University of Kwazulu-Natal

Ai Is Transforming The Economy Understanding Its Impact Nature

Bonisiwe Shabane
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ai is transforming the economy understanding its impact nature

Daniel Björkegren is an assistant professor of international and public affairs at Columbia University, New York City, New York, USA. How will artificial intelligence reshape the global economy? Some economists predict only a small boost — around a 0.9% increase in gross domestic product over the next ten years1. Others foresee a revolution that might add between US$17 trillion and $26 trillion to annual global economic output and automate up to half of today’s jobs by 20452. But even before the full impacts materialize, beliefs about our AI future affect the economy today — steering young people’s career choices, guiding government policy and driving vast investment flows into semiconductors and other... Why evaluating the impact of AI needs to start now

Given the high stakes, many researchers and policymakers are increasingly attempting to precisely quantify the causal impact of AI through natural experiments and randomized controlled trials. In such studies, one group gains access to an AI tool while another continues under normal conditions; other factors are held fixed. Researchers can then analyse outcomes such as productivity, satisfaction and learning. Yet, when applied to AI, this type of evidence faces two challenges. First, by the time they are published, causal estimates of AI’s effects can be outdated. For instance, one study found that call-centre workers handled queries 15% faster when using 2020 AI tools3.

Another showed that software developers with access to coding assistants in 2022–23 completed 26% more tasks than did those without such tools4. But AI capabilities are advancing at an astounding pace. For example, since ChatGPT’s release in 2022, AI tools can now correctly handle three times as many simulated customer-support chats on their own as they could before5. The better, cheaper AI of tomorrow will produce different economic effects. The rapid advancement of artificial intelligence (AI) may usher in the most significant economic transformation since the Industrial Revolution. For nearly a decade, as I witnessed the continuous progress in deep learning, I have been studying the economics of transformative AI — how our economy may be transformed as AI systems advance toward...

The prospect of understanding the strange new world we will inhabit when transformative AI is developed has felt both intellectually urgent and personally meaningful to me as a father of two young children. Today, AI systems are approaching and exceeding human-level performance in many domains, and it looks increasingly like our world will be transformed before my children have grown up. In this research summary, I outline my analysis of how transformative AI could reshape our economy, discuss frameworks for preparing for this transition, and explore how AI tools are already transforming economic research itself. The pace of advancement in AI has been nothing short of extraordinary. Over the past 15 years, the computational resources employed to train cutting-edge AI systems have grown by a factor of four every year, as illustrated in Figure 1. The costs of such training are currently in the realm of hundreds of millions of dollars, as described in a market structure analysis with Jai Vipra.1 This exponential growth in compute has been accompanied...

Taken together, these advances imply increases in the effective compute of frontier AI systems of 10 times per year. So-called scaling laws describe how the rapid growth in inputs translates into AI’s performance gains, providing AI labs and their investors with some predictability for the returns on their investments and facilitating their bets... While returns to additional computing power may eventually diminish in some domains due to data scarcity, there are compelling reasons to expect that scaling will continue to yield significant capability gains in the coming... A growing number of leading AI researchers and industry figures now predict transformative AI could arrive within years, not decades. Geoffrey Hinton, the 2024 Nobel laureate in physics, considers it a possibility before the decade’s end. Sam Altman of OpenAI anticipates superintelligence “within a few thousand days,” while Anthropic’s CEO Dario Amodei expects transformative AI by 2027, if not sooner.

While these experts — and critics who view recent AI advances as overhyped — acknowledge the profound uncertainty in such predictions, the potential consequences of transformative AI are so significant that I consider it... Given the rapid pace of advancement of AI, my research agenda focuses on two critical areas: (1) analyzing transformative AI’s economic implications, and (2) leveraging AI to enhance economic research and increase our research... When the globe’s most powerful nations needed guidance on how artificial intelligence might affect their collective economies, they turned to the University of Virginia’s Anton Korinek. The economics professor from the University of Virginia’s Darden School of Business was one of a handful of international experts selected to create a report for the recent meeting of the G7 nations of... His specialty is teasing out what could happen to economies if AI essentially takes over jobs that humans do. In academic papers and in interviews, he’s painted a cautionary picture of “disruption” and “wage collapse.”

UVA Today caught up with Korinek while he was on a plane returning from San Francisco, where he organized a conference and presented a talk called “The Economics of Transformative AI.” “We also had participation from the leading AI labs, including the CEO of Anthropic and several high-level participants from OpenAI,” he said. “The world that we are about to enter in the coming years will certainly be an interesting one.” Q. Let’s start with the basics: What role, in general, is AI starting to play in economics and economic policy? Brooke Tanner, Josie Stewart, Nicol Turner Lee

We are on the brink of a technological revolution that could jumpstart productivity, boost global growth and raise incomes around the world. Yet it could also replace jobs and deepen inequality. The rapid advance of artificial intelligence has captivated the world, causing both excitement and alarm, and raising important questions about its potential impact on the global economy. The net effect is difficult to foresee, as AI will ripple through economies in complex ways. What we can say with some confidence is that we will need to come up with a set of policies to safely leverage the vast potential of AI for the benefit of humanity. In a new analysis, IMF staff examine the potential impact of AI on the global labor market.

