Cognitive Comparative Advantage and the Organization of Work: Lessons from Herbert Simon's Vision of the Future

Abstract

In a marvelous but somewhat neglected paper, "The Corporation: Will It Be Managed by Machines?" Herbert Simon articulated from the perspective of 1960 his vision of what we now call the New Economy - the machine-aided system of production and management of the late twentieth century. Simon's analysis sprang from what I term the principle of cognitive comparative advantage: one has to understand the quite different cognitive structures of humans and machines (including computers) in order to explain and predict the tasks to which each will be most suited. Perhaps unlike Simon's better-known predictions about progress in artificial intelligence research, the predictions of this 1960 article hold up remarkably well and continue to offer important insights.

In what follows I attempt to tell a coherent story about the evolution of machines and the division of labor between humans and machines. Although inspired by Simon's 1960 paper, I weave many other strands into the tapestry, from classical discussions of the division of labor to present-day evolutionary psychology. The basic conclusion is that, with growth in the extent of the market, we should see humans "crowded into" tasks that call for the kinds of cognition for which humans have been equipped by biological evolution. These human cognitive abilities range from the exercise of judgment in situations of ambiguity and surprise to more mundane abilities in spatio-temporal perception and locomotion. Conversely, we should see machines "crowded into" tasks with a well-defined structure. This conclusion is not based (merely) on a claim that machines, including computers, are specialized idiots-savants today because of the limits (whether temporary or permanent) of artificial intelligence; rather, it rests on a claim that, for what are broadly "economic" reasons, it will continue to make economic sense to create machines that are idiots-savants.

Keywords: New Economy, cognition, division of labor, arificial intelligence, work organization, skill

JEL Classification: B31, J24, L23, M54, 033