Will AI Make Us Wonderfully Prosperous?

Will AI Make Us Wonderfully Prosperous? Authored by Jeffrey Tucker via The Epoch Times, “Any given government program will become the opposite of its name,” Elon Musk said recently. The rule seems correct. Think of the Affordable Care Act, the Inflation Control Act, the CARES Act, the War on Poverty, and countless others. They all resulted in the very inverse of how they are named. That’s some wisdom right there. Musk holds many libertarian views along these lines and has been a vocal champion of capitalism as an economic system. He famously set out to lead a team to cut $2 trillion from the federal budget. It did not work but not for want of trying. However, Musk is not always consistent. And he is not always correct. He also recently wrote the following: “Universal HIGH INCOME via checks issued by the Federal government is the best way to deal with unemployment caused by AI. AI/robotics will produce goods & services far in excess of the increase in the money supply, so there will not be inflation.” Let’s consider these assertions from the inside out. Musk claims that AI is going to produce vast goods and services such that it will generate 4, 5, and 6 percent growth. Indeed, if economic growth is going to outpace money supply growth, even in normal times, it will need to be above 6 percent at least. That’s just based on average rates of money growth over the decade. If we want healthy growth beyond that, we’ll need output growth on the level of 9 and 10 percent. The United States has not experienced growth like that since the 1880s. Data gathering was not quite sophisticated in those days—national income accounting had not yet been invented—so we cannot say for sure. This is just an estimate. Perhaps it is not far off, however. We had a bout of explosive innovation: commercialized steel, internal combustion, electric lighting, telegraph and photography, and much more. That kind of innovation did indeed generate economic growth. The world had never seen anything like it. Elon is implicitly assuming that artificial intelligence will be the same, a driver of a massive increase in prosperity. There is reason for doubt. We heard the same thing about the digital age. In fact, I was certain back in the late 1990s that the Internet would yield huge increases in productivity that would lead to growth on the scale of the Gilded Age. That did not happen. We saw the opposite. We’ve been through 30 years of frustratingly slow economic growth. The fruits of the digital revolution were squandered with growing amounts of government debt, regulation, burdensome business mandates, and a litigation explosion. That combination created an enormous drag on what should have been glorious growth. Recall that in the 1880s, we had no federal regulatory agencies at all. We did not have a welfare state or income tax. The dollar was secured and sound with a gold standard. We had no inflation at all; in fact, the dollar grew in value year by year, something that has not happened once since World War II. For technological innovation to create explosive economic growth, you need that special ingredient called economic freedom. We are nowhere near as free in economics today as we were then. Given this history, I’m extremely doubtful of the predictions that AI will give birth to wonderful economic growth anywhere near 9 and 10 percent. I would be very surprised. Indeed, mankind has proven its remarkable capacity for squandering wonderful opportunities to make the world a better place. AI is impressive but with all new technologies, the hype always exceeds the reality. Remember it was only 10 years ago that everything and anything would “get on the blockchain” and magically become wonderful. Business consultants made bank duping naive corporate managers with this prattle. At some point, it became obvious that the blockchain is useful for specific tasks while the old tech would be fine for most everything else. I see the frenzy over AI very similarly. Nor do I believe that the home robot has much of a future in our domestic lives. Factories and shipping, sure, but helping around the house as in the Jetsons? Doubtful. There is another odd feature to Elon’s argument. He says that all this wonderful but unproven economic growth will be accompanied by widespread unemployment as robots replace humans. This is odd. We’ll never live in a world where there is no work to be done. There is always work to be done at some price. So long as labor markets are free, there will be jobs. One might suppose, too, that with 10 percent economic growth, there would be more than enough prosperity flowing to hire people for every manner of work. It’s not as if human beings will become useless. AI is great at routine tasks but terrible at judgment and creativity. There will be more, not less, of a market for those skills in an AI/robot world. Therefore, there is no reason to suppose that the AI revolution will create mass unemployment over the long term. It’s reasonable to expect disruption and dislocation out of many professions. But if the labor markets are free to adapt, the old jobs will be replaced by new jobs. In the 20th century, we’ve developed an obsession with unemployment, particularly since the Great Depression. The entire reason for this problem traces to controls on the labor market, privileges flowing to unions, restrictions on wage levels, and attempts to keep the market from adapting. High unemployment is a sure sign that the labor market is not free. In a genuine free market, there would be no unemployment at all simply because it’s the nature of the world always to call forth human labor for some purpose and at some price. Musk proposes that the U.S. government offer huge benefits in the form of income support for the unemployed. There are now 170 million people in the labor force. If 20 million of them are displaced by AI/robotics and each person is given $100,000 a year, that’s an astronomical expenditure of $2 trillion a year—exactly the amount that Musk sought to cut from the federal budget. To match that figure with a money supply increase would mean nearly a 9 percent increase in M2 each year, which would certainly be hugely inflationary, all else equal. To stop that inflation, economic growth would have to be 10 percent and higher, which is highly unlikely. As a result, such expenditure would certainly mean a dramatic degradation in the purchasing power of the dollar. No inflation, promises Musk, but he is likely wrong and the rest of society and the world would be stuck with the results. Putting all these workers on permanent welfare would stop labor markets from adjusting to reflect new technologies. Why would anyone take a job if he can sign up for a basic income from the taxpayers? Such a proposal is completely contrary to any conception of a free market. There is another feature here. Putting millions or tens of millions on permanent income support would drain creativity, energy, and productivity from the markets. It would be the greatest subsidy that sloths ever enjoyed. This would be a disaster for the human spirit. We saw how universal income worked in the COVID years with stimulus payments. It led to fraud, demoralization, and inflation. Making such a policy permanent would do the same and worse. Remember the first Musk principle: “Any given government program will become the opposite of its name.” What this points to is the general tendency to oversell and mask especially in government. It’s the same for universal basic income. It would not and could not be universal and it will degrade the lives of everyone it touches. Tyler Durden Wed, 05/06/2026 - 17:00