Is the rise of generative artificial intelligence an opportunity for turbocharged productivity and income growth, or a threat to millions of workers? The answer to both is effectively “yes,” according to a top central banker who weighed in on the economics of AI on Friday.
Why it matters: It was the first time a top Fed official has spoken in detail on the macroeconomic implications of AI.
Driving the news: Fed governor Lisa Cook, speaking at a National Bureau of Economic Research conference in Toronto, said that “[e]conomic history suggests cautious optimism” in how the technology built on large language models might affect jobs.
What they’re saying: Generative AI’s economic importance depends on whether it turns out to be a “general purpose technology” that improves productivity across a wide array of industries, as tech advances and electrification did a century ago.
“The impact of AI on the economy and monetary policy will depend on whether AI is just another app or something more profound,” Cook said. “The most consequential innovations in the past have been general purpose technologies that have broadly transformed the economy over an extended period of time.”
She suggests there is a strong possibility this is the case. “Generative AI makes communication more efficient, and nearly all human activities—and all industries—involve communication,” she said.
“It is true that if you let generative AI draft an email, write the minutes of a meeting, or research a topic, you will have to review, fact-check, and edit the result,” she adds. “Nonetheless, thanks to AI’s contribution, you may be much closer to your goal when you start than if you began with a blank page.”
What’s next: While that has the potential to make many jobs obsolete, the net benefits for workers and incomes should be favorable, Cook argued — though not without pain in some sectors.
“When the world switched from horse-drawn transport to motor vehicles, jobs for stable hands disappeared, but jobs for auto mechanics took their place,” she said.
“New technologies may displace some types of labor, but they can also raise the productivity and incomes of jobs they create or complement,” Cook adds.
“Nonetheless, the displacement effect might be concentrated and the productivity effect more diffuse. Therefore, while many workers throughout the economy benefit, a smaller set bear the brunt of the negative effects,” which could make for “a difficult transition for some workers.”
The bottom line: The potential — and pitfalls — for AI to shape the growth and jobs outlook is increasingly on the minds of top policymakers.