Economist Steve Hanke argued that artificial intelligence (AI) is unlikely to replace workers on a massive scale because deploying it remains too expensive.
Hanke, a professor of applied economics at Johns Hopkins University and a former member of President Ronald Reagan‘s Council of Economic Advisers, argued that many expectations surrounding AI overlook the technology’s real-world costs. While speaking to Business Insider, he said AI requires significant investments in electricity, water and computing infrastructure, making large-scale worker replacement less practical than many forecasts suggest.
The Cost of AI
“The idea that artificial intelligence will be free to use and virtually costless to provide is delusional and dumb,” Hanke told Business Insider. He added that AI is “incredibly costly” and “very resource intensive,” requiring “huge amounts of water, power, and physical capital” such as graphics chips.
Hanke also pushed back against predictions of widespread unemployment driven by AI.
“Businesses will not be firing everybody and replacing them with AI,” he said, arguing that in many cases employing people remains less expensive than deploying advanced AI systems.
Major technology companies including Microsoft Corp. (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN) and Meta Platforms Inc. (NASDAQ:META) have projected roughly $700B in combined capital expenditures this year and about $1T in 2027 as they accelerate investments in AI infrastructure.
Differing Views on AI
The comments add to an increasingly divided debate over AI investment and adoption.
Hanke’s comments come as Wall Street continues to debate whether the AI boom is sustainable. Earlier this month, ‘Big Short’ investor Michael Burry argued investors were increasingly questioning whether Big Tech’s massive AI spending could deliver adequate returns.
Last week, Hanke also warned of an “AI bubble,” arguing that a growing web of investments and financing deals among AI companies could artificially inflate demand. He said the industry’s increasing reliance on what he described as circular financing raised broader concerns about the sustainability of the AI boom.
Tesla Inc. (NASDAQ:TSLA) and Space Exploration Technologies Corp. (NASDAQ:SPCX) CEO Elon Musk has taken a different view. He said AI could eventually outperform humans in most jobs, while raising broader questions about how people will find meaning and purpose in an AI-driven world.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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