⚡ Is AI finally ready to supercharge the US economy?
Also: 5 Quick Questions for … economist Erik Brynjolfsson on the AI economy
In This Issue
The Essay: Is AI finally ready to supercharge the American economy?
5QQ: 5 Quick Questions for … economist Erik Brynjolfsson on the AI economy
Micro Reads: chips and immigration, costs of CEQA, augmenting intelligence, and more …
Quote of the Issue
“In 2056, I think you'll be able to buy T-shirts on which are printed equations describing the unified laws of our universe.” - Max Tegmark
⚡ Is AI finally ready to supercharge the American economy?
When I do my “5 Quick Questions” interviews for this newsletter, I frequently ask some version of the basic following question: “If the 2020s turn out not to be a New Roaring Twenties, what probably went wrong?” I’ve gotten lots of great answers, but none yet that would match my response.
Here’s how I see it: If in 2030 we look back at the 2020s as a time of accelerated economic growth, it will be because the economy experienced faster productivity growth. Remember, GDP growth is generated by more workers generating more output per hour. But labor force growth has slowed a lot over the past half century. In the 1970s, labor force growth alone contributed 2.7 percentage points to GDP growth. So even with no productivity growth — zero, zip, nada — the economy would still have expanded at nearly 3 percent a year. Today, labor force growth is around 0.5 percent with boomers retiring and Americans having fewer kids. Absent greatly increased immigration, productivity growth will have to do the heavy lifting for faster GDP growth.
So how do we get faster productivity growth over the rest of this decade and beyond? The most obvious and likely way is that recent advances in artificial intelligence will broaden and deepen across the economy leaving almost no sector — biotech, energy, retailing, finance, manufacturing, among others — untouched and untransformed. In other words, AI will finally become an economically significant general-purpose technology in the 2020s, much as factory electrification did (finally) in the 1920s.
Let me repeat: “economically significant.” Breakthrough scientific discoveries and technological inventions need, at some point, to translate into valuable commercial innovation and greater productivity. And for that to happen, there needs to be all manner of complementary investments. This explanation from economist Erik Brynjolfsson (who is my 5QQ interviewee in this issue) is helpful: