Keeping up with the Trends: The Economics of Artificial Intelligence
Artificial Intelligence (AI). Machine Learning. Natural Language Processing. Big Data. Deep Learning. These phrases are being murmured reverently, debated hotly and mentioned in forced indifference within society at an increasing rate. Dominating conversations between ambitious college students and overworked Silicon Valley techies as well as the headlines of global news, these fields simply cannot be overlooked. Even if you don’t know much about them, you more than likely know that they’re huge, hot and trending. Yet, the precise implications of these terms – what they currently comprise of and what their impact will be on the global economy, labor force and the everyday lives of people – are unknown to many and theoretical to the experts at best.
What is AI? Modern pop culture will have society believe that it is conscious robots, set out to destroy humanity. Alan Turing, known today as the father of computer science, proposed that the intelligence of computers would be revealed when people are no longer able to distinguish between answers from a human and those from a computer. In truth, the AI so hotly discussed today performs tasks that imitate intelligence such as visual image recognition, decision making, speech recognition and data analysis through extraordinary computational power and algorithms. These tasks are then tailored to multiple industries and can be specifically altered to go hand in hand with the subfields of economics.
Advances in machine learning and data-driven tech are reimagining the business world dramatically. Data scientists are the new sought-after employees for strategy as business environments, data and processes can now all be reconfigured into programs that churn out situational models in management plans and employee relations. Consumer behavior and interest can be gauged from tech that records store movement, purchases and motivational responses to marketing techniques and advertisements. Financial models are run again and again in response to the stock market, world crises, fluctuating GDP and sinking national debt at the macro level, as well as to analyze personal investments, real estate purchases and loans at the micro level. AI’s impact on the field of economics can be assessed only in the short term as the technology continues to evolve at an exponential rate.
AI’s impact on the economy is expected to be significant. The staff from the Council of Economic Advisers, the Domestic Policy Council, the National Economic Council, the Office of Management and Budget and the Office of Science and Technology released a report from the White House in December 2016, informing policymakers to be prepared for five primary effects on the economy:
Positive contributions to aggregate productivity growth.
Changes in the skills demanded by the job market, including greater demand for higher-level technical skills.
Uneven distribution of impact across sectors, wage levels, education levels, job types and locations.
Churning of the job market as some jobs disappear while others are created.
The loss of jobs for some workers in the short-run and possibly long-run, depending on policy responses.
The magnitude of these effects is yet unclear. The impact of AI may come as a large shock to the economy in the upcoming years, in which case drastic changes in the job market would create a mismatch between the skills of available workers and those demanded in the labor market. In this case, policies providing assistance to current workers as well as education in the respective fields of demand (such as programming) would need to be implemented. On the other hand, AI may not have a sudden impact on the economy, in which case the current trends in the market and workforce would continue to progress and the effects of AI would only be gradually felt. Due to the broad scope of industries that AI impacts, it will be difficult to determine which industries, and specifically which workers in those industries, will bear the brunt of the economic shift. Given the challenges of identifying a direct cause-and-effect relationship between these economic changes and AI, it will also be difficult to determine how best to address the labor and wage markets, sectors of globalization and the effects of public policy. Therefore, policies and strategies designed to allay any potentially negative effects of the AI industry on the economy cannot help but be broad in order to avoid mitigation efforts in an area in which no change occurs. Another point that would need to be considered is the cultural and economic differences between the various countries in which AI is rapidly growing, as it is global in reach.
Due to the uncertainty surrounding the field, the controversy behind the impact of AI both within and outside the tech sector is immense, popularized by the Twitter feud between technology giants Elon Musk and Mark Zuckerberg on the issue. In fact, Musk stated, “If you’re not concerned about AI safety, you should be. Vastly more risk than North Korea,” before calling Zuckerberg’s knowledge on the subject “limited.” Society’s wariness of advancements in this expanding technology is furthered by the media’s constant mention of the term “AI,” adding to its preconceptions of the field and its stigma. That said, the sheer amount of excitement among academics, techies and businessmen for the potential opportunities and exponential growth rate of the AI field lends itself to a perpetually positive outlook in the industry. According to the 2017 Extraordinary Future Conference and Business Insider, AI will add $15.7 trillion to the global economy by 2030. This number can be broken down further into $6.6 trillion towards labor productivity and $9.1 trillion towards increased consumer demand by 2035 in a multitude of industries encompassing manufacturing, professional services, wholesale and retail and financial services. The theoretical data mentioned strongly imply that AI will have an impact and a substantial one at that.
However controversial AI and the multiple fields it addresses prove to be, it is evident that AI is dramatically changing the tech industry and the global economy. The investments made in research and development by tech giants such as Google (DeepMind and AlphaGo), Facebook (facial recognition technology), Apple (Siri), Amazon (Alexa) and Tesla (self-driving vehicles) show that AI is here to stay. The conversation surrounding AI today highlights the uncertainty behind the economic, cultural and global changes that it will bring about. However, it is clear that the field of AI is growing at an exponential rate, proving that adaptation to this technology even as it adapts to the needs of society is essential.
Written By Joonhwa Kim, Undergraduate Economics Student
https://obamawhitehouse.archives.gov/blog/2016/12/20/artificial-intelligence-automation-and-economy (source)