I am a fan of generative AI because I think it can enhance productivity significantly. And we desperately need to improve productivity to boost growth in an ageing society. Yet, when I read a recently published short note from Daron Acemoglu on the likely growth impact of AI
The result is quite astonishing, but I would disagree with some of the referenced papers on which it is based. As a software and data engineer, I really would estimate the productivity gains to be much higher than the ~50% stated in the study by Peng et al. - rather between something like 100% and 1000% (yes, that is 10 times). This could be also due to the more powerful models available today and increased experience in knowing which tasks to apply them to, and how. (The study's task was also unusual since no software engineer worth their salt would (a) write a web server from scratch, and (b) do so in JavaScript. ;P)
I think the 50% productivity gain is already at the high end. Be aware that the internal combustion engine and the industrial revolution only brought with them productivity gains of about 20% to 50% across the entire economy. There clearly are areas where there is massive productivity gains, such as software engineering or even music (see: https://www.youtube.com/watch?v=zbo6SdyWGns) but in most other sectors the gains are far more modest. In my own field of finance, I am using AI, but so far the productivity gains are only in the range of about 5% to 10% because generative AI is pretty bad at data analysis - even the latest generation. I know this is going to get better, but I doubt that we will see productivity gains of more than 20% in finance.
Plus, don't forget that the vast majority of our economy is based on human to human interaction and physical actions by humans. Think of construction, retail shops, any sales activity. AI can make these processes more efficient, but there are limited efficiency gains in social care, construction, food preparation, teaching, etc.
Finally, you also have to be aware that if we make people redundant due to increased productivity gains from AI, the unemployed will be a drag on national productivity because they depend on the social welfare system. Thus, what you gain in productivity in one part of the economy, you lose in another.
The result is quite astonishing, but I would disagree with some of the referenced papers on which it is based. As a software and data engineer, I really would estimate the productivity gains to be much higher than the ~50% stated in the study by Peng et al. - rather between something like 100% and 1000% (yes, that is 10 times). This could be also due to the more powerful models available today and increased experience in knowing which tasks to apply them to, and how. (The study's task was also unusual since no software engineer worth their salt would (a) write a web server from scratch, and (b) do so in JavaScript. ;P)
I think the 50% productivity gain is already at the high end. Be aware that the internal combustion engine and the industrial revolution only brought with them productivity gains of about 20% to 50% across the entire economy. There clearly are areas where there is massive productivity gains, such as software engineering or even music (see: https://www.youtube.com/watch?v=zbo6SdyWGns) but in most other sectors the gains are far more modest. In my own field of finance, I am using AI, but so far the productivity gains are only in the range of about 5% to 10% because generative AI is pretty bad at data analysis - even the latest generation. I know this is going to get better, but I doubt that we will see productivity gains of more than 20% in finance.
Plus, don't forget that the vast majority of our economy is based on human to human interaction and physical actions by humans. Think of construction, retail shops, any sales activity. AI can make these processes more efficient, but there are limited efficiency gains in social care, construction, food preparation, teaching, etc.
Finally, you also have to be aware that if we make people redundant due to increased productivity gains from AI, the unemployed will be a drag on national productivity because they depend on the social welfare system. Thus, what you gain in productivity in one part of the economy, you lose in another.
Indeed, the overall picture for the economy might be very different (and very difficult to model).