AI promises considerable economic benefits, even as it disrupts the world of work. These three priorities will help achieve good outcomes. The time may have finally come for artificial intelligence (AI) after periods of hype followed by several "AI winters" over the past 60 years. AI now powers so many real-world applications, ranging from facial recognition to language translators and assistants like Siri and Alexa, that we barely notice it. Along with these consumer applications, companies across sectors are increasingly harnessing AI's power in their operations. Embracing AI promises considerable benefits for businesses and economies through its contributions to productivity growth and innovation. At the same time, AI's impact on work is likely to be profound. Some occupations as well as demand for some skills will decline, while others grow and many change as people work alongside ever-evolving and increasingly capable machines.
We face two problems here. First, productivity has grown only half as fast in the last decade as in the prior one, so we're not creating more and better stuff as fast as we had been. Second, the productivity growth we've seen hasn't been generating commensurate wage and income growth for most workers and families. Instead, the benefits of productivity growth are going mainly to those with the very highest incomes. That's partly because the share of income going to business owners and shareholders has risen at the expense of that going to labor.
Despite all the advances in technology designed to streamline work, output per hour has actually been leveling off since around 2006. While some believe that's the new normal for productivity, new research from MIT Sloan economist Erik Brynjolfsson and his colleagues shows it may just be a temporary lull. This is one of the great puzzles of our era: amazing technologies, but so far, slow productivity growth. The researchers developed a model to account for the presence of unmeasured intangible investments in a firm, which can signal the benefits of an emerging general purpose technology that don't show up in other metrics. They studied the effect in the context of artificial intelligence, an emerging technology that many believe will carry big implications for productivity.
If a quiet theme can be found in Washington's debates over taxes, trade, budgets, and regulations, it is the difficulty of settling on actions that will bring back the high productivity that the United States enjoyed just 20 years ago. Productivity growth, or a rising output per worker, has slowed, as it has in much of the world, reducing living standards. What can bring it back? The first step is for elected leaders to focus on ways to foster innovation, such as investments in education, infrastructure, and research. One model for such a singular political focus is New Zealand.