The Impact of Humanoid Robots (HR) in the Economy: From Microeconomic and Macroeconomic Perspective

Abstract

This short academic note provides an overview of the role of humanoid robots (HR) in the economy from a macroeconomic perspective. In the first section, we present a general introduction to robots. The second section offers a brief history of robots. The third section focuses on the basic requirements for building a humanoid robot (HR). In the fourth section, we delve into a microeconomic analysis of the impact of humanoid robots (HR) on firms, specifically regarding cost, revenue, and profit maximization. In the fifth section, we evaluate from a macroeconomic view, we assess the impact of humanoids robots (HR) on the productivity, unemployment, inflation, economic growth, income distribution, and international trade. Additionally, this research emphasizes that humanoid robots (HR) are likely to create two possible outcomes, both of which require two mechanisms. We highlight key aspects of the emerging role of humanoid robots (HR) as a potential and effective substitute for human labour across various production sectors in the economy, as well as the profound changes occurring in the macroeconomic performance of any country.

?Keywords: Robots, humanoids, artificial intelligence, microeconomics, firm, research, jobs, macroeconomics, unemployment’s, inflation, massive disruption jobs effect, faster job relocation and adaptation effect.

JEL: A1, B00.

?1.???? Introduction

The idea of robots (West, 2018) is quite confusing and not well understood by most knowledgeable people. We need to start with automation as the basic premise of robotics. The primary concept of automation is reducing human intervention in the production process to increase productivity and decrease dependency on workers for the generation of goods or services for the market. The origin of automation lies in the use of basic tools as extensions of our arms or bodies in the production process (Cilekoglu, Moreno, and Ramos, 2021).

?The second stage of automation involves the creation and use of machines to facilitate production, improving efficiency with the aim of reducing production costs (total, average, and marginal). This enables the production of higher-quality goods and larger quantities, lowering prices in the market, which in turn generates faster and significant revenue in the short term. The ultimate goal is to generate substantial profits (by maximizing sales and minimizing production costs) and achieve rapid wealth accumulation in a sustainable manner.

?The third stage of automation is the transition from mechanical machines (operated by workers) to fully autonomous machines (controlled by computers and advanced software) that require minimal human labour in the production process. These machines offer high productivity (through standardization and large-scale production) and efficiency (by ensuring quality and volume).

?The fourth stage involves the use of fully automatic, highly precise robots controlled by computers and advanced software, again with minimal human involvement. These robots achieve large-scale productivity (through standardized production of large volumes) and efficiency (through record production times).

?The fifth and final stage of full automation involves the use of humanoids—robots with human-like features—equipped with artificial intelligence (AI), sensors, microchips, micro-sensors, advanced materials, fast-charging batteries, and sophisticated structures. These humanoids can assess situations and take actions in real time without any human input, ultimately eliminating the need for workers in the production process entirely (Dautenhahn, 2007).

?2.???? Short Brief of Robots History

Robots originated in the ancient world across various civilizations, including the Greeks, Chinese, Indians, and Romans. In the beginning, the concept of robots was purely mechanical, relying on a system of levers, cylinders, gears, and cables integrated to simulate human actions manually. According to this research robots were for military reasons more than for commercial reasons. A key contributor to the development of the formal idea of robots was Leonardo da Vinci, who created a robotic design in 1495.

?Historically, the origins and massive uses of robots in the process of production as we know them today can be traced back to the Industrial Revolution in England in the 1760s (18th century), with the use of steam and coal in various machines. Nevertheless, we have the contribution of Nikola Tesla with amazing advances in robots in the modern era. In this section, it is important to clarify that there are three phases of robot classification:?

1. Full-mechanical and fully-manual – Robots are powered and controlled entirely by human force, requiring full human intervention.?

2. Semi-mechanical and semi-manual – Partial human intervention is required, with the use of parts and components powered by less human force to assist in the control and operation of the robot, the main source to supply energy was based on steam and coal.?

3. Electric and fully-autonomous – Minimal human intervention is needed, as robots are controlled and operated primarily by computers, the main source to supply energy to the robots is from electricity.

