Computer Science > Artificial Intelligence
arXiv:2603.09209 (cs)
[Submitted on 10 Mar 2026]
Title:Abundant Intelligence and Deficient Demand: A Macro-Financial Stress Test of Rapid AI Adoption
Authors:Xupeng Chen
View a PDF of the paper titled Abundant Intelligence and Deficient Demand: A Macro-Financial Stress Test of Rapid AI Adoption, by Xupeng Chen
View PDF
HTML (experimental)
Abstract:We formalize a macro-financial stress test for rapid AI adoption. Rather than a productivity bust or existential risk, we identify a distribution-and-contract mismatch: AI-generated abundance coexists with demand deficiency because economic institutions are anchored to human cognitive scarcity. Three mechanisms formalize this channel. First, a displacement spiral with competing reinstatement effects: each firm's rational decision to substitute AI for labor reduces aggregate labor income, which reduces aggregate demand, accelerating further AI adoption. We derive conditions on the AI capability growth rate, diffusion speed, and reinstatement rate under which the net feedback is self-limiting versus explosive. Second, Ghost GDP: when AI-generated output substitutes for labor-generated output, monetary velocity declines monotonically in the labor share absent compensating transfers, creating a wedge between measured output and consumption-relevant income. Third, intermediation collapse: AI agents that reduce information frictions compress intermediary margins toward pure logistics costs, triggering repricing across SaaS, payments, consulting, insurance, and financial advisory.
Because top-quintile earners drive 47--65\% of U.S.\ consumption and face the highest AI exposure, the transmission into private credit (\$2.5 trillion globally) and mortgage markets (\$13 trillion) is disproportionate. We derive eleven testable predictions with explicit falsification conditions. Calibrated simulations disciplined by FRED time series and BLS occupation-level data quantify conditions under which stable adjustment transitions to explosive crisis.
| Subjects: | Artificial Intelligence (cs.AI) |
| Cite as: | arXiv:2603.09209 [cs.AI] |
| (or arXiv:2603.09209v1 [cs.AI] for this version) | |
| https://doi.org/10.48550/arXiv.2603.09209
Focus to learn more
arXiv-issued DOI via DataCite
|
Full-text links:
Access Paper:
- View PDF
- HTML (experimental)
- TeX Source
View a PDF of the paper titled Abundant Intelligence and Deficient Demand: A Macro-Financial Stress Test of Rapid AI Adoption, by Xupeng Chen
References & Citations
export BibTeX citation
Loading...
Bookmark
Bibliographic Tools
Code, Data, Media
Demos
Related Papers
About arXivLabs
Bibliographic and Citation Tools
Bibliographic Explorer Toggle
Bibliographic Explorer (What is the Explorer?)
Connected Papers Toggle
Connected Papers (What is Connected Papers?)
Litmaps Toggle
Litmaps (What is Litmaps?)
scite.ai Toggle
scite Smart Citations (What are Smart Citations?)
Code, Data and Media Associated with this Article
alphaXiv Toggle
alphaXiv (What is alphaXiv?)
Links to Code Toggle
CatalyzeX Code Finder for Papers (What is CatalyzeX?)
DagsHub Toggle
DagsHub (What is DagsHub?)
GotitPub Toggle
Gotit.pub (What is GotitPub?)
Huggingface Toggle
Hugging Face (What is Huggingface?)
Links to Code Toggle
Papers with Code (What is Papers with Code?)
ScienceCast Toggle
ScienceCast (What is ScienceCast?)
Demos
Replicate Toggle
Replicate (What is Replicate?)
Spaces Toggle
Hugging Face Spaces (What is Spaces?)
Spaces Toggle
TXYZ.AI (What is TXYZ.AI?)
Recommenders and Search Tools
Link to Influence Flower
Influence Flower (What are Influence Flowers?)
Core recommender toggle
CORE Recommender (What is CORE?)
arXivLabs: experimental projects with community collaborators
arXivLabs is a framework that allows collaborators to develop and share new arXiv features directly on our website.
Both individuals and organizations that work with arXivLabs have embraced and accepted our values of openness, community, excellence, and user data privacy. arXiv is committed to these values and only works with partners that adhere to them.
Have an idea for a project that will add value for arXiv's community? Learn more about arXivLabs.
