In the Shadow of Smith`s Invisible Hand: Risks to Economic Stability and Social Wellbeing in the Age of Intelligence

• URL: http://arxiv.org/abs/2407.01545v1
• Date: Mon, 22 Apr 2024 06:16:48 GMT
• Title: In the Shadow of Smith`s Invisible Hand: Risks to Economic Stability and Social Wellbeing in the Age of Intelligence
• Authors: Jo-An Occhipinti, William Hynes, Ante Prodan, Harris A. Eyre, Roy Green, Sharan Burrow, Marcel Tanner, John Buchanan, Goran Ujdur, Frederic Destrebecq, Christine Song, Steven Carnevale, Ian B. Hickie, Mark Heffernan,
• Abstract summary: Even a moderate increase in the AI-capital-to-labour ratio could increase labour underutilisation to double its current level. To prevent a reduction in per capita disposable income due to the estimated increase in underutilization, at least a 10.8-fold increase in the new job creation rate would be necessary.
• Score: 0.0
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: Work is fundamental to societal prosperity and mental health, providing financial security, identity, purpose, and social integration. The emergence of generative artificial intelligence (AI) has catalysed debate on job displacement. Some argue that many new jobs and industries will emerge to offset the displacement, while others foresee a widespread decoupling of economic productivity from human input threatening jobs on an unprecedented scale. This study explores the conditions under which both may be true and examines the potential for a self-reinforcing cycle of recessionary pressures that would necessitate sustained government intervention to maintain job security and economic stability. A system dynamics model was developed to undertake ex ante analysis of the effect of AI-capital deepening on labour underutilisation and demand in the economy. Results indicate that even a moderate increase in the AI-capital-to-labour ratio could increase labour underutilisation to double its current level, decrease per capita disposable income by 26% (95% interval, 20.6% - 31.8%), and decrease the consumption index by 21% (95% interval, 13.6% - 28.3%) by mid-2050. To prevent a reduction in per capita disposable income due to the estimated increase in underutilization, at least a 10.8-fold increase in the new job creation rate would be necessary. Results demonstrate the feasibility of an AI-capital- to-labour ratio threshold beyond which even high rates of new job creation cannot prevent declines in consumption. The precise threshold will vary across economies, emphasizing the urgent need for empirical research tailored to specific contexts. This study underscores the need for governments, civic organisations, and business to work together to ensure a smooth transition to an AI- dominated economy to safeguard the Mental Wealth of nations.

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