automation, process march of automation, process march of automation, process engineering, informatics, and supply engineering, informatics, and supply engineering, informatics, and supply engineering, informatics, and supply chain management will continue to chain management will continue to chain management will continue to chain management will continue to operate and transform our industryoperate and transform our industryoperate and transform our industryoperate and transform our industry. . . . Informatics, computing, and technology Informatics, computing, and technology Informatics, computing, and technology Informatics, computing, and technology are going to change both what it means are going to change both what it means are going to change both what it means are going to change both what it means to practice law and to “think like a to practice law and to “think like a to practice law and to “think like a to practice law and to “think like a lawyerlawyerlawyerlawyer.””.””.””.””

� “Quantitative legal prediction (QLP)“Quantitative legal prediction (QLP)“Quantitative legal prediction (QLP)“Quantitative legal prediction (QLP)————now stands on the horizon”now stands on the horizon”now stands on the horizon”now stands on the horizon”� Do I have a case?

� What is our likely exposure?

� How much is this going to cost?

� What will happen if we leave this particular provision out of this contract?

� How can we best staff this particular legal matter?

Substitution+complementSubstitution+complementSubstitution+complementSubstitution+complement


Disciplines likely to be affected?

� Corporate housekeeping

� Compliance work

� Standardized work (business law, family law,

administrative law, patent law?)


Retraining challenge

Forget Forget Forget Forget substitutablesubstitutablesubstitutablesubstitutable workworkworkwork

� Routine tasksRoutine tasksRoutine tasksRoutine tasks

� Memorization

� Research and other repetitive

data-driven tasks a thing of the

past

� Non routine manualNon routine manualNon routine manualNon routine manual----tasks?tasks?tasks?tasks?

� Filing briefs

� Taking minutes of meetings

� Due diligence work

Invest in Invest in Invest in Invest in complementscomplementscomplementscomplements

� Train in science, computation, Train in science, computation, Train in science, computation, Train in science, computation,

data data data data analyticsanalyticsanalyticsanalytics and and and and technologytechnologytechnologytechnology

� Invest in soft Invest in soft Invest in soft Invest in soft skillsskillsskillsskills: social : social : social : social

bottlenecksbottlenecksbottlenecksbottlenecks

� BurnBurnBurnBurn youryouryouryour codes?codes?codes?codes?


Legal bottleneck

� AttorneyAttorneyAttorneyAttorney----client client client client confidentialityconfidentialityconfidentialityconfidentiality in a in a in a in a BigDataBigDataBigDataBigData worldworldworldworld


Rent seeking?

� ForbidForbidForbidForbid lawbotslawbotslawbotslawbots to to to to makemakemakemake justice?justice?justice?justice?

� ForbidForbidForbidForbid lawbotslawbotslawbotslawbots to to to to representrepresentrepresentrepresent clients?clients?clients?clients?


Conclusion

� MGI, 2013:

� “In some cases there may be regulatory hurdles to overcome. To protect citizens, many knowledge work professions (including legal, medical, and auditing professions) are governed by strict regulatory requirements regarding who may perform certain types of work and the processes they use”

� “Policies discouraging adoption of advanced robots—for example, by protecting manual worker jobs or levying taxes on robots—could limit their potential economic impact”.

� Frey and Osborne, 2013:

� “The extent and pace of legislatory implementation can furthermore be related to the public acceptance of technological progress”