?3.???? ?The Basic Requirements to Build a Humanoids Robots (HR):

In this section, we focus on the technical aspects of humanoids robot (HR) development and engineering. Encouraging science education at the secondary and university levels is crucial for fostering interest in the pure sciences (mathematics, physics, chemistry, and biology), which provide the foundation for supporting technical disciplines such as computer science (programming, networking, and security), materials science (nanotechnology), electronics, design and graphic design, architecture, engineering, and technology.

?To shift economies toward advanced technology, education systems must ensure that 60% of graduates focus on science and engineering fields. This emphasis is vital for building a strong foundation in robotics and automation. Constructing any robot humanoid (HR) requires meeting basic conditions and conducting specialized research and development in the following areas:

?1. Energy resources: Developing large-scale energy sources, such as electricity, to provide sufficient power for humanoids robots (HR).

2. Electronics: Ongoing research and development of electronic components like microchips, circuits, and coding.

3. Computing: Advancing mega-computers and servers with high memory capacity, speed, and data storage.

4. Network systems: Rapid development of networking and interconnectivity systems.

5. Internet speed: Ensuring faster internet access, with at least 5G speeds.

6. Materials: Creating new materials that are strong, durable, and cost-effective.

7. Design and manoeuvrability: Continuously creating, designing, and producing new robot models with improved manoeuvrability and responsiveness.

8. Software: Constantly developing sustainable programming and coding for better software.

9. Mechanical and electronic parts: Innovating the creation and development of mechanical and electronic components.

10. Aesthetic and graphic design: Incorporating artistic and graphic design to make humanoids robots (HR) more realistic and unique.

11. Security: Developing robust antivirus software and protection systems to ensure robot humanoids (HR) safety.

12. Maintenance systems: Establishing maintenance and improvement systems for humanoids robots (HR).

?This research strongly recommends that the development of artificial intelligence (AI) for humanoids robots (HR) be renamed as the Central Neural Artificial Intelligence Box (CNAI-Box). This system would interconnect the hardware and software of humanoids robots (HR), enabling them to analyse information, process data, and take actions based on pre-established parameters. It is essential to have a mechanism in place to disconnect any robot humanoid (HR)in case of an uncontrolled situation.

?4.???? The impact of Humanoids Robots (HR) from a Microeconomic Perspective:

In the beginning, we can say that humanoid robots (HR) are entering the circular flow of the economy, where they interact with firms and households in the market. The primary goal of firms is to produce and supply goods and services for household consumption. In turn, household spending (S) on these goods and services becomes revenue (R) for the firms, creating an automated cycle. These transactions take place in the goods and services market.

?On the other hand, the market for factors of production consists of labour (L), land (La), capital (K), and entrepreneurship (E). These factors are provided by households to firms, and in return, firms compensate households through various forms of income: wages (for labour), rent (for land), interest (for capital), and profit (for entrepreneurship). For firms, these payments represent production costs (C), but for households, they are sources of income that enable them to spend on goods and services in the market.

?If we introduce humanoid robots (HR) to replace labour in the production process (Graetz and Michaels, 2018)., we see a dramatic shift in this equation. Labor (Barth, R?ed, Sch?ne, Umblijs, 2020) becomes less relevant to firms, reducing their dependence on human workers (Montobbio, Staccioli, Virgillito, and Vivarelli, 2020), which could lead to a significant decrease in the demand for labour from households. This, in turn, may cause mass unemployment (Barbieri, Mussida, Piva, and Vivarelli, 2019) in the labour market.

?In terms of demand (D) and supply (S), there may be an initial overreaction, but in the long run, this could result in an optimal equilibrium (e) for firms and households. Adjusting price and quantity equilibrium may face some challenges at the outset. It’s important to note that one of the main variables that can shift supply is technology—in this case, humanoids robots (HR). Additionally, the producer's surplus is likely to expand dramatically compared to a system relying on more labour (L) and less capital (K).

