Artificial Intelligence: Problem or Solution?

SupplyYourDemand
Jul 5, 2020
6 min read

“A computer is only as smart as the person using it” goes the saying. But is that really true? In a time of huge technological advancements, artificial intelligence is on the rise. Our machines are learning and adapting to their environment, solving problems that humans have until recently found impossible. Surprisingly, even though our machines are getting smarter, humans by contrast are not. Health figures by the Gov.uk website shows us that 1 in 3 children leave secondary school overweight or obese {1}. This is a prevalent issue that needs to be solved now, as it has detrimental long-term effects on our economy. On the other side of the spectrum, another serious problem is the lack of transparency of large multi-national corporations. Many stories have hit the headlines recently talking about the exploitation of workers and use of young children in their manufacturing process - even prisoners! - by these large MNCs, which I believe to be inhumane. What do these both have in common? They can both be solved using artificial intelligence.

Child obesity is, I believe, a national crisis that has been talked about but not much action has been taken to tackle it. One possible cause is from simple yet effective strategies by firms called choice architecture. This term was first coined by behavioural economists Richard Thaler and Cass Sunstein and describes how consumers’ choices are influenced by how our choices are presented to us. Unsurprisingly, we find that the choice most commonly made by consumers is in fact the most beneficial to the firm, and not at all a rational decision for the consumer. Economic theory assumes that consumers are rational, who aim to maximise their utility and hold complete and perfect information. This school of thought was followed by Adam Smith, David Ricardo and Thomas Malthus to name a few. However, this was a huge assumption that did not account for human emotions. Firms take advantage of this by using a strategy called Framing. A documentary by Which? showed that WHSmith intentionally placed chocolates and sweets at eye level to young children. Thus, these children would be more likely to see the chocolates and ask their parents to buy them. On top of this, the chocolates were placed right along the side of the till. Therefore, right when the parents are paying and are in a rush, they immediately say yes. This is an example of computational weakness, where the parents decide to purchase the unhealthy food rather than spend more time in the shop.

Health issues in young people are especially detrimental as they have an increased risk of becoming overweight adults. 28.7% of adults in England are obese and a further 35.6% are overweight but not obese {2}. If adults are overweight, they are not at optimum health and so our labour workforce is not as productive as they could be. We will be working well within our economy’s potential productive capacity and this is bad because we won’t be able to produce as many goods and services, thus our GDP will fall. There will be a negative output gap and a fall in GDP means low animal spirits and low investment, both by firms and consumers. Less aggregate demand by consumers and more saving means there’s a large proportion of income leaking out of the circular flow of income. This reduces the effect of any multipliers going on or may even cause a spiral of decline. Of course, the amount of income being withdrawn from the circular flow of income depends on the marginal propensity to save, import and levels of taxation. Confidence in the UK economy is still low from the Global Financial Crisis of 2007-2008 and so lower animal spirits will further consumers’ incentive to save and hold onto their money.

Artificial intelligence, encouraged by the installation of the 5G network, will, I believe, help prevent this problem. A BBC panorama documentary called ‘Can we trust Huawei’ {3} showed that with the installation of the 5G network, our devices will be more interconnected. One specific example showed a fridges being connected to phones. I strongly believe that artificial intelligence will advance enough within the next 20 years that our fridges will be able to detect and order our weekly groceries when they empty out. These can be programmed to only allow a certain amount of unhealthy food in the house and will learn itself how much to order based on the family eating pattern. This ensures that only the necessary foods and drinks are bought, introducing healthy and locally produced food and excluding damaging and foods from across the world. This takes the online shopping experience to a whole new level and at the same time, helps reduce the disastrous effects of globalisation by reducing consumers’ carbon footprint. Most significantly, artificial intelligence will able to help consumers avoid making irrational decisions and help slow the rise of obesity.

A lack of transparency between large multinational corporations and consumers is also a severe problem that economists will need to solve. One such case of a lack of information was evident when a six-year old child opened her Christmas cards to find ‘someone had already written in it’. Tesco stopped the manufacturing of their cards in China following allegations that forced prison labour was used to produce their cards {4}. Tesco admitted that it had no idea who their Christmas cards were being manufactured by; however, Tesco is not the only one to have experienced a scandal like this. Almost all large transnational corporations don’t know where their products are being manufactured, who is manufacturing the products and in what conditions. This is because the world is more interconnected now and globalisation means that its easier for companies to outsource to where the prices of the factors of production are lowest, for example in India where the cost of living is so low that an all-you-can-eat meal is only $1.85 {5}. Long supply chains are created, and this leads to large economies of scales forming as the corporations’ costs of production falls. Firms will benefit from higher profits as the total costs have fallen, resulting in high consumer and investor confidence in the corporation. On the other hand, if a corporation gets too big, diseconomies of scale may form. Using Tesco, as it got bigger and bigger and the world became smaller and smaller (the shrinking world effect due to globalisation), it got easier for Tesco to expand and source its supplies from more countries where the prices were the cheapest. This created extremely long supply chains, so large that each individual supplier couldn’t be traced. This creates huge issues like ill-treatment of workers and over-exploitation of natural resources. This is economically, socially and environmentally unsustainable. Tesco may claim that its products are manufactured sustainably and are eco-friendly, thus consumers are willing to pay the higher price even if they can buy the same good at a lower price elsewhere. This is an example of consumer irrationality, but it’s intentional. However, the market is failing; consumers don’t have complete information and by paying the higher price, their economic welfare is decreasing as they have less disposable income.

Artificial intelligence can be used here to manage the large supply chains; it can calculate where to ship what volume of goods. Due to the complex nature of global supply chains, it is difficult to judge what method will the most productive and efficient. Some companies have decided to go with a completely AI-based solution, for example Proctor and Gamble use and trust the AI solution called E2open {6}. This helps align supply with demand by collaborating with suppliers ahead of time, thus improving productivity and reducing risk {7}. Large, global companies will now be able to see where their products are being manufactured and adapt their packaging to translate the information onto consumers. Therefore, artificial intelligence has already helped and will help companies and consumers have a more transparent relationship in the future.

Artificial intelligence is when a device or algorithm can observe its environment and adjust accordingly to execute the most effective and beneficial outcome for the user. I personally believe that AI can help humanity rid itself of some of our irrational behaviour and create a healthier, fairer and more sustainable economy.