Artificial Intelligence Technologies and Aggregate Growth Prospects

By T. Bresnahan. 2021

Artificial Intelligence Technologies are already in large scale use in two kinds of applications. We examine those applications, consumer/product matching engines and user interfaces, as well as the early diffusion of AITs and some categories where laboratory AIT and application are closely linked. In the leading applications, AITs are core production technologies with hundreds of billions of dollars in revenue. These production applications of AITs involve no substitution of machine for human work at the task level. The tasks undertaken by AIT in the leading applications were previously done by capital, not by human workers. Whatever your view of AITs, it should be updated to deal with this basic fact about their initial highly valuable applications. There is capital deepening, not factor substitution, at the task level. The absence of task-level substitution is unsurprising to scholars of ICT-based production. The transition to ICT-based production has largely proceeded at the system level, not the task level. A modern example is the AIT-using Amazon store and mall, which as a system competes with brick and mortar stores and malls. That competition involves many changes which are not cost minimization, i.e., not the substitution capital for labor with fixed outputs. Instead, system-level substitution is driven as much or more by output characteristics – convenience, breadth of choice, effective recommendations – as by cost. In forecasting the long run factor demand implications of AITs, there is no good reason to see them as different from other ICT – working at the system level to slowly change over to a more capital intensive, less labor intensive, more human capital intensive form of production, but not a form of production whose primary new feature is different factor use. Looking not only at the leading applications but at the early diffusion, AIT-based systems appear to be on the same track as most other highly innovative ICT-based systems of the last 25 years. They have spread out over a range of activities, to be sure, but have their largest impact in a narrow range of industries and functions, notably in consumer-oriented mass market production, distribution and marketing. The invention of consumer-oriented services like the WWW and consumer oriented devices like smartphones and tablets represents the diffusion of ICT to consumption. AITs, however, so far are participate in a very different 21st century trend, capital deepening in a narrow range of consumer-oriented markets and functions with divergence across firms in the rate of technical progress. Examining the strengths and weaknesses of AITbased production illuminates the narrowness and depth of ICT application more generally.

Subfields: Economics & Operations Research

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics & Operations Research

Citations in the corpus

GPTs are GPTs: An Early Look at the Labor Market Impact Potential of Large Language Models (2023, background): “More recent studies have distinguished between technology’s task-displacement and task-reinstatement eﬀects (where new technology increases the need for a wider array of labor-intensive tasks) (Acemoglu and Restrepo, 2018, 2019).”
AI Adoption and System-Wide Change (2021, background): “The question then becomes: if an organisation adopts AI, will it want to restructure itself for a higher m , as Bresnahan (2020) contends?”
The Labor Market Impacts of Technological Change: From Unbridled Enthusiasm to Qualified Optimism to Vast Uncertainty (2022, background): “Works by Agrawal et al. (2018), Bresnahan (2021), and Korinek and Stiglitz (2018) offer different lenses on these questions that bring different issues into focus.”