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Thoughts on AI: Some High-Probability Predictions on a Very Uncertain Future

August 20, 2018 by J.H. Cullum Clark
While it’s impossible to be certain about what artificial intelligence (AI) will mean for our economic future, history offers hints for what it may hold.

Will AI cause mass unemployment?

No. New technologies have always enabled the economy to produce existing products with fewer workers, freeing up people’s resources for new products and freeing up workers to produce them. Farm automation reduced agricultural work as a share of the labor force from 38 percent in 1900 to two percent today, and we produce more food than ever. Education, recreation, and healthcare, which absorbed a tiny share of household spending in 1900, now account for almost half our spending and many millions of jobs. 

The products of the future will generate plenty of jobs. Companies that have successfully automated production, such as BMW’s U.S. operations, have mostly seen net increases in jobs, not reductions. Also, current evidence suggests AI is likely to be ill-suited for many tasks performed by human beings for a long time to come, as Ed Lazear, a leading economist at Stanford and the Hoover Institution and Chairman of the George W. Bush Institute-SMU Economic Growth Initiative’s Advisory Council, points out in a recent interview

To be clear, AI will undoubtedly reduce the demand for human workers in many traditionally labor-intensive occupations, just as automation reduced the demand for farm workers in past decades. But history argues that growing occupations – including some that don’t yet exist – will counter-balance this challenge and keep the working-age population well employed. 

How will AI enrich society?

First, it will deliver new goods and services, such as improved medical care – a focus of AI work at Google and IBM. Second, it will make workers more productive, as new tools have always done, and thus lead to higher real incomes. And third, it will make work more engaging for most workers, as Amazon CEO Jeff Bezos predicted at the Bush Center’s Forum on Leadership in April. 

What are AI’s biggest pitfalls?

One is that it introduces new, destabilizing dynamics into geopolitics and national security. Rogue actors seeking to disrupt the U.S. and our allies through asymmetric tactics have new weapons at their disposal, as we’ve seen with foreign efforts to hack our election system. It will take considerable ingenuity for Western nations to respond. 

Another challenge is that AI will likely disrupt many white-collar service professions as profoundly as automation has disrupted manufacturing. The most innovative companies will overturn incumbents at a breathtaking clip. This coming wave of disorienting change will likely influence politics, war, and culture in countless unpredictable ways as it unfolds. 

Will AI increase economic inequality?

The only high-probability prediction we can venture on this question is that it is utterly unpredictable. Contrary to today’s conventional wisdom, the advent of new production technologies has generally not raised the share of the economic “pie” going to owners of capital at the expense of workers over the long term. Rather, income shares for labor and capital have fluctuated back and forth unpredictably, and the most recent trend has been toward a greater share for labor. 

Also, AI will likely disrupt white-collar “brain” work more than lower-skilled “brawn” work, reversing the pattern of the last three decades. New tools may also transform the productivity of people in low-skill occupations that haven’t seen technological improvements in recent decades, such as hotel room cleaners and food service workers. Inequality may recede. 

What does AI mean for international economic relations?

With any luck, trade disputes over steel and aluminum will become a minor, manageable sideshow. But the emerging contest between the U.S. and China for supremacy in 21st century technologies like AI will surely shape the world in dramatic ways for many years to come.


Author

J.H. Cullum Clark
J.H. Cullum Clark

J.H. Cullum Clark is Director, Bush Institute-SMU Economic Growth Initiative and an Adjunct Professor of Economics at SMU.  Within the Economic Growth Initiative, he leads the Bush Institute’s work on domestic economic policy and economic growth.  Before joining the Bush Institute and SMU, Clark worked in the investment industry for 25 years.  He served as an equity analyst and portfolio manager at Brown Brothers Harriman & Co. (1993-96), as a portfolio manager at Warburg Pincus Asset Management (1996-2000), as President and Chief Investment Officer of Cimarron Global Investors, a Dallas-based hedge fund firm (2000-02), and as President of Prothro Clark Company, a Dallas family investment office (2002-18).  Prior to entering the investment industry, he served for one year on the staff of the U.S. Senate Select Committee on Intelligence.

Clark fulfilled a lifelong goal by earning his Ph.D. in Economics at SMU in May 2017, and subsequently joined the faculty of SMU’s Department of Economics.  His research has focused on monetary policy, fiscal policy, financial markets, economic geography, urban economics, modern economic history, and economic growth. 

Clark's volunteer leadership activities include serving on the boards of Uplift Education, the Eugene McDermott Foundation, the Yale University Art Gallery, and the Foundation for the Arts, as well as on the investment committee of SMU.  He earned a B.A. in History from Yale University in 1989 and an A.M. in Political Science from Harvard University in 1993, in addition to his Ph.D. in 2017.  After graduating from Yale he lived for one year in Japan.  Clark and his wife Nita have three daughters: Lili, Annabel, and Charlotte.

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