The AI Layoff Trap
9 hours ago
- #automation trap
- #Pigouvian tax
- #AI labor displacement
- AI-driven automation can outpace job creation, reducing consumer demand.
- Firms engage in an automation arms race due to demand externalities, leading to excess displacement of workers.
- Excess automation harms both workers and firm owners, with no automatic market correction.
- Competition and better AI exacerbate the problem; wages, entry, and common policies like UBI fail to solve it.
- A Pigouvian tax on automation is proposed as the only effective solution to align private and social incentives.