Intelligent Machines and Technological Singularity

Will we ever end up in a world where highly intelligent machines become capable of educating themselves faster than humans. If machines become more “intelligent” than humans and humans become economically superfluous what future should we expect as a human kind and what consequences it would have for our economies. This scenario, often referred to as “technological singularity”, was studied by the Nobel laureate William Nordhaus in Nordhaus (2021). 

From economic point of view different effects can arise. 

”If information and conventional stuff are elastic substitutes either in consumption or in production, then growth will rise, perhaps extremely rapidly. However, if information and conventional stuff are inelastic in production and consumption, then rapid improvements in information technology will eventually be irrelevant to the economy.” Nordhaus (2021). 

Here under “stuff” Nordhaus understands labor, energy or natural resources. Even if technological progress accelerates at a high speed, the “real” economy might put an upper limit on the overall economic development. Increasingly more powerful computers require more sophisticated hardware, for example, semiconductors. If those can only be produced in the “real” part of the economy with the use of human labor and cannot be substituted for by informational goods, that are also created by computers, then the technological singularity will not have dramatic consequences for the economy and the labor market. Indeed, there is no empirical evidence so far of a rapid substitution of capital for labor in the national income. 

On the other hand, the demand elasticity might also play a role. 

“Singularity would occur if preferences are such that consumer spending move increasingly toward high-productivity-growth industries as relative prices change.” Nordhaus (2021). 

If demand is inelastic, people might enjoy the products of the informational industry such as a very efficient search engine or a bar-keeper-robot but still demand goods form the “real” economy such as a theatre performance or a chef-made restaurant food. In fact, Nordhaus (2021) founds out, that based on the historical data for 89 distinct sectors for 1929-2012, the demand for output of different industries is highly inelastic with respect to price. Additionally even though the costs and thus prices in the information-technology sectors (telecommunications, video services, information equipment, internet services, telephone, and photographic services) have been falling in the recent decades, no major demand shift towards these industries occurred so far. 

Nordhaus concludes that technological singularity can occur not earlier than in 100 years if at all. Nevertheless, an exponential growth is initially indistinguishable from the linear growth. Technology plays an important role in the economic interactions and labor markets already. Advances in AI and automation will continue shaping the future of work in the years to come. 

Anna Almosova

Works Cited

Nordhaus, W. D. (2021). Are we approaching an economic singularity? information technology and the future of economic growth. American Economic Journal: Macroeconomics, 13(1), 299-332.