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Bank of Canada Governor raises concerns regarding disruptive potential of AI
(MENAFN) Bank of Canada Governor Tiff Macklem raised significant concerns on Friday regarding the disruptive potential of artificial intelligence (AI) on the job market. Speaking at the National Bureau of Economic Research's Economics of Artificial Intelligence Conference in Toronto, he cautioned that as AI becomes more integrated into the economy, it might lead to the elimination of more jobs than it creates over the long term. He emphasized that those who lose their jobs due to automation could face difficulties in finding new employment opportunities, a troubling prospect for many workers.
Macklem highlighted the importance of understanding and addressing the labor market impacts of AI as the technology continues to evolve and permeate various sectors. He pointed out that the effects of AI extend beyond job displacement; it may also influence how businesses set prices. Evidence suggests that firms that are heavily digitized tend to adjust their prices more frequently than those that are less so, indicating a shift in pricing strategies driven by AI.
Moreover, the Governor discussed AI's ambiguous effects on market competition. He noted that while AI-focused startups could initially capture market share by undercutting traditional companies, there's a risk that it could lead to monopolistic practices where a few dominant firms control the market. In such a scenario, competition could diminish, resulting in higher prices for consumers, which contradicts the initial benefits of increased competition.
Macklem underscored the necessity for central banks to thoroughly understand how AI might influence inflation, both indirectly through changes in overall demand and supply and directly through its effects on price-setting behaviors. He called for collaboration between academics, businesses, and policymakers to better predict and navigate the complex impacts of AI on the economy, emphasizing the importance of proactive measures in addressing these challenges.
Macklem highlighted the importance of understanding and addressing the labor market impacts of AI as the technology continues to evolve and permeate various sectors. He pointed out that the effects of AI extend beyond job displacement; it may also influence how businesses set prices. Evidence suggests that firms that are heavily digitized tend to adjust their prices more frequently than those that are less so, indicating a shift in pricing strategies driven by AI.
Moreover, the Governor discussed AI's ambiguous effects on market competition. He noted that while AI-focused startups could initially capture market share by undercutting traditional companies, there's a risk that it could lead to monopolistic practices where a few dominant firms control the market. In such a scenario, competition could diminish, resulting in higher prices for consumers, which contradicts the initial benefits of increased competition.
Macklem underscored the necessity for central banks to thoroughly understand how AI might influence inflation, both indirectly through changes in overall demand and supply and directly through its effects on price-setting behaviors. He called for collaboration between academics, businesses, and policymakers to better predict and navigate the complex impacts of AI on the economy, emphasizing the importance of proactive measures in addressing these challenges.
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