How can AI accelerate economic growth faster than previous technologies?

The advent of generative artificial intelligence has the potential to induce faster transformations in both the workplace and the economy compared to earlier waves of technological advances.The significance lies in the potential accuracy of this evaluation, stated by a prominent Federal Reserve representative and other intellectuals during a notable conference on Friday. If proven true, it could translate to increased economic growth, elevated incomes, and reduced inflation, despite workforce changes due to automation.In her remarks at the University of Chicago Booth Monetary Policy Forum, Mary Daly, President of the San Francisco Fed, asserted, "There's no technology I'm aware of that ever reduced employment on net."

However, it substantially disturbs the distribution of employment and determines the winners and losers resulting from the introduction of these new technologies.Daly contended that the usual sequence for integrating new technologies into business operations, resulting in increased productivity, involves initially replacing routine tasks performed by humans, followed by enhancing human work, and ultimately creating entirely new types of jobs.

• Instead of occurring in a sequential manner, she suggested that there are indications AI is causing all three of those developments to unfold simultaneously.
• This suggests that the typical "S" curve of technology adoption, characterized by initial modest gains followed by significant productivity increases that eventually plateau, could be shorter and more abrupt with AI compared to previous technological advancements.

For example,Daly shared the example of a company within her Federal Reserve district engaged in the design and production of over 100,000 items, spanning from small screws to high-value products costing thousands of dollars.

• The company employs copywriters who have a substantial backlog of unwritten product descriptions for less popular items. Recently, an AI-driven program has assumed this responsibility.
• With the alleviation of copywriters' concerns about backlogs for items like screws, they can engage in more valuable tasks, such as collaborating with the sales team. This shift contributes to overall growth for the company, as highlighted by Daly.

Between the lines: It's noteworthy that this subject was extensively deliberated in a monetary policy forum, with the participation of nine out of the 19 members of the Fed's policy committee.

The other side:Not everyone in influential economic policy circles is swayed by this perspective. There is skepticism that although AI represents the latest technology enhancing productivity,

It shows how questions around AI's productivity and labor market implications are becoming increasingly front-of-mind for policymakers."Why have I attended?" questioned Andrew McAfee, a research scientist from MIT who was also part of the panel.He explained that general-purpose technologies such as AI fall within the overlapping interests of macroeconomists, those focused on monetary policy, and researchers examining the economic ramifications of highly influential technologies.