Alex Tabarrok

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YIWU, CHINA - MAY 18: (CHINA OUT) A "female" robot waiter delivers meals for customers at robot-themed restaurant on May 18, 2015 in Yiwu, Zhejiang province of China. Sophomore Xu Jinjin in 22 years old from Hospitality Management of Yiwu Industrial and Commercial College managed a restaurant where a pair of robot acted as waiters. The "male" one was named "Little Blue" (for in blue color) and the "female" one was "Little Peach" (for in pink) and they could help order meals and then delivered them to customers along the magnetic track and said: "Here're your meals, please enjoy". According to Xu Jinjin, They had contacted with the designer to present more robot waiters to make the restaurant a real one that depends completely on robots. (Photo by ChinaFotoPress via Getty Images)

The economist Alex Tabarrok participated in an interesting Q&A session at Quora, but I really wish I could ask him a follow-up on the exchange about Artificial Intelligence’s impact on the middle class. One point he makes is that the benefits of AI will flow to masses the way smartphones have. That sounds promising except that the diffuse nature of that particular technology has coincided by most estimates with a hollowing out of the middle. For instance, those phones have enabled Uber to destabilize the taxi industry, replacing solid jobs and small businesses with Gog Economy insecurity. Having a remarkably great tool in our shirt pockets isn’t necessarily a panacea for larger economic issues, and it’s possible the benefits from AI won’t cover the losses it creates. 

The exchange:


Will the proliferation of affordable AI decimate the middle class?

Alex Tabarrok:

Here is how I think about these issues. The Artificial in AI can sometimes mislead so let’s start by getting rid of the A and asking instead whether more NI, Natural Intelligence will decimate the middle class. For example, will increasing education in China decimate the American middle class? I don’t think so.

As I said in my TED talk, the brainpower of China and India in the 20th century was essentially “offline.” Instead of contributing to the world technological frontier the people of China and India were just barely feeding themselves. China and India are now coming online and I see the increase in natural intelligence as one of the most hopeful facts for the future. It’s been estimated that a reduction in cancer mortality of just 10 percent would be worth $5 trillion to U.S. citizens (and even more taking into account the rest of the world). A reduction in cancer mortality is more likely to happen with a well-educated China than with a poorly educated China. So we have a huge amount to gain by greater NI.

In the case of low-skill labor the rise of China has hurt some US low-skill workers (although US workers as a whole are almost certainly better off due to lower prices). The US has historically had an abundance of highly-skilled labor and with greater education around the world we have less of a competitive advantage. In the case of high-skill labor, however, I think the opportunities for gains are much greater than with competition for low-skill labor. Ideas are what drives growth and ideas are non-rivalrous, they quickly spread around the world. The more idea creators the better for everyone. At the world level, for example, the standard of living and the growth rate of world GDP have both gotten larger as population has increased.

Greater foreign intelligence and wealth could be a threat if intelligence turns from production to destruction (this is also a potential problem with AI). We probably can’t keep China poor, even if we tried, and any attempt to try to do so would likely backfire in the worst possible way. Thus, if want to keep high-skill Chinese workers working on medical rather than military breakthroughs, we must preserve a peaceful world of trade. Indeed, peace and trade become ever more important the richer the world gets. 

Now let’s turn from NI to AI. For the foreseeable future I see AI as being very similar to additional NI. Smart people in China aren’t perfect substitutes for smart people in the United States and there are also plenty of opportunities for complementarity. Similarly AI is not a perfect substitute for NI and there are plenty of opportunities for complementarity. An AI that drives your car, for example, complements your NI because it leaves more time for more productive tasks.

(What happens when AI does become a perfect substitute for NI? We could easily be 100 years or more from that scenario but my foresighted colleague, Robin Hanson, has a new book The Age of EM that discusses the implications of uploads, human intelligence copied into software—Hanson’s book is the most serious attempt in all of history to lay out the implications of a new technology but we may not know whether he is right for a long time.)

