The macroeconomics of artificial intelligence

ARTIFICIAL intelligence (AI) is likely to be among the most transformative technologies of our time. The nature of the vast changes ushered in by AI – most notably potential efficiency gains in both white- and blue-collar occupations – can partly explain the attention the technology has garnered, particularly on the heels of developments in large language models such as ChatGPT.

Although the technology itself is wholly new, the macroeconomic challenges associated with AI are not. History provides ample evidence that, while AI is unlikely to spur joblessness or mass unemployment, the likelihood of rising inequality is high. And this brings with it a host of monetary and macroeconomic considerations that will impact economists and central banks alike.

What are the macroeconomics of AI?

A common starting place for economists is to study previous technological revolutions – most notably the industrial revolution and the early 20th century technological transformation (railroads and glassware, for example). Both of these periods coincided with significant growth in labour productivity. Both boosted growth and quality of life for subsequent generations. And both of these moments were replete with contemporary discourse that fretted about the “end of work” and the prospect of widespread unemployment at the hands of new machines.