Latest news with #Acemoglu
Miami Herald
23-05-2025
- Business
- Miami Herald
AI may cause a college graduate job crisis. What should young people do?
There's comforting news for veteran office workers and professionals, but bad news for recent college graduates. When it comes to the future of jobs, new data suggest that artificial intelligence (A.I.) may threaten young people's employment prospects more than any other group. Recent studies show that we're very close to a college graduate unemployment crisis, because entry-level white collar jobs are the easiest to be replaced by artificial intelligence. Most graduates entering the workforce do repetitive research and number-crunching jobs — precisely the ones A.I. does best. Unemployment among U.S. college graduates has risen 30%, from 2% to 2.6%, since September 2022. By comparison, unemployment among the general population has grown by only 18%, from 3.4% to 4%, according to Federal Reserve Bank of New York data. The ADP Research Institute, which specializes in labor market data, said in a report that 'finding a job has become harder' for young college graduates. This is not due to an oversupply of graduates: In fact, full-time student enrollment at U.S. higher education institutions has fallen in recent years, as The Wall Street Journal reported on May 19. A recent survey of 3,000 executives by LinkedIn, the social media platform, found that 63% agreed A.I. will eventually eliminate the jobs currently done by entry-level employees. Curious about how A.I. will impact all jobs — including mine — in the future, I contacted last year's co-winner of the Nobel Prize in Economics Daron Acemoglu. In a wide-ranging interview, he told me that he doesn't think experienced attorneys, accountants, physicians, teachers or journalists will lose their jobs to A.I. — at least not over the next 10 years. 'I would not want an A.I. to represent me in court,' Acemoglu told me. 'We're not going to see the end of lawyers, accountants, auditors, marketing professionals. These are deeply complex jobs.' He added that current A.I. models and the ones that are likely to be developed in the near future will be able to handle parts of these jobs, but not replace humans entirely. 'The same for physicians,' he said. A.I. is getting better and better at diagnosis, but there is a lot of tacit knowledge that doctors gain through experience that A.I. will find hard to replicate, he added. A doctor learns a lot from a patient's body language, or from the way a person describes his pain, or from the way different parts of the body react when touched, Acemoglu explained. But when I asked him about A.I.'s impact on young people's employment opportunities, he started by saying, 'Well, I'm worried, I wouldn't hide that from you.' As for what advice he's giving his students and other young people these days, he said they should focus on specialization and flexibility. 'The advice I would give is to build very specialized skills that they can be excellent in some domain, so that they are a potential partner for AI, not a target,' he said. And flexibility is essential, too, 'because you need to change what you do as technology changes,' he added. Acemoglu, who teaches at the Massachusetts Institute of Technology (MIT), says a small group of technology barons who dominate the industry are partly to blame for the college graduate unemployment problem. They are creating A.I. programs to help companies cut costs by eliminating jobs, rather than focusing on increasing productivity and creating more jobs. I confess that, after speaking with Acemoglu and other experts in recent months, I'm less optimistic than I used to be. When I wrote my 2018 book 'The Robots Are Coming,' about the future of jobs in the age of automation, I was a cautious techno-optimist. I tended to believe the technology industry mantra that new technological breakthroughs always end up creating more jobs than they destroy. But now? I'm not so sure. Think about it: When Henry Ford rolled out the car manufacturing assembly line in the early 20th century, sure, carriage makers and stable hands lost out. But whole new industries were created to build roads, bridges, tires and other car parts. But today, when a supermarket replaces a human cashier with an automated checkout machine, that job usually just disappears. To be sure, having a college — or, better, a graduate — degree is more important than ever. Even the latest figures show that those with college diplomas are much less likely to be unemployed than the general population. But it's imperative for high schools and colleges to teach students, in addition to specialized skills, how to use A.I. as a tool in their careers — not just as an enhanced Google search engine. That would help college graduates get jobs that until recently were reserved for people with two or three years of work experience. Without that, A.I. may end up hurting recent graduates more severely than it affects older, more experienced workers. Don't miss the 'Oppenheimer Presenta' TV show on Sundays at 9 pm E.T. on CNN en Español. Blog:
