3 days ago
Forget rows about interest rates — we should watch out for AI
The US president and the chairman of the Federal Reserve board are at swords drawn over the relation between changes in interest rates and job creation.
While the president concentrates on defenestrating bureaucrats who report fewer jobs than he believes exist, and the chairman of the Fed ponders the significance of 'cracks' in the labour market, artificial intelligence is making those concerns pale into insignificance.
Morgan Stanley estimates that these large models that are equipping machines to perform tasks typically associated with human intelligence will gobble $3 trillion of capital in the next three years. It is the double-digit unemployment gorilla sitting in congressional hearing rooms, in the Fed board room and at the dining table at Mar-a-Lago.
Dario Amodei, CEO of Anthropic, a powerful creator of AI systems, estimates that AI will wipe out half of all entry-level white-collar jobs in the next one to five years, and drive the unemployment rate to as high as 20 per cent. Indeed, even now, recent college graduates — unemployment rate 6.5 per cent — are complaining of extreme difficulties in finding jobs.
McKinsey, the management consultancy, reckons that AI could automate 30 per cent of hours currently worked across the US economy by 2030, and that 60 per cent will be significantly altered by AI tools. JPMorgan Chase CEO Jamie Dimon says: 'AI is everywhere … it hedges our equity portfolios … there's nothing it's not going to touch.' Gone will be bank tellers, data entry clerks, administrative assistants and executive secretaries.
More optimistic observers point out that when Henry Ford reduced the horse from a major means of transportation to dressage, starring roles in cowboy movies, and polo, consumers wanted, then needed cars — and more than one — creating millions of jobs for auto workers and mechanics. When Thomas Alva Edison created the light bulb he relegated candlemakers to making scented gifts, while creating jobs for manufacturers of those bulbs and enabled students to engage in myriad night time activities, including, but not limited to, studying. When Steve Jobs created the iPhone and thin Macs, he replaced latter-day Bob Cratchits with spread sheets, and AT&T repairmen with programmers and manufacturers of computers, carrying cases, ergonomic chairs. The supply of each invention created its own demand, along with the burning desire for their add-ons. Apple AirPods, anyone?
We do not yet know whether the beneficent effects of this new force will be outweighed by its ability to seize control of its creators. But the speed with which AI is penetrating almost every phase of economic life, and uncertainty about just what products it will create or make newly affordable for consumers, make it unwise to mumble something about the historic fecklessness of Luddites and do nothing. The potential transition costs will be too high, the potential strains on society and the pressures on politicians too great for a policy of benign neglect.
Imagine this: in the morning strange metal objects directed by AI 'agents', software systems capable of planning and reasoning, are directing machines, usually robots, that are mowing your lawn and cleaning your pool. An AI agent-directed drone has deposited the book you ordered on your doorstep after an AI-directed robot selected it from the bottom of a pile in a huge warehouse. You enter an AI- directed driverless car that delivers you to your golf club while you adjust the Metaglasses that have replaced iPhones and read news reports written by an AI agent specially for you, based on your recent purchases, travels, conversations at home and other personal data sprinkled by you across the internet. No waiting for a sci-fi future; it has arrived. The question, where have all the workers gone? The answer, AI agents have replaced them, every one.
Some experts, including Jamie Dimon, believe the past is prologue: AI will create more jobs than it will destroy, proving John Maynard Keynes right again when he wrote almost 100 years ago, that 'technological unemployment … is only a temporary phase of maladjustment.' Possible. But even so, there will be high transition costs for which policies must be thought through before the full blast of AI makes itself felt.
Government budgets already under strain will make it difficult to supplement the incomes of displaced workers, at a time when an ageing population places greater demand on the existing social safety net. Past efforts at retraining programmes have largely failed, and must be reshaped. Taxes will be needed to transfer some of the benefits of AI to the adversely affected. But without destroying incentives to retrain and find work, as would a universal basic income — no work required — being mooted by some guilt-ridden Silicon Valley magnates.
Add measures that provide incentives to accelerate the development of new products and the consequent new jobs for humans, and the higher incomes capable of financing the amelioration of the costs of change. Make fast write-offs of research and development costs and investment a permanent feature of the tax code.
I leave the question of regulating scams, abuses, of what Amodei calls 'extreme blackmail behaviour' and robots that are capable of assassinating their creators to others.
irwin@
Irwin Stelzer is a business adviser
