AI and the Economy

AI and the Economy

We review the evidence that artificial intelligence (AI) is having a large effect on the economy. Across a variety of statistics—including robotics shipments, AI start-ups, and patent counts—there is evidence of a large increase in AI-related activity. We also review recent research in this area that suggests that AI and robotics have the potential to increase productivity growth but may have mixed effects on labor, particularly in the short run. In particular, some occupations and industries may do well while others experience labor market upheaval. We then consider current and potential policies around AI that may help to boost productivity growth while also mitigating any labor market downsides, including evaluating the pros and cons of an AI specific regulator, expanded antitrust enforcement, and alternative strategies for dealing with the labor market impacts of AI, including universal basic income and guaranteed employment.

Artificial intelligence (AI) has been advancing rapidly in recent years, measured both in terms of the amount of resources devoted to it and also in terms of its outputs.¹ The Economist estimated that AI-related mergers and acquisitions were 26 times larger in 2017 than in 2015.² Increased investment has been driven by and also contributed to rapid increases in the technical capabilities of artificial intelligence (AI). For example, according to the AI Index, error rates for image recognition has dropped from 29% to less than 3% between 2010 and 2017, surpassing human performance levels.³

These rapid advancements apply not just to AI, but also to robotics, sensors, and the connection of them all via digitization (also known as “Industry 4.0”). These advancements have started to manifest themselves in a variety of applications, including AI beating humans at complex strategy games,⁴ the creation of chatbots and virtual assistants such as Alexa and Siri,⁵ and Amazon’s new cashier-less and cash-less grocery stores.⁶

This has led both to excitement about the capability of technology to boost economic growth and to concern about the fate of human workers in a world in which computer algorithms can perform many of the functions that a human can (e.g., Frey and Osborne 2017; Furman 2016). Some have taken more extreme views. For example, Elon Musk has stated his belief that “AI is a fundamental risk to the existence of human civilization.”⁷