Yahoo
20-05-2025
- Business
- Yahoo
MIT Disavowed a Viral Paper Claiming That AI Leads to More Scientific Discoveries
The Massachusetts Institute of Technology (MIT) is distancing itself from a headline-making paper about AI's purported ability to accelerate the speed of science. The paper in question is "Artificial Intelligence, Scientific Discovery, and Product Innovation," and was published in December as a pre-print by an MIT graduate student in economics, Aidan Toner-Rodgers. It quickly generated buzz, and outlets including The Wall Street Journal, Nature, and The Atlantic covered the paper's (alleged) findings, which purported to demonstrate how the embrace of AI at a materials science lab led to a significant increase in workforce productivity and scientific discovery, albeit, at the cost of workforce happiness. Toner-Rodgers' work even earned praise from top MIT economists David Autor and 2024 Nobel laureate Daron Acemoglu, the latter of whom called the paper "fantastic." But it seems that praise was premature, to put it mildly. In a press release on Friday, MIT conceded that following an internal investigation, it "has no confidence in the provenance, reliability or validity of the data and has no confidence in the veracity of the research contained in the paper." MIT didn't give a reason for its backpedaling, citing "student privacy laws and MIT policy," but it's a black eye on MIT nonetheless. The university has also requested that the paper be removed from the ePrint archive ArXiv and requested it be withdrawn from consideration by the Quarterly Journal of Economics, where it's currently under review. The ordeal is "more than just embarrassing," Autor told the WSJ in a new report, "it's heartbreaking." According to the WSJ's latest story, the course reversal kicked off in January, when an unnamed computer scientist "with experience in materials science" approached Autor and Acemoglu with questions about how the AI tech centered in the study actually worked, and "how a lab he wasn't aware of had experienced gains in innovation." When Autor and Acemoglu were unable to get to the bottom of those questions on their own, they took their concerns to MIT's higher-ups. Enter, months later: Friday's press release, in which Autor and Acemoglu, in a joint statement, said they wanted to "set the record straight." That a paper evidently so flawed passed under so many well-educated eyes with little apparent pushback is, on the one hand, pretty shocking. Then again, as materials scientist Ben Shindel wrote in a blog post, its conclusion — that AI means more scientific productivity, but less joy — feels somewhat intuitive. And yet, according to the WSJ's reporting, it wasn't until closer inspection by someone with domain expertise, who could see through the paper's optimistic veneer, that those seemingly intuitive threads unwound. More on AI and the workforce: AI Is Helping Job Seekers Lie, Flood the Market, and Steal Jobs
Express Tribune
25-02-2025
- Business
- Express Tribune
Unbalanced institutional power and economic growth
Listen to article Immediately after joining his office in January 2025, President Trump halted aid to several countries including Pakistan. Secretary of State Marco Rubio has said: "Every dollar we spend, every program we fund, and every policy we pursue must be justified with the answer to three simple questions: Does it make America safer? Does it make America stronger? Does it make America more prosperous?" The three questions raised by Rubio clearly indicate that US aid is all about fostering economic prosperity in the US and not necessarily the aid recipient countries. Many analysts in Pakistan, therefore, see indigenous economic growth as the only panacea for achieving economic self-reliance in the country. However, unfortunately, Pakistan's fragmented institutions exhibiting and exercising unbalanced power relations have become a major hurdle in kick-starting sustainable economic growth in the country. The 2024 Noble Prize in economics went to a Turkish American Professor Darron Acemoglu who underlined the importance of state institutions in fostering economic growth. Looking into the evolutionary history of the factors responsible for igniting economic growth, one could clearly observe that these factors are not the same for developed and developing countries. Conceptually following Acemoglu's Model of Inefficient Institutions (MII), one can hypothesise that the groups in Pakistan with political power, called 'the powerful elite', frame politico-economic policies to increase their own incomes. They also use these policies to divert resources to them from the rest of the population. Owing to such a policy approach, inefficiency is the natural outcome inhibiting national economic growth. The MII approach suggests three main mechanisms behind this inefficiency: revenue extraction; factor price manipulation; and political consolidation. In Pakistan's peculiar context, many taxes such as sales tax is a kind of distortionary tax that can conceptually be