The economic implications of artificial intelligence (AI) 

The emergency of the artificial intelligence tool ChatGPT produced by OpenAI has led to a huge amount of media interest in the growing importance of AI in people’s lives. Whenever a technological development moves to a new level (the internet, smartphones, social media platforms) there is always speculation about what the economic implications of the technology are.

Here are eight economic consequences of the development of AI:

• ChatGPT is a Chatbot that can interact with users in a conversational way to answer questions. This is particularly useful for customer service activities. For example, people can contact their bank 24/7 and have questions about their accounts instantly answered.
• In agriculture, AI is being used in analysing soil, vegetation and climate so that farmers know the best crops to grow, when to plant them and how to manage them. AI and machine technology will also improve planting and harvesting techniques and this will all help improve agricultural efficiency.
• As businesses increasingly use eCommerce, AI is useful at predict market trends, stock management and important customer buying information. For consumers who use online retailers such as Amazon, AI is useful in recommending products and providing reviews.
• In education, AI has the potential to revolutionise testing and assessment. Exams in the future would be set and marked by AI without the need for huge teams of question setters and examiners. This could mean the results of exams could be available much more quickly after they have been sat.
• In healthcare surgical procedures are becoming more automated and robots supported by AI can provide more precise and less invasive medical procedures. AI can also be used in medical diagnoses by monitoring a patient’s health through wearable devices such as a smartwatch.
• Consumer products are increasingly using AI to improve customer satisfaction. This might be the driving software in a person’s car, facial recognition technology to log into an account and filters on email to get rid of spam messages. There is also AI used in voice recognition technology such as Siri and Alexa.

These consequences have both demand and supply consequences for economies across the world. AI creates demand for new products and increases demand for existing products. AI improves productive efficiency on the supply side which can increase business profits and lead to lower prices for consumers.

At a macroeconomic level, AI technology will be a factor that increases the potential output of an economy and contributes to long-run economic growth. There are, however, concerns that the increased use of AI might lead to structural unemployment.

Possible points to discuss with a class

What is AI as a resource?

How can AI affect demand in a market?

How does AI improve productive efficiency?

Discuss the consequences of AI for economic growth and employment.