Artificial Intelligence will Transform the Economy

Author: Shunsuke, Managi, Faculty Fellow, RIETI

Mankind has always developed new tools and technology to expand its habitat and to enrich its livelihood. In the history of mankind, social and economic activities have undergone drastic changes through various innovations such as new innovations such as food production, sanitation and transportation. Among them, the major technological innovation surrounding the invention of the steam engine, commonly referred to as the Industrial Revolution, dramatically improved our material well-being, with the ripple effect of enabling other various types of innovation that had not been possible earlier, which, in turn, exponentially transformed economic activities around the world.

However, the effects of such new technology innovation have not necessarily been positive and the ensuing drastic changes in the economy have also given rise to various social problems. Labor problem is one example. Through the invention and the widespread use of the steam engine, employers who had previously been major players in the manufacture of products were faced with the crisis of termination. As a result, in certain parts of England, laborers’ fear of unemployment even gave rise to the radical Luddite movement, which advocated the destruction of machinery. Such crisis mentality became major issues in the subsequent technology innovation, and it is this crisis mentality that is attracting much attention in the IT revolution, which has been gaining momentum since the late-1990’s as well as in the much-discussed development and dissemination of Artificial Intelligence (AI).

New technology innovation also has the potential of dramatically tipping the traditional economic balance of power between countries. Just as Japanese automobile manufacturers in the past achieved global technological superiority by successfully developing fuel-efficient cars and dominated the global automobile market, the development of self-driving cars has the potential of dramatically realigning each country’s technological superiority in the automobile industry. Consequently, discussions on how to promote the development and the dissemination of AI and how to build a framework that can withstand economic changes on a global scale have become matters of the utmost urgency. To address this issue, we discussed how Japan should respond to this innovative technology from the perspective of international competition, and how society should respond to problems expected in the introduction of AI, from the standpoint of an economics study group on Artificial Intelligence.

Read the entire article on the RIETI website

Image taken by Haophuong21 and sourced from Wikimedia Commons.

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