How Generative AI Could Jumpstart Economic Productivity

JJohn August 3, 2023 4:53 PM

Generative AI, with its capabilities to transform industries and accelerate innovation, could just be the answer to the recent lull in U.S. productivity growth. The technology, characterized by large language models, holds potential to revolutionize work processes and catalyze economic prosperity.

Generative AI's potential to boost productivity

Generative AI, including large language models like ChatGPT, is packed with massive potential to overhaul various industries. It's not just about reshaping business processes or the nature of work; it's about accelerating productivity and innovation, which are critical for sustained prosperity. The U.S. economy, in particular, is in dire need of a productivity boost. This becomes evident when we consider that productivity growth has been somewhat sluggish in recent decades, only showing temporary rebounds in the 1990s and early 2000s. Hence, the transformative potential of generative AI could be a game-changer.

Broad applications of improved AI models

The metamorphosis of generative AI models has led to some remarkable developments. For instance, large language models (LLMs) can now draft emails, summarize complex papers, suggest ideas, analyze data, write computer code, and more. This wide array of applications is capable of impacting cognitive work across various occupations and activities. For example, Google AI is being used at the Mayo Clinic to assist with diagnoses and to reduce paperwork for doctors and nurses. Research also suggests that AI can enhance productivity in software engineering and call centers, thus illustrating the far-reaching implications of these advancements.

Generative AI is not just about increasing productivity; it's also about fuelling economic growth. A recent report by Goldman Sachs suggests that generative AI could potentially increase global GDP by 7% over the next decade. This stems from the fact that these technologies could impact a vast array of cognitive work, leading to a discernible impact on the global economy. Hence, the economic implications of generative AI extend beyond simple productivity enhancements, encapsulating potential GDP growth as well.

Accelerating innovation with AI

The advent of generative AI and related technologies could potentially accelerate the pace of innovation, thereby leading to faster productivity growth. For instance, AI-based systems can predict future scientific discoveries, which could, in turn, fuel practical innovations contributing to productivity growth. Even minor increases in productivity improvement rates can have a substantial cumulative effect over time. With generative AI's potential to directly impact and potentially influence future growth, we could see a near doubling of output over the next couple of decades.

Challenges in adopting generative AI

While the potential benefits of generative AI are immense, its adoption will not be instantaneous. Several barriers can hinder the process, such as organizational inertia, a lack of necessary skills, or stringent regulations. Moreover, the productivity of many knowledge workers is difficult to measure, and even when improvements are genuine, they may be constrained by bottlenecks in other complementary steps of production processes. Therefore, the path to widespread adoption of generative AI may be pitted with challenges.

While generative AI holds promise, it could inadvertently widen the inequality gap. This is because productivity gains may disproportionately flow to those with advanced education or those already earning higher profits. The displacement of workers due to automation and trade has been a chronic issue, and AI might exacerbate the problem by eliminating well-paying, blue-collar jobs without providing comparable alternatives. Hence, despite its immense potential, generative AI could instigate a sense of dissatisfaction among workers with fewer opportunities.

Transforming education with AI

In addition to its impact on productivity and economic growth, generative AI could prove instrumental in transforming education. By leveraging AI, we could enhance the quality of education and better equip students for a rapidly changing labor market. This could mitigate some of the potential adverse effects of AI, such as job displacement. In other words, while AI might disrupt traditional job markets, it could simultaneously help create a workforce that's ready for the future.

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