Research & Insights

Predistribution AI Lab Discussion Paper Series - Part I: Modeling Ghost GDP - Macro-financial Risk and Diversified Portfolios in the Age of Artificial Intelligence, Automation, and Populism

This discussion paper, the first in PDI's Predistribution AI Lab series, analyzes four scenarios, modeling the cascading effects of income erosion and unemployment on consumption, tax revenue, mortgage markets, corporate debt, equity values, pension systems, and insurance assets. Scenarios are designed to illuminate key transmission channels of potential macro-financial risk through the real economy, markets, and to diversified investment portfolios. Three scenarios are based on higher unemployment numbers as predicted by Anthropic CEO, Dario Amodei, while the “lighter” scenario is built on the historical precedent of declining returns to labor and a “fissured workplace” even as employment has grown with technology. We do not take a view on whether AI will lead to higher unemployment. Rather, we center our attention on the risks of historical and ongoing declining returns to labor that are shared across stakeholders in society, including financial risks to diversified investors’ portfolios. We argue that the advent of AI is an inflection point at which the world is either poised to deepen the current trends toward risk, or at which we can sculpt and refine economic structures to avoid such risks. This first paper primarily focuses on macro-financial analysis. However, safety, blind spots, and cognitive bias risks are also considered, particularly in Part II of the discussion paper series.