Stany N Kunda

Artificial Intelligence, Robots and Automation Stany N Kunda

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.