The rapid deployment of AI and its potential impacts on human society and economies is now clearly in the spotlight. The launch of OpenAI’s AI chatbot, ChatGTP, on November 30, 2022, has sparked controversy and concern over what the future holds. In just a few months, we have seen Italy ban ChatGTP over privacy concerns, leading technology luminaries calling for a pause on AI systems development, and even prominent researchers saying we should be prepared to launch airstrikes on data centres associated with rogue AI.
The big question on everyone’s mind is what will AI mean for productivity and economic growth? Will it usher in an age of automated luxury for all or simply intensify existing inequalities? The answer to these questions has been a topic of study by economists for many years. However, according to a survey conducted by economists Yixiao Zhou and their colleague in 2021, we are still far away from definitive answers.
Over the past half-century, workers worldwide have been receiving a smaller fraction of their country’s total income, while growth in productivity has slowed down. This period has also seen significant developments in the creation and implementation of information technologies and automation. Better technology is supposed to increase productivity, but the “Solow paradox” shows that the computer revolution has not yet delivered these gains.
While consulting firms have often painted AI as an economic panacea, policymakers are more concerned about potential job losses. Economists, however, take a more cautious view, citing the huge uncertainty around the future trajectory of AI technology as the single greatest source of concern. Compared to previous technological leaps – such as railways, motorised transport and, more recently, the gradual integration of computers into all aspects of our lives – AI can spread much faster and do so with much lower capital investment.
Furthermore, the application of AI is largely a revolution in software, which means much of the infrastructure it requires is already in place, and it is relatively cheap to use, significantly decreasing the barriers to entry. However, this is linked to the major uncertainty around AI: the domain and scope of the impacts are unknown, and many AI tools will be instantly available to anyone with an internet connection.
While economists have varying opinions on the impact of AI, there is general agreement among economic studies that AI will increase inequality, ultimately weakening labour institutions and reducing tax bases, weakening the government’s capacity for redistribution. Most empirical studies find that AI technology will not reduce overall employment. However, it is likely to reduce the relative amount of income going to low-skilled labour, which will increase inequality across society.
The rise of AI challenges economists to develop more complex representations of humans and the “economic agents” who inhabit their models since traditional economic modelling often equates humans with “labour” and as optimising agents. However, in a world of AI agents, economists believe that economic theory may better represent AI’s behaviour than human behaviour.
In conclusion, what is clear is that AI’s impact on human society and economies is significant, and there is a need to better understand its potential to avoid negative impacts on the economy and society.