Joe Walker serves as our interlocutor. “Larry Summers – AGI and the Next Industrial Revolution” (Joe Walker Podcast, October 22, 2024) Here are a few key points that caught my eye, but there is much more to the interview itself.
Summers’s explanation of the long-term growth of economic output over time and its interrelationship with technology is as follows:
[T]The more I study history, the more amazed I am at how major inflection points in history have to do with technology. I did a calculation some time ago and figured that while only 7% of the people who have ever lived are still alive, two-thirds of the GDP that humanity has produced has been produced in my lifetime. And reasonable projections suggest that over the next 50 years we could produce three times as much as has been produced thus far throughout human history. .. Of course I think this is [AI] The technology potentially has greater implications than any technology of the past. Because fire doesn’t create more fire, and electricity doesn’t create more electricity. However, AI has the ability to improve itself.
There is an interesting dynamic between strong technological advancements in a sector and its share of the economy. Imagine if the price of something plummets because it becomes much cheaper to make it. The quantity demanded for a good increases, at least to some extent. In the context of the economy as a whole, the size of a particular sector is determined by multiplying its output by its price. If prices continue to fall and quantity demanded does not continue to grow rapidly, the share of highly productive sectors in the economy will decline. Likewise, as the price of AI technology plummets, the output of AI technology in the economy is likely to decline as well. Summer is as follows:
[S]In sectors where there is activity where there is sufficiently fast growth, you almost always see prices falling very quickly. And without a very elastic demand for them, that means they become a smaller and smaller share of the overall economy. So we’ve seen agriculture grow very rapidly, but because people only want so much food, the result is that agriculture’s share of the economy has declined. So even if growth is fast or accelerating, it has a diminishing impact on overall GDP growth. In some ways, we are seeing the same thing happening in the manufacturing sector, where manufacturing’s share of GDP is declining. But that’s not the result of a manufacturing failure. This is a result of our manufacturing success.
typical example On lighting, courtesy of Yale economist Bill Nordhaus. The lighting sector has made tremendous progress over the decades, at a rate of 8-10% per year. But the result is that nightly Little League games are always played differently than they were when I was a kid. On the other hand, candle making was an important sector of the 19th century economy, and no one considers the lighting sector to be an important sector of the economy. [today]. So, I think it’s always inevitable that 20 minutes of intimacy between two individuals will take 20 minutes, whatever the residual passage of time and any activity that inherently involves human interaction.
So those types of activities will inevitably have an increasingly larger share of economic value. And if the productivity growth of the entire economy is a weighted average of the growth of individual sectors, the fastest-growing sectors will have less and less weight over time.
In other words, the economic problem with AI is not that the capabilities of the technology are entirely isolated. Instead, it is how AI technologies interact with workers and consumers through the production and consumption of goods and services. Some tasks currently performed by workers will be replaced, but it will also create possibilities for new products and services, as well as improvements to existing products and services. I don’t pretend to know how everything will play out in the next few decades, but I do know that the AI cat has already escaped the globalized world economy. Paul Romer (Nobel ’18) provided a concise saying A few years ago: “Everyone wants progress. “Nobody wants change.” Or we could say that some people are afraid or hesitant about change until society or government has full control over the direction of change and full knowledge of its future impact. Of course, in these cases it does not amount to “change”. any.