?From a production cost perspective, humanoids robots (HR) can significantly reduce total costs (Ct) that is equal to the variable costs (Cv) plus the fixed costs (Cf) (See Expression 1), particularly by lowering variable costs more than fixed costs. This is largely due to the reduction in labour required for the production process of any firm. Average total costs (ATC) and marginal total costs (MTC) will undergo rapid changes in the short run, as marginal total costs may initially exceed average total costs (see Expression 2). However, this will eventually lead to economies of scale, where constant returns to scale will increase substantially in the long run due to the intensive use of humanoids robots (HR). It can be argued that with humanoids robots, diseconomies of scale—where ATC rises as output increases—are unlikely, as humanoids robots (HR) help maintain lower costs even with increased output.

?Ct = Cv + Cf?? (1)

?ATC < MTC (2)

?In the case of profit maximization (see Expression 3), humanoids robots (HR) can reduce total costs, allowing firms to offer lower prices, which in turn can boost sales and increase total revenue. As a result, profit maximization with humanoids robots (HR) is achievable through high marginal revenues – MR- (driven by increased sales from firms using humanoids robots (HR) intensively in the production process) combined with lower marginal production costs (MC), benefiting both firms and households through reduced prices in the market.

?MR > MC? (3)

?5.???? The impact of Humanoids Robots (HR) from a Macroeconomic Perspective:

In the beginning, we can say that humanoid robots (HR) are entering the circular flow of the economy, where they interact with the economic performance and households in the market. The primary goal of the economic performance is to produce and supply goods and services for household consumption. In turn, household spending on these goods and services becomes revenue for the economic performance, creating an automated cycle. These transactions take place in the goods and services market.

?On the other hand, the market for factors of production consists of labour, land, capital, and entrepreneurship. These factors are provided by households to the economic performance, and in return, the economic performance compensate households through various forms of income: wages (for labour), rent (for land), interest (for capital), and profit (for entrepreneurship). For the economic performance, these payments represent production costs, but for households, they are sources of income that enable them to spend on goods and services in the market. However, the effects of humanoid robots (HR) may lead to dramatic changes in key macroeconomic variables, as follows:

?a. Productivity: Traditionally, productivity is understood through the concept of total factor productivity (TFP), which represents the relationship between aggregate output (GDP) and aggregate inputs (a ratio between labour input -L- and physical capital input -K-). TFP measures the efficiency of inputs in generating large outputs in short time periods; a high TFP is typically synonymous with economic growth. Here, we introduce the Cobb-Douglas production function (see Expression 4) (Cobb and Douglas, 1928)., where total production is denoted by Y, total factor productivity by A, and output elasticities for labour (α) and capital (β), both of which are linked to the technology available in a given historical period. A critical condition in this framework is that the sum of α and β must always be equal to or less than one (Fruit, 1962) and (Beer, 1980).

?Y (L, K) = ALαKβ (4)

?In our proposed adaptation, we suggest a deep modification of the original Cobb-Douglas production function (see Expression 5), replacing traditional labour with humanoid robots (HR) which, given their high productivity, can outperform traditional labour as outlined in Expression 6 and 7. This modified form, known as the Cobb-Douglas-Ruiz Estrada Production Function, replaces L with HR, which allows for geometric growth in A. Here, the output elasticities for HR, denoted as αHR, and for capital, β, are set to an equal level of 0.50, compared to the typical ratios for labour and capital of 0.70 and 0.30 respectively (Gordon, 2017). Technology is a vital component of TFP, reflecting the technological advancements of the current era. In this context, HRs would take full control of production, marketing, design, logistics, and distribution processes.

?Y (HR, K) = AHRαHRKβ (5)

?αHR = ?Q/?HR (6)

??β = ?Q/?K (7)

?In addition, we apply the law of diminishing returns by examining the marginal product of humanoid robots (MPHR) (see Expression 8) and the marginal product of capital (MPk) (see Expression 9), using second-order derivatives to test whether output may decrease if the number of HRs increases, assuming K is constant. It is essential to maintain high quality and continuous improvement in HRs rather than merely increasing quantity.

?MPHR = ?2Q/?HR (8)

?MPk = ?2Q/?K (9)

?Furthermore, the marginal rate of technical substitution (MRTS) is expressed in Expression 10:

?αHR/β = ?HR/?L (10)

?We assume that technology is constantly evolving. Outputs can vary based on household demand, as raw materials remain a variable cost, while HRs and K remain fixed costs. Remarkably, HRs enable standardized, high-quality outputs with near-zero errors, a feat made possible solely by HR technology.