linked with Acemoglu's notion of 'revenue extraction'. Arguably, distortionary taxes tend to extract resources from the middle-class producers. Therefore, per MII, the absence of non-distortionary taxes, aimed at linking distribution of resources with efficient production, result in institutional inefficiency. In Pakistan's context, all kinds of tax concessions for the powerful fall within the purview of factor price manipulation wherein the elite reduce the prices of factors they use for their own production of goods. This is again done by taxing the middle-class producers. The third factor in the MII model is political consolidation which aims to limit the profits of the middle-class producers because higher profits of the middle-class reduce the political power of the elite. In addition, a predominant problem with developing countries is that they lack resources to carry out effective research that could critically analyse these factors and come up with innovative policy frameworks for their local growth challenges. Furthermore, overreliance on quantitative modelling and various econometric tools has been a rudimentary problem in suggesting a policy framework that could successfully kick-start economic growth in developing countries irrespective of their local economic challenges. This kind of traditional approach has the tendency to ignore outliers, treating them insignificant in economic analysis. As a result, government functionaries, policymakers and economists in developing countries apply the same model of economic growth as is done by developed countries. This is the fundamental problem why the economic policies in developing countries do not yield desired economic growth results despite massive investments. Like other developing countries, Pakistan is no exception. When the developed countries were focusing on such factors of economic growth as capital, labour, technology and human capital, the developing countries did the same. However, the policy approach could not augment economic growth in many developing countries. The developed countries then pointed out the existence of long-term determinants of economic growth such as geography, culture and institutions. The developing countries accordingly started accommodating these factors in their economic policy documents without considering their local and contextual economic challenges. Within the three long-term determinants of economic growth, the importance of inclusive institutions in an economy gave birth to several groundbreaking factors that promote economic growth. As usual, the developing countries are now focusing more on institutional capacity building as a factor that can accelerate economic growth in their countries. However, the developing countries are still making the same mistake by ignoring their local economic and institutional challenges. One elementary factor that could be generalised across developed and developing countries is the balance of power among state institutions. The literature shows that power is the fundamental concept in social sciences in the same way as energy is the basic concept in physics. The developing countries like Pakistan must, therefore, concentrate on balancing institutional power in the country. Institutions can be divided into three broad categories: institutions holding naked power; institutions holding judicial power; and institutions holding administrative power. In some developing countries, institutions holding naked power snub the institutions holding judicial or administrative power against the principles of inclusivity and collective economic wisdom. Consequently, many of the factors responsible for fostering economic growth get snubbed. For example, if a department of environmental protection is not issuing No Objection Certificate for a housing society and the housing society gets the NOC issued using naked power, it will weaken the institutional power of public administration in the country and thus slow down the economic growth rate. The same principle applies to the decisions of institutions holding judicial power. The institutions in Pakistan must focus on balancing their power relations. Considering the MII recommendations, powerful institutions must come up and withdraw their excessive powers voluntarily in national economic interest. Many analysts wonder why Pakistan could not aggrandise economic growth rate despite drafting best Five-Year Plans in the world. Unbalanced institutional power remains one such factor that is inhibiting the country's economic growth. Power is the same for an economy as blood for a body. It must have balanced circulation to keep all organs working. The 5Es Plan, central to URAAN Pakistan's objectives, for instance, may consider adding 6th 'E' referring to 'Evenness of Institutional Power'. The inclusion of 6th E will indeed be a point of departure from the traditional wisdom of econometric modelling by incorporating practical issues faced by the economy of Pakistan.
Observer
08-02-2025
- Business
- Observer
Is Artificial Intelligence worth the hype?
