The Macroeconomics of Artificial Intelligence

The collective decisions we make today will determine how AI affects productivity growth, income inequality, and industrial concentration Economists have a poor track record of predicting the future. And Silicon Valley repeatedly cycles through hope and disappointment over the next big technology. So a healthy skepticism toward any pronouncements about how artificial intelligence (AI) will change the economy is justified. Nonetheless, there are good reasons to take seriously the growing potential of AI-systems that exhibit intelligent behavior, such as learning, reasoning, and problem-solving-to transform the economy, especially given the astonishing technical advances of the past year. AI may affect society in a number of areas besides the economy-including national security, politics, and culture. But in this article, we focus on the implications of AI on three broad areas of macroeconomic interest: productivity growth, the labor market, and industrial concentration. AI does not have a predetermined future. It can develop in very different directions. The particular future that emerges will be a consequence of many things, including technological and policy decisions made today. For each area, we present a fork in the road: two paths that lead to very different futures for AI and the economy. In each case, the bad future is the path of least resistance. Getting to the better future will require good policy-including Creative policy experiments A set of positive goals for what society wants from AI, not just negative outcomes to be avoided Understanding that the technological possibilities of AI are deeply uncertain and rapidly evolving and that society must be flexible in evolving with them First fork: Productivity growth The first road concerns the future of economic growth-which is largely the future of productivity growth. The US economy has been stuck with disturbingly low productivity growth for most of the past 50 years, except for a brief resurgence in the late 1990s and early 2000s (Brynjolfsson, Rock, and Chad 2019). Most advanced economies now have the same problem of low productivity growth. More than any other factor, productivity-output per unit of input-determines the wealth of nations and the living standards of their people. With higher productivity, such problems as budget deficits, poverty reduction, health care, and the environment become far more manageable. Boosting productivity growth may be the globe’s most fundamental economic challenge.