Economic progress does not follow a linear trajectory. Episodes of abundance and prosperity are juxtaposed with instances of pessimism and hardship. Today’s world is no different. Apart from the recession caused by the recent US-Iranian war and its aftermath, persistent uncertainty appears to have gripped the economic landscape for at least a decade. And it has to do with how artificial intelligence (AI) shapes the economy and the job market. Some prophecies paint a picture so horrifying that it would make Doctor Doom himself blush.
But is the possible future really that scary? As with most such questions in economics, let’s look to economic history and see what that reveals. Mainly because this fear has resonated deeply throughout history—at least since the clergyman William Leigh invented the “stocking frame” in the late 16th century (which Queen Elizabeth I had refused to patent for fear of putting hand knitters out of work).
In 1927, James J. Davis, the U.S. Secretary of Labor who had served under three presidents, discussed this issue at length. “Every day we see the miracle of a new machine being perfected that allows one person to do better and faster what many people used to do.…But what is this machine doing for us? What is it doing for us?…Formerly 41 One person is doing the same thing that people were doing now. What are we doing with the men who were evacuated? … I don’t see anything that would give us serious concern in the long run. I’m no longer worried about the men who once had to explode.” “We have more bottles than I do for seamstresses, who once feared they would starve to death when the sewing machine was introduced. We know that thousands more seamstresses than ever before are earning a living that would not be possible without the sewing machine. After all, any device that reduces human labor and increases production is a boon to humanity.”
That was in 1927. Davis argued that technological advances bring more opportunities and progress than problems and misery.
Technology tends to change the nature of certain tasks rather than completely replacing them.
But similar fears continued to arise in later years. The most prominent voice was that of Dr. Norbert Wiener, who is widely regarded as the pioneer of modern AI (which he called “cybernetics”). In 1948, he warned of mass unemployment and the “merciless brutality” of the Industrial Revolution. His 1960 paper (“The Moral and Technological Consequences of Automation”) argued that things would be different this time, as advanced machines would now outgrow humans and come to dominate them.
Fast forward to 1982. Economist and Nobel Prize winner Vasily Leontief wrote about his concerns about how automation will cause mass unemployment in the coming years, with thinking machines replacing human intelligence in the same way manual machines replaced human muscle. He cited job losses due to ATMs as an example. (Interestingly, former President Barack Obama also quoted the same thing in 2011).
Now to now — 2026. Ten years ago, when new AI software started performing the work of radiologists, 2024 Nobel Prize winner Jeffrey Hinton (the “godfather of AI”) opined that we should stop training radiologists because they would soon become redundant.
How do all these predictions match reality? Let’s start with the radiologist. Now in 2026, with more than 700 approved radiology software programs in operation, radiologists are in greater demand than ever before, and their average salaries have increased significantly.
What about job losses due to ATMs (the first ATM was installed in 1969) and other financial inventions? James Bessen collected data and shared his findings in 2015 (Toil and Technology). The results showed that the number of bank tellers actually increased as the number of ATMs increased.
There are countless other examples. And despite all the doomsday warnings, global per capita income has tripled since 1950, global trade volume has increased 45 times, and net job creation (jobs destroyed minus jobs created) in the United States, currently the most technologically advanced economy, remained positive at about 70 million people from 1977 to 2023.
What this shows is that give-and-take-all (‘net’ in economics parlance), technological developments have expanded the scope of the economy rather than contracting it. Within this extended range, job creation is typically more expensive than job destruction in the long run. Although certain industries and services may disappear, new industries usually emerge, and many of the same industries and services experience growth in related operations.
The 2025 World Trade Report predicts something similar, concluding that AI will lead to significant increases in real incomes and global trade.
However, this does not mean that we are turning a blind eye to this issue. As James Davis pointed out, the possibility of a short-term move is real. Certain sectors and occupations may experience severe downsizing and layoffs. In such episodes, the worker is usually the one on the receiving end. Here, active public policies (fiscal and monetary factors) play a rather important role.
However, in most cases, technology tends to change the nature of certain tasks rather than completely replacing them. One reason is that automation is inexpensive, and one is that humans and machines are never perfect replacements. Or, as in the case of ATMs, automation has made it cheaper enough to expand the number of branches significantly, requiring more tellers whose jobs lean toward customer service.
Advances in technology are relentless. The ripple effect is real. It poses challenges, but also opportunities that the most dynamic and entrepreneurial economies are best placed to optimize. The decline of some sectors and services is usually accompanied by the rise of others. If the most pessimistic scenario were to materialize, it would mean a complete reversal of history in terms of technological change and the resulting economic impact, the likes of which the world has never seen before.
The age of AI will probably be the same, so I think we can dismiss such a possibility. Put aside doomsday scenarios for now.
The author is an economist. His current research focuses on economic reforms, the history of economic thought, and long-term analysis of issues plaguing Pakistan’s economy.
shahid.mohmand@gmail.com
X: @ShahidMohmand79
Published at Dawn on May 22, 2026
