Artificial intelligence: Don’t believe the hype about AI’s impact on productivity

While some believe that machines soon will do everything humans can do, ushering in a new age of boundless prosperity, other predictions are at least more grounded. For example, Goldman Sachs predicts that generative AI will boost global GDP by 7 per cent over the next decade, and the McKinsey Global Institute anticipates that the annual GDP growth rate could increase by 3-4 percentage points between now and 2040.

What about the share of tasks that will be affected by AI and related technologies? Using numbers from recent studies, I estimate this to be around 4.6 per cent, implying that AI will increase TFP by only 0.66 per cent over 10 years, or by 0.06 per cent annually. Of course, since AI will also drive an investment boom, the increase in GDP growth could be a little larger, perhaps in the 1-1.5 per cent range.

Similarly, we are unlikely to see far more than 4.6 per cent of tasks being taken over, because AI is nowhere close to being able to perform most manual or social tasks .As of 2019, a survey of essentially all US businesses found that only about 1.5 per cent of them had any AI investments. Even if such investments have picked up over the past year and a half, we have a long, long way to go before AI becomes widespread.

But many of the 4.6 per cent of tasks that could feasibly be automated within 10 years – evaluating applications, diagnosing health problems, providing financial advice – do not have such clearly defined objective measures of success, and often involve complex context-dependent variables . In these cases, learning from outside observation is much harder, and generative AI models must rely instead on the behaviour of existing workers.

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