00:00 Speaker A
My question for today came to me out of the blue, but here it is. What is the likely outcome of rising U.S. unemployment as a result of the rise of AI? Is it a dystopia pedaled by Centrini’s dark new book, or is it more like what Goldman Sachs said this week that unemployment could rise slowly and steadily because of AI? What do you say, Peter?
00:24 peter
It would take a policy failure for AI to cause unemployment to rise significantly. Therefore, we can imagine a scenario where AI eventually replaces many workers and GDP increases. Of course, GDP must equal GDI income. Although incomes increase, the income ultimately goes to the very rich who save a lot of money but don’t spend enough, which causes the economy to stagnate. Well, if it happens, it can happen. I mean, it happened in the 1930s.
01:00 peter
What is the policy solution? The answer is that the budget deficit will only widen further. If you have all the excess savings from the AI owners, you’re fine. The government doesn’t save, runs large budget deficits, and funnels that money to the household sector, where they spend. So while such an outcome is possible, I think it would require a fairly serious policy failure, which I think is probably unlikely.
01:21 Speaker A
Peter, let me push back on that because I’m on the other side. Why don’t we expect policy failure? I mean, they can’t even keep the government open. So, assuming that policies fail, and assuming that AI continues to advance at this rate, will we, you know, have double-digit unemployment five years from now?
01:44 peter
Well, the government likes budget deficits, so in a recessionary economy where there is a lot of excess savings due to deflation and low interest rates, the government will just spend money. I think it’s very simple. Well, if you think about it from that perspective, I don’t think I’m that worried about AI unemployment. I think a very important question is: Who is actually going to reap the lion’s share of the benefits from AI?
02:24 peter
You probably won’t be able to become a worker. Will it be an AI company? Well, it depends, right? There can be a lot of competition in the AI space. For example, look at EV. It’s very innovative, but the companies aren’t making that much money. The really surprising thing for investors, and I haven’t heard many people talk about this, is that AI probably won’t be profitable for AI companies. Perhaps it does not benefit the worker, but it does benefit the owners of the remaining fixed factors of production, the only factors of production that are still finite: land and natural resources. This is because building all these humanoid robots in the future will require huge amounts of materials. If they are manufacturing goods, they will need more goods. Perhaps the commodity supercycle we’re talking about is still in its infancy, and perhaps AI will accelerate that supercycle.
03:09 Speaker A
Feeling hopeless about the unemployment outlook? There’s no need to make up numbers or make predictions. That’s not what we do here. I’m just trying to get a feel for you.
03:20 ines
It is clear that we have yet to see the extent of what will happen as a result of unemployment, employment, and the culling of AI. That’s what you’re seeing in the reaction of some stocks to some companies, because you’re saying, if there are fewer people working, what I’m concerned about is if stock prices are going down, how does that affect spending, and what does that mean for companies that want to hire but can’t even hire?
03:55 Speaker A
Brooke, one last thing. Will AI take all our jobs?
03:58 brook
So, certainly what we’re seeing now. I like what Ines said, and I like what Peter said. We’ll see how this goes. Certainly, we’re seeing great progress in the way Americans can interact with and learn from AI, as well as the way they interact with top shopping platforms like Amazon and Walmart. But I think what I’m concerned about now is the impact of AI on young people coming out of college and their entry-level roles. And that’s what I’m looking at in the near future.
04:30 Speaker A
Okay, well said, guys. Peter, Brooke and Ines, thank you so much for joining us on the show. I appreciate it
