OpenAI Investors Say AI Will Hugely Deflate Economy: The Reasons

Vinod Khosla, a billionaire investor and early supporter of OpenAI, forecasts a seismic shift in the world economy. His new findings suggest artificial intelligence will not only disrupt industries but will also dramatically change how we measure and experience economic development over the next 25 years. According to the Hindustan Times, he mentioned his outlook on AI’s economic impact in his recent post on the X platform. “AI should be hugely deflationary over twenty-five years.”

Capital Scarcity

Khosla predicts that as AI grows more widespread, the economy will face a capital shortage. This is most likely due to the significant investments required for AI development, deployment, and adaptation across multiple industries. Traditional economic measurements such as GDP may lose relevance when capital becomes scarcer.

Changing Economic Metrics

Khosla believes that in an AI-dominated future, traditional measurements of economic health, like GDP, may become less relevant. Because of the emphasis placed on capital scarcity, present techniques of evaluating economic growth may not correctly reflect the true state of the economy. This raises the question of which metrics should be used to assess economic well-being in an AI-dominated society.

AI’s Deflationary Effect

Khosla expressly states that AI will have a “substantial deflationary effect” during the next 25 years. This suggests that, in contrast to inflation, which results in an increase in the general price level of goods and services, deflation results in a fall in the general price level. According to the event of deflation, AI would result in an abundance of products and services, perhaps making them more affordable and generating a shift in economic dynamics.

Plenty of Goods and Services

Despite a shortage of capital, Khosla predicts a future in which products and services will be abundant. This implies that AI, by boosting efficiency and production, could result in a surplus of products and services, thereby changing consumption patterns and economic priorities.

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