Column: Economic implications of AI and the metaverse in a changing landscape

Text: Michael So

BBA (Hons) in Risk and Insurance Management (2001)

Michael is an expert in e-learning and e-commerce technology development with over 20-year experience. Throughout his career, Michael has held executive positions at several international and large-scale enterprises and listed companies. He is currently Special Advisor to the Associate Vice-President.

As a technology enthusiast and strategic business consultant, I can see that Artificial Intelligence (AI) and the Metaverse are going to transform the economic landscape. These innovations will create new business opportunities and disrupt traditional industries in ways we can’t yet imagine.

Indeed, more than 100 new AI applications are already being launched every week, bringing significant change to sectors like insurance, accounting, and the legal profession. And, elsewhere, powerful AI models, such as ChatGPT-4, are making it possible to simplify systems development, improve search functions, and enhance access to information.

Clearly, the advances in these areas can be expected to have wide-reaching economic implications. For instance, the Metaverse can serve as a platform for a more inclusive virtual economy, and that is something which will no doubt give university professors, researchers and economic theorists much to contemplate.

The first thing to look out for is the accelerating speed of transformation in various industries. All around us, we can see that the rapid implementation of AI applications is driving innovation, leading to a phenomenon known as "creative destruction", a term coined by the renowned economist Joseph Schumpeter.

The latest AI-powered tools mean employers can now automate all kinds of routine tasks, anything from drafting standardised legal documents or processing insurance forms to preparing basic month-end accounts. Making use of the technology helps to increase efficiency, reduce costs, and minimise human error. And the resulting shift will inevitably lead to a redistribution of human resources, with employees freed from many of the mundane tasks and, instead, able to focus their energies on more creative, strategic, and customercentric roles.

The second key thing is that advanced AI models like ChatGPT-4 will continue to “democratise” access to systems development and, thereby, foster further innovation. As the technical barriers are lowered, more people will be encouraged to design and trial other new applications, which will only increase the general sense of momentum. We can foresee that this will lead to a more competitive market, driving down product and service costs, which is consistent with the economic concept of “perfect competition”.

Furthermore, developments like this should contribute to a more inclusive economy, where technology empowers individuals from diverse backgrounds to play a full part. In addition, it is reasonable to predict that AI-powered search and summarisation capabilities will increase market transparency by making a wealth of information more accessible and “digestible”. Having greater transparency reduces information asymmetry, a concept introduced by the economists George Akerlof, Michael Spence, and Joseph Stiglitz.

As a result, consumers are in a position to make wellinformed decisions; businesses better understand market trends and customer preferences; and prices for products and services remain generally stable. In other respects, enhanced market transparency can lead to a more equitable distribution of knowledge, resources and opportunities, which benefits society at large.

Alongside all this, the Metaverse presents a unique opportunity to create a virtual economy. By transcending traditional barriers, whether linked to geography, social status or simply access, this new environment will allow people everywhere to interact, trade, and collaborate on a more equal footing. AI technology applied in the Metaverse can enhance communication, thus enabling individuals to present ideas and business plans effectively, regardless of their language proficiency or writing skills. The virtual economy can also exhibit the “network effect”, a concept which holds that the value of a product or service increases as more people use it.

Michael is an expert in e-learning and e-commerce technology development with over 20-year experience. Throughout his career, Michael has held executive positions at several international and large-scale enterprises and listed companies. He is currently Special Advisor to the Associate Vice-President.

Therefore, in basic terms, as the Metaverse gains users, the virtual world will become more valuable, attracting businesses and further investment. The resulting positive feedback loop should spur rapid economic growth, while the use of blockchain technology and decentralised finance (DeFi) should facilitate more efficient allocation of resources and reduced transaction costs.

In my view, there is no doubt that a revolution is under way. The business landscape is changing and, at this point, it is vital to study these phenomena in more detail and explore how businesses can leverage the new technologies and respond to everchanging market dynamics.