Many studies have predicted the likelihood that jobs will be replaced by AI. Yet we know that in many cases AI is likely to complement human work. The IMF analysis captures both these forces. The findings are striking: almost 40 percent of global employment is exposed to AI. Historically, automation and information technology have tended to affect routine tasks, but one of the things that sets AI apart is its ability to impact high-skilled jobs. As a result, advanced economies face greater risks from AI—but also more opportunities to leverage its benefits—compared with emerging market and developing economies.

In advanced economies, about 60 percent of jobs may be impacted by AI. Roughly half the exposed jobs may benefit from AI integration, enhancing productivity. For the other half, AI applications may execute key tasks currently performed by humans, which could lower labor demand, leading to lower wages and reduced hiring. In the most extreme cases, some of these jobs may disappear. Artificial intelligence (AI) is rapidly transforming the global economy, impacting everything from labor markets and productivity to innovation and wealth distribution. Its influence stems from its potential to automate tasks, augment human capabilities, and generate novel insights from vast datasets.

This article delves into the multifaceted ways AI is shaping the economic landscape, examining its potential benefits, challenges, and implications for future growth. At its core, AI’s economic impact is driven by its ability to enhance productivity and automate processes. Machine learning algorithms, particularly deep learning models, can analyze complex datasets to optimize operations, predict demand, and improve resource allocation. This leads to increased efficiency and reduced operational costs across various industries. The automation capabilities of AI, particularly in areas such as robotics and process automation (RPA), are significantly reshaping the labor market. While automation can lead to job displacement in certain sectors, it also creates new opportunities in areas such as AI development, data science, and AI-related infrastructure management.

The net effect on employment remains a subject of ongoing debate and depends heavily on factors such as the pace of technological adoption and the development of appropriate workforce retraining programs. AI is a catalyst for innovation, enabling the development of new products, services, and business models. Its ability to analyze large datasets, identify patterns, and generate insights facilitates the creation of novel solutions to complex problems. Impact on Labor Markets and Income Inequality AI is fundamentally transforming the way we interact with technology. Image: REUTERS/Priyanshu Singh

AI has become firmly embedded across industries this year, as trust and acceptance in the technology has accelerated. As adoption continues to grow, so too have the ways companies are using AI across and within different sectors and regions. At the Forum's 2025 Annual Meeting of the New Champions, a panel of experts explored how the adoption of AI is playing out and what the deviations in usage could mean for business collaboration. Watch the full session below. Keen to learn more about the cross-industry impacts of AI? Developed in collaboration with Accenture, the AI in Action: Beyond Experimentation to Transform Industry Forum report provides a comprehensive analysis of the impacts of emerging AI technologies on industries.

Online harms – such as child sexual exploitation, scams, privacy violations and disinformation – are growing both in complexity and volume. In a new paper, MIT Institute Professor Daron Acemoglu predicts that artificial intelligence will have a “nontrivial, but modest” effect on GDP in the next decade. Artificial intelligence research is filled with dramatic forecasts. AI will affect almost 40% of jobs around the world, according to the International Monetary Fund. It will increase global GDP by $7 trillion — or 7% — over 10 years, predicts Goldman Sachs. Or it will grow between $17.1 and $25.6 trillion annually, if you prefer to go with McKinsey’s estimate.

And these projections are relatively conservative compared with others. In a new paper, “The Simple Macroeconomics of AI,” MIT Institute Professor Daron Acemoglu has a more conservative estimate of how AI will affect the U.S. economy over the next 10 years. Estimating that only about 5% of tasks will be able to be profitably performed by AI within that time frame, the GDP boost would likely be closer to 1% over that period, Acemoglu suggests. This is a “nontrivial, but modest effect, and certainly much less than both the revolutionary changes some are predicting and the less hyperbolic but still substantial improvements forecast by Goldman Sachs and the McKinsey... Acemoglu, a 2024 Nobel laureate in economic sciences, also looked at other economy-wide wage and inequality impacts expected from generative AI.

For the paper, Acemoglu looked at prior scholarship that analyzed which tasks will be exposed to AI and computer vision technologies and concluded that nearly 20% of all tasks in the U.S. labor market could be replaced or augmented by AI. But only about a quarter of those tasks — or 5% economy-wide — could be profitably performed. (In the other 75% of cases, costs for implementation may exceed the benefits.)

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Daniel Björkegren is an assistant professor of international and public affairs at Columbia University, New York City, New York, USA. How will artificial intelligence reshape the global economy? Some economists predict only a small boost — around a 0.9% increase in gross domestic product over the next ten years1. Others foresee a revolution that might add between US$17 trillion and $26 trillion to...

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Given the high stakes, many researchers and policymakers are increasingly attempting to precisely quantify the causal impact of AI through natural experiments and randomized controlled trials. In such studies, one group gains access to an AI tool while another continues under normal conditions; other factors are held fixed. Researchers can then analyse outcomes such as productivity, satisfaction a...

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Another showed that software developers with access to coding assistants in 2022–23 completed 26% more tasks than did those without such tools4. But AI capabilities are advancing at an astounding pace. For example, since ChatGPT’s release in 2022, AI tools can now correctly handle three times as many simulated customer-support chats on their own as they could before5. The better, cheaper AI of tom...

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The prospect of understanding the strange new world we will inhabit when transformative AI is developed has felt both intellectually urgent and personally meaningful to me as a father of two young children. Today, AI systems are approaching and exceeding human-level performance in many domains, and it looks increasingly like our world will be transformed before my children have grown up. In this r...

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