Thus, the analysis of AI and NI is similar except for one important fact. As Chinese workers become better educated a significant share of the gains will go to Chinese workers (although by no means all).  AI, however, is produced by capital. But in our world capital isn’t scarce. The world is awash in capital and computing power is getting ever cheaper. AI isn’t like an oil field owned by a handful of people. AI will be cheap and ownership will be widespread. Just look at your cellphone—it’s faster and more powerful than a multi-million dollar Cray-2 supercomputer of 1990. Moreover, in 1990 there were only a handful of Cray-2s and today there are billions of cell-phone super-computers including hundreds of millions and soon billions in poor countries. The gains from AI, therefore, will flow not to capital but to consumers. So if anything the gains from more AI are even larger than the gains from more NI.•



Apple is just crazy enough to (most likely) enter the auto industry, but it assuredly has no intention of going into the non-profit university business. But should the company do just that?

It’s easy to spend someone else’s money, and Apple might be better served by instead investing in an attempt at a latter-day Bell Labs á la Google X, but in a really smart Marginal Revolution post, economist Alex Tabarrok argues that Apple should devote some of its vast banked wealth to buy a university and reinvent it. An excerpt:

Apple is a for-profit corporation not a charity but there are plenty of ways to make money from a non-profit university. Aside from the tax breaks and other deductions, Apple University would be a proving ground for educational technologies that would be sold to every other university in the world. New textbooks built for the iPad and its successors would greatly increase the demand for iPads. Apple-designed courses built using online technologies, a.i. tutors, and virtual reality experimental worlds could become the leading form of education worldwide. Big data analytics from Apple University textbooks and courses would lead to new and better ways of teaching. As a new university, Apple could experiment with new ways of organizing degrees and departments and certifying knowledge. Campuses in Delhi, Seoul, Shanghai, Berlin, and Sao Paulo could provide opportunities for studying abroad. Apple’s reputation would attract top students, especially, for example, if it started with a design and business school. Top students would lead Apple University to be highly ranked. The more prestigious Apple University became the greater would be the demand for Apple University educational products.•



Gurgaon in India is a libertarian wet dream, a high-tech private city that grew from nothing, knows little or no regulation and has no infrastructure. You want your sewage taken away? Hire a firm to do it. You want to start a business? Don’t worry about pesky rules. You want roads to drive on? Not so much. You’re worried about environmental protection? Wait, what? It’s the free market extrapolated to an extreme.

On the latest EconTalk episode, Russ Roberts and fellow economist Alex Tabarrok have a lively discussion about this private city and other ones which favor “voluntary action.” While the guest is enthusiastic about Gurgaon as something of a model for the next global cities, he acknowledges its faults (“The roads situation is terrible, a disaster”), though he often waves these shortcomings away by saying they’re no worse than in other parts of India. The idea of using some sort of Disneyland approach to building private cities on a large scale, which Tabarrok seriously suggests, seems a little cuckoo to me. An excerpt:

Alex Tabarrok:

Between just 2015 and 2030, in India, the urban population is expected to increase by over a quarter of a billion people. So, just think about that. What that means is that during the next 15 years, even taking into account the reduced infrastructure in India, India is going to need on the order of a new Chicago every single year for the next 15 years. At least. And then continuing on into the future. So we have, around the world, massive increases in the urban population. And most of this is happening in the developing world. And the developing world, of course, is struggling with corruption and with poor governments and with a lack of information. And you know, we just can’t expect governments to work very well in these countries. So how are we going to plan? We can hope, right, that cities will be planned and laid out and the sewage lines will be planned for the future and everything will be divided neatly. You know, the way an urban planner in theory would do it. But that’s just not realistic. So, what can we expect? Are there other ways of doing this? And Gurgaon is one possible alternative route, which involves, you know, leaving a whole lot to the private sector.

Russ Roberts:

When you talk about that increasing urbanization, say, in India, the most likely way that’s going to happen is that the existing cities in India are going to get larger. And they are going to have increasing stress on their current infrastructure systems, which are not very effective, from what I understand, already. And so, the likely result of this urbanization and population growth is going to be muddling through with a big set of imperfections. It seems to me China is taking a different approach. China is saying: We need a bunch of new cities. So they are just building them. They are building cities out in the middle of relatively nowhere, from scratch. With lots of buildings, lots of infrastructure, from the top down. And I did read today–I didn’t get to click through on the tweet, but somebody tweeted that the Chinese, some Chinese officials were bidding in auctions to keep land prices high in some of the cities that they are worried about. This is not likely to be a successful strategy for creating value. But China has taken a different approach. It might be a lot better.

Alex Tabarrok:

So, current urban areas are certainly going to grow. But there’s also no question that we’re going to need entirely new cities–both in India and China and elsewhere. And you just look at the United States. Even in the United States, which has long been majority-urbanized, we’ve seen growth, really essentially new cities. Like Houston, has grown in the past 50 years from 100,000 to, you know, several million people. And so forth. You think about the Industrial Revolution in Great Britain: the creation of new cities like Birmingham and so forth. It’s not just London getting bigger, in other words. Although that happened as well. So, I want to put China aside for a minute, and maybe come back and talk about that. But I want to keep on, on Gurgaon, for a little bit longer, because I want to talk about what has worked, and what hasn’t.

Russ Roberts:

Yeah, go ahead.

Alex Tabarrok:

So, fire prevention in Gurgaon works really well. So, what has happened is these private developers buy a chunk of land. And within that chunk of land you have excellent infrastructure; you have excellent delivery of services. So, the developers will build office parks. And within the office parks, you have sewage. But the sewage doesn’t go anywhere. It just–once it leaves the office park–well, sometimes it will go to a small treatment plant. You’ll also have electricity–electricity 24 hours, but funded with diesel, provided with diesel. Which is inefficient. You don’t get all the economies of scale. You do get excellent fire protection. It’s pretty interesting: Gurgaon has India’s only private fire department. And it’s the only fire department really in all of India which has equipment which can reach the top of these skyscrapers.

Russ Roberts:

Good idea.

Alex Tabarrok:

Yeah, exactly. The public system is a complete disaster. You also have delivery of transportation. So, these private firms hire taxis, sort of like Uber but a totally private system to bring their workers, ferry their workers, all over the city.

Russ Roberts:

Yeah. By the way, it’s important to mention: we’ve had some discussions of private busses here, in Chile with Mike Munger. But of course many firms in Silicon Valley outside of San Francisco bus workers into their companies and have major, significant private bus companies.

Alex Tabarrok:

Exactly. It’s very similar.

Russ Roberts:

They are running them themselves. I don’t think they are hiring them out. But they are not public.

Alex Tabarrok:

Exactly. It’s very similar to that.•

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A fool and his money are soon parted, even if we’re talking about Lotto millions. Alex Tabarrok of Marginal Revolution wrote a post about the predictable results of lottery winners mishandling new-found wealth. In it, he links to a Mail Online story about a British trashman who blew through his lottery winnings and returned to hauling trash. An excerpt:

“He became the self-proclaimed king of the chavs after turning up to collect his £9.7million lottery win wearing an electronic offender’s tag.

But eight years on, having blown all that money, Michael Carroll is practising for a return to his old job as a binman.

The 26-year-old, who squandered his multi-million fortune on drugs, gambling and thousands of prostitutes, has since February claimed £42 a week in jobseeker’s allowance.

But he is keen to get off the dole and back to earning £200 a week collecting rubbish near his home in Downham Market, Norfolk.

The father of two told The People: ‘I can’t wait to stop signing on and start getting paid for doing a proper job like normal people.’”


Documentary about Lotto “winner” Michael Carroll;

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