The Rise of AI and Its Economic Impacts

Technology has changed dramatically throughout history, having an impact on both our
lives and economies. This essay examines how technological advancements affect
occupations, increase productivity, and the development of AI. It talks on the issue of
machinery and the difficulties presented by AI before closing with the requirement for
prudent policies.

Throughout the history of mankind, technological advances have been occurring every
single day. These advances impact many long-term economic factors by improving our
productivity. One of the essential determinants of productivity is Technological
knowledge, which only increases in volume with various technological advances. With
numerous technological advances, we can increase the production of goods and
services while reducing the total cost and down-time.

The technological advances also change the composition of the labour demand. Due to
huge strides in Automation and digitisation of most jobs Labour demand is shift from
low-level and mid-level to high-level jobs which require more analytical, technical, and
managerial skills. However, these shifts in labour demand are not without faults,
Because of the gaps that can exist in the skills demanded by the employer’s,
Technological unemployment can take place if people do not update their skillset
often. Periodic technological advances which increase the demand for high-skill level
Labor force have caused a stagnation in the low-level labour’s wage growth, leading to
income inequality among labour forces.

Technological advances require large capital and High skill, the resources to create
these technological advances and profit off them are only available to already dominant
Firms.
Due to their huge capital and High skill labour, Companies like google, Microsoft and
Apple are so technologically dominant in their respective sectors due to their
investment in Technological Research and Development that some might say they are
monopolies.

When talking about the current Technological space and the Huge Question mark that
is Artificial Intelligence (AI), we can’t help but look to the machinery question for
guidance.
The machinery question was first posed by the economist David Ricardo in 1821 at a
time when the industrial revolution was picking up with the introduction of machinery.
The question was related to the influence of introduction of the machinery during the
industrial revolution and how it affected the lives of different sections of the society. He
approached the question through an example looking at the point of view of a
“capitalist’s” manufacturing firm considering the use of machinery and how it might
result in lower real wages for the Labor class, ultimately being detrimental to their
interests.
However, it’s not sensible to assess AI through the machinery question. The machinery
question was first raised during industrial revolution. The nature and range of jobs
affected Then and now are different. Recent advances in AI have resulted in these
systems being able to Generate data. This Emergence of generative AI poses a threat
to many industries. The machinery during industrial revolution replaced manually
repetitive and time-taking jobs, Artificial Intelligence can perform various intellectually
dependent tasks like software coding, data analysis, financial modelling, Contract
drafting and many more. AI generates Images and text from written prompts, this can
replace creative industries too. The rate of change at which these AI models evolve is
greater than the Improvement in machinery in the industrial revolution. AI s like GPT-4
have access to the internet This helps them gain more function easily.

The scope of AI is not just restricted to Computers, AI is gaining in physical world as

well. Transportation is being Transformed with AI. Recently, the tesla fully self-driving
program entering beta, it has shown great progress regarding the growth of automation,
with the help of AI. The global taxi-driving/riding sharing Industry was valued at $199.14
Billion USD in 2021, but now there is a disruption in this industry in San Fransisco
caused by an AI driven cab service. Waymo is an Autonomous vehicle company owned
by Alphabet and Cruise, they had begun operating on the city streets available to the
public for use since 2022. Recently on 23rd September 2013 the San Francisco
government has approved the expansion of their fleet. Not only taxis but the trucking
Industry is not safe from AI, with Californian government supporting the Fully self-
driving trucks. If this is viable, then it might make many transportation workers
obsolete.

One can’t help but wonder if AI will make humans relics of the past. Looking back
although there was unemployment at the start of the industrial revolution, the period
after it saw unprecedented job growth. However, it might not be the same with AI. The
future of life institute released an open letter to public, warning everyone about the
potential mass unemployment that Generative AI models like Chat GPT might bring
forward, this letter was co-signed by many prominent tech leaders, researchers and
professional, including Tesla CEO Elon musk. This letter called for a 6-month pause on
AI models which are being developed after the release of GPT 4.

Elon shares a long history with OpenAI. Elon Co-founded open AI in 2015 as a non-
profit. However, in recent times he has grown away from OpenAI and has voiced his
concerns that the organisation has not been operating as non-profit and has been
building Technology that is biased in political and social debates. He has been in talks
with other prominent AI experts to develop his own AI start up called X.AI., he believes
that he can offer a safer and more non-disruptive form of AI compared to others in the
market. He believes that AI will be a major turning point in Human history and might be
disastrous if not managed properly. He has called for regulators to keep a check on AI.
He believes that OpenAI has turned to making profits, and that is it was no longer
serving as a check on the power of tech giants. Many experts who have discussed about
the implications of AI with Mr. Musk feel that his concerns are sincere and genuine.
Looking towards my future as a participant in the labour force, after my banking and
finance master, I hope to find a profession in Investment Banking field, preferably as
financial analyst. Financial analysts can benefit from AI assistance in data analysis by
making the repetitive and time-intensive tasks automated using AI. It can be used
speed up forecasting, it can also be used to detect any signs of malpractice. AI can also
be used to manage spending and detect any cost anomalies.
AI is expected to boost productivity in front-office productivity in the investment
banking industry. It can be used to spark innovation. AI can enable front-office
employees to increase productivity along various activities. It can help manage costs
improve analytical capabilities, improve the IT systems. But generative AI is not risk free
and is prone to giving false information, so human moderation is necessary. To increase
the task allocation to AI the investment banking industry must Assess the risk
associated with errors in AI output. They should work integrate the AI systems into
existing technology.

The wide-scale adoption of AI is not the end of times for us. However, it is beneficial
formulate some policies to prepare for its eventual dawn on us. Leading nations can
come together to form a global monitoring body which can oversee the AI activities to
ensure proper and responsible usage of AI, that non-detrimental to the interest of
Humans. We can promote for pause in development of AI to develop a greater
understanding of it and to develop counter measures to AI, and to promote
development of Beneficial AI which can conduct research in health sciences, or space
exploration and many other fields. A universal wage to affected citizens is a good
welfare measure. A good policy would be to mandate employee training, shielding
against obsolescence.

Some of the policies suggested above like the re-education/employee spending, and
global monitoring body are good measures the cost to carry them out is large and not a
main priority of most governing bodies. Other policies like the pause of AI development
and maximization of beneficial AI research are more practical and economically
feasible.

CONCLUSION
Particularly with AI on the horizon, technology has a significant impact on our
economies. It can lead to unemployment, change jobs, and raise issues. We require
international collaboration, helpful AI research, and intelligent guidelines to navigate
this. Although it is expensive, it is an investment in a better tomorrow.