AI Doom vs. Data: Why 90% of job loss fears are pure fiction, according to finance experts – Global Market Pulse News

A research report from Citrini about AI caused stock markets to drop. The report spelled out a macro doom story. AI leads to the elimination of white-collar jobs. Unemployed software engineers become taxi drivers. Consumption drops and foreclosures rise. This leads to a financial and economic crisis. All due to widespread AI adoption.

It is a good story. But the economic logic behind it is simply false.

A variety of research (for example from Citadel) has addressed the local fallacies in the report. Here is the crux of the argument. Suppose new technology causes GDP or income to go up. Then it is not possible for consumption to fall dramatically at the same time.

What happens to your own consumption when your income goes up? It is a given that you will consume more. You will have a higher living standard when your income increases. The same logic holds in aggregate. This is not to say that AI adoption won’t cause displacement. Certain jobs will disappear, and many others will change. Some individuals might be worse off. But if AI is in fact a technology that makes society more productive, then both income and consumption will go up as a result, in aggregate. AI adoption is not going to cause a recession or macroeconomic crisis.

These apocalyptic AI scenarios are pure fiction. And fiction is enjoyable to read.

Why Bad News Sells

For solid evolutionary reasons, human nature is hardwired to respond to bad news. We take threats much more seriously than the opposite. This response makes sense when danger is imminent. This is why this Citrini report got so much attention. And why the market sold off following its release.

But AI is not an imminent danger. There are legitimate concerns about this technology and its uses.

It may turn out that this technology causes more harm than good. Social media is a good example of technology that has negative effects (for example on teenage mental health) even if its impact is positive overall. In my own experience of teaching students, AI use makes it more difficult to determine whether they’ve learned the material properly.

The AI Narrative: Fear-Driven Markets vs. Logical Buying

The AI narrative has become a contest between two groups. The first group is pushing the AI doom story. They claim that AI really is different. While previous technologies required human intervention, AI has a mind of its own (no pun intended). The second group treats AI as a new technology, in the same way that the internet, or the computer, was a new technology.

Both the computer and internet changed office jobs and white-collar work. While many jobs disappeared, new ones were also created. Ultimately, it led to an increase in our living standards. This is true even though there are negative side effects from too much computer or internet use.

The first narrative is playing on our fears. The second narrative appeals to our logic. Next time there is a fear-driven market selloff, start looking for good buying opportunities.

Disclaimer:

Note: The purpose of this article is to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly encouraged to consult your advisor. This article is for strictly educative purposes only.

Asad Dossani is an assistant professor of finance at Colorado State University. His research covers derivatives, forecasting, monetary policy, currencies, and commodities. He has a PhD in Economics. He has previously worked as a research analyst at Equitymaster, and as a financial analyst at Deutsche Bank.