Are what Keynes called “animal spirits” being raised in the discussion of the impact of AI?
A growing number of economists are studying the potential economic impacts of artificial intelligence expectations, even before the technology reaches its full capabilities. A new study from New York University examines how anticipation of AI automation could create significant economic disruption through changes in wage expectations and saving behaviors.
Key findings: Economist Caleb Maresca’s research suggests that mere expectations of transformative AI could trigger substantial economic upheaval before any major technological breakthroughs occur.
- The study predicts interest rates could surge by 10-16 percent as markets adjust to expectations of reduced labor costs
- Higher borrowing costs would make it more difficult to start businesses or purchase homes
- These conditions could trigger a mass saving response that could slow economic activity
Current market signals: Major tech industry leaders are already positioning themselves for an AI-automated future while sending concerning signals about employment.
- OpenAI CEO Sam Altman has called for a “new social contract” in preparation for AI’s impact
- Fintech CEO Sebastian Siemiatkowski recently claimed an AI system could replace 700 employees while laying off 22% of his workforce
- Tech leaders consistently promote narratives about AI reducing the need for human labor
Economic implications: The redistribution of wealth from workers to AI system owners could create severe economic disparities.
- Wages previously earned by human workers would flow primarily to those controlling AI systems
- Households may attempt to acquire AI-related assets, creating what Maresca calls a “prisoner’s dilemma in saving behavior”
- The scenario could mirror or exceed current wealth inequality in Russia, where 1% of the population controls 55% of national wealth
Expert recommendations: Maresca outlines potential strategies for both policymakers and individuals to prepare for AI’s economic impact.
- Political action is needed to ensure AI-generated wealth is broadly distributed
- Individuals should prepare for the possibility that traditional human capital may significantly decrease in value
- Current income sources based on human capital could face substantial devaluation
Looking ahead – Economic restructuring: The study suggests that avoiding negative economic outcomes from AI advancement will require significant policy intervention and societal changes, as current market structures may amplify rather than distribute the benefits of automation.
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