In this article Owen Lamont from Acadian Asset Management  revisits Einstein’s Depression-era warning about “technological unemployment” and argues that the real economic threat may not be AI itself, but the narrative that AI will replace us all.

Einstein’s Layoffs

A spectre is haunting the economy – the spectre of mass layoffs due to AI. One manifestation is the recent announcement by Block that it was embracing a “deliberate and bold” AI adoption policy and was therefore laying off 40% of its employees.[1] In assessing the economic impact of artificial intelligence, can we learn anything from Albert Einstein, an exemplar of human intelligence?

What would Einstein have to say about the impact of AI? He’d be predicting Great Depression II. Here’s what Einstein said in 1933, during the depths of Great Depression I, as quoted by Shiller (2019):

According to my conviction it cannot be doubted that the severe economic depression is to be traced back for the most part to internal economic causes; the improvement in the apparatus of production through technical invention and organization has decreased the need for human labor, and thereby caused the elimination of a part of labor from the economic circuit, and thereby caused a progressive decrease in the purchasing power of the consumers.

Einstein was talking about the concept of “technological unemployment,” the idea that technology will destroy jobs and lead to disaster.

Will AI cause mass unemployment? Probably not, because when it comes to economics, Einstein was no Einstein. The vast majority of economists, including me, do not think that automation was an important cause of the Great Depression. Historically, revolutionary technologies do not generally cause mass unemployment. Of course, it’s always possible that AI will be different due to its rapid introduction. But the big picture is that innovation eventually makes society richer and not poorer.[2]

So, I’d say that Einstein’s economic views were riddled with fallacies and falsehoods.[3] I’m sure that my views on quantum mechanics are equally valueless. However, there’s something to be learned from Einstein’s words, because he was articulating a widespread contemporary narrative. And narratives are important. One theory is that the Great Depression, while not caused by automation, was caused by the fear of automation.

Shiller (2019) makes a surprisingly convincing case that the technological unemployment narrative was a contributing factor to the Great Depression. Here’s a headline from The New York Times on February 26, 1928:

MARCH OF THE MACHINE MAKES IDLE HANDS

Prevalence of Unemployment With Greatly Increased Industrial Output Points to the Influence of Labor-Saving Devices as an Underlying Cause

Perhaps readers of this headline, concerned about their job security, would become less willing to spend money on a new car. The demand for new cars goes down, leading to layoffs by automakers and further negative headlines. We end up with idle factories, not because of machines replacing labor, but because of a self-fulfilling prophecy of low aggregate demand; a “bad equilibrium” with pessimistic beliefs.

Here’s Shiller in 2019 describing a similar narrative-driven negative feedback loop in the case of AI:[4]

I’m worried about the narrative that artificial intelligence (AI) will replace everyone’s jobs. It’s impossible to predict the effects of artificial intelligence on people’s livelihoods and future employment, but narratives around AI and machine learning really have the potential to cause economic booms and busts and drive public policy. The narrative hasn’t become toxic at this point… It could take hold in the United States, too, especially if some new advancement in AI comes out that is really impressive or unemployment starts to rise.

Well, here in 2026, the really impressive new advancement has arrived, and Shiller’s toxic narrative is spreading as predicted. It’s not important whether this narrative is true, what’s important is that it is believed by consumers. If low consumer confidence leads to reduced spending, the narrative can have real economic impact. And even if consumers don’t actually believe the narrative, stock prices could decline if investors believe that consumers believe the narrative.

We should resist these potentially self-fulfilling prophecies of doom. To the people of the world, here is my message: do not fear the robots, for they are our friends. They will lighten our burdens and make us healthier, wealthier, and happier. My fellow humans, we have nothing to fear from AI but fear of AI itself.