AI enthusiasm is a hype: Economists sound alarm on possible market crash like crypto

At least two prominent economists, one of them a Nobel laureate, have warned against hyping up artificial intelligence, just as Microsoft-backed OpenAI, at the forefront of generative AI, was declared to be worth over $157 billion after a new funding round.

In recent interviews and articles, MIT economist Daron Acemoglu has criticised the hype around AI. Fellow economist and Nobel Laureate Paul Romer is also sceptical about any economic windfalls accruing from AI.

Acemogluwarned that the hype could lead to wasted investments and unkept promises and even a market crash akin to the crypto crash.

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In spite of the exuberance, the Turkish-American economist feels that only five per cent of global jobs will be impacted by AI in next decade.

Such a minial disruption is not going to lead to any economic revolution, he argued.

Possible future scenarios for AI include some successful apps surviving and the remaining hype cooling off, and a volatile cycle of excitement and disillusionment, he predicted.

He said that companies that replace humans with AI at the workplace will only end up re-hiring people when they realise AI's limitations.

While apps like ChatGPT, the large language model from OpenAI, are appreciated, Acemoglu said AI would not be able to replace human workers in jobs needing nuanced judgement.

"You need highly reliable information or the ability of these models to faithfully implement certain steps that previously workers were doing. They can do that in a few places with some human supervisory oversight like coding, but in most places they cannot. That's a reality check for where we are right now,” he said.

Studies that forecast significant economic growth from AI lack any empirical evidence, he pointed out, while adding that AI might eventually exacerbate inequality.

He advocated a more regulated approach to AI, as opposed to uncritical optimism about the technology.

He warned that the AI frenzy could eventually end up in a tech stocks crash in what he called an “AI spring followed by AI winter”.

"If you listen to tech industry leaders, business-sector forecasters, and much of the media, you may believe that recent advances in generative AI will soon bring extraordinary productivity benefits, revolutionising life as we know it. Yet neither economic theory nor the data support such exuberant forecasts," he said.

"I think people are buying a little bit too much of the hype and they’re losing perspective," he said. "I don’t think AI is actually the big revolution that we’re living through right now."

"The autonomous vehicles were supposed to be the killer application of AI, and it’s turning out to be a bust. There’s a reason Apple just canceled its car project," Romer added.

(With inputs from agencies)