Technological revolutions have long animated economic history. The concept of "creative destruction"--in which technological advancement destroys certain sectors of the economy while giving rise to new ones--has roots in some of the earliest economic thought.1 This process hinges on the idea that machines serve to supplement human labor, primarily labor dedicated to repetitive physical and cognitive tasks. At the moment, machines can solve intensive well-defined tasks but for the most part cannot be expected to define problems nor identify and traverse particularly complex systems without human oversight.
However, stunning advances in artificial intelligence, or AI, are beginning to allow computers to do things considered impossible just a few years ago. The upshot is that this time it may be different. There's now no logical reason why--at some point in the future--machines cannot do everything humans can and with greater efficiency. This idea, carried to its logical, frictionless conclusion, shows a world in which virtually all labor productivity has been transmitted to capital, and the labor market, as it were, is transformed to a preindustrial, artisan-based economy. The potential impact on wages, returns to education, and the composition of the labor market is profound.
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Hal Ratner does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.