What hasn't been said about artificial intelligence? It's a disruptor, a game changer, the next technological revolution. Soon we'll all be chilling with our feet up while our AI assistants do all the heavy lifting — right?
One economist isn't so sure. A new study by Caleb Maresca at New York University predicts that just the looming possibility of transformative AI has the potential to completely upend the economy in a bad way, decimating wages and sending interest rates skyward.
"My findings reveal that expectations of [transformative AI] can substantially affect current economic conditions," Maresca writes, "even before any technological breakthrough occurs."
The study looks at possible dates when AI will be ready to automate work — what Maresca calls "transformative AI" — to predict how the hype will affect the economy, in a thought experiment that raises grim possibilities.
For one thing, a growing expectation that AI will gut the price companies pay for work could lead to huge increases in interest rates — the cost of expected inflation on borrowed money — by as much as 10-16 percent in some scenarios. This would mean the cost of starting a new business or buying a house goes to the Moon, scaring people into saving more and spending less. (That might be prudent on an individual level, but at scale, it's generally seen as bad for the health of the economy.)
It's impossible to know just how much work AI will actually end up taking over, but the study safely assumes big business will revel in any chance to cut costs on labor — no doubt the ultimate endgame of AI development. Indeed, today's ultra-wealthy are already positioning to take the helm, boosting AI hype as they do.
Just weeks ago, OpenAI CEO and billionaire Sam Altman declared that AI will require a new social contract. Earlier, fintech CEO Sebastian Siemiatkowski bragged that his company's AI agent could do the work of "700 full-time" employees while laying off 22 percent of his workforce. And of course there's Elon Musk, who once pined that "jobs will be optional for humans" in the near future.
But Maresca's work indicates otherwise.
"When AI automates a job — whether a truck driver, lawyer, or researcher — the wages previously earned by the human worker don’t vanish or automatically transform into broader economic gains," the economist notes. "Instead, they flow to whoever controls the AI system performing that job."
That's great news for anyone who owns an AI company, and bad news for the rest of us. Under these conditions, households might try to save cash to afford slices of the AI pie, though the race to save would create a "form of prisoner's dilemma in saving behavior," as Maresca puts it.