Other parts of this series:
Key indicators like the rate of GDP expansion, population demographics, and total factor productivity reveal a discouraging truth about growth in the world’s most advanced economies today. As we’ve previously discussed, these metrics indicate that increases to capital and labor are no longer driving the economic performance that the world has come to expect.
Enter artificial intelligence. While far from a new idea, artificial intelligence (AI) is changing rapidly, with new capabilities like natural language processing and machine learning changing how banks and other businesses gather information, analyze it, and act.
As a result, AI is becoming a new factor of production. Recent analysis from Accenture indicates that it could double economic growth rates in 12 developed economies.
AI’s impact on growth should be easiest to measure in terms of its ability to free up labor to focus on high-value tasks or enhance labor and capital . However, there is a third way in which AI can catalyze economic growth: its ability to accelerate innovation throughout an economy.
This is harder to measure than AI’s other economic impacts, and therefore less talked about, but its impact could be no less profound. We’ll focus on AI’s innovation diffusion abilities in this post.
To grasp the “knock-on” effect advanced AI can have on economies, consider the example of driverless cars. Thanks to advances in computer vision, machine learning algorithms, cameras, and navigational tech like lasers and global positioning systems, driverless cars are rapidly moving from daydream to reality. Technology companies like Google Inc. and traditional car makers like the Ford Motor Company and BMW AG are racing to bring driverless cars to market.
The impact of driverless cars will create an innovation chain reaction
The AI systems powering driverless cars will generate masses of data. This is expected to create opportunities for insurers to create new revenue streams, especially if they combine this new data source with others from smart phones and public transportation systems. Covering all forms of mobility with one insurance policy could be possible. This data can also be useful to traffic planning authorities, changing the way they charge for road usage.
A driverless car used by services like Lyft, Inc. or Uber Technologies Inc. could spend a much greater portion of its time actually driving, unlike privately-owned vehicles today that spend the majority of their time parked. Reduced demand could free up valuable urban real estate devoted to parking right now, creating development opportunities.
It doesn’t stop there. Driver’s licenses could disappear, leaving people with more money in their pockets and time on their hands. Labor market participation could grow as those unable to drive (for example, because of disability or injury) are empowered to travel for work.
The entertainment industry could change as people are able to devote their commuting time to absorbing culture. Driving under the influence of alcohol could also disappear, saving lives and boosting sales at bars and restaurants—though perhaps driving up healthcare costs in the long run. Transportation could become more integrated with other services, so a customer could buy a meal from a restaurant and the cost of a trip there and back in a single transaction.
Or perhaps not. The further the analysis extends, the fuzzier the specific predictions. The important point is that driverless cars, like other cutting-edge AI developments, are likely to catalyze chain reactions of innovation that could radically transform the way economies function and the pace at which they grow.
And this is just one example. Other AI-enabled technologies, like intelligent automation or next-gen personal assistants or self-piloting drones could be just as consequential. The specifics are difficult to predict with certainty, but the big picture is clear. Through innovation diffusion, AI is positioned to rewrite the rules of growth in ways that are difficult to imagine—maybe even impossible.
Of course, nothing about the future is guaranteed. AI itself could be a risk to future prosperity—the entrepreneur Elon Musk has said it could become humanity’s “biggest existential threat.”1 Much depends on how we manage the transition to the AI era. Come back next week for some discussion of this, or read more about Accenture’s AI economic impact analysis here.
“Elon Musk’s Billion-Dollar Crusade to Stop the A.I. Apocalypse,” Vanity Fair, April 2017. Access at: https://www.vanityfair.com/news/2017/03/elon-musk-billion-dollar-crusade-to-stop-ai-space-x