The phillips curve

This chapter pays attention to the Philipps Curve. This theory states that inflation and unemployment have a stable and inverse relationship (Phillips 1958). In this theory, economic growth is expected to generate inflation and more work opportunities, which decrease unemployment. We review how the application of AI would impact assumptions of the Philips Curve as well as the potential impact of AI on this theory. In particular, our focus is on the critical aspect of the Philips Curve, which is unemployment and inflation. When the Phillips Curve made an appearance into the scene, labour had a considerable role in the production of goods and services. With several countries intensely pursuing technology, we begin to see most factories adopting AI-powered technologies in their production lines. Mostly, we are beginning to see a massive line of production processes being automated. When a considerable part of the production line becomes automated (mechanized), we think the critical aspect of the Philips Curve will be impacted. Variables of both inflation and unemployment are key to the Phillips Curve. Our conclusion is that in the era of artificial intelligence, where a considerable part of the production line is expected to be automated (mechanized), we think the critical aspect of the Philips Curve will be impacted. In the automated world, economic growth could be fuelled by robotic infrastructure. Because the robotic infrastructure would have possibly replaced individuals, growth would not be accompanied by employment opportunities. At the same time, since this could result in unemployment, the demand for goods and services could be expected to be put under pressure. If supply remains the same because the robotic infrastructure will be producing, potentially at a higher rate than humans, prices could be expected to decline, dampening inflation prospects.