Sketching the new dysto-utopian world with massive presence of artificial intelligence

Global Inequality and More 3.0

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Sketching the new dysto-utopian world with massive presence of artificial intelligence<br>A four-class society (a long read)

Branko Milanovic<br>Jul 20, 2026

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The massive deployment of artificial intelligence (AI) presents economists with perhaps the unique situation in the past five or six decades. The artificial intelligence is an all-purpose technology and its effects are, from the current perspective, quite difficult or even impossible to predict. If one wonders whether there would be increased unemployment due to the introduction of the AI it makes no sense to talk to labor economists. Labor economists might be able to answer questions such as whether any specific technology would lead to unemployment or whether the increase in the minimum wage would make some people redundant but they cannot address the question of the effects of a new general purpose technology because both the extent of the application of such a technology and its effects on labor demand are simply unknown. The new general purpose technology could be, like electricity, included in 90% of the activities or it might fail and the hopes, and fears, that we entertain for the artificial intelligence may be disappointed.<br>This then requires not looking for concrete answers which I think at this stage are impossible to make but defining a meaningful set of questions regarding the possible effect of the AI, and then sketching the new world it might produce.<br>The first meaningful question is whether AI would lead to an increase in total output or would keep total output more or less the same but would reshuffle the roles of machines (including artificial intelligence itself which can be called a machine) and live labor. In other words, whether AI would be an output-augmenting technology or factor-shifting technology, meaning that it substitutes capital for live labor but does not lead to the production of many new goods and services, or increased production of the already existing goods and services. I have dictated most of this essay; I did not write it as I normally do in Word, nor did I write in longhand as I used to do twenty years ago. But in this example, neither word processing technology nor machine-dictation have made me produce more essays. There was probably some improvement in productivity, in the sense that a readable essay was produced in less time, but little else. Yet the all-purpose technology of the information revolution has made this essay much more accessible to many people. In that sense, there was an increase in overall welfare (assuming that reading this Substack does not produce anger and unhappiness in many of its readers).<br>The second related question is whether AI would lead to increased productivity defined as output per live unit of labor. There, as both the common sense of labor substitution by AI, and the previous example, suggest, we can relatively safely assume that AI would increase output per unit of live labor. And in some cases, dramatically so. In order not to come to this conclusion we would have to assume that total output would shrink by the application of AI to the same extent that the use of live labor is expected to shrink. This seems most unrealistic. Consequently, the ratio between total output and total live labor, we can safely predict, would go up.<br>The third issue is whether AI would create a significant surplus population. I prefer to use the term surplus population to a more neutral term of higher unemployment because it reflects better what may be the effects of a general purpose technology. It might create people who are basically unemployable and whose skills belong to a revolved era. These may be skills and knowledge that are entirely made redundant by the deployment of the AI; or people whose skills require a “retooling” for the needs of a new economy that would take five or more years. In either case, such people are over a medium- to long-term a surplus population. If the surplus population becomes large, for example reaching 15 or 20 percent of the labor force it would create political problems. The issue will then be how to solve this political problem. It may be dealt within the existing system of unemployment benefits with the proviso that in the case of the surplus population unemployment benefits might run for years rather than for six or nine months as they do nowadays. Or through, as many people argue, universal guaranteed income. Both would require a change in the way the welfare system is organized and funded. We would have to accept the possibility of people who would never work during their lifetime or might work for very little time in some subaltern occupations.<br>Money transfers however do not eliminate the political issue of a large surplus population. It would be naïve to believe that simply giving people money to survive...