Our beloved North Florida isn’t just famous for its natural beauty and warm hospitality, it’s also home to some of the most innovative minds in the country. As your local news reporter, I’m excited to shed light on a topic that has captured the attention of the world – Artificial Intelligence (AI).
At a recent AI summit in Switzerland, IMF First Deputy Managing Director Gita Gopinath warned about the potential risks of AI. The primary focus has been on privacy, security, and misinformation. But what’s not being talked about enough is how AI could exacerbate the next recession.
AI Risks in Labor Markets
In good economic times, companies invest in automation but retain workers because they can afford to. But when the economy dips, companies cut costs, and workers are often replaced by automation. Gopinath cited IMF research which indicates that in advanced economies, 30% of jobs are at high risk of AI substitution. This is compared to 20% in emerging markets, and 18% in low-income countries.
AI Risks in Financial Markets
The financial industry has always been quick to adopt automation and earlier forms of AI, such as algorithmic trading, and is adopting newer AI technologies quickly today. However, the risks of AI are more likely to show up in a downturn. This is because new AI models may perform poorly in novel events that differ from what they were trained on.
Gopinath explained that in such a situation, AI could trigger a quick, simultaneous move to safe assets, leading to falling prices on risk assets. The AI models would then detect the price declines, view that as affirmation of their earlier moves, and then double down with more asset sales.
AI Risks in Supply Chains
As businesses adopt AI, they may allow it to play a larger role in deciding how much inventory to hold and how much to produce. In normal economic times, this can boost efficiency. But AI models trained on outdated data can generate significant errors, leading to a cascade of supply chain breakdowns.
Ways to Mitigate AI’s Risks
Despite the risks, Gopinath also suggested ways to mitigate AI’s potential dangers without hampering its positive aspects. These include:
- Ensuring tax policies don’t inefficiently favor automation over workers
- Helping workers with education and new skills
- Strengthening the social safety net with generous jobless benefits
AI can also be part of the solution, such as in upskilling, better targeting assistance, and flagging early warnings in financial markets, she added.
As we continue to navigate the complexities of the AI realm, it’s critical to consider these risks and solutions. The world of AI is ever-evolving, and it’s not just about seizing the opportunities it presents, but also about understanding its potential impact on our economy and labor markets.
As your trusted reporter, I will continue to keep you informed on this and other pressing issues affecting our community. Sign up for our newsletter to stay abreast of how AI is shaping our future.
