Michael Strain explores one of the most important impacts of artificial intelligence.
Since OpenAI’s ChatGPT burst onto the scene in late 2022, economists and commentators have been discussing generative AI’s possible effects on productivity. But from a cultural and political perspective, it is useful to ask a normative question: How much productivity growth should society desire?
The economic disruption that accompanies rapid productivity growth can be wrenching. The British Industrial Revolution, for example, led to stagnant or declining average wages in at least the last two decades of the 18th century, with some economists arguing that it took several more decades for industrialization to raise typical workers’ living standards. Meanwhile, real wages plummeted in some occupations, and many laid-off workers struggled for years to find jobs. …
… [B]ecause output per worker is the key driver of long-term living standards, it is tempting to argue that we should want productivity to grow as rapidly as possible. Rising living standards mean new and better medicines, safer workplaces, longer lives, and more leisure time.
Seemingly small changes to growth rates can have a huge economic impact. Productivity growth was around 3% at the peak of the 1990s digital revolution, compared to roughly 1.5% following the 2008 global financial crisis. The former rate would double Americans’ standard of living in 24 years, while the latter rate would double it in 47 years.
Finding the right balance between the damage from economic and social disruption and the benefits of rapidly rising productivity and living standards requires considering three key questions.
First, citizens and policymakers must decide their optimality criterion. Is the goal to make aggregate economic output grow as quickly as possible? Or is the aim to increase incomes at a rapid pace while preventing a jump in poverty or long-term unemployment? …
… A second consideration is the living standard of future generations. …
… The final consideration is the pace of technological advance: The faster it improves, the greater the social instability and the harder it is for laid-off workers to find new jobs.
