Artificial intelligence is the new technology that is taking over the world. It has made lives easier and there are new developments each day. This article throws light on whether AI can be as effective in the field of economics as it is in other fields. Does it have the ability to understand the needs of the economy and form policies in accordance with it? Thus, this article combines two trending topics of the world; giving the reader a view of both Fields.
Artificial intelligence (AI) is a new invention in the technical sphere. It is defined as the ability of machines such as computers and robots to perform those tasks which have been traditionally done by humans. It has brought drastic changes in many fields and is now slowly taking up the world. Whether it be autonomous flying, production, agriculture, or smaller scaled things like chatbots, and sports analysis, the importance of artificial intelligence in all sectors has increased. With time, all fields are trying to utilize artificial intelligence in some form. Also, with the pandemic and everything going digital and hands-free, it is high time for
governments to focus on incorporating AI in all possible places and make the citizens comfortable with these technological advances. A nation's development status is estimated based on technological progress and socio-economic indicators. With the world changing with each passing minute, it is not wrong to say that artificial intelligence and economics are the future.
Economics is a dynamic subject. It is mainly concerned with the production, distribution, and consumption of goods and services. It studies how individuals, businesses, governments, and nations make choices regarding the allocation of resources. The thing with economics is that it has many unrealistic assumptions. For example, while studying, it is assumed that the consumer is rational. But, in reality, how can we be sure that all consumers will behave in the same pattern? Everyone thinks and reacts differently. So, even after considering most kinds of consumers, there may still be chances that someone behaves differently than expected. Moreover, there is no specific correct answer to any economic situation. While making a decision, there is initially a tradeoff between various answers provided by different economists. Whatever solution is selected, there is always an opportunity cost attached to it. Thinkers consider the solution which has less opportunity cost. So with such diversity and options, the question that arises is, 'Can AI be successfully
implemented in all domains of economics?' As of now, AI helps in Economic Research. It makes the process of collecting data and analyzing it easier. It has led to a new age of economic research.
AI has a lot of scope in contributing to this field. By helping in predicting the loss of incomes of farmers disconnected from the electronic national agricultural market (eNAM) in agricultural economics, the interest losses to governments, and the corresponding volumes of funds returned by the target users in public finance and other related things, it can also make it easier to know the macroeconomic scenario and the development economics. Also, there are other places where it can be helpful. For example, banks can use it to keep in check loan defaulters, to find equilibrium levels of outputs, do complicated analyses with huge packets of data, and stock market analysis, to name a few.
But is AI capable enough to formulate policies according to the requirements of the economy?
I believe that in no way, AI could replace human intelligence. As stated earlier, there is no fixed pattern followed in economics. Every day the economists learn something new from their decisions and keep altering the plan to maintain the equilibrium (which is again next to impossible to obtain). No matter how much work AI is capable of, it can only make the working of economists and policymakers easier. It cannot understand how humans think, respond to changes and react to incentives.
This picture shows the projected global economic effects of AI by 2030.
With the ideal usage of AI in economics, it won't be wrong to say that economies would develop at a greater rate in the future. What will be wrong to believe is that it is sufficient to depend only on AI for making policies and decisions. The challenge will be to find the ideal amount of human intelligence and artificial intelligence required to understand and escalate the economy.
Since there are changes being made in the technology on a daily basis, it might be too soon to predict how capable AI will become in the future and to what extent it will be used in the field of economics. We can't wait to see what the future holds and hope that AI becomes an exception to the law of diminishing marginal utility for all of us.
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Authored by Riju Garg