Economic Impact of AI

 AI can contribute additional 14% to Global GDP by 2030 through increase in labour
productivity, time saving and improvements in quality of products and services.

Economic Reasoning and AI

 homo economicus model where humans have to make complex economic decisions
have been subjected to several criticisms.
 With the introduction AI based tools and techniques a machine economicus has
evolved where machines are trained to take complex economic decisions.
 Because of the use of finite computational resources, AI must face limitations of
linear bounded automation leading to bias in the decision-making ability.
 Within AI, the combination of humans and computers in the decision making area
leads to collective intelligence and development of new and smart institutional
structures.
 Collective intelligence may be called superminds – development of superminds might
lead to new principal-agent problems

Challenges in adoption of AI to Economic Reasoning

 Adoption of AI might lead to micro-division of human labour and excessive
specialisation leading to exponential increase in number of occupations
 Such development will question the fundamental economic assumption that humans
must ensure their existence to make the ends meet.
 Excessive specialisation and micro division of labour is likely to make it difficult to
meet the ends by justifying their existence.
 Economy is likely to become more complex making it difficult for individual manager
or employee or other stakeholder to understand how the organisation could create
value because most decisions will be made through use of collective intelligence with
less input from humans.
 Data will become another factor of production apart from traditional factors of
production of labour and capital leading to negative externalities because of data
repurposing and data spillages
 Newer principal-agency and employment problems might arise because of
symmetries of information resulting from
 (i) Faster information accessing and processing will provide a distinct
competitive advantage to AI agents, (ii) abundant use of server contacts and
(iii) lack of tracking the ways in which AI agents access and process
information.

Success Factors in implementing AI Projects

 Comparison of market capitalisation of digital firms and traditional firms reveal
that implementation of AI has helped digital firms to increase their market cap.
 Success factors in the case of digital firms are (i) innovation, (ii) effective use of
Internet technology, (iii) hiring of too talents and motivating them and (iv)
acquisition of promising start-up companies
 Other success factors are : (i) significant drop in computing costs, (ii)
development of wide-spread use of Internet and (iii) substantial reduction in
capital cost of digital technologies
 Innovation and deep learning like statistical natural language processing (NLP)
including semantic NLP, natural language generation (NLG), robotic process
automation (RPA) and development of rule-based systems.
 Deployment of Neural Networks, Fuzzy Cognitive Maps, Genetic Algorithms and
the Bayesian Model.
Models and Techniques
 Different models include Diffusion of Innovation (DOI), the technology,
organisation and environment context (TOE) model or the benefits, organisational
readiness and external pressure (BOE) model.
 Model should support robust data capture, efficient governance processes and
excellent digital capabilities that are at the core of implementing AI by the
organisations.

BOE Model
 External pressure, perceived benefits and organisational readiness are the basic
factors comprised in this model.
 Competitive advantage likely to accrue to organisations can apply external
pressure on organisations for early adoption of AI. Greater production volumes,
 improvements in production processes and use of improved production
technologies are the areas where AI can help industrial organisations to improve
their competitive strength.
 External pressure in the form of government regulations cannot be said to be
fierce on the AI adoption as the regulatory frameworks are still in the nascent
stage.
 The most important part of the BOE model is the organisational readiness which
needs to be looked at from the perspectives of both constraints and enablers.
 Constraints include culture, lack of skills required for AI adoption and availability
of appropriate human resources. Budget constraints, lack of direction or leadership
awareness, cultural resistance and accessibility to data are some other constraints
affecting AI adoption
 Access to latest and improved technology, enhanced computing power, increased
availability of information technology products offering wider accessibility to data
and access to complete AI solutions are some of the organisational enablers