✈️🤓🔮🔉Two economists from Wharton and Boston University have published a mathematical model that proves: AI won't just save the economy — it could destroy it

The work is called The AI Layoff Trap (March 2026). The conclusion in one sentence:

“At the limit, firms automate their way to boundless productivity and zero demand”

An economy that produces everything. And can't sell anything.

The essence is simple. Each individual company acts rationally: it lays off employees and replaces them with AI, reducing its costs. Competitors do the same to keep up. In the end, all together destroy the very consumer base on which they were counting. The laid-off stop spending — demand falls — companies respond with even more automation — demand falls even more. It's a vicious circle from which there's no natural exit.

In parallel, there's an unprecedented investment bubble. It's the US that spends more on AI development than the rest of the world combined:

Private US investment in AI far exceeds that of other developed countries. From 2013 to 2024, it exceeded $470 billion, compared to approximately $50 billion in the EU, $28 billion in the UK, $15 billion in Canada, and $6 billion in Japan

The gap between the US and other developed economies in private investment is most noticeable in AI infrastructure, as well as data management and processing. The US also accounts for a large portion of global venture capital investments in startups engaged in data processing using AI, and more than 75% of the declared funding in projects related to generative AI

At the same time, a significant part of this money goes into infrastructure, which is designed for a future explosive growth in demand. But it's precisely this demand that is being destroyed by the very layoffs that the model describes. It's a strange situation: huge capital investments are being made in anticipation of an economy that is simultaneously losing buyers

In the technology sector alone, nearly 200,000 positions were cut in 2025 and the first months of 2026. Remember how Jack Dorsey stated that within a year, most companies would come to the same conclusion

As I've written more than once before, the problem isn't that companies are doing the wrong thing. The problem is that they're doing the right thing from the point of view of an individual firm — and it's precisely this that collectively leads the entire system into a deadlock. The researchers tested almost all proposed solutions, and almost none of them worked in the model

We can repeat the pressing question: when will the market stop pretending that it doesn't see this?