Artificial Intelligence, Robots and Automation

This book revolves around the idea that Artificial Intelligence (AI) is likely to bring about policy challenges with regards to employment. Recent literature has shown that automation is a trend that is here to stay. Policymakers need new tools and instruments to tackle the AI challenge. I argue that economic theory provides a taxation tool that can ensure the proliferation of AI is followed by a Pareto-improved situation. With the assumption that AI capital is a perfect substitute to human capital within a given firm, partially differentiating a Cobb-Douglas production function (with elasticity of substitution equal one) shows that in the absence of a tax, marginal product of labour would equal that of AI rental. Imposing a tax on the latter would ensure that firms simply switch from AI to human labour, which would improve their condition without making the firm worse off.