AI's Potential Benefits for Everyone

Economic development is ultimately determined by two factors: the addition of workers and the increase in their productivity. In most major economies, things have been looking dismal on both counts. Populations are aging and declining in several circumstances. And the big internet productivity surge is passed.

‍

Nonetheless, three recent analyst studies revealed trends that might boost productivity over time. Goldman Sachs researched artificial intelligence. Citigroup explored blockchain technology, which is far less glamorous but possibly transformational. Oxford Economics, perhaps most mundanely, addressed the consequences of 5G mobile networks.

‍

If any of these situations come true, it will be a game changer. The trend rate of increase would be greater. Government debt loads that appear threatening now would diminish over time. Gains in real income would be greater.

‍

There is a risk in hyping up new technology that has negligible macroeconomic benefits, but history does reveal eras when huge shifts happened. The introduction of the electric motor in the late 1800s and the personal computer in the 1970s were game changers. According to a report published by MIT last year, nearly 60% of employment in 2018 was in occupations that did not exist in 1940.

‍

Gordon Moore, the inventor of the law that became a yardstick for assessing the speed, memory, and capacities of an electronic device, died recently, reminding us of the power of technology.

‍

Moreover, as Goldman economists Joseph Briggs and Devesh Kodnani put it, it was the exponential rise in computing power that Moore initially helped to unleash in the 1960s that permitted the present fast advancements in the complexity of jobs AI can execute with precision.

‍

The most recent milestone was the release of ChatGPT-4 by artificial intelligence startup OpenAI in mid-March. It's a stronger version of the interactive software that went popular late last year.

‍

"The genie is out of the bottle—there will be all sorts of individuals doing all kinds of things," former Treasury Secretary Lawrence Summers remarked of the new offering. "This is going to be a tale like past technological stories—it may take longer than you think it will, but it will eventually happen faster and more widely than you imagined."

‍

According to Briggs and Kodnani, the ease of use of modern chatbots is comparable to the advent of the mouse and icons on personal computers. Because of these advancements, computers were far more user-friendly than traditional MS-DOS command-line programming.

‍

In a March 26 letter to clients, the Goldman team determined that AI may displace roughly 7% of existing American jobs, with 63% being complimented and 30% remaining untouched. Many displaced employees, like in earlier times of technical growth, would likely be hired in new jobs that arise either directly from AI or as a result of the economic expansion caused by increased productivity, they added.

‍

"The combination of considerable labor-cost reductions, new job creation, and a productivity increase for non-displaced employees suggests the likelihood of a labor-productivity boom similar to those seen after the introduction of prior general-purpose technologies," Briggs and Kodnani stated.

‍

According to Goldman, after at least half of all enterprises globally implement AI technology, yearly global GDP might increase by 7% over the next decade. According to the bank, worker productivity in the United States might increase by 1.5 percentage points each year over the next decade, up from 1.3% on average during the previous decade.

‍

In a paper evaluating the consequences of the development of 5G networks, Oxford Economics predicts a similar-scale increase in productivity (which, by way of disclosure, the research group notes was commissioned by the telecommunications-equipment company Qualcomm Inc.)

‍

According to the organization, "modeling suggests that mid-band 5G mobile network connection upgrades are predicted to add 1.1% to global GDP in 2030 through productivity increases."

‍

More traffic capacity and quicker internet speeds, of course, aid in the adoption of technologies such as AI. Citigroup's Global Perspectives & Solutions (GPS) department is seeing an especially fast spread.

‍

"With the rapid recent rise in data availability and computer power, improved algorithms, and models that have led to products such as ChatGPT, mass adoption for AI might be as early as 2-4 years."

‍

Although widespread use of blockchain technology is likely still some time away, "we are nearing an inflection moment" where its promise "will be realized and quantified in billions of users and trillions of dollars in value," Citi GPS's Kathleen Boyle stated in her organization's research.

‍

The banking industry, in particular, might be transformed by blockchain, because of its capacity to "tokenize" assets—creating a transparent, digital record of ownership that subsequently allows fractions of them to be sold in previously inconceivable ways.

‍

Real estate, agriculture, carbon credits, intellectual property, and art are all tough to exchange. According to one analysis, $16 trillion in assets, or over 10% of global GDP, might be tokenized by 2030, according to the Citi team. Tokenized financial assets include trade invoices, private loans, and mortgages, as well as more familiar securities.

‍

The use of blockchain technology to tokenize things is essential because it encourages new methods of funding investment. Citi predicts changes such as "new funding possibilities for small businesses and small and medium-sized organizations." And new infrastructural support.

‍

Legal and regulatory adjustments will be required to enable the new technology, but such changes are already occurring in one area. Citi cited steps in the United Kingdom to allow the adoption of digital papers as a "major milestone for the global trade finance business, as English law governs around 80% of worldwide volumes."

‍

Apart from the present banking sector crisis and inflation difficulties, all of these trends are worth keeping an eye on.

‍