Artificial intelligence, which is the ability of machines to react intelligently to their environment, has been undergoing tremendous progress in the last decade. An AI program can mimic human functions such as problem solving and learning. While it's true that AI offers much promise for the development of smarter and more useful machines, it also fills many with fear of a dystopian future where millions are thrown out of work, replaced by robots and smart machines.

It's perhaps possible that humans will one day be reduced to servants of our machine overlords, but a sober appraisal predicts a mixed impact of AI on the job market. History teaches us that machines do displace humans, but somehow there are still plenty of jobs available today. The reason is that automation can substitute for labor on certain jobs, but also complements labor for other jobs that are not easily automated, making labor more productive and actually increasing the demand for workers.

Jobs that are composed of repetitive tasks are the ones most vulnerable to automation. Examples including automated weaving machines, ATMs, production-line welders and phone answering systems. It might seem that these advances would simply throw people out of work. But look at the example of the weaving machines. They increased productivity 50-fold and dropped the price of cloth by 98 percent. The demand for cloth exploded as the price fell, thereby creating more weaver jobs. In the years between 1830 and 1900, the number of weaver jobs increased 4-fold despite automation. Automation increased demand for weavers, but also changed the nature of the weaver's job.

A similar process happened with ATMs, which did not remove the need for human tellers, whose numbers actually have risen since ATMs were introduced in the 1970s. Other examples abound, but the question we now face is whether things have changed because of AI, and massive labor displacement will occur in the future. Artificial intelligence offers the possibility of taking on certain white-collar jobs, something not thought possible a generation ago. We've already seen computer programs that, for instance, create attractive websites without the need of a graphic designer.

The intelligent response is for the public and private sectors to create worker training programs to teach new skills that will be required despite the spread of automation. This will require an investment in on-the-job training and lifelong learning. Some experts point to the social policies adopted by Denmark that make hiring and firing easy, yet support out-of-work employees as they receive retraining and search for a new job. America is already seeing a movement away from employer-linked health care, pensions and benefits, instead favoring mobile benefits that move with workers.