Machines of Mind: The Case for an AI-powered Productivity Boom




  • The figure illustrates that the key driver of changes in labor productivity is changes total factor productivity (TFP). There are many reasons for America’s recent economic struggles, but slow TFP growth is a key cause, slowly eating away at the country’s prosperity, making it harder to fight inflation, eroding workers’ wages and worsening budget deficits. (View Highlight)
  • The primary determinant of our long-term prosperity and welfare is the rate of productivity growth: the amount of output created per hour worked. This holds even though changes in productivity are not immediately felt by everyone and, in the short run, workers’ perceptions of the economy are dominated by the business cycle. (View Highlight)
  • for about 10 years starting in the 1990s there was a surge in productivity growth, as shown in Figure 1, driven primarily by a huge wave of investment in computers and communications, which in turn drove business transformations. Even though there was a stock market bubble as well as significant reallocation of labor and resources, workers were generally better off. (View Highlight)
  • The answer appears to be yes. Brynjolfsson, Li, and Raymond (2023) show that call center operators became 14% more productive when they used the technology, with the gains of over 30% for the least experienced workers. What’s more, customer sentiment was higher when interacting with operators using generative AI as an aid, and perhaps as a result, employee attrition was lower.  The system appears to create value by capturing and conveying some of the tacit organizational knowledge about how to solve problems and please customers that previously was learned only via on-the-job experience. (View Highlight)