More Inequality (Designed by ai Companies)
In today’s New York Times, economist Jennifer Harris argues that we are seeing the rise of a “new aristocracy.”
“Over the past two years,” she writes, “nineteen households have added $1.8 trillion to their coffers.” Harris adds that the top 1 percent of Americans hold more wealth than the bottom 90 percent combined.
The new Upriver Press book Inequality by Design, by Dr. Ryan Mattson and Ben Johnson, provides a deeper analysis of America’s astounding inequality, including where we could end up if we don’t change the ship’s course. The roots of the problem stem, in part, from policy designs beginning in about 1980. The book provides practical survival solutions for ordinary citizens, and ideas for policymakers who might still care about the people they represent.
Harris adds to this discussion some insights about how AI could worsen inequality in America. She points to the fact that AI could replace many workers while consolidating even more wealth and political influence into the hands of a few groups. We encourage everyone to read the article.
Policy designs, as shown in Inequality by Design, are based in prominent but false narratives. One of the narratives employed by the leaders of AI companies is that their technologies will drive massive, across-the-board economic growth, making everyone’s lives better.
That claim is a myth, according to two Stanford University economists. Chad Jones and Chris Tonetti recently published a groundbreaking academic paper that, in short, contradicts the Silicon Valley hype about AI’s short-term potential to create an explosion of economic growth.
“AI does some amazing things,” said Tonetti during a recent webinar with Princeton economist Markus Brunnermeier. “But . . . you can’t immediately translate the amazing things you see AI doing on any particular task into having a major impact in the short run in the aggregate economy.”
Jones and Tonetti say AI-caused economic growth will be very slow because of “weak links” in our interconnected economy. To better understand what they mean, consider what happened to supply chains during the Covid-19 pandemic. Certain sectors were hard hit by the virus. Those industries became weak links in the network. As they ceased to function, all the other parts of the global trade system suffered. The interconnectedness of the global economy became disconnected, and that breakdown caused a reduction in overall global GDP.
Apply the concept of weak links to AI. The technology might bring about some productivity improvements within isolated industries, but AI does not function in isolation. It exists within a complex, integrated economy. Just because it revolutionizes one industry or one type of work does not mean it will cause aggregate economic growth. In fact, AI technology itself relies heavily on interconnected, hard-to-automate industries, such as electricity generation and mining. If there’s no sand or lithium, there are no AI chips.
“If you have twenty links (comprising an overall economic sector) and even if you make some of them infinitely strong (say, through automation), the weak links will still slow all the growth,” said Jones.
The only way for a true “explosion” of economic growth to occur is to automate all the weak links in that highly complex system, which is what Jones and Tonetti call “full automation.” To fully automate all the human labor in the US economy will take at least a century, they say. Nothing remarkable will happen until at least 2135. You can read their paper at this link.
If AI does not fuel widespread economic benefits, as the AI company leaders claim, then we can probably expect that AI will drive increased inequality. A small group of powerful figures will reap most the AI profits, as Harris argues. Remember that this arrangement is designed by lawmakers who are beholden to Big Tech money.
For these reasons, we hope that everyone reads Inequality by Design. With collective efforts, maybe we can steer in another direction.