?b. Unemployment: If we introduce humanoid robots (HR) to replace labour in the production process (Graetz and Michaels, 2018)., we see a dramatic shift in this equation. Labor (Barth, R?ed, Sch?ne, Umblijs, 2020) becomes less relevant to the economic performance, reducing their dependence on human workers (Montobbio, Staccioli, Virgillito, and Vivarelli, 2020), which could lead to a significant decrease in the demand for labour from households. This, in turn, may cause mass unemployment (Barbieri, Mussida, Piva, and Vivarelli, 2019) in the labour market. To address this issue, we propose two new concepts: the job disruption effect and the job relocation and adaptation effect.

?The massive jobs disruption effect refers to the immediate, negative impact of humanoid robots on the labour market, potentially displacing workers across various industries. On the other hand, the faster job relocation and adaptation effect involve the challenges and opportunities created as workers are forced to adapt to new roles in the evolving market.

?Addressing the job relocation and adaptation effect requires a fundamental shift in education systems (from elementary to high education) to foster creativity and human interaction, which are essential to competing with humanoid robots (hardware) and artificial intelligence (software) (Ruiz Estrada, Park, and Staniewski, 2023). Rapid adaptability and constant creativity are the most powerful tools labour can use to survive in the modern market, ensuring that this factor of production remains active and relevant in the long run.? To observe how humanoids robots (HR) are going to transform the entire economy from a macroeconomic perspective. We begin by noting that the intensive use of humanoids robots (HR) will push the production possibilities frontier (PPF) higher than the average PPF achieved through labour-intensive production with less capital. Efficiency levels can increase significantly, allowing for the production of two or more goods simultaneously, thus lowering opportunity costs.

?c. Inflation: Substantially, inflation can be described as a generalized and constant increase in the prices of goods and services. The main causes of inflation include an increase in energy costs for electricity generation (such as oil price crises), war, natural disasters, scarcity of natural resources, and financial issues (such as fluctuations in exchange rates, interest rates, stock market crashes, or financial crises) (Clark, 1982). Other contributing factors are international trade deficits, speculation by firms and black markets, unemployment (leading to income loss), embargoes (which limit export and import possibilities), the protection of infant industries (requiring high tariffs) (Ruttan, 1979), rising labour costs (due to labour shortages or low birth rates) (Freund, 1981), low levels of investment (both domestic and foreign), government debt, and a reduction in government spending. All these factors directly impact the general price level of goods and services.

?From a production perspective, however, the intensive use of humanoid robots (HR) could help maintain lower inflation rates, provided that electricity consumption is optimized in the HR charging process. Advances in battery and charging systems will be crucial in sustaining HR performance and production efficiency, helping to keep production costs low and thus maintaining competitive prices for consumers. Additionally, reducing dependency on oil and promoting renewable energy sources, such as solar and wind power, will further support these goals by minimizing environmental impact.

?d. Economic Growth:? The impact of humanoid robots (HR) on economic growth is significant. According to this research, the maximized use of HR across various productive sectors, such as agriculture, industry, and services, can yield substantial effects in both the short and long term. Neo-classical growth theories support increasing production output, which helps to drive consistent GDP expansion in real terms, maintaining low inflation and consistently high productivity. Several economic growth models help explain this concept:?

?(i) Harrod–Domar Model (Sato, 1964): This model highlights the importance of expanding savings and capital for economic growth, paving the way for the exogenous growth model (Solow, 1956).?

(ii) Solow–Swan Model (Dowrick and Rogers, 2002): Known as the exogenous growth model, it emphasizes capital accumulation and high labour productivity driven by technological progress.?

(iii) Kaldor’s Growth Model (Kaldor, 1957): This model explores the role of technical progress in economic growth, stemming from capital accumulation and influenced by non-economic factors, which ultimately support GDP performance.?

(iv) Rostow’s Stages of Growth Model: This model describes the economic transformation from a traditional to a modern society, progressing through different stages, particularly evident in changing patterns of consumption, investment, and societal shifts.?

