12 votes
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Why in most macro models technology is labor-augmenting?

The mathematical reason, is that this happens in order for the model to have a steady-state in terms of growth rates: variables like Consumption, Capital, Income, grow at the steady-state, but grow at ...
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7 votes

Claiming that food delivery apps are purely rent extraction

In addition to @KennyLJ 's answer, I think it's worth pointing out that your points require some pretty restrictive assumptions about the demand for food delivery. Some individuals might substitute ...
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  • 1,370
7 votes
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Why do we spread knowledge across nations?

This is a long comment that is too long for the comment box. In fact, many research projects in US are secretive, especially the ones related to military. At the same time, much, much more research ...
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  • 1,620
6 votes

Why in most macro models technology is labor-augmenting?

In the Cobb Douglas production function technological progress can be thought of as either labor or capital augmenting, it doesn't matter. Under Cobb Douglas: $Y_t = F(A_t, K_t, L_t) = A_t \cdot ...
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5 votes
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Is Artificial Intelligence a completely new (and underestimated) production factor?

My guess is that it is not a new factor of production, but simply a type of total factor productivity. This is because: factors of production are a stock, which produce services. What is the stock of ...
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  • 8,437
5 votes

Claiming that food delivery apps are purely rent extraction

In my youth, pizza delivery was my way to make money, so I have some understanding of how the economics work in practice. Taking orders is expensive. It takes several minutes and can require that ...
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  • 1,152
4 votes

Difference between Value-Added TFP and Gross-Output TFP?

Your assumption is correct. Value added is Gross Output-intermediate consumption(inputs). value-added approach is a simple measure that ignores the difficulties of dealing with inter-industry and ...
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  • 1,453
4 votes

Why do companies launch products at much higher prices, only to reduce the price drastically after a few months?

Two very general reasons are: 1) High prices at the beginning target "early adopters" - people that have a higher "willingness to pay" for a new product just to have it first. Early adopters know ...
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4 votes

Why do companies launch products at much higher prices, only to reduce the price drastically after a few months?

In addition to (intertemporal) price discrimination, there's a parallel process of ramping up production. Especially with tech products, they can have bugs at the beginning, even with all the ...
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  • 3,730
4 votes

Why do companies launch products at much higher prices, only to reduce the price drastically after a few months?

I want to flesh out the answers from Alecos Papadopoulos and Bill Clark to make sure it's clear why a firm might want to reduce prices over time—known as intertemporal price discrimination. Suppose ...
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4 votes

Increasing returns, implications?

Provided that increasing returns to scale apply over the whole production function of the company it is likely that it would become natural monopoly. For example, Mankiw in Principles of Economics (pp ...
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3 votes

Labour Saving vs. Labour Augmenting - what is the difference?

Consider a Leontief production function: $$ Y = \text{min}(aL,bK) $$ Optimal capital-labour ratio is: $$ \frac{K^*}{L^*}=\frac{a}{b} $$ Labour-saving technical change is such that $a$ increases. ...
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  • 8,437
3 votes

Proxies for technological change in an economy?

I would say these are some proxies Number of patents Number of published scientific papers Human capital
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  • 1,206
3 votes

How technology will help economists to do better predictions?

I'm an economist by training who also is a programmer and works with a lot of data scientists, so I've some insight into this area. One of my projects at the Urban Institute is trying to bridge the ...
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3 votes

Factoring Technology into Economics models

Yes, this is pretty standard stuff in economics. First, the simplest models contain it in a hidden form. Supply curves are derived from production functions, and include (marginal) cost of ...
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  • 244
3 votes

Do machines reduce labor... or so they redistribute, alter, and globally increase labor?

The only "perpetual motion machine" is life itself. No it is not. We also convert energy to heat as we go through life. We are certainly not immune to the second law of thermodynamics, we increase ...
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  • 131
3 votes

What are some growth theories that are considered the most correct at the moment?

There exists also a tendancy to treat growth models with heterogeneous agents. I think the question is not to use the right growth model but contribute to the theory by trying to change "...
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3 votes
Accepted

What are some growth theories that are considered the most correct at the moment?

Oded Galor's interesting work on Unified Growth Theory subsumes the Solow model, the Malthusian model and endogenous growth theories in a very stylized way. This model is of course "long term" and ...
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  • 1,373
3 votes

factors of production (and their relative contribution)

People aren't ignoring things like raw material, energy, and land, they're abstracting them. They're saying, "We don't want to keep track of each of these separately, so we'll say that for our ...
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3 votes

Cobb-Douglas production function, given $w$ get $r$ regardless of input levels. Why?

A clarification: The values $w,r$ are not independent of input combinations: you have already solved for $K/L$. 1) Unless you assume that the price of the output is equal to 1, there is a minor ...
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3 votes

Cobb-Douglas production function, given $w$ get $r$ regardless of input levels. Why?

This is a subtle issue. First let's present a numerical example to see the head-scratching riddle. Assume $$\alpha =1/2 \implies Y = K^{1/2}L^{1/2}$$ and that the exogenously given input prices are ...
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3 votes

Increasing returns, implications?

It can be shown that a firm with increasing returns to scale (IRTS) and no market power makes a negative profit (and may not be observed at all, in the long run). Conclusion: either subsidies, or ...
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  • 2,527
3 votes

Increasing returns, implications?

Besides the great answers already given, adding my two cents: A firm ends up being a sole player in the sector when market entry for others is restricted, which may not be guaranteed by IRTS or even ...
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3 votes

Basic question i guess

fall in price arising from the labor savings The price of a product is usually determined in part by its cost. (This holds in almost all theoretical models without strict capacity constraints, even ...
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2 votes
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Why do developing countries adopt 21st century technology, but stay behind in output per capita?

Probably if you go to almost any country in the world, however poor, you will find considerable use of relatively cheap cutting-edge consumer technology such as smartphones and some more expensive ...
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  • 6,693
2 votes

Understanding Tertiarization of the Economy

I' m not sure its a law, its what has happened because manufacturing productivity has moved faster. Indeed, the robot economy might well get rid of most service jobs and we'll all be making or ...
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  • 2,590
2 votes
Accepted

Is information technology going to turn most "common goods" into private goods?

Many obstacles to converting common goods into private goods are legal or normative rather than technological. For example, the technology necessary for congestion pricing of traffic is long ...
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  • 15.9k
2 votes
Accepted

Disruptions in Server / Data Center Market

Institutions like banks for many years now keep back-up archives of their data in physical locations owned and operated by other legal entities. This is a standard case of outsourcing to specialists ...
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2 votes

Have automation and technological advance been shown to have a positive impact on society and the economy or a negative one?

Would you rather work with a tractor or shovel? Would you rather use one hand to work or two?... Mathemathically the formula is: $$EL = \mathrm{GDP}_r$$ That is, efficiency ($/h) times hours ...
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