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Understanding the financial aspects of artificial intelligence (AI): an overview of its economic impact

Artificial Intelligence (AI) applications and their societal impact are drawing significant attention from MIT Institute Professor Daron Acemoglu, an economist who has penned multiple studies on AI economics over the past few months.

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AI's potential role in driving societal economic progress is a subject of great concern for MIT...
AI's potential role in driving societal economic progress is a subject of great concern for MIT Institute Professor Daron Acemoglu, who has recently released multiple studies on AI economics.

Understanding the financial aspects of artificial intelligence (AI): an overview of its economic impact

Artificial Intelligence (AI) is causing quite a stir, but the real-world economic effects remain somewhat elusive. Economist Daron Acemoglu, a Nobel laureate and MIT Institute Professor, has been delving into the matter for some time. His work focuses on how society will be employing AI and what can be expected from the technology economically.

The million-dollar question on everyone's mind, "What kind of impact will AI have?", leaves Acemoglu puzzled. "We don't know yet where the new tasks for humans with generative AI will come from," he confesses. Simply put, we're still figuring out the apps that will really revolutionize our everyday lives.

Taking a closer look at the numbers, AI might increase GDP by between 1.1 to 1.6 percent over the next decade. This equates to a minor annual gain in productivity of approximately 0.05 percent. While these numbers don't match the bold claims made by tech industry insiders and journalists, Acemoglu stresses that his assessment is an estimate, and additional AI applications could emerge in the near future.

Acemoglu's study hinges on recent data about AI-impacted jobs, such as a 2023 study which estimates that around 20 percent of U.S. job tasks might be exposed to AI capabilities. Furthermore, a 2024 study by MIT FutureTech researchers found that about 23 percent of computer vision tasks, which can be ultimately automated, could be done so profitably within the next 10 years.

However, Acemoglu accepts that these figures might underestimate the true impact of AI, as they don't include groundbreaking applications like AI's ability to predict protein shapes, for which other researchers received a Nobel Prize in October.

In light of the impact AI can have on jobs, it's essential to consider which sectors might be most affected. Acemoglu envisions that AI will primarily impact office jobs – data summarization, visual matching, and pattern recognition tasks – which, combined, account for roughly 5 percent of the economy. While there's been some debate whether AI will render these jobs obsolete or merely liberate workers from tedious, repetitive tasks, Acemoglu remains skeptical about a significant sea change in the job market. In his view, most companies will continue doing more or less the same things, and we'll still have journalists, financial analysts, and HR employees around.

The AI-optimists and pessimists alike would do well to heed Acemoglu's warnings. He believes that the AI industry should focus on providing expertise and information to workers, rather than merely automating tasks. Otherwise, we risk creating what he's been calling "so-so technology" – applications that mimic human abilities but don't elevate them.

Finally, Acemoglu warns against adopting AI unfettered and unchecked. Instead, he suggests patience and due diligence when it comes to implementing AI, as any technology can carry hidden pitfalls that should be carefully addressed before deployment. If we don't tread carefully, we could be driving ourselves into a ditch at top speed.

  1. Economist Daron Acemoglu, focusing on society's employment of AI, remains uncertain about the exact impact of AI.
  2. Acemoglu's assessment suggests that AI might increase GDP by 1.1 to 1.6 percent over the next decade, equating to an annual productivity gain of 0.05 percent.
  3. Acemoglu's study considers recent data about AI-impacted jobs, such as a 2023 study estimating that around 20 percent of U.S. job tasks might be exposed to AI capabilities.
  4. In addition, a 2024 study by MIT FutureTech researchers found that about 23 percent of computer vision tasks could be automated profitably within the next 10 years.
  5. Acemoglu believes AI will primarily impact office jobs, like data summarization, visual matching, and pattern recognition tasks, which combined account for roughly 5 percent of the economy.
  6. Acemoglu urges the AI industry to focus on providing expertise and information to workers, rather than merely automating tasks, to avoid creating "so-so technology."
  7. Acemoglu cautions against unprestrained and unchecked adoption of AI, suggesting patience and due diligence in implementing AI to address hidden pitfalls.
  8. In his final thoughts, Acemoglu warns that if we don't approach AI implementation carefully, we could be speeding towards a ditch.

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