(v) Dual Sector Model by Arthur Lewis (1954, 1956): This model addresses the issues in least developed countries (LDCs), where a high-productivity labor force and capital stock support short labour cycles in production. Additionally, substantial savings maintain a high capital stock, fostering income growth over the long term.?

?e,?? Income distribution and Poverty: The improvement of income is relatively because if

exist the favourable conditions under a low massive jobs disruption effect from HR, at the same time, a higher and faster job relocation and adaptation effect of unemployed armies take it part in different productions sectors, then the incomes can be relocated and adapted under a different labour market structure with more competitiveness and efficiency that request a new education system under the use of more creativity together with more interaction between HR and humans in the production process. In the case of poverty always is going to continues around us but in different shape (partial scarcity and less consumption) from the traditional view about poverty (misery and extreme scarcity). Again, it is depended on the unemployment generated by humanoids robots (HR) in the short and long run.

?f.????? International Trade: The use of humanoid robots (HR) in international trade is set to

reshape the emergence of new players on the global trade stage. By integrating HR into production processes, certain relative endowments, specifically labour (L), are being replaced by humanoid robots (HR). When applying the Heckscher–Ohlin model to assess comparative advantage, the focus shifts to research and development (R&D) capabilities in HR, emphasizing precision, energy efficiency, and long-term productivity. Consequently, exports become increasingly tied to the performance of HR and the sophistication of productive capital—such as infrastructure and transportation systems (K)—supported by a constant supply of high-quality raw materials, affordable sustainable energy, and strong R&D for new products and technologies.

?Moreover, as technology becomes more deeply embedded in production processes, incorporating HR, sustainable energy resources, biotechnology (for new materials), and autonomous transportation systems, production capacity rises. This can decrease the reliance on imports for domestic consumption, ultimately creating a net export surplus in the long run.

?6.???? Conclusion

In conclusion, the use of humanoid robots (HR) in the near future is an inevitable reality that will drive a shift from job disruption to job relocation and adaptation. To mitigate unemployment and keep labour (L) active in the production equation, it is essential to foster continuous human creativity and interaction (HCI). This will enable us to remain competitive alongside HR and artificial intelligence (AI), supported by innovative educational reforms from elementary to higher education.

?From a microeconomic perspective, we observe a transformation in the production function, where production factors shift from labor (L) to HR to achieve faster, higher profit maximization at a lower marginal total cost (MTC) and higher marginal total revenue (MTR) in a competitive market environment. Profit maximization occurs when firms set output levels (O) where marginal revenue equals marginal cost, applying to various market structures, including oligopolies and monopolies. The optimal outcome is achieved when marginal revenue (total sales) is higher, and marginal cost is lower (due to mass production and economies of scale) in the short term, assuming HR usage does not lead to diseconomies of scale.

?From a macroeconomic perspective, replacing labour (L) with HR in the Cobb-Douglas production function significantly alters productivity factors, directly impacting the final output (Y). Job disruption is likely to have an immediate, negative impact on the labour market, displacing workers across industries. However, rapid job relocation and adaptation offer both challenges and opportunities, as workers are compelled to adapt to new roles in the evolving market. Additionally, intensive HR usage could reduce inflation, assuming optimized electricity consumption for HR charging. Advances in battery and charging systems will play a critical role in sustaining HR performance and production efficiency, ultimately keeping production costs low and maintaining competitive prices for consumers.

?Economic growth driven by HR usage is projected to be significant. This research suggests that maximizing HR utilization across sectors such as agriculture, industry, and services can yield substantial short- and long-term benefits. Income distribution and poverty alleviation could also improve if the conditions are favourable, with minimal job disruption from HR and rapid job relocation and adaptation in various production sectors. In such cases, income can be redistributed within a more competitive and efficient labor market that requires a reformed education system focused on creativity and increased interaction between HR and humans in the production process.

?Finally, in terms of international trade, exports will increasingly rely on HR performance and the sophistication of productive capital—including infrastructure and transportation systems (K)—backed by a steady supply of quality raw materials, affordable sustainable energy, and robust R&D for new products and technologies.

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