AI and productivity growth – a note of caution

Some observers are predicting a very big uplift to global productivity and economic growth from developments in artificial intelligence. But our historical analysis of productivity growth and technological change suggests that while AI could be transformative for some sectors, it’s unlikely to shift world growth on to a markedly higher path.

What you will learn:

• Global growth has been trending down since the early 2000s, partly due to slower productivity growth. Demographics will be a drag in the decades ahead. To return growth in advanced economies to a 1990s-2000s pace would require total factor productivity growth to quadruple – a huge ask.
• Periods of much faster productivity growth are visible since the 19th century. Some of these periods were long lasting and were closely linked to the rise of new technologies such as railways, electric power, and computers. AI, as a general-purpose technology with potentially large spillovers, could in principle produce similar results.
• However, not all new technologies have lived up to their initial promise, and even when they have the impact on aggregate growth has sometimes been modest. Often, the gains came many years after the technology was first invented, due to lags such as slow diffusion into the capital stock. The benefits of electrification, for example, took decades to appear in the US data.