Thank the productivity paradox: AI isn’t the job killer it’s feared to be

livemint.com:

Artificial intelligence (AI) image generators are still struggling with getting human fingers right. They are not taking away human jobs anytime soon. If that does not settle doomsday prophesies, let us discuss it logically.

With economic theory and data. Since the mechanical loom, every wave of new technology has created more jobs at higher wages throughout history. However, the fear remained that each such wave would deliver a death blow to human labour.

And yet, here we are. We have been through two such tech-driven unemployment panic cycles recently: outsourcing in the 2000s and automation in the 2010s. The reality: before the onset of covid, the world had more jobs at higher wages than ever in history.

This time, it appears we finally have the technology that will take all our jobs and render human workers superfluous: Generative AI. It is seen as a killer meteorite that will wipe out all human jobs. I would argue to the contrary.

The fundamental mistake people repeatedly make is called the Lump Of Labour Fallacy. In the current context, it is the inaccurate notion that there is a fixed amount of work in the economy at any given time, and either machines or people do it. It follows that if machines do it, there will be no work for people.

This conclusion doesn’t ring right. When a process becomes more efficient thanks to technology, productivity grows. It results in lowering of prices for goods and services.

We pay less for them as prices fall, leaving us more money to buy more. Demand in the economy increases, which drives innovation, which creates new products, industries and jobs for people, making up for those replaced by automation. The net result is a larger economy, with higher prosperity, more industries,