Predicting Economic Ups and Downs: The AI Boost

Jan Hatzius, the chief economist at Goldman Sachs, gained recognition for his accurate prediction of a soft landing in late 2022. This forecast came at a time when many were worried about an impending recession. In 2008, he also made a bold call by warning about the impact of toxic mortgages, which ultimately led to a recession.

Now, Hatzius has a positive outlook on the impact of artificial intelligence on the US economy. In an interview with CNN, he expressed his confidence that AI will greatly boost economic growth by increasing the efficiency of workers.

Hatzius views it as a way to boost productivity for many workers in the economy, making them more efficient. This increase in productivity is predicted to be so substantial that Goldman Sachs raised its long-term forecast for the US gross domestic product (GDP) last year.

AI chatbots are a helpful tool for workers in various tasks such as brainstorming ideas, conducting research, writing reports, creating presentations, exploring new topics, and analyzing large amounts of data. Even government agencies like the Treasury Department and the IRS are utilizing AI to combat financial crimes and detect tax evasion.

However, AI is not flawless. There have been instances where AI chatbots have been criticized for displaying bias and generating historically inaccurate depictions of individuals. Additionally, AI tools have been known to occasionally produce convincing but false results, a phenomenon referred to as "hallucinating".

AI has the potential to both eliminate and create jobs. With the advancement of Generative AI, tasks such as writing emails, summarizing books, creating advertisements, and generating images can now be done by machines. This poses a threat to certain jobs that were traditionally done by humans.

"It will impact employment in certain areas," Hatzius explained to CNN. "There will be sectors of the job market where tasks can be automated, leading to a decrease in employment. However, there will also be opportunities for innovation and the creation of new jobs in other areas."

White-collar workers are considered to be especially vulnerable to this technological disruption.

Goldman Sachs previously estimated that as many as 300 million full-time jobs around the world could be automated in some way by generative AI.

Boosting GDP

Hatzius admitted that it's hard to determine which jobs will be lost and which ones will be preserved.

He explained, "Throughout history, economic growth and innovation have followed a similar pattern: new technologies may reduce jobs in certain sectors, but create opportunities in others. It's challenging to predict how this balance will play out in the short run. However, I am more certain that it will contribute significantly to overall growth in the long term."

Satyen Sangani, the CEO of data intelligence unicorn Alation and an economist, mentioned that the increasing productivity from AI can counterbalance the slowdown in the labor force in the United States and other countries.

According to Sangani, as many Baby Boomers are retiring, there is a shortage of labor. AI has the potential to mitigate the decline in the labor force by assisting in maintaining productivity levels.

AI chatbots can help customer support employees at understaffed hotels and medical professionals dealing with complex medical records. Sangani mentioned that AI will support these workers, not replace them, but also acknowledged that there are instances where AI will take over certain tasks.

IMF warns AI could deepen inequality

Even if AI accelerates economic growth, there is no guarantee that everyone will benefit.

Earlier this year, the International Monetary Fund warned that nearly 40% of jobs worldwide could be impacted by AI, potentially worsening inequality.

To address this challenge, the IMF recommended that governments establish social safety nets and programs for retraining workers.

Investors are still fascinated by the possibilities of AI, investing billions in AI stocks and sparking a modern-day gold rush on Wall Street. However, there are worries that the AI hype may be excessive.

Jeremy Grantham, who predicted the dot-com crash in 2000 and the financial crisis in 2008, recently warned that AI is a bubble that could start to deflate.

Editor's P/S:

The article presents a nuanced view of the potential impact of artificial intelligence (AI) on the US economy. On the one hand, it highlights the optimistic outlook of Jan Hatzius, Chief Economist at Goldman Sachs, who believes that AI will boost economic growth by increasing worker efficiency. On the other hand, it acknowledges the potential for job displacement and the need to address its societal implications.

While AI has the potential to revolutionize industries and create new opportunities, it is crucial to mitigate its negative effects. Governments and policymakers must prioritize addressing potential job losses, retraining workers, and establishing social safety nets to ensure an equitable distribution of AI's benefits. Additionally, it is essential to address biases and inaccuracies in AI systems to ensure fair and responsible use. As the development and implementation of AI progress, it is imperative to strike a balance between embracing innovation and safeguarding the well-being of the workforce and society as a whole.