
How Will AI Fundamentally Transform Our Economy?
When the globe’s most powerful nations needed guidance on how artificial intelligence might affect their collective economies, they turned to the University of Virginia’s Anton Korinek.
The economics professor from the University of Virginia’s Darden School of Business was one of a handful of international experts selected to create a report for the recent meeting of the G7 nations of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. His specialty is teasing out what could happen to economies if AI essentially takes over jobs that humans do. In academic papers and in interviews, he’s painted a cautionary picture of “disruption” and “wage collapse.”
UVA Today caught up with Korinek while he was on a plane returning from San Francisco, where he organized a conference and presented a talk called “The Economics of Transformative AI.”
“We also had participation from the leading AI labs, including the CEO of Anthropic and several high-level participants from OpenAI,” he said. “The world that we are about to enter in the coming years will certainly be an interesting one.”
Q. Let’s start with the basics: What role, in general, is AI starting to play in economics and economic policy?
A. AI is about to fundamentally transform our economic system in ways that are comparable to the Industrial Revolution. Just as that earlier transition moved us from the Middle Ages to our modern industrial economy, AI will usher in an entirely new economic paradigm. The technology is rapidly advancing, with the potential to automate both cognitive and physical work across virtually all sectors.
Still, there is significant uncertainty about the timeline and extent of these changes. Some experts predict transformative advances within the next year or two, while others expect more gradual changes, in a range of five to 10 years from now. What’s clear is that AI is already affecting productivity and starting to affect labor markets and financial systems.
The uncertainty about AI’s trajectory poses a unique challenge for economic policymakers, who must prepare for scenarios ranging from incremental change to rapid, transformative disruption while ensuring that the benefits of AI are broadly shared across society.
Q. How has AI begun influencing your economic research and scholarship?
A. About a decade ago, I made a strategic decision to redirect my research focus toward understanding AI’s transformative economic implications. This shift was partly motivated by my realization that AI would profoundly shape the future world that my children would inherit. I’ve maintained a dual focus: studying how AI will transform our economic system while also exploring how to use AI tools to enhance economic research itself.

Anton Korinek is an expert on how AI might affect economies at all levels as the technology continues to advance. He was one of a handful of global experts chosen to advise the G7 nations at a recent meeting. (Contributed photo)
I have an ongoing project on “Generative AI for Economic Research,” which examines how these tools can automate aspects of economic analysis and scholarship, and which I update every few months to inform fellow economists on how to optimally leverage these tools. I have also worked to build bridges between economics and the AI research community, as I believe economists have crucial insights to contribute to AI governance and development. This work has become increasingly relevant as AI capabilities have advanced more rapidly than many anticipated over the past five years.
Q. What role did you play in shaping the panel’s final report?
A. While the report was truly a collaborative effort, I contributed significantly to its scenario-based approach to AI preparedness. Drawing on my research, I helped develop the framework that considers multiple possible trajectories for AI development – from gradual evolution to potentially transformative changes within the next few years. I drafted several key sections of the report dealing with economic and financial implications as well as policy preparations for different AI scenarios.
I hope that this approach will help policymakers develop robust strategies that work for multiple different scenarios, rather than betting on a single prediction about AI’s development. The framework emphasizes the importance of maintaining policy flexibility while taking seriously the possibility of rapid, transformative change over the next few years.
Q. What are the panel’s high-level findings or recommendations?
A. The panel’s core message is that policymakers should adopt a stance of “policy preparedness” in the face of significant uncertainty about AI’s development. The report outlines 10 immediate recommendations, including adopting proactive and flexible policy approaches, rapidly building AI expertise within institutions, establishing clear guidelines for AI use in financial activities and enhancing cross-border cooperation on AI governance.
We also developed a policy preparedness matrix to help governments evaluate their readiness across different AI scenarios. The report emphasizes that while AI offers unprecedented opportunities for economic growth and innovation, it also presents significant challenges – from potential labor market disruption to financial stability risks. We particularly stressed the importance of preparing for transformative scenarios where AI could fundamentally reshape economic structures, while also ensuring that policies remain effective under more gradual development paths for AI.
Q. Many economists argue that worries that AI will take jobs are overblown. Your perspective seems more aligned with technologists. Why do you think there’s this divide?
A. There’s a fascinating dynamic at play. Economists have spent decades explaining why technological automation doesn’t lead to permanent unemployment – what we call the “lump of labor fallacy.” This professional experience may actually make it harder for economists to recognize when the rules of the game suddenly change.
With AI, we are potentially facing something fundamentally different: a technology that could substitute for human cognitive capabilities across all domains. If AI systems can match or exceed human performance in virtually any task, as many leading AI researchers predict, we will need to rethink our basic economic frameworks. This is not about falling for old fallacies – it’s about recognizing that transformative AI could change the very foundations of our economic system, much like the Industrial Revolution did.
This article was originally published in UVA Today.
The University of Virginia Darden School of Business prepares responsible global leaders through unparalleled transformational learning experiences. Darden’s graduate degree programs (MBA, MSBA and Ph.D.) and Executive Education & Lifelong Learning programs offered by the Darden School Foundation set the stage for a lifetime of career advancement and impact. Darden’s top-ranked faculty, renowned for teaching excellence, inspires and shapes modern business leadership worldwide through research, thought leadership and business publishing. Darden has Grounds in Charlottesville, Virginia, and the Washington, D.C., area and a global community that includes 18,000 alumni in 90 countries. Darden was established in 1955 at the University of Virginia, a top public university founded by Thomas Jefferson in 1819 in Charlottesville, Virginia.
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