Let me explain.
On Satuday Worthwhile Canadian Initiative had a post "Capital-biased technical change vs low interest rates?" about the flow of income from productivity gains accruing to capital in larger and expanding proportion rather than to labor:
One of his commenters made a very sharp observation:Paul Krugman says that recent technical change has been capital-biased. That robot story sounds plausible to me too. But if so, why are real interest rates so low? (Yes I know there's a global recession on, but real interest rates were falling even before the recession). Maybe we are forgetting a third factor, land, and land rents are rising?Suppose there were a new technology that caused both wages and interest rates to fall. Why wouldn't capitalists and workers say "Stuff that, let's go back to the old technology!"? Any individual firm, or group of firms, that went back to the old technology, while borrowing at the new low interest rates and paying the new low wages, would make super-normal profits. And all the other firms would eventually choose to, or have to, follow it back....MORE