AI chatbots are fun, sometimes even useful, and, until recently, endowed with the uncanny ability to mesmerize investors and fuel the U.S. stock market. However, the excellent performance of a new, relatively cheap artificial intelligence engine from a Chinese startup, DeepSeek, has perturbed the market and complicated the AI story. Investors are reevaluating prominent companies swept up in AI fever, including Nvidia, Meta, Alphabet, Microsoft, Amazon, Tesla, and the private startup OpenAI. The notion that full-blown superhuman intelligence is imminent has spurred the-sky-is-the-limit valuations, as well as concerns about the political and social risks posed by advanced intelligence. One immediate question: Is the main approach to developing AI in the United States — pouring billions of dollars into chips and infrastructure — worth the expenditure for all companies if similar results can be achieved far more cheaply? DeepSeek's lower-cost innovations add urgency to bigger, long-standing financial questions: How much are AI companies worth, and what will the broader economic value of AI ultimately be? Daron Acemoglu, a winner of the 2024 Nobel in Economic Science, gave me some answers. 'There is a lot of hype in the industry,' he said in a telephone conversation. Yes, he said, AI companies have made some 'impressive achievements,' but he added that many financial and economic calculations are based on mere 'projections into the future that are sometimes exaggerated.' Acemoglu, an economist at the Massachusetts Institute of Technology with an interest in the effect of technical innovations on global economics, is skeptical about the more fervent AI claims. He ranks AI as a significant advance, perhaps with a macroeconomic effect akin to the telephone, which was no small thing. But don't get carried away, he said, at least not yet. He doubts that full, advanced artificial general intelligence 'that can do anything a human can do but more' will be achieved. Therefore, over the next decade, he estimated, increased productivity from the diffusion of impressive, but limited, AI engines will increase the size of the U.S. economy by only about 1%, or roughly 0.1% a year. That doesn't seem like enough to count as a technological revolution in economic terms, I said. 'Well, it's not trivial,' Acemoglu said, 'but it's one or two orders of magnitude less' than AI bulls 'would like you to hear.' Of course, he added, if one or more companies achieve true, complete, artificial general intelligence within the next several years, then his estimates will turn out to be far too low. Relentlessly Upbeat It's earnings season on Wall Street, and in the past two weeks, some of the U.S. companies that are developing and investing heavily in AI have offered entirely positive — and, frankly, self-serving — estimates of the AI future. I read transcripts and listened to several conversations with top executives and analysts. The most extravagant narrative undoubtedly came from Tesla CEO Elon Musk, who took time off from his government work to talk about his company's earnings. While conceding that Tesla will have a tough year meeting production and profit targets, he was ecstatic about its AI prospects. Already, Musk claimed, 'there is no company in the world that is as good at real-world AI as Tesla.' Once its cars are approved for 'full self-driving' on the roads — he promised that he wasn't 'crying wolf' and that it would really happen this year, though he has been saying the same thing for many years — the company's fleet will increase in value '10X,' he said, thanks to AI. Moreover, he said, Tesla will produce millions of AI-embedded Optimus robots in the not-too-distant future, creating a 'path for Tesla being the most valuable company in the world by far.' Musk elaborated: 'There is a path where Tesla is worth more than the next top five companies combined.' And 'that is overwhelmingly due to autonomous vehicles and autonomous humanoid robots.' Musk's assertions are not universally accepted. Since Jan. 24, when DeepSeek's AI innovation began to roil the market, Tesla shares have fallen 11%. Other AI companies fared nearly as badly. Shares of Nvidia, whose chips run much-advanced AI, have dropped 9%. Aswath Damodaran, a New York University finance professor who has evaluated many tech companies, said DeepSeek's efficiency implied that fewer and less advanced chips would be needed for many AI functions. As a result, he wrote recently, the market for Nvidia's high-end chips isn't likely to grow as rapidly as expected. So, he said, Nvidia shares will be worth less than anticipated, even after the recent price decline. In addition, shares of nuclear-powered electricity providers like the utilities Constellation and Vistra, which had soared in the expectation that AI data factories would need ever-increasing quantities of power, sank on reduced projections of the required electricity. Meta, Alphabet, and Microsoft, which have invested billions in AI development, have had mixed performances since DeepSeek's arrival. Alphabet and Microsoft have fallen, while Meta has risen 11%. The companies are complex and enormous, with different products and strategies, but the chiefs of all three said they would continue pouring vast sums into AI infrastructure, in hopes of developing a competitive edge, while extending AI offerings throughout their consumer services. This past week Alphabet said it would increase capital expenditures to $75 billion in 2025 from $52.5 billion last year — a huge AI-driven jump that surprised Wall Street and that, along with a slump in Alphabet's cloud-computing sales, may account for the decline of its shares. Military Supremacy One company making heavy use of AI whose shares have surged this month is Palantir. It's not a consumer brand, but its technology is widely used not just by corporations but by the U.S. military, police forces and U.S. Immigration and Customs Enforcement. These have been growth areas in Democratic and Republican administrations. Shyam Sankar, the company's chief technology officer, told analysts that DeepSeek had made basic AI cheaper but that 'I think the real lesson, a more profound one, is that we are at war with China. We are in an AI arms race.' Alexander Karp, the company's CEO and one of its founders spoke unabashedly of Palantir's role in ensuring U.S. military supremacy. 'We believe we are making America more lethal, making our adversaries increasingly afraid of acting against the interest of America and especially Americans,' he said. Karp and Musk were the two highest-paid executives of U.S. public corporations in 2023, according to filings with the Securities and Exchange Commission that for the first time required universal disclosure of 'compensation paid.' Musk gained $1.4 billion in 2023, while Karp had a windfall of nearly $1.1 billion, the filings showed. Both of their fortunes continue to be tied to AI and, in idiosyncratic ways, to the U.S. government. AI companies come in many shapes and sizes and will need to be valued in tiers, Damodaran said. Consumer-facing companies embedding AI chatbots in services available to millions will benefit from lower-cost, commoditized AI, while cutting-edge AI with military, corporate, and scientific payoffs may receive premium valuations. Infrastructure companies like Nvidia can benefit from these variations and more, but not all ventures will require huge expenditures on the most formidable chips. Given the complexity and uncertainty, it makes sense for long-term investors to diversify while AI fever cools down, Acemoglu said. 'I have a balanced portfolio,' he said. 'So I've got tech stocks, health stocks, real estate stocks, everything. I don't go out of my way to pick, you know, Tesla or any other company. I'm an index fund kind of guy, and I don't do anything other than that.' This article originally appeared in
New York Times
07-02-2025
- Business
- New York Times
Is Artificial Intelligence Really Worth the Hype?
A.I. chatbots are fun, sometimes even useful and, until recently, endowed with the uncanny ability to mesmerize investors and fuel the U.S. stock market. But the excellent performance of a new, relatively cheap artificial intelligence engine from a Chinese start-up, DeepSeek, has perturbed the market and complicated the A.I. story. Investors are re-evaluating prominent companies swept up in A.I. fever, including Nvidia, Meta, Alphabet, Microsoft, Amazon, Tesla and the private start-up OpenAI. The notion that full-blown superhuman intelligence is imminent has spurred the-sky-is-the-limit valuations, as well as concerns about the political and social risks posed by advanced intelligence. One immediate question: Is the main approach to developing A.I. in the United States — pouring billions of dollars into chips and infrastructure — worth the expenditure for all companies if similar results can be achieved far more cheaply? DeepSeek's lower-cost innovations add urgency to bigger, longstanding financial questions: How much are artificial intelligence companies really worth, and what will the broader economic value of A.I. ultimately be? Daren Acemoglu, a winner of the 2024 Nobel in economic science, gave me some answers. 'There is a lot of hype in the industry,' he told me in a telephone conversation. Yes, he said, A.I. companies have made some 'impressive achievements,' but he added that many financial and economic calculations were being based on mere 'projections into the future that are sometimes exaggerated.' Professor Acemoglu, an M.I.T. economist with an interest in the impact of technical innovations on global economics, is skeptical about the more fervent A.I. claims. He ranks A.I. as a significant advance, perhaps with a macroeconomic effect akin to the telephone, which was no small thing. But don't get carried away, he said, at least not yet. He doubts that full, advanced artificial general intelligence 'that can do anything a human can do, but more,' will be achieved. Therefore, over the next decade, he estimated, increased productivity from the diffusion of impressive, but limited, A.I. engines will increase the size of the U.S. economy by only about 1 percent, or roughly 0.1 percent a year. That doesn't seem like enough to count as a technological revolution in economic terms, I said. 'Well, it's not trivial,' Professor Acemoglu said, 'but it's one or two orders of magnitude less' than A.I. bulls 'would like you to hear.' Of course, he added, if one or more companies achieve true, complete, artificial general intelligence within the next several years, then his estimates will turn out to be far too low. Relentlessly Upbeat It's earnings season on Wall Street, and over the last two weeks, some of the U.S. companies that are developing and investing heavily in A.I. have offered entirely positive — and, frankly, self-serving — estimates of the A.I. future. I read transcripts and listened to several conversations of top executives and analysts. The most extravagant narrative undoubtedly came from Elon Musk, Tesla's chief executive, who took time off from his government work to talk about his company's earnings. While conceding that Tesla will have a tough year meeting production and profit targets, he was ecstatic about its A.I. prospects. Already, Mr. Musk claimed, 'there is no company in the world that is as good at real-world A.I. as Tesla.' Once its cars are approved for 'full self-driving' on the roads — he promised that he wasn't 'crying wolf' and that it would really happen this year, though he has been saying the same thing for many years — the company's fleet will increase in value '10X,' he said, thanks to A.I. Moreover, he said, Tesla will produce millions of A.I.-embedded Optimus robots in the not-too-distant future, creating a 'path for Tesla being the most valuable company in the world by far.' Mr. Musk elaborated: 'There is a path where Tesla is worth more than the next top five companies combined.' And, he added, 'that is overwhelmingly due to autonomous vehicles and autonomous humanoid robots.' Mr. Musk's assertions are not universally accepted. From Jan. 24, when DeepSeek's A.I. innovation began to roil the market, Tesla shares fell 7 percent through Thursday. Other A.I. companies fared worse. Shares of Nvidia, whose chips run much advanced A.I., dropped 12 percent. Aswath Damodaran, a New York University finance professor who has evaluated many tech companies, said DeepSeek's efficiency implied that fewer and less-advanced chips would be needed for many A.I. functions. As a result, he wrote recently, the market for Nvidia's high-end chips isn't likely to grow as rapidly as expected. So, he said, Nvidia shares will be worth less than anticipated, even after the recent price decline. In addition, shares of nuclear-powered electricity providers like the utilities Constellation and Vistra, which had soared in the expectation that A.I. data factories would need ever-increasing quantities of power, sank on reduced projections of the required electricity. Meta, Alphabet and Microsoft, which have invested billions in A.I. development, have had mixed performances since DeepSeek's arrival. Alphabet and Microsoft fell, while Meta rose modestly. The companies are complex and enormous, with different products and strategies, but the chiefs of all three said they would continue pouring vast sums into A.I. infrastructure in hopes of developing a competitive edge, while extending A.I. offerings throughout their consumer services. This past week, in fact, Alphabet said it would increase capital expenditures to $75 billion in 2025 from $52.5 billion last year — a huge A.I.-driven jump that surprised Wall Street and that, along with a slump in Alphabet's cloud-computing sales, may account for the decline of its shares. Military Supremacy One company making heavy use of A.I. whose shares have surged this month is Palantir. It's not a consumer brand, but its technology is widely used, not just by corporations but by the U.S. military, police forces and U.S. Immigration and Customs Enforcement. These have been growth areas in both Democratic and Republican administrations. Shyam Sankar, the company's chief technology officer, told analysts that DeepSeek had made basic A.I. cheaper. But he added: 'I think the real lesson, a more profound one, is that we are at war with China. We are in an A.I. arms race.' Alexander Karp, the company's chief executive and one of its founders, spoke unabashedly of Palantir's role in ensuring U.S. military supremacy. 'We believe we are making America more lethal, making our adversaries increasingly afraid of acting against the interest of America and especially Americans.' Careful readers may recall that Mr. Karp and Mr. Musk appeared together in Strategies in June. They were the two highest-paid executives of U.S. public corporations in 2023. This was according to filings with the Securities and Exchange Commission that for the first time required universal disclosure of 'compensation actually paid.' Mr. Musk gained $1.4 billion in 2023 while Mr. Karp had a windfall of nearly $1.1 billion, the filings showed. Both of their fortunes continue to be tied to A.I. and, in idiosyncratic ways, to the U.S. government. A.I. companies come in many shapes and sizes and will need to be valued in tiers, Professor Damodaran said. Consumer-facing companies embedding A.I. chatbots in services available to millions will benefit from lower-cost, commoditized A.I, while cutting-edge A.I. with military, corporate and scientific payoffs may receive premium valuations. Infrastructure companies like Nvidia can benefit from these variations and more, but not all ventures will require huge expenditures on the most formidable chips. Given the complexity and uncertainty, it makes sense for long-term investors to diversify while A.I. fever cools down, Professor Acemoglu, the new Nobel laureate, said. 'I have a balanced portfolio,' he said. 'So I've got tech stocks, health stocks, real estate stocks, everything. I don't go out of my way to pick, you know, Tesla or any other company. I'm an index fund kind of guy, and I don't do anything other than that.'
