↗ The case for an AI-driven productivity boom

It's not just that generative AI is powerful, it's also being quickly adopted

Quote of the Issue

“Faster productivity growth is an elixir that can solve or mitigate many of our society’s challenges, from raising living standards and addressing poverty to providing healthcare for all and strengthening our defenses. Indeed, it will be nearly impossible to fix some of our budgetary challenges, including the growing deficits, without sufficiently stronger growth.” - “Machines of mind: The case for an AI-powered productivity boom”

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The Essay

↗ The case for an AI-driven productivity boom

Let’s briefly summarize what’s been happening with artificial intelligence/machine learning/deep learning/generative AI such as ChatGPT, Bard, Copilot, and Midjourney. The American economy has been in dire need of the Next Big Thing to boost productivity and economic growth. The most likely candidate has been AI/ML. To quote economist Erik Brynjolfsson — perhaps the leading expert on the digital economy — making the case for AI/ML as a productivity catalyst:

AI is a general-purpose technology that is affecting almost every industry while accelerating the pace of discovery. Recent breakthroughs in machine learning will boost productivity in areas as diverse as biotech and medicine, energy technologies, retailing, finance, manufacturing and professional services

And as far as timing goes for this boost to productivity growth:

The productivity benefits of general-purpose technologies typically take years to show up in the official statistics. In fact, productivity is initially suppressed as organizations invest time and effort creating intangible assets like new business processes, new skills, new goods and new services. However later, these investments are harvested, boosting productivity. The result is a productivity J-curve. Recent research indicates that are approaching the rising part of the productivity J-curve for the AI and related technologies.

Brynjolfsson made those statements as a part of a “long bet” with techno-skeptic economist Robert Gordon of Northwestern University. Specifically: “Private Nonfarm business productivity growth will average over 1.8 percent per year from the first quarter (Q1) of 2020 to the last quarter of 2029 (Q4).” Brynjolfsson is the bullish “predictor” with Gordon the bearish “challenger.”

Now a lot has happened since that bet was made a few years back, most notably the GenAI revolution of the past six months. And despite the exciting economic potential of what appears to be a “general purpose technology” (such as electrification, the internal combustion engine, and the PC + internet), virtually all the news coverage has been about the potential for massive job loss, expanding inequality, and existential risk to humanity. Such is the techno-pessimist, Down Wing culture of America and the West.

But let’s circle back to Brynjolfsson for a different perspective on GenAI. In a new analysis, “Machines of mind: The case for an AI-powered productivity boom,” Brynjolfsson, along with co-authors Martin Baily and Anton Korinek, focus on the growth impact of GenAI.