What happens when AI takes over? That's the question UBS economists asked in their note Wednesday.
"The hype about artificial intelligence (AI) has been increasing — it is the 'Bored Ape' of 2023. However, unlike the crypto or NFT crazes, there is a clear economic application for AI."
The analysts told investors that there is "a lot of hype about artificial intelligence (AI)," and there are four broad impacts where economists "have something sensible to contribute."
AI and Jobs: UBS believes AI should improve efficiency, "allowing more to be done with less." As a result, the less could mean less labor, noted UBS. However, they also stated that AI should also create jobs and that in the long term, there should be no net increase in unemployment, although they believe the speed with which AI is adopted may create painful, temporary, frictional unemployment.
AI and Growth: While UBS believes the efficiencies associated with AI should raise living standards, they added that it may not be reflected in GDP data despite the assumption that technological change will increase rates of growth. UBS believes that efficiency gains coming from AI and other technology may go toward increasing output but that it cannot be automatically assumed. "Lowering inputs may be more attractive than increasing output in the context of sustainability," said the analysts.
AI and Inflation: On inflation, analysts explained that AI should initially reduce overall inflation as it improves economic efficiency, while it also has the power to make inflation a less meaningful concept. "If greater efficiency means we can do more with less, costs should go down. Some or all of those lower costs will be passed to consumers," the analysts wrote.
AI and Politics: AI will change politics, according to UBS, and it will feedback to impact economic development. They believe the economic impact of AI on politics comes through the policy and social responses to technological change. "Prejudice politics and economic nationalism are destructive but highly probable consequences of the changes AI will bring about," they argue.