Feb 23, 2024 - Economy

The case for skepticism on AI productivity gains

Illustration of a robot hand crumpling a hundred dollar bill

Illustration: Sarah Grillo/Axios

Federal Reserve Bank of New York president John C. Williams weighed in on the potential impact the artificial intelligence boom could have on the economy — specifically, whether it will make workers more productive over the long term.

Where it stands: Whether or not the current productivity boom is sustainable — especially if and when the supply-side effects Williams mentions wear off — might come down to the impact of AI.

  • "One way to think of it is AI is — and this is my own view, but based on what I heard from others — is AI is just that new thing that's going to get us that 1% to 1.5% productivity growth that we've been getting for decades or even a century," Williams says.

Still, Williams noted there's a chance that AI becomes a technology for general purpose underlying different types of products and services, much like the internet and tech boom in the 1990s.

  • "So there is a possibility that we could get a decade or more faster productivity growth if this really is its general purpose and revolution," Williams says.

Between the lines: There is at least one key difference between the tech boom of the 1990s and early aughts, and today's AI wave.

  • Back then, many of the computers were being produced in the U.S. — a fact that helped juiced those productivity gains, Williams says.
  • "[I]t was not only that we were doing things differently and making new things for the internet, but we were producing the stuff," Williams says. "Today, we produce a very small share of computers and chips."
  • It means any productivity boom from AI "might happen in other countries more than it happens here," Williams said.
  • "So we get productivity gains from new technologies, but we're not getting that extra hit, if you will, because we're just not as big a producer of technology, chips and computers."

The bottom line: "The one thing we all agree is AI is very important. It's a big deal," Williams said.

  • "It could very well be one of the drivers of strong productivity growth in the future. But we don't know. It's really too early."
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