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

Introduction to the Law of Robots andIntroduction to the Law of Robots andIntroduction to the Law of Robots andIntroduction to the Law of Robots and ArtificialArtificialArtificialArtificial IntelligencesIntelligencesIntelligencesIntelligences
Prof. Nicolas Petit ©Prof. Nicolas Petit ©Prof. Nicolas Petit ©Prof. Nicolas Petit ©
UniversityUniversityUniversityUniversity ofofofof 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%
TechTechTechTech 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%
TechTechTechTech 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 economising
the 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 ofBank ofBank ofBank of AmericaAmericaAmericaAmerica/Merrill Lynch,/Merrill Lynch,/Merrill Lynch,/Merrill Lynch, 2015201520152015
““““Robots areRobots areRobots areRobots are likelylikelylikelylikely totototo be performing 45% of manufacturing tasks by 2025Ebe performing 45% of manufacturing tasks by 2025Ebe performing 45% of manufacturing tasks by 2025Ebe 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 AdvancesDisruptive technologies AdvancesDisruptive technologies AdvancesDisruptive technologies Advances that willthat willthat willthat will
transform life, business, and the globaltransform life, business, and the globaltransform life, business, and the globaltransform life, business, and the global economy, 2013economy, 2013economy, 2013economy, 2013
By 2025, “By 2025, “By 2025, “By 2025, “knowledgeknowledgeknowledgeknowledge workworkworkwork automationautomationautomationautomation tools and systems could take ontools and systems could take ontools and systems could take ontools 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 performuse of computers to performuse of computers to performuse of computers to perform
tasks that rely on complex analyses, subtle judgments, and creativetasks that rely on complex analyses, subtle judgments, and creativetasks that rely on complex analyses, subtle judgments, and creativetasks that rely on complex analyses, subtle judgments, and creative
problemproblemproblemproblem solving).solving).solving).solving).
By 2025, “[By 2025, “[By 2025, “[By 2025, “[w]ew]ew]ew]e estimate that the use of advanced robots for industrial andestimate that the use of advanced robots for industrial andestimate that the use of advanced robots for industrial andestimate that the use of advanced robots for industrial and
service tasks could take on work in 2025 that could be equivalent to theservice tasks could take on work in 2025 that could be equivalent to theservice tasks could take on work in 2025 that could be equivalent to theservice 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
JobJobJobJob polarizationpolarizationpolarizationpolarization
Shift in theShift in theShift in theShift in the occupationaloccupationaloccupationaloccupational
structurestructurestructurestructure
DisplacedDisplacedDisplacedDisplaced workersworkersworkersworkers relocaterelocaterelocaterelocate
theirtheirtheirtheir laborlaborlaborlabor supplysupplysupplysupply totototo lowlowlowlow skillskillskillskill
service occupationsservice occupationsservice occupationsservice occupations
OtherOtherOtherOther humanshumanshumanshumans resistresistresistresist bybybyby
investinginvestinginvestinginvesting inininin 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 « labourlabourlabourlabour marketmarketmarketmarket
polarizationpolarizationpolarizationpolarization » (» (» (» (AutorAutorAutorAutor, 2014;, 2014;, 2014;, 2014;
CowenCowenCowenCowen, 2013), 2013), 2013), 2013)
DiscussionDiscussionDiscussionDiscussion
Frey and Osborne, 2014 believeFrey and Osborne, 2014 believeFrey and Osborne, 2014 believeFrey 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, 2011and McAfee, 2011and McAfee, 2011and McAfee, 2011
disagreedisagreedisagreedisagree:::: whenwhenwhenwhen technologytechnologytechnologytechnology
becomesbecomesbecomesbecomes cognitive, substitutioncognitive, substitutioncognitive, substitutioncognitive, substitution
cancancancan alsoalsoalsoalso occuroccuroccuroccur for non routinefor non routinefor non routinefor non routine
taskstaskstaskstasks

Substitution pace
““““Technological advances are contributing to declining costs inTechnological advances are contributing to declining costs inTechnological advances are contributing to declining costs inTechnological advances are contributing to declining costs in
robotics. Over the past decades, robot prices have fallen aboutrobotics. Over the past decades, robot prices have fallen aboutrobotics. Over the past decades, robot prices have fallen aboutrobotics. Over the past decades, robot prices have fallen about
10 percent annually and are expected to decline at an even10 percent annually and are expected to decline at an even10 percent annually and are expected to decline at an even10 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----precisionprecisionprecisionprecision
dexterity, which typically cost 100,000 to 150,000 USD, will bedexterity, which typically cost 100,000 to 150,000 USD, will bedexterity, which typically cost 100,000 to 150,000 USD, will bedexterity, which typically cost 100,000 to 150,000 USD, will be
available for 50,000 to 75,000 USD in the next decade, withavailable for 50,000 to 75,000 USD in the next decade, withavailable for 50,000 to 75,000 USD in the next decade, withavailable 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 within2012b). Declining robot prices will inevitably place them within2012b). Declining robot prices will inevitably place them within2012b). 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

PhilipsPhilipsPhilipsPhilips 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 GlobalMcKinsey GlobalMcKinsey GlobalMcKinsey 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 SubstitutionSubstitutionSubstitutionSubstitution 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)
ComputersComputersComputersComputers are more substitutable for humanare more substitutable for humanare more substitutable for humanare more substitutable for human labourlabourlabourlabour in routinein routinein routinein routine
relative to nonrelative to nonrelative to nonrelative to non----routineroutineroutineroutine tasks (substitution effect);tasks (substitution effect);tasks (substitution effect);tasks (substitution effect);
AndAndAndAnd (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 increasesinputs increasesinputs increasesinputs increases thethethethe
marginal productivity of nonmarginal productivity of nonmarginal productivity of nonmarginal productivity of non----routineroutineroutineroutine inputs (complementarityinputs (complementarityinputs (complementarityinputs (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 ofskill content ofskill content ofskill content of
recent technological change: An empiricalrecent technological change: An empiricalrecent technological change: An empiricalrecent technological change: An empirical exploration”.exploration”.exploration”.exploration”. TheTheTheThe
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
LongLongLongLong termtermtermterm miserymiserymiserymisery

T. Cowen, 2013
AverageAverageAverageAverage isisisis overoveroverover
TheTheTheThe richrichrichrich willwillwillwill getgetgetget richerricherricherricher,,,, poorpoorpoorpoor
willwillwillwill getgetgetget poorerpoorerpoorerpoorer
SubsitutionSubsitutionSubsitutionSubsitution effecteffecteffecteffect strongerstrongerstrongerstronger inininin
workworkworkwork w/ow/ow/ow/o
consciousnessconsciousnessconsciousnessconsciousness////abilityabilityabilityability to trainto trainto trainto train
FreestyleFreestyleFreestyleFreestyle chesschesschesschess metaphormetaphormetaphormetaphor
HumanHumanHumanHuman----computercomputercomputercomputer teamsteamsteamsteams
outperformoutperformoutperformoutperform machinemachinemachinemachine teamsteamsteamsteams
NotNotNotNot necessarynecessarynecessarynecessary teams of grandteams of grandteams of grandteams of grand
mastersmastersmastersmasters
““““In theIn theIn theIn the language of economics,language of economics,language of economics,language of economics,
we can say that the productivewe can say that the productivewe can say that the productivewe can say that the productive
worker and the smart machineworker and the smart machineworker and the smart machineworker 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 thanstronger complements thanstronger complements thanstronger complements than
beforebeforebeforebefore””””

Substitution-Complement Framework

The model explained
MultiMultiMultiMulti----causal substitutioncausal substitutioncausal substitutioncausal substitution
«««« DeskillingDeskillingDeskillingDeskilling »»»»
ExponentialExponentialExponentialExponential decreasedecreasedecreasedecrease inininin costscostscostscosts
ofofofof technologytechnologytechnologytechnology
«««« The copyThe copyThe copyThe 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 fromComplements arising fromComplements arising fromComplements arising from
substitution (substitution (substitution (substitution (upward sloppingupward sloppingupward sloppingupward 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 (LLLL
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
WorksWorksWorksWorks beyondbeyondbeyondbeyond employmentemploymentemploymentemployment
CanCanCanCan alsoalsoalsoalso workworkworkwork for «for «for «for « existentialexistentialexistentialexistential riskriskriskrisk »»»»
SocialSocialSocialSocial acceptabilityacceptabilityacceptabilityacceptability of new technologiesof new technologiesof new technologiesof new technologies dependsdependsdependsdepends onononon 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
““““LikeLikeLikeLike many industries before it, themany industries before it, themany industries before it, themany industries before it, the
march of automation, processmarch of automation, processmarch of automation, processmarch of automation, process
engineering, informatics, and supplyengineering, informatics, and supplyengineering, informatics, and supplyengineering, informatics, and supply
chain management will continue tochain management will continue tochain management will continue tochain management will continue to
operate and transform our industryoperate and transform our industryoperate and transform our industryoperate and transform our industry....
Informatics, computing, and technologyInformatics, computing, and technologyInformatics, computing, and technologyInformatics, computing, and technology
are going to change both what it meansare going to change both what it meansare going to change both what it meansare going to change both what it means
to practice law and to “think like ato practice law and to “think like ato practice law and to “think like ato 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
ForgetForgetForgetForget 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 inInvest inInvest inInvest in complementscomplementscomplementscomplements
Train in science, computation,Train in science, computation,Train in science, computation,Train in science, computation,
datadatadatadata analyticsanalyticsanalyticsanalytics andandandand technologytechnologytechnologytechnology
Invest in softInvest in softInvest in softInvest in soft skillsskillsskillsskills: social: social: social: social
bottlenecksbottlenecksbottlenecksbottlenecks
BurnBurnBurnBurn youryouryouryour codes?codes?codes?codes?

Legal bottleneck
AttorneyAttorneyAttorneyAttorney----clientclientclientclient confidentialityconfidentialityconfidentialityconfidentiality in ain ain ain a BigDataBigDataBigDataBigData worldworldworldworld

Rent seeking?
ForbidForbidForbidForbid lawbotslawbotslawbotslawbots totototo makemakemakemake justice?justice?justice?justice?
ForbidForbidForbidForbid lawbotslawbotslawbotslawbots totototo 